SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 22, 1993
KEMPER CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
<TABLE>
<S> <C>
1-10242 36-6169781
(Commission File Number) (IRS Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
One Kemper Drive, Long Grove, Illinois 60049
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, Including Area Code: (708) 320-4700
EXHIBIT INDEX ON PAGE 7
PAGE 1 OF 99
FORM 8-K
TABLE OF CONTENTS
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Page
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ITEM 5. OTHER INFORMATION
A. Mortgage Refinancing................................ 3
B. Joint Venture Partner............................... 3
C. Centre Reinsurance Common Stock Sale................ 4
D. Sale of Federal Kemper Insurance Company............ 4
E. Litigation Resolution............................... 4
F. Lines of Credit..................................... 5
G. Senior Management................................... 5
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS...................... 7
SIGNATURES....................................................... 7
EXHIBIT 10....................................................... 8
</TABLE>
Page 2
ITEM 5. OTHER INFORMATION
A. Mortgage Refinancing.
On December 22, 1993, subsidiaries of Kemper Corporation (the "Company")
received $275.3 million in cash from a refinancing of mortgage loans and
other real estate-related investments, including $22.4 million of accrued
interest. The cash is being reinvested in investment-grade fixed
maturities. The refinancing reduced the Company's real estate-related
investments ($1.74 billion at September 30, 1993) by approximately 15
percent.
The refinancing was accomplished by an unaffiliated investment banking
concern that arranged for the creation of a real estate mortgage investment
conduit (a "REMIC") under the Internal Revenue Code and sold mortgage
pass-through certificates that represent undivided interests in new first
mortgage loans. Company subsidiaries hold second mortgages on properties
securing the first mortgages. Of the $275.3 million of REMIC proceeds
received by Company subsidiaries, $149.7 million repaid loans (including
related accrued interest) from Company subsidiaries to joint ventures owned
by the master limited partnership created in 1993 by and among Company
subsidiaries and Lumbermens Mutual Casualty Company ("Lumbermens") and its
affiliates. The REMIC's loans are nonrecourse to the borrowers and are not
guaranteed by any affiliate of the Company or Lumbermens.
B. Joint Venture Partner.
As of January 4, 1994, the Company's real estate and life insurance
subsidiaries and Lumbermens and its affiliates, primarily through the
above-mentioned master limited partnership, entered into definitive
agreements with Peter B. Bedford and his affiliates ("Bedford") pursuant to
which Bedford will transfer to the partnership and a Company affiliate
Bedford's ownership in more than 200 real estate-related ventures
previously owned, directly or indirectly, generally 50% by Bedford, 25% by
Company affiliates and 25% by Lumbermens and its affiliates. Upon the
closing currently scheduled for late January, Bedford will be released from
recourse liabilities owed to the partnership, the ventures, the Company,
Lumbermens and their respective affiliates, and the Company's and
Lumbermens' ownership will increase from 25% each to 50% each. This
non-cash transaction, which simplifies the management of this portion of
the Company's real estate portfolio, does not result in any material impact
on the Company's financial statements.
Page 3
C. Centre Reinsurance Common Stock Sale.
On December 30, 1993, two Company subsidiaries sold their minority common
stock investments in Centre Reinsurance Holdings Limited, a specialty
reinsurance holding company ("Centre Re"), to Zurich Insurance Company, a
Swiss corporation and the principal owner of Centre Re ("Zurich"). In
conjunction with the Centre Re common stock sales by Company subsidiaries
and by Kemper Reinsurance Company ("Kemper Re"), the Company realized a
fourth-quarter 1993 after-tax capital gain of $37.8 million, or
approximately $1.15 per share. Also effective as of the sale date, David
B. Mathis, Chairman of the Board and Chief Executive Officer of Kemper
Corporation, resigned from the board of directors of Centre Re. Pursuant
to the sale agreement, Zurich will pay a purchase price of $65.1 million in
cash to the Company in the first quarter of 1994.
Concurrent with the sale by the Company's subsidiaries, Kemper Re sold its
common stock investments in Centre Re. Kemper Re has been a wholly owned
subsidiary of Lumbermens since the August 1993 stock exchange transaction
between Kemper Corporation and Lumbermens. The Kemper Re investments in
Centre Re common stock constituted $40.7 million of the $136.3 million
value (as of December 31, 1992) of certain investments which has been
guaranteed by Kemper Corporation in connection with the stock exchange
transaction. Upon the payment by Zurich to Kemper Re for its Centre Re
stock in the first quarter of 1994, the off-balance sheet commitment of the
Company related to this guarantee will decline by $40.7 million.
D. Sale of Federal Kemper Insurance Company.
On December 31, 1993, the Company sold the stock of its only remaining
property-casualty insurance subsidiary, Federal Kemper Insurance Company
("FKI"), to Anthem P&C Holdings, Inc., a Delaware corporation which is part
of the Associated Group. The Company received $100 million in the
transaction, approximately $95 million in cash and the balance in the form
of a property dividend from FKI.
E. Litigation Resolution.
In January 1994, the Company's securities brokerage operations, Kemper
Securities, Inc. ("KSI"), settled all lawsuits, including Prescott, Ball &
Turben, Inc. v. ContiCommodity Services, Inc., involving claims asserted by
ContiCommodity Services, Inc. ("Conti") and Conti's customers. As
previously reported in the Company's periodic reports filed with the
Securities and Exchange Commission, Conti had obtained a judgment of $137.4
million, plus post-judgment interest, in mid-1992.
Page 4
During December 1993, KSI also settled Christian Mutual Life Insurance
Company, Inc. v. KSI, et al. The plaintiffs in this case had sought up to
approximately $31 million in compensatory damages and other relief in New
Hampshire state court relating to a 1990 proposed underwriting involving
Liberty University.
The settlements of both the Conti and the Christian Mutual matters do not
impact the Company's or KSI's income statements.
F. Lines of Credit.
On January 12, 1994, the Company and Lumbermens mutually agreed to cancel
the Company's $80 million line of credit from Lumbermens which had been
available only for limited purposes during the pendency of the Conti
litigation. This line of credit had not been used since 1988. The Company
has committed lines of credit with certain banks which total $325.0
million, with $162.5 million expiring November 1, 1994 and $162.5 million
expiring November 1, 1996. These committed lines are unused and fully
available.
G. Senior Management.
Under a reorganization of the Company's management structure commenced in
November 1993, the Company is replacing reporting channels divided by
subsidiary with reporting channels divided by function: asset management,
life insurance and annuities, sales and distribution, information and
customer service, and real estate. In addition to these functional
operating groups, four major staff groups have been formed to oversee all
staff activities at both the holding company and operating group levels:
finance and accounting, legal, corporate and international development, and
administration.
The following persons constitute the senior officers of the Company elected
by the board of directors as of January 11, 1994:
1. David B. Mathis, Chairman of the Board and
Chief Executive Officer since February 1992.
2. Stephen B. Timbers, President and Chief Operating
Officer since September 1992.
3. John H. Fitzpatrick, Executive Vice President since
May 1993 and Chief Financial Officer since May 1990.
Page 5
4. Charles M. Kierscht, Executive Vice President, asset
management, since May 1993.
5. James R. Boris, Executive Vice President, sales and
distribution, since January 1994.
6. Robert T. Jackson, Executive Vice President, information
and customer service, since January 1994.
7. John B. Scott, Executive Vice President, life insurance and
annuities, since January 1994.
8. Alan J. Baltz, Senior Vice President, administration,
since May 1990.
9. Stanley R. Fallis, Senior Vice President, planning,
since January 1994.
10. Kathleen A. Gallichio, Senior Vice President since
January 1994, General Counsel since May 1991 and
Corporate Secretary since May 1990.
11. Sandy A. Lincoln, Senior Vice President since May 1993
and Chief Investment Officer since January 1994.
12. Arthur J. McGivern, Senior Vice President and Corporate
Counsel since January 1994.
13. John E. Neal, Senior Vice President, real estate,
since January 1994.
14. Joseph R. Sitar, Senior Vice President and Chief Accounting
Officer, beginning January 24, 1994.
15. John W. Burns, Treasurer since May 1990.
16. Thomas B. Sabol, General Auditor since September 1993.
Page 6
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired - not applicable.
(b) Pro forma financial information - not applicable.
(c) Exhibits
Exhibit No. Pages
10 Stock Purchase Agreement Among
Associated Insurance Companies, Inc.,
Anthem P&C Holdings, Inc. and
Kemper Corporation......................... 8 - 99
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Kemper Corporation
(Registrant)
Date: January 14, 1994 By:/s/ JOHN H. FITZPATRICK
John H. Fitzpatrick
Executive Vice President and
Chief Financial Officer
Page 7
W:\SEC\KC\8K1-94.DOC
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement") dated as of
November 23, 1993, by and among ASSOCIATED INSURANCE COMPANIES,
INC., an Indiana corporation ("Associated"), ANTHEM P&C HOLDINGS,
INC., a Delaware corporation ("Buyer") and KEMPER CORPORATION, a
Delaware corporation ("Seller").
WHEREAS, Seller owns all of the issued and outstanding shares
of capital stock (the "Shares") of Federal Kemper Insurance
Company, an Illinois stock property-casualty insurance corporation
(the "Company"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller the Shares upon and subject to the terms and
conditions set forth in this Agreement; and
WHEREAS, Associated has agreed to become an additional party
to this Agreement for the sole purpose of guaranteeing the
obligations of Buyer under this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, Associated, Buyer and Seller covenant
and agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings hereinafter set forth:
(a) "Adjusted Closing Loss Reserves" is defined in Section
11.10.
(b) "Affiliate" shall mean, with respect to any organization
(i) another organization of which such first organization or its
subsidiaries own in excess of 10% of the stock; (ii) another
organization of which such first organization or its subsidiaries
may be deemed to be in control because of factors or relationships
other than the percentage of stock (or equivalent evidence of
ownership) owned; (iii) any person, directly or indirectly,
controlling, controlled by or under common control with any such
organization; and (iv) any executive officer, director, partner or
co-partner of any such organization.
(c) "Affiliate Agreements" shall mean all agreements and
contracts in effect immediately prior to the Closing Date between
the Company or any Subsidiary on the one hand and the Seller or any
of its Affiliates (other than the Company or any Subsidiary) on the
other hand.
(d) "Agreement" shall mean this Stock Purchase Agreement.
(e) "Annual Convention Statement" shall mean an annual
convention statement or equivalent of the Company filed with the
Illinois Insurance Department.
(f) "Business Day" shall mean any day which is neither a
Saturday nor a Sunday, nor a day on which banking institutions in
Chicago, Illinois, shall be permitted or required by law or
executive order to be closed.
(g) "Closing Loss Reserves" is defined in Section 3.26.
(h) "Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect on the date hereof, and the Treasury
regulations promulgated thereunder.
(i) "Contaminant" shall mean any pollutant, hazardous
substance, toxic substance, hazardous waste, or special waste as
those terms are defined in Environmental, Health or Safety
Requirements of Law and also includes any radioactive substance,
radioactive waste, petroleum, petroleum-derived substance or waste,
asbestos or PCBs.
(j) "Environmental Damages" shall mean all claims,
judgments, damages (including punitive damages), losses, penalties,
fines, interest, fees, liabilities (including strict liability),
encumbrances, liens, costs, and expenses of investigation and
defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement of judgment, of whatever
kind or nature, contingent or otherwise matured or unmatured,
foreseeable or unforeseeable, including without limitation,
reasonable attorneys' fees, any of which are incurred at any time
as a result of the existence of Contaminants or noncompliance with
Environmental, Health or Safety Requirements of Law with respect to
the period prior to the Closing, including without limitation:
(i) damages for personal injury (including
sickness, disease or death), or injury to
property or natural resources, foreseeable or
unforeseeable, including, without limitation,
the cost of demolition and rebuilding for
existing use of any improvements on real
property;
(ii) reasonable fees incurred for the services of
attorneys, consultants, contractors, doctors,
experts, laboratories, and all other
reasonable costs incurred in connection with
any damages as described in clause (i) of this
definition, and the investigation or
remediation of Contaminants or the suspected
presence of Contaminants or the violation of
Environmental, Health or Safety Requirements
of Law including, but not limited to, the
preparation of any necessary feasibility
studies or reports or the performance of any
investigations, cleanup, treatment,
remediation, removal, response, abatement,
containment, closure, storage, disposal,
transport, restoration or monitoring work
required by any federal, state or local
governmental agency or political subdivision,
or reasonably necessary to restore any
Property to economic use or otherwise expended
in connection with such conditions, and
including, without limitation, any reasonable
attorneys' fees, costs and expenses incurred
in enforcing this Agreement or collecting any
sums due hereunder; and
(iii) liability to any third person or Governmental
Authority to indemnify such person or
Governmental Authority for costs expended in
connection with the items referenced in
clauses (i) and (ii) of this definition.
(k) "Environmental, Health or Safety Requirements of Law"
shall mean all federal, state and local laws, statutes, codes,
ordinances, rules, regulations or orders now in effect relating to
or addressing the environment, health or safety, including, but not
limited to, any law, statute, code, ordinance, rule, regulation, or
order relating to (x) the use, handling or disposal of any
Contaminant or (y) workplace or worker safety and health, as
promulgated by the specifically authorized Governmental Authority
responsible for administering such requirements.
(l) "Environmental Lien" shall mean a lien in favor of any
Governmental Authority for any (a) liability under any
Environmental, Health or Safety Requirement of Law, or (b) damages
arising from, or costs incurred by, such Governmental Authority in
response to a Release or threatened Release of a Contaminant into
the environment.
(m) "Environmental Permits" is defined in Section 3.9(b).
(n) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.
(o) "ERISA Affiliate" shall mean any trade or business,
whether or not unincorporated, that is part of the same controlled
group, or under common control with, or part of an affiliate
service group that includes the Company within the meaning of
section 414(b), (c), (m) or (o) of the Code or section 4001(b) of
ERISA.
(p) "Expenses" shall mean any and all reasonable expenses
incurred in connection with investigating, defending or asserting
any claim, action, suit or proceeding incident to any matter
indemnified against hereunder (including, without limitation, court
filing fees, court costs, arbitration fees or costs, witness fees,
fees of outside legal counsel, investigators, expert witnesses,
accountants and other professionals, and the allocated cost of in-
house attorneys used in lieu of outside legal counsel).
(q) "Final Consolidated Return(s)" shall mean, for the
Taxable Period of the Company or a Subsidiary that ends on the
Closing Date, the consolidated federal income Tax Return that
includes the Company and the Subsidiaries and/or the unitary State
of Illinois income Tax Returns that include the Seller and the
Company and/or a Subsidiary.
(r) "Governmental Authority" shall mean any agency,
department, court or other administrative, legislative or
regulatory authority of any federal, state or local governmental
body.
(s) "Indemnified Party" is defined in Section 11.3.
(t) "Indemnitor" is defined in Section 11.3.
(u) "Interim Period" shall mean, with respect to any Taxable
Period that begins on or before the Closing Date and ends after the
Closing Date, the portion of such period that ends on the Closing
Date.
(v) "IRS" shall mean the Internal Revenue Service.
(w) "Kemper Group" is defined in Section 12.1(a).
(x) "Kemper Marks" is defined in Section 7.5.
(y) "Knowledge", when used in reference to the knowledge of
the Seller, shall mean to the knowledge of any of the senior
officers of the Company or the Seller set forth on Schedule 1 after
due inquiry.
(z) "Leased Properties" shall mean all real properties
leased by the Company prior to the date of this Agreement.
(aa) "Lien" shall mean any interest in any property or asset,
including policies of insurance, whether real, personal or mixed,
or tangible or intangible, securing any obligation owed to, or a
claim by, one other than the owner of the asset or property,
whether such interest is based on the common law, statute, contract
or otherwise, and including but not limited to any lien or security
interest arising from a mortgage, encumbrance, pledge, security
agreement, consignment or bailment for security purposes. The term
Lien shall include reservations, exceptions, encroachments,
easements, rights-of-way, burdens, covenants, conditions, options,
claims, restrictions, leases and other title exceptions and
encumbrances affecting an asset or property.
(ab) "Losses" shall mean any and all losses, costs,
obligations, liabilities, settlement payments, awards, judgments,
fines, penalties, damages, expenses, deficiencies or other charges.
(ac) "Loss Reserves" shall mean all undiscounted reserves for
incurred losses including, without limitation, case reserves,
reserves for incurred but not reported losses and reserves for loss
adjustment expenses, both allocated and unallocated (and without
any deduction for salvage, subrogation or reinsurance
recoverables), but "Loss Reserves" shall not include any
liabilities relating to the PIP Claims (as defined in Section
6.18).
(ad) "Lumbermens" shall mean Lumbermens Mutual Casualty
Company.
(ae) "Material Adverse Effect" shall mean any adverse effect
which has a determinable cost in excess of One Million Five Hundred
Thousand Dollars ($1,500,000). In determining whether an adverse
effect exceeds $1,500,000, no loss, liability, cost or expense
shall be taken into account unless each individual event or item
constituting or causing such loss, liability, cost or expense
exceeds One Hundred Fifty Thousand Dollars ($150,000).
(af) "Mortgaged Properties" shall mean all real properties on
which mortgages are held by the Company prior to the date of this
Agreement.
(ag) "PBGC" shall mean the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its functions
under ERISA.
(ah) "Permits" shall mean all licenses, permits, orders,
approvals, registrations, authorizations and qualifications with
and under all federal and state laws, local or foreign laws and
governmental or regulatory bodies and all industry or other non-
governmental self regulatory organizations created by statute.
(ai) "Plan" or "Plans" shall mean those benefits or benefit
plans, contracts, or other arrangements listed in Schedule 3.11,
including the Qualified Plans.
(aj) "Pre-Closing Period" shall mean any Short Period,
Interim Period, or other Taxable Period that ends on or before the
Closing Date.
(ak) "Profit Sharing Plan" shall mean the FKI Employees
Savings and Profit Sharing Plan.
(al) "Post-Closing Period" shall mean any Taxable Period that
begins after the Closing Date and, with respect to any Taxable
Period that begins on or before and ends after the Closing Date,
the portion of such Taxable Period beginning on the day following
the Closing Date.
(am) "Properties" shall mean all Property and all Leased
Properties.
(an) "Property" shall mean all real property owned by the
Company prior to the date of this Agreement.
(ao) "Qualified Plans" shall mean the Retirement Plan and
the Profit Sharing Plan.
(ap) "Quarterly Convention Statement" shall mean a quarterly
statement of the Company prepared on selected pages of the Annual
Convention Statement form.
(aq) "Release" shall mean the release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migrating of Contaminants into the indoor or
outdoor environment or through or in the air, soil, surface water,
groundwater or Properties.
(ar) "Remedial Action" shall mean actions required to (i)
clean up, remove, treat or in any other way address Contaminants in
the indoor or outdoor environment; (ii) prevent the Release or
threat of Release or minimize the further Release of Contaminants;
or (iii) investigate and determine if a remedial response is
needed, to design such a response and post-remedial investigation,
monitoring, operation, maintenance and care.
(as) "Required Approvals" shall mean all necessary approvals,
consents, authorizations and clearances of governmental and
regulatory bodies and officials required to consummate the
transactions contemplated hereby.
(at) "Retirement Plan" shall mean the FKI Retirement Plan.
(au) "Short Period" shall mean any Taxable Period that ends
on the Closing Date.
(av) "Specified Transactions" shall mean any dividend or
distribution with respect to stock as contemplated by Section 5.9,
and any transactions contemplated by Section 5.8, concerning
modification of the investment portfolio (except for the
disposition of any portfolio investment pursuant to the maturity of
such investment or the exercise of a call provision set forth in
the terms of the investment).
(aw) "Subsidiary" shall mean a corporation of which the
Company and/or another Subsidiary owns directly or indirectly more
than 50% of the outstanding capital stock.
(ax) "Tax Allocation Agreement" shall mean the Kemper
Corporation Affiliated Group Plan for Allocation of Tax Liabilities
and Recoveries dated September 6, 1977 and unwritten policies and
practices for the allocation of Taxes by and among the Seller, the
Company, and their subsidiaries.
(ay) "Tax" and "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or additions to tax
that may become payable in respect thereof, imposed by any federal,
state, local, or foreign government, or any agency or political
subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income taxes
(including, but not limited to, United States federal income taxes
and state income or franchise taxes), payroll, employee, and other
withholding taxes, unemployment insurance, social security, sales
and use taxes, excise taxes, franchise taxes, net worth taxes,
gross receipts taxes, occupation taxes, real and personal property
taxes, stamp taxes and transfer taxes.
(az) "Tax Reserve" is defined in Section 12.1(c).
(ba) "Tax Return" or "Return" shall mean all reports,
elections, estimates, information statements, returns, and other
filings (including all schedules, exhibits and other attachments
thereto) relating to, or required to be filed in connection with,
any Tax pursuant to the statutes, rules and regulations of any
federal, state, local or foreign taxing authority.
(bb) "Taxable Period" shall mean any taxable year or any
other period that is treated as a taxable year (including any Short
Period) with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Seller shall, at the
Closing (as defined in Section 2.3 herein), sell to Buyer, and
Buyer shall, at the Closing, purchase from Seller, all of the
Shares for the purchase price provided in Section 2.2 upon the
terms and conditions herein set forth.
2.2 Purchase Price. The purchase price for Seller's
agreement not to compete with the Buyer as set forth in Section
6.13 shall be Five Hundred Thousand Dollars ($500,000.00) (the
"Non-Compete Purchase Price") and the purchase price for the Shares
(the "Share Purchase Price") shall be Ninety Nine Million Five
Hundred Thousand Dollars ($99,500,000.00) (the Non-Compete Purchase
Price together with the Share Purchase Price being the "Purchase
Price"), in each case, payable at Closing in immediately available
funds as provided in Section 2.3(b).
2.3 Closing.
(a) Subject to the satisfaction or waiver of the terms and
conditions hereof, the consummation of the sale and purchase of the
Shares provided for herein (the "Closing") shall occur at the
offices of the Seller in Long Grove, Illinois, at 9:00 a.m., local
time ("9:00 a.m."), on the last business day of the month during
which the satisfaction or waiver of all of the conditions set forth
in Articles VIII and IX other than receipt of items to be delivered
at Closing occurs, or such other date as Buyer and Seller shall
mutually agree upon in writing (the "Closing Date").
(b) At the Closing, Buyer shall pay to Seller, by wire
transfer of immediately available funds to a bank account
designated in writing by Seller not less than three (3) days prior
to the Closing Date, the Purchase Price less the amount of the In-
Kind Dividend as provided in Section 5.9(i) hereof. Associated and
Buyer shall also deliver to Seller such other documents and
instruments as shall be required of Associated and Buyer under the
terms and provisions of this Agreement. All such documents and
instruments shall be in form and content reasonably satisfactory to
Seller and Seller's counsel. Simultaneously at the Closing, Seller
shall deliver to Buyer a certificate or certificates representing
all of the Shares, endorsed in blank for transfer or accompanied by
duly executed blank stock powers and accompanied by any applicable
stock transfer stamps, together with such other instruments as
shall reasonably be required by Buyer to vest fully in Buyer all
right, title and interest in and to all of the Shares free and
clear of all Liens. Seller shall also deliver to Buyer such other
documents and instruments as shall be required of Seller under the
terms and provisions of this Agreement. All such documents and
instruments shall be in form and content reasonably satisfactory to
Buyer and Buyer's counsel.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that, as of the date
hereof:
3.1 Organization, Standing and Authority of Seller. Seller
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is in good
standing as a foreign corporation in all jurisdictions in which its
failure to qualify or to be in good standing would have a Material
Adverse Effect upon consummation or the validity of the
transactions provided for in this Agreement. The Seller has all
requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder, to own, hold, sell
and transfer the Shares and to consummate the transactions
contemplated hereby by Seller.
3.2 Execution and Delivery. The board of directors or the
executive committee of the board of directors of Seller has
approved the execution, delivery and performance of this Agreement
by Seller, and the consummation by Seller of the transactions
contemplated hereby will be 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 the
valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or by
other equitable principles of general application.
3.3 Organization, Existence, Qualification, Certificate of
Authority, etc., of the Company. The Company is a stock property-
casualty insurance corporation duly organized, validly existing and
in good standing under the laws of the State of Illinois and has
the requisite corporate power and authority to own, lease and
operate its assets, properties and business and to carry on its
business as now being and as heretofore conducted. The Company is
duly qualified or otherwise authorized as a foreign corporation to
conduct the insurance business conducted by it and is in good
standing in each of the jurisdictions named on Schedule 3.3 (the
"Qualified Jurisdictions"), which named jurisdictions are the only
jurisdictions in which such qualification or authorization is
required by law in order to carry on its business as now being
conducted. No other jurisdiction has claimed, in writing, or
otherwise to Seller's Knowledge, that the Company is required to
qualify or otherwise be licensed therein. The Company does not own
or lease real property in any jurisdiction other than the
jurisdictions set forth in Schedule 3.3. The Company is authorized
to write (a) the lines of insurance defined under Classes 2 and 3
of Section 4 of the Illinois Insurance Code except legal expense
insurance and (b) insurance in the jurisdictions listed on Schedule
3.3 in the respective lines of insurance specified thereon as such
insurance is defined in the insurance laws of the respective
jurisdictions. Except as set forth in Schedule 3.3, the Company's
Certificates of Authority to transact insurance in Illinois and the
other Qualified Jurisdictions have not been limited, revoked or
suspended, and are not the subject of a proceeding for limitation,
suspension or revocation; the Company has received no written
communication from any of the Qualified Jurisdictions threatening
to limit, suspend or revoke any of its Certificates of Authority
which remain unresolved; and the Company is not operating under a
voluntary agreement with the insurance regulatory authorities of
any jurisdiction in which it now holds a current Certificate of
Authority which restricts its authority to do business authorized
on such Certificate of Authority. Seller has furnished, or will
furnish on or before the Closing Date, to Buyer true and complete
copies of the articles of incorporation (certified by the Illinois
Department of Insurance) and the by-laws of the Company (certified
by the Secretary of the Company), as amended to the date of
execution of this Agreement, and copies of the Certificates of
Authority from the Qualified Jurisdictions, and within one week
prior to Closing Seller shall furnish to Buyer current certificates
of good standing of the Company from each of the Qualified
Jurisdictions. The minute books of the Company accurately reflect
all actions taken at all meetings and consents in lieu of meetings
of the stockholders of the Company since December 31, 1988, and all
actions referred to in such minutes taken at all meetings and
consents in lieu of meetings of the board of directors of the
Company and all committees thereof since December 31, 1988.
3.4 Title to Shares. The authorized capital stock of the
Company consists of 500,000 shares of common stock, $50.00 par
value per share, of which 64,000 shares are issued and outstanding
and which constitute the Shares. The Seller owns beneficially and
of record, free and clear of any Lien, all of the Shares, and, upon
delivery of the payment for such Shares as herein provided, the
Buyer will have good title thereto, free and clear of any Lien
except as arising out of or in connection with liabilities or
claims against Buyer. The Shares are duly authorized, validly
issued, fully paid and nonassessable, and were not issued in
violation of the preemptive rights of any person or any agreement,
law or regulation by which the issuer of such Shares at the time of
issuance was bound. There are no outstanding subscriptions,
warrants, options, rights, calls, unsatisfied preemptive rights,
or, except for this Agreement, other agreements or rights of any
kind to purchase or otherwise receive or be issued, or securities
or obligations of any kind convertible into, any shares of capital
stock or any other security of the Company. Other than this
Agreement, there is no outstanding contract of the Seller, the
Company or any other person to purchase, redeem or otherwise
acquire any outstanding shares of the capital stock of the Company.
Seller has furnished to Buyer a copy of the stock ledger of the
Company.
3.5 Subsidiaries. Schedule 3.5 hereto sets forth a list of
all of the Subsidiaries of the Company and the authorized capital
stock, the number of shares of capital stock duly issued and
outstanding, the number of shares of capital stock owned by the
Company or any of its Subsidiaries and the jurisdiction of
incorporation of each Subsidiary. The Company owns directly or
indirectly all of the outstanding shares of capital stock of each
of the Subsidiaries. The outstanding shares of capital stock of
each Subsidiary are duly authorized, validly issued, fully paid and
nonassessable, and were not issued in violation of the preemptive
rights of any person or any agreement, law or regulation by which
the issuer of such shares of capital stock at the time of issuance
was bound. There are no outstanding subscriptions, warrants,
options, rights, calls, unsatisfied preemptive rights, or other
agreements or rights of any kind to purchase or otherwise receive
or be issued, or securities or obligations of any kind convertible
into, any shares of capital stock of any Subsidiary. Each of the
Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority
to own, lease and operate its assets, properties and business and
to carry on its business as now being and as heretofore conducted.
Each of the Subsidiaries is duly qualified, licensed or otherwise
authorized to transact business as a foreign corporation and is in
good standing in the states named on Schedule 3.5 (the "Subsidiary
Qualified States"), which named states include the only states in
which such qualification or authorization is required by law in
order to carry on its business as now being conducted, except where
the failure to have such qualification, authorization or standing
would not have a Material Adverse Effect. No other jurisdiction
has claimed, in writing or otherwise, to Seller's Knowledge, that
any of the Subsidiaries is required to qualify or otherwise be
licensed therein. None of the Subsidiaries owns or leases real
property in any jurisdiction other than the jurisdictions set forth
in Schedule 3.5. Except as set forth in Schedule 3.5, each of the
Subsidiaries' licenses or other authorizations to transact business
("Licenses") in the jurisdiction of its incorporation and the other
Subsidiary Qualified States has not been limited, revoked or
suspended, and is not the subject of a proceeding for limitation,
suspension or revocation; none of the Subsidiaries has received any
written communication from any of the Subsidiary Qualified States
threatening to limit, suspend or revoke any of its Licenses which
remain unresolved; and none of the Subsidiaries is operating under
a voluntary agreement with the insurance regulatory authorities of
any state in which it now holds a current License which restricts
its authority to do business authorized by such License. Seller
has furnished, or will furnish on or prior to the Closing Date, to
Buyer true and complete copies of the articles or certificates of
incorporation (certified by the Secretary of State or other
appropriate official of its jurisdiction of incorporation), by-laws
(certified by its Corporate Secretary) and other constitutive
documents of each of the Subsidiaries, as amended to the date of
execution of this Agreement, and copies of the Licenses from the
Subsidiary Qualified States. The minute books of each Subsidiary
accurately reflect all actions taken at all meetings and consents
in lieu of meetings of the stockholders of such Subsidiary since
December 31, 1988, and all actions referred to in such minutes
taken at all meetings and consents in lieu of meetings of the board
of directors of such Subsidiary and all committees thereof since
December 31, 1988. Except as set forth on Schedule 3.5 and except
for ownership or interest by reason of securities held in the
investment portfolio of the Company and/or any of its Subsidiaries,
neither the Company nor any of its Subsidiaries has any direct or
indirect ownership interest, by way of stock ownership or
otherwise, in any corporation, association, joint venture or other
business enterprise.
3.6 No Conflict or Violation. Except as set forth in
Schedule 3.6, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby in accordance with the terms and conditions hereof will not
(i) violate any provision of the articles or certificate of
incorporation, by-laws or other constitutive document of the
Seller, the Company or any of its Subsidiaries; (ii) require any
consent, approval or notice under, violate, conflict with or result
in the breach of any of the terms of, otherwise give any other
contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default (by way of
substitution, novation or otherwise, or give rise to any right to
termination, cancellation or acceleration) under, any contract to
which the Seller, the Company or any of its Subsidiaries is a party
or by or to which they or any of the Company's or any of its
Subsidiaries' assets or properties may be bound or subject, the
impact of which would have a Material Adverse Effect; (iii) violate
any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding
upon, or any agreement with, or condition imposed by, any
governmental or regulatory body, foreign or domestic, binding upon
the Seller, the Company or any of its Subsidiaries or upon the
securities, assets or business of the Company or any of its
Subsidiaries which violation would have a Material Adverse Effect;
(iv) result in the creation or imposition of any Lien upon the
Seller, the Company or any of its Subsidiaries, or their respective
assets, which would have a Material Adverse Effect; (v) result in
the breach of any of the terms or conditions of, constitute a
default under or otherwise cause any impairment of any Permit; or
(vi) violate any statute, law, rule or regulation of any
jurisdiction as such statute, law, rule or regulation relates to
the Company or to the securities, properties or business of the
Company which violation would have a Material Adverse Effect.
3.7 Financial Statements and Convention Statements.
(a) Seller has furnished to Buyer copies of the unaudited
consolidated balance sheets of the Company and its Subsidiaries, as
at December 31, 1990, 1991 and 1992, and the related consolidated
statements of income, stockholder's equity and cash flows for the
years then ended, and the notes thereto and copies of the unaudited
consolidated balance sheets of the Company and its Subsidiaries as
at March 31, June 30 and September 30, 1993, and the related
consolidated statements of income, stockholders' equity and cash
flows for the quarters then ended and the notes thereto ("Company
Financial Statements"). The Company Financial Statements fairly
present the financial condition of the Company and its Subsidiaries
at the respective dates indicated and the results of operations of
the Company and its Subsidiaries for the respective periods then
ended, in accordance with generally accepted accounting principles,
applied on a consistent basis with prior periods, except as
otherwise noted therein. Except as and to the extent reflected,
reserved against or disclosed in the Company Financial Statements,
together with the schedules included therein and, except as
disclosed in Schedule 3.7 hereto, neither the Company nor any of
its Subsidiaries had at the respective dates of the Company
Financial Statements any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise and whether due
or to become due) required to be stated in the Company Financial
Statements in accordance with generally accepted accounting
principles consistently applied with prior periods.
(b) Seller has furnished to Buyer copies of the Annual
Convention Statements of the Company for the years ended December
31, 1990, 1991 and 1992 and the Quarterly Convention Statements for
the periods ended March 31, June 30 and September 30, 1993 of the
Company, and such Annual Convention Statements and Quarterly
Convention Statements, together with the schedules included in such
Annual Convention Statements and Quarterly Convention Statements,
fairly present the consolidated statutory financial condition of
the Company and its Subsidiaries at the respective dates indicated,
and the consolidated statutory results of operations of the Company
and its Subsidiaries and other data contained therein for the
respective periods then ended, and, except as disclosed in Schedule
3.7 hereto or as previously provided to Buyer by Seller in writing,
were prepared in conformity with statutory accounting principles
(which have been applied on a consistent basis with prior periods,
except as expressly set forth therein or required by a rule or
regulation of the Illinois Department of Insurance). Except as and
to the extent reflected, reserved against or disclosed in the
Annual Convention Statements and the Quarterly Convention
Statements, together with the schedules included therein and,
except as disclosed in Schedule 3.7 hereto, to the Seller's
Knowledge, neither the Company nor any of its Subsidiaries had at
the respective dates of the Annual Convention Statements and the
Quarterly Convention Statements any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise and
whether due or to become due) required to be stated in the Annual
Convention Statements and the Quarterly Convention Statements in
accordance with statutory accounting principles consistently
applied with prior periods.
3.8 No Defaults. Except as set forth in Schedule 3.8
neither the Company nor any of its Subsidiaries is in default under
or in violation of, and no event has occurred which with notice or
lapse of time or both would constitute a default under or violation
of, (i) any Permit, or (ii) its articles or certificate of
incorporation, by-laws or other constitutive document or any
mortgage, note, agreement, lease, or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by
which they or any of their assets or properties are bound or any
judgment, order, decree, ruling or injunction, which default or
violation of any such document or instrument referred to in this
clause (ii) would have a Material Adverse Effect.
3.9 Environmental Matters. Except as disclosed on Schedule
3.9,
(a) The Company complies in all material respects with all
applicable Environmental, Health or Safety Requirements of Law,
including, without limitation, its use, maintenance and operation
of the Properties, and all activities and conduct of business by it
related thereto, including, without limitation, the treatment,
remediation, removal, transport, storage and/or disposal of any
Contaminant or, if the Company is not in compliance in all material
respects with same, such noncompliance could not reasonably be
expected to have a Material Adverse Effect.
(b) The Company has obtained or has taken appropriate steps,
as required by Environmental, Health or Safety Requirements of Law,
to obtain all environmental, health and safety permits, consents,
licenses and other authorizations (collectively, "Environmental
Permits") necessary for its operations as contemplated hereby, all
such Environmental Permits are in good standing, and the Company is
currently in compliance with all terms and conditions of such
Environmental Permits, or, if the Company has failed to obtain or
take appropriate steps to obtain such Environmental Permits, such
failure could not reasonably be expected to have a Material Adverse
Effect or, if such Environmental Permits have been obtained and the
Company has failed to maintain such Environmental Permits in good
standing or failed to have complied with all terms and conditions
of such Environmental Permits, such failure could not reasonably be
expected to have a Material Adverse Effect. No material change in
the facts or circumstances reported or assumed in the applications
for or the granting of such Environmental Permits exists. There
are not any proceedings threatened which would jeopardize the
validity of any such Environmental Permits.
(c) To the Seller's Knowledge, all of the third parties with
which the Company has arranged, engaged or contracted to accept,
treat, transport, store, dispose or remove any Contaminant, or
which otherwise participate in activities or conduct related to the
business of the Company and its Subsidiaries, were properly
permitted at the relevant time to perform the foregoing activities
or conduct.
(d) The Company has not received notice of any investigation
by any Governmental Authority with respect to, or any judicial or
administrative proceeding, notice, order, judgment, decree or
settlement alleging or addressing (i) violation of any
Environmental, Health or Safety Requirements of Law; (ii) any
Remedial Action; or (iii) any claims, liabilities or costs arising
from the Release of any Contaminant into the environment, the
outcome or effect of which could reasonably be expected to result
in the Company incurring a Material Adverse Effect.
(e) No Environmental Lien has attached to the Property and
to Seller's Knowledge, no Environmental Lien has attached to the
Leased Property.
(f) Seller has not, nor to Seller's Knowledge has the
Company or any prior owner or occupant of the Properties, received
in writing any notice, claim or other communication concerning (i)
any alleged violation of any Environmental, Health or Safety
Requirements of Law by the Company or any Subsidiary at the
Properties, whether or not corrected to the satisfaction of the
appropriate authority, (ii) alleged liability of the Company or any
Subsidiary for Environmental Damages, or (iii) any liability to any
person as a result of the Release of a Contaminant into the
environment, which Release could reasonably be expected to result
in a Material Adverse Effect; and there exists no writ, injunction,
decree, order or judgment outstanding, nor any lawsuit, claim,
proceeding, citation, directive, summons or investigation, pending
or to the Knowledge of Seller, threatened, relating to the
condition, ownership, use, maintenance or operation of the
Properties by the Company, or from the suspected presence of
Contaminants thereon or therefrom as a result of the actions or
inaction of the Company or any Subsidiary or from alleged violation
of any Environmental, Health or Safety Requirements of Law by the
Company or any Subsidiary nor to Seller's Knowledge does there
exist any basis for such lawsuit, claim, proceeding, citation,
directive, summons or investigation being instituted or filed.
(g) There has been no Release of any Contaminants into the
environment in reportable quantities by the Company or any
Subsidiary, which Release could reasonably be expected to have a
Material Adverse Effect.
(h) Neither the Property nor to Seller's Knowledge the
Leased Properties are listed or proposed for listing on the
National Priorities List ("NPL") pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended
("CERCLA"), or on the Comprehensive Environmental Response
Compensation Liability Information System List ("CERCLIS") or any
similar state list of sites, and neither the Seller nor the Company
is aware of any conditions on the Properties which, if known to a
Governmental Authority, would qualify the Properties for inclusion
on any such list.
(i) The Company does not have any contingent liability in
connection with any Release of any Contaminant into the
environment, which liability could reasonably be expected to have
a Material Adverse Effect.
(j) The Company has not disposed (as such term is defined in
the Federal Resource Conservation and Recovery Act) of any
Contaminant at the Properties or the Mortgaged Properties.
(k) The Company has not transported or arranged for the
transport of any Contaminant to any site, other than amounts and
types of Contaminants normally expected to be present in ordinary
office trash or household waste, and to Seller's Knowledge such
waste has not been transported to any facility or site for the
purpose of disposal which (i) is included on the NPL or CERCLIS,
(ii) is or was, at the time of disposal, subject to a Remedial
Action requirement (other than routine, anticipated, closure-
related corrective action obligations affecting closed solid waste
management units at such facility) issued under the Federal
Resource Conservation and Recovery Act or any state or local solid
or hazardous waste regulatory law, or (iii) at the time of the
disposal had received a notice of violation or was otherwise
subject to a governmental enforcement action with respect to
alleged violations of any Environmental, Health or Safety
Requirements of Law.
(l) Neither the Company nor, to the Seller's Knowledge, any
owner, tenant, occupant or user of the Properties nor any other
person, has engaged in or permitted any operations or activities
upon, or any use or occupancy of any of the Properties or any
portion thereof, for the purpose of or in any way involving the
manufacture, treatment, remediation, removal, generation, release,
discharge, refining or dumping of any Contaminant (whether legal or
illegal, accidental or intentional) or the illegal or improper
handling, storage, use or disposal of any Contaminant on, under, in
or about the Properties, nor has the Company, nor, to the Seller's
Knowledge, any previous owner, tenant, occupant or user of the
Properties nor any other person, caused to be presented
constructed, deposited, released, stored, disposed, leaching or
otherwise located on, under, in or about the Properties any
Contaminant nor, to the Seller's Knowledge, has any Contaminant
migrated from the Properties upon or beneath other properties, nor,
to the Seller's Knowledge, has any Contaminant migrated or
threatened to migrate from other properties upon, about or beneath
the Properties.
(m) There is not constructed, placed, deposited, stored,
disposed nor located on any Property nor to the Seller's Knowledge
on any Leased Properties any asbestos in any form which has become
friable.
(n) No underground improvements, including but not limited
to treatment or storage tanks, sumps, or water, gas or oil wells
are or have ever been located on any Property nor to Seller's
Knowledge on any of the Leased Properties which could reasonably be
expected to result in a Material Adverse Effect. Neither the
improvements nor any associated piping have leaked, and all such
improvements and piping are in substantial conformity with all
Environmental, Health or Safety Requirements of Law.
(o) There is not constructed, placed, deposited, released,
stored, disposed, leaching nor located on any Property nor to
Seller's Knowledge on any of the Leased Properties any
polychlorinated biphenyls ("PCBs") nor transformers, capacitors,
ballasts, or other equipment which contains dielectric fluid
containing PCBs which could reasonably be expected to result in a
Material Adverse Effect.
(p) There is not constructed, placed, deposited, released,
stored, disposed, leaching nor located on any Property nor to
Seller's Knowledge on any of the Leased Properties any insulation
material containing urea formaldehyde which could reasonably be
expected to result in a Material Adverse Effect.
(q) With respect to Mortgaged Properties: (i) the Mortgaged
Properties are not in default; (ii) neither Seller nor the Company
are in possession of the Mortgaged Properties; and (iii) neither
the Sellers nor the Company have ever operated the Mortgaged
Properties nor have they exercised control over the day to day
operations of the Mortgaged Properties.
3.10 Litigation. Except as disclosed in Schedule 3.10, there
are no outstanding orders, judgments, injunctions, awards or
decrees of any court, governmental or regulatory body or
arbitration tribunal against or involving the Company or any of its
Subsidiaries, or against or involving any of the directors,
officers or employees of the Company or any of its Subsidiaries,
which could have a Material Adverse Effect or could materially
adversely affect the validity or enforceability of this Agreement,
consummation by Seller of the transactions contemplated hereby or
compliance with the terms hereof by Seller or which would prevent
the use by the Buyer of assets material to the Company and the
Subsidiaries, taken as a whole, in each case in accordance with
past practices. Except for claims litigation against the Company
or any of its Subsidiaries arising in the ordinary course of
business and except as disclosed in Schedule 3.10, there are no
actions, suits or claims, or legal, administrative or arbitration
proceedings or investigations pending or, to the Seller's
Knowledge, threatened against: (a) the Company or any of its
Subsidiaries, (b) the Seller, with respect to the Company or any of
its Subsidiaries, or (c) the directors, officers or employees of
the Company, any of its Subsidiaries or, with respect to the
Company or any of its Subsidiaries, the Seller, in each case at law
or in equity in any court, or before or by any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or any other instrumentality, which, individually or
in the aggregate, would have, if adversely determined, a Material
Adverse Effect or would materially adversely affect the validity or
enforceability of this Agreement, consummation by Seller of the
transactions contemplated hereby or compliance with the terms
hereof by Seller or which would have a Material Adverse Effect on
the Permits, business, financial condition or results of operation
of the Company and its Subsidiaries, taken as a whole.
3.11 Employee Benefit Plans. Schedule 3.11 contains a list
of all employee benefit plans sponsored by the Company or any of
its Subsidiaries or to which the Company or any of its Subsidiaries
is required to contribute with respect to its employees or former
employees or their dependents. Plans listed on Schedule 3.11 and
referred to in this Agreement shall include any "employee benefit
plan" (described in section 3(3) of ERISA) as well as any other
formal or informal plan, arrangement or contract involving direct
or indirect compensation, maintained or formerly maintained by the
Company or any of its Subsidiaries, or with respect to which any
employees or former employees of the Company or any of its
Subsidiaries are participants, and to which the Company or any of
its Subsidiaries has any liability or under which the Company or
any of its Subsidiaries has any present or future obligations or
liability on behalf of their respective employees or former
employees or their dependents or beneficiaries, including but not
limited to, each retirement, pension, profit-sharing, thrift,
savings, target benefit, employee stock ownership, cash or
deferred, multiple employer, multiemployer or other similar plan or
program, each other deferred or incentive compensation, bonus,
stock option, employee stock purchase, "phantom stock" or stock
appreciation right plan, each other program providing payment or
reimbursement for or of medical, dental or visual care, psychiatric
counselling, or vacation, sick, disability or severance pay
(including "basic severance pay") and each other "fringe benefit"
plan or welfare plan arrangement. Schedule 3.11 indicates each
Plan which is intended to be qualified under section 401(a) of the
Code. Schedule 3.11 also contains a list of all former employees
of the Company and its Subsidiaries who are as of the date of this
Agreement receiving or entitled to receive retiree medical
benefits, retiree life insurance benefits, or group accident
insurance benefits. Except as set forth in Schedule 3.11:
(a) Except pursuant to the Plans, there are no present or
former employees of the Company or any of its Subsidiaries (or
dependents or beneficiaries of present or former employees of the
Company or any of its Subsidiaries) to which the Company has any
present or future obligations or liabilities pursuant to (i)
pensions or other benefits to be paid after termination of
employment, including termination on account of disability (except
as required under section 601 of ERISA) or (ii) deferred
compensation payments.
(b) There are no employees or former employees of the
Company and its Subsidiaries (or their dependents or beneficiaries)
receiving or entitled to receive pension benefits from any Plan
other than the Retirement Plan or FKI Supplemental Retirement Plan.
(c) Seller has delivered or made available to Buyer copies
of the following documents, as they may have been amended to the
date hereof, embodying or relating to the Plans: (i) all written
Plan documents for each of the Plans listed in Schedule 3.11,
including all amendments thereto, and any related trust agreements,
group annuity contracts, insurance policies or other funding
agreements or arrangements; (ii) the most recent determination
letter, if any, received from the Internal Revenue Service, with
respect to the qualification of a Qualified Plan (or terminated
Plan) under section 401(a) of the Code and section 501(c)(9) of the
Code with respect to the tax status of the Kemper VEBA; (iii)
actuarial valuations for each Plan, if applicable, for the most
recent plan year for which such valuations are available; (iv) the
current summary plan description, if any, for each Plan; and (v)
the most recently filed annual return/report on Form 5500, 5500-C
or 5500-R, if any, for each of the Plans.
(d) As of the date of this Agreement:
(i) The written terms of each of the Plans and any
related trust agreement, group annuity
contract, insurance policy or other funding
arrangement are in substantial compliance and
are being operated in compliance in all
material respects with the requirements
prescribed by all applicable statutes, orders,
or governmental rules and regulations,
including without limitation with ERISA and
the Code. Each Plan is in substantial
compliance and is being operated in compliance
in all material respects with the requirements
prescribed by all applicable statutes, orders
or governmental rules or regulations,
including without limitation, ERISA and the
Code. Each Plan which is intended to be a
qualified plan under section 401(a) of the
Code (or section 501(c)(9) of the Code) is
qualified, by its terms, and in operation, and
has received a favorable determination from
the Internal Revenue Service as to its
qualification and nothing has occurred that
could adversely affect the qualified status of
any Plan;
(ii) Contributions due and payable from the Company
with respect to the Retirement Plan and the
Profit Sharing Plan for all calendar (plan)
years through December 31, 1992 are reflected
on the consolidated financial statements of
the Company and its Subsidiaries. All
payments of outstanding contributions, due on
or prior to the date of the Agreement,
including minimum contributions, premiums,
including premiums (and interest charges for
late payment) owed to the PBGC, if any, and
funding obligations imposed by the terms of
any Plan or by any law or government agency
shall have been made with respect to each
Plan;
(iii) All contributions to each Qualified Plan are
and have been in the year to which they relate
fully deductible pursuant to section 404 of
the Code and are not subject to excise tax
under section 4972 of the Code and no excess
contributions have been made to the Kemper
VEBA that exceed the limitations under
sections 419 and 419A of the Code;
(iv) Neither the Company nor any Subsidiary has,
nor has any other "disqualified person" or
"party in interest," as defined in section
4975 of the Code and section 3(14) of ERISA,
respectively, nor has any party required to be
indemnified by the Company engaged in a
"prohibited transaction", as such term is
defined in section 4975 of the Code and
sections 406 or 407 of ERISA, with respect to
any Plan subject to ERISA which could subject
the Company or any Subsidiary to a tax or
penalty on prohibited transactions imposed by
either section 502 of ERISA or section 4975 of
the Code;
(v) Neither the Company nor any Subsidiary has,
nor has any administrator, any fiduciary of
any Plan (or any agent of any of the
foregoing) nor any party required to be
indemnified by the Company, engaged in any
transaction or failed to act in a manner which
could subject the Company or any Subsidiary to
any material liability for a breach of
fiduciary duty under ERISA or any other
applicable law;
(vi) The execution and delivery by the Seller of
this Agreement and the consummation of the
transactions contemplated hereby will not (i)
involve any prohibited transaction within the
meaning of section 406 of ERISA or section
4975 of the Code, or (ii) accelerate the
payment of any benefits under any Plan;
(vii) Other than qualified domestic relations orders
as defined in section 414(p) of the Code,
qualified medical child support orders as
defined in section 609(a)(2)(A) of ERISA, or
claims for benefits in the ordinary course,
there are no actions, suits, arbitrations,
disputes, legal, administrative or other
proceedings or governmental investigations
pending against any of the Plans, the assets
of any of the Plans, or any Person who is a
fiduciary with respect to any Plan;
(viii) (A) No Plan subject to Title IV of ERISA
maintained by the Company or any Subsidiary
has been terminated; and (B) no proceeding has
been initiated by the PBGC to terminate any
Plan;
plan," as defined in section 3(2) of ERISA,
has incurred an "accumulated funding
deficiency," within the meaning of section 302
of ERISA, or section 412 of the Code nor has
the Company at any time requested a minimum
funding waiver within the meaning of section
412(d) of the Code;
(x) No "reportable event" (within the meaning of
section 4043(b)(1)-(9) of ERISA) with respect
to which a notice must be filed has occurred
with respect to any Plan subject to Title IV
of ERISA;
(xi) Neither the Company nor any ERISA Affiliate
has at any time maintained, contributed to or
had an obligation to contribute to any plan
under which more than one employer makes
contributions (within the meaning of section
4064(a) of ERISA) or any "multiemployer plan"
(within the meaning of section 3(37)(A) or (D)
of ERISA, as amended by the Multiemployer
Pension Plan Amendments Act of 1980);
(xii) To Seller's Knowledge, there have been no
representations made by Seller or the Company
to employees or former employees of the
Company and its Subsidiaries other than those
contained in the Plan documents themselves,
summaries of the Plans, and the announcements
listed in Schedule 3.11 that would affect the
ability of the Company to amend or terminate
the Plans.
(xiii) The Company and each member of its business
enterprise has complied with the Worker
Adjustment and Retraining Notification Act;
(xiv) No amendment has been adopted to any Plan
since January 1, 1992 which would increase
benefits. No other event has occurred since
such date that would significantly increase
the cost of such Plans;
(xv) There are no employees or former employees of
the Company who have in effect any employment
agreement with the Company, nor are any
employees covered by any collective bargaining
agreement. There are no representation
questions, arbitration proceedings, labor
slowdowns or other labor disputes pending or,
to the Seller's Knowledge, threatened with
respect to employees of the Company; and
(xvi) The Company has no liability, and does not
have any reason to expect to incur any
liability, with respect to any defined benefit
plan maintained by an ERISA Affiliate other
than the Company.
3.12 Title to Property. Except as set forth in Schedule 3.12
or the Annual Convention Statement of the Company for the year
ended December 31, 1992, the Company or a Subsidiary, as the case
may be, has good and marketable title to all personal and real
property reflected as owned by them in the Annual Convention
Statement of the Company for the year ended December 31, 1992 or
acquired since that date (except properties disposed of in the
ordinary course of business subsequent to said date), in each case
free of all Liens and charges of any nature whatsoever.
3.13 Brokers. Neither Seller nor any party acting on its
behalf has paid or become obligated to pay any fee or commission to
any broker, finder or intermediary or financial adviser for or on
account of the transactions contemplated by this Agreement, other
than the fees of Smith Barney Shearson Inc. for which Seller is
solely responsible.
3.14 Consents and Approvals. The execution and delivery by
the Seller of this Agreement, the performance by the Seller of its
obligations hereunder and the consummation by the Seller of the
transactions contemplated hereby do not require any consent,
approval, authorization or action of, or any filing with or any
notice to, any corporation, person or firm or any public,
governmental or judicial authority except (a) as set forth in
Schedule 3.14, and (b) those which, if not obtained, would not have
either a Material Adverse Effect, a material adverse effect on the
transactions contemplated hereby, or a Material Adverse Effect on
the Permits, business, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole.
3.15 Compliance with Laws. Except as set forth in
Schedule 3.15, to the Seller's Knowledge, neither the Company nor
any of its Subsidiaries is in violation of any applicable order,
judgment, injunction, award or decree or of any federal, state,
local or foreign law, ordinance or regulation or any other
requirement of any governmental or regulatory body, court or
arbitrator applicable to its business, the violation of which would
have a Material Adverse Effect and neither the Company nor any
Subsidiary has received written notice that any such violation is
being alleged.
3.16 Insurance Business.
(a) Except as disclosed in Schedule 3.16 and except with
respect to terms specifically negotiated with policyholders, all
policies of insurance issued by the Company as now in force are, to
the extent required under applicable law, on forms which have been
approved by applicable insurance regulatory authorities or which
have been filed and not objected to by such authorities within the
period provided for objection. Any premium rates required to be
filed with or approved by insurance regulatory authorities have
been so filed and/or approved or are otherwise in compliance with
existing law and premium rates established by the Company conform
thereto.
(b) Seller has furnished to Buyer a list of all written
contracts between the Company or any of its Subsidiaries and its
agents, managing general agents or brokers ("Agency Agreements").
Attached to Schedule 3.16 is a copy of the Company's and each of
its Subsidiaries' standard agency agreement, including copies of
all schedules and exhibits customarily attached thereto and made a
part of such Agency Agreements. Each of the Agency Agreements is
valid, binding and in full force and effect in accordance with its
terms, assuming no default by any such agent, manager or broker
under any such contract or agreement and except for such contracts
the failure of which to be valid, binding and in full force and
effect would not have a Material Adverse Effect. Neither the
Company nor any Subsidiary is in default in any material respect
with respect to any such contract or other agreement (described in
the preceding sentence including the exception) and no such
contract or other agreement contains any provision providing that
the other party thereto may terminate the same by reason of the
transactions contemplated by this Agreement or any other provision
which would be altered or otherwise become applicable solely by
reason of such transactions.
3.17 Regulatory Filings. Seller will make, or has made,
available for inspection by the Buyer all material registrations,
filings or submissions made with respect to the Company and each of
its Subsidiaries with any governmental or regulatory body and each
and every Annual Convention Statement and Quarterly Convention
Statement filed with or submitted to any state governmental or
insurance regulatory body and any reports of examinations issued by
any such state governmental or insurance regulatory body since
December 31, 1990. Each of the Company and its Subsidiaries has
filed all reports, statements, documents, registrations, filings or
submissions required to be filed by it with any governmental or
regulatory body, except where failure to so file would not have a
Material Adverse Effect and except (i) those with respect to which
the imposition, levy or collection of all fines, penalties,
assessments, Taxes, forfeitures, money judgments or sanctions of
any type are barred by the applicable statute of limitations, and
(ii) as otherwise agreed to in writing by the applicable
governmental or regulatory body. Except as indicated on Schedule
3.17, (x) all such registrations, filings and submissions were in
material compliance with applicable law when filed, and (y) no
material deficiencies have been asserted by any such governmental
or regulatory agency with respect to such registrations, filings or
submissions that have not been remedied or otherwise satisfied.
3.18 Powers of Attorney, Guarantees. Schedule 3.18 lists all
powers of attorney currently in effect that the Company or any of
its Subsidiaries has granted and the Company or any of its
Subsidiaries has received. Except as set forth in Schedule 3.18,
neither the Company nor any Subsidiary has any obligation to act
under any outstanding power of attorney or any obligation or
liability, either actual, accrued, accruing or contingent, as
guarantor, surety, co-signer, endorser, co-maker or indemnitor in
respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity (other
than for purposes of collection in the ordinary course of its
business and other than with respect to reinsurance assumed in the
ordinary course of its business.)
3.19 Permits. Except as set forth in Schedule 3.19, the Company
and each of its Subsidiaries has obtained all Permits that
are necessary for the ownership and conduct of the business of the
Company and each of its Subsidiaries as presently conducted; such
Permits are in full force and effect and are sufficient for the
ownership and conduct of such business; no violations are or have
been recorded by the entity that issued the Permit in respect of
any such Permit; and no proceeding is pending or, to the Seller's
Knowledge, threatened, to suspend, revoke or limit any such Permit.
3.20 Contracts.
(a) Schedule 3.20 sets forth as of the date of this
Agreement all material written contracts (excluding insurance
policies and reinsurance and coinsurance treaties and agreements,
contracts relating to investments, contracts for the sale of any
asset in the ordinary course of business and contracts referred to
in Sections 3.13, 3.16(b) and 3.24) to which the Company or any of
its Subsidiaries is a party or by or to which they or their assets
or properties are bound or subject including the following:
(i) other than insurance commission arrangements
as set forth in the attachments to Schedule
3.16 and pursuant to Plans described on
Schedule 3.11, contracts and other agreements
with any current or former officer, director,
employee, consultant, agent or other
representative having more than six (6) months
to run from the date hereof or providing for
an obligation to pay and/or accrue
compensation of $100,000 or more per annum, or
providing for the payment of fees or other
consideration in excess of $100,000 in the
aggregate to any officer or director of the
Company or any Subsidiary or to any other
entity in which any such person has an
interest;
union or association representing any
employee;
(iii) contracts and other agreements for the
purchase, lease or sale of equipment or
services for a price in excess of $100,000 in
any one case (or in the aggregate, in the case
of any related series of contracts, or other
agreements) that contain an escalation,
renegotiation or redetermination clause or
that can be canceled without liability,
premium or penalty only on ninety (90) days'
or more notice;
(iv) contracts and other agreements for the sale of
any of its assets or properties or for the
acquisition of any operating business of, or
the disposition of any operating business by,
any other person, other than in the ordinary
course of business and for a sale price
exceeding $100,000 in any one case (or in the
aggregate, in the case of any related series
of contracts or other agreements) or for the
grant to any person of any preferential rights
to purchase any of its assets or properties,
in each case other than contracts or other
agreements relating to investments;
(v) contracts and other agreements for the
purchase or lease of real property calling for
an aggregate purchase price or payments in any
one year of more than $100,000 in any one case
(or in the aggregate, in the case of any
related series of contracts and other
agreements), other than contracts or other
agreements relating to investments;
(vi) except as contemplated by this Agreement,
executory contracts relating to the
disposition or acquisition of any investment
or of any interest in any person if such
investment or interest has a book value of, or
the disposition or acquisition price of such
investment or interest is $100,000 or more;
(vii) joint venture agreements;
(viii) contracts or other agreements, other than in
the ordinary course of business or in amounts
not in excess of $100,000, under which any of
the Company or its Subsidiaries agrees to
indemnify any party or to share Tax liability
of any party;
(ix) contracts and other agreements containing
covenants of the Company or any Subsidiary not
to compete in any line of business or with any
person in any geographical area or covenants
of any other person not to compete with the
Company or any Subsidiary in any line of
business or in any geographical area;
(x) except for ordinary premium financing and
agents' credits, contracts and other
agreements relating to the making of any loan
by the Company or any Subsidiary in excess of
$100,000 in any one case;
(xi) contracts and other agreements relating to the
borrowing of money in excess of $100,000 by
the Company or any Subsidiary, or the direct
or indirect guaranty (by means of the
extension of a letter of credit or otherwise)
by the Company or any Subsidiary of any
obligation for, or an agreement by the Company
or any Subsidiary to service the repayment of
any borrowing in excess of $100,000 or any
other contingent obligations in respect of
indebtedness in excess of $100,000 of any
other person or governmental or regulatory
agency, including without limitation, (a) any
such agreement or arrangement relating to the
maintenance of compensating balances, (b) any
such agreement or arrangement with respect to
lines of credit, (c) any such agreement to
advance or supply funds to any other person
other than in the ordinary course of business,
(d) any such agreement to pay for property,
products or services of any other person even
if such property, products or services are not
conveyed, delivered or rendered, (e) any such
agreement relating to obligations to keep
well, make whole or maintain working capital
or earnings or any similar agreement, and (f)
any such agreement containing a guaranty with
respect to any lease or other agreement
containing similar periodic payments to be
made by any such person; and
(xii) Affiliate Agreements and agreements between
the Company or any Subsidiary on the one hand
and Lumbermens or any of its Affiliates on the
other hand.
(b) There have been delivered or made available to the Buyer
true and complete copies of all of the contracts and other
agreements set forth on Schedule 3.20 or on any other Schedule. To
the extent that such contracts and agreements are individually or
in the aggregate material to the business, properties, assets,
operations, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole,
and assuming that no party thereto other than the Company or a
Subsidiary is in default thereunder, each such contract and other
agreement is valid, in full force and effect and binding upon the
Company or its Subsidiaries as the case may be in accordance with
its terms, and neither the Company nor any Subsidiary, as the case
may be, is in default in any material respect under any of them.
For purposes of this Section 3.20, a contract is material if
the Company's or any of its Subsidiaries' liability thereunder for
any calendar year is one hundred thousand dollars ($100,000) or
more.
3.21 No Material Adverse Change. Except as set forth in
Schedule 3.21 or otherwise disclosed in any other Schedule hereto,
since December 31, 1992, there has been no material adverse change
in the properties, business or operations of the Company or any of
its Subsidiaries, except as is or will be reflected in any of the
Quarterly Convention Statements which have been or will be provided
to Buyer pursuant to Section 5.5 herein or which is the result of
events, conditions or circumstances beyond the control of the
Company or any of its Subsidiaries.
3.22 Reinsurance and Coinsurance. Schedule 3.22 sets forth
a list of all reinsurance treaties or agreements to which the
Company or any of its Subsidiaries is a party or is a named
reinsured. Except as indicated on Schedule 3.22, all such treaties
or agreements as set forth in such Schedule are in full force and
effect. None of the Company, any of its Subsidiaries, or, to the
Seller's Knowledge, any other party to any agreement listed in
Schedule 3.22 is in default thereunder in any material respect
except as indicated on Schedule 3.22 and all such treaties or
agreements as set forth in such Schedule are in full force and
effect; no such agreement contains any provision providing that the
other party thereto may terminate such agreement by reason of the
transactions contemplated by this Agreement.
3.23 Insurance. Schedule 3.23 sets forth a list and brief
description (specifying the insurer and the policy number or
covering note number with respect to binders, describing each
pending claim thereunder of more than $50,000 (or in the case of
policies of workers' compensation, more than $100,000) and
identifying the aggregate amounts paid out under each policy since
January 1, 1989 through the date hereof and the aggregate limit, if
any, of the insurer's liability thereunder) of all policies or
binders of fire, liability, product liability, workers'
compensation, vehicular and other insurance covering the Company or
any of its Subsidiaries, other than (a) reinsurance treaties and
agreements listed on Schedule 3.22 and (b) policies in respect of
which the Company or any of its Subsidiaries is an insured
mortgagee or lessor. Such policies and binders are, to the
Seller's Knowledge, valid and enforceable in accordance with their
respective terms and are in full force and effect, and insure
against risks and liabilities to the extent and in the manner
deemed appropriate and sufficient by the Company and each
Subsidiary.
3.24 Operations of the Company. Except as set forth in
Schedule 3.24, since December 31, 1992, neither the Company nor any
of its Subsidiaries has:
(a) amended its articles or certificate of
incorporation, by-laws or other constitutive
documents or merged with or into or consolidated
with any other person, subdivided or in any way
reclassified any shares of its capital stock or
changed or agreed to change in any manner the
rights of its outstanding capital stock; or
issued, or committed itself to issue, any shares
of capital stock or obligations or securities
convertible into or exchangeable for shares of
capital stock, except for issuances or commitments
by any Subsidiary to issue any such securities to
the Company or any wholly owned Subsidiary;
(b) except for this Agreement, issued or sold or
purchased, or issued options or rights to
subscribe to, or entered into any contracts or
commitments to issue or sell or purchase, any
shares of its capital stock or any of its bonds,
notes, debentures or other evidences of
indebtedness;
(c) except in the ordinary course of business,
incurred any indebtedness for borrowed money or
incurred or assumed any other liability (other
than liabilities to policyholders under policies
of insurance issued by the Company or any of its
Subsidiaries and for reinsurance or coinsurance
treaties and agreements of the type described on
Schedule 3.22), in excess of one hundred thousand
dollars ($100,000) in each case;
(d) except as otherwise provided in this Agreement,
declared or paid any dividends or declared or made
any other distributions of any kind to its
shareholders or made any direct or indirect
redemption, retirement, purchase or other
acquisition of any shares of its capital stock;
(e) except as required by law or statutory accounting
principles or as otherwise disclosed to Buyer,
made any change in its accounting methods or
practices including, without limitation, any
change with respect to establishment of reserves
for unearned premiums, losses (including incurred
but not reported losses) and loss adjustment
expenses or made any change in depreciation or
amortization policies or rates adopted by it;
(f) entered into any lease (as lessor or lessee) under
which the Company or any of its Subsidiaries would
be obligated to make or would receive payments in
any one year of one hundred thousand dollars
($100,000) or more; sold, abandoned or made any
other disposition of any of its assets or
properties having a fair market value of one
hundred thousand dollars ($100,000) or more,
excluding investment assets; granted or suffered
any material Lien on any of its assets other than
Liens excepted in Section 3.12; entered into or
amended any contract to which it is a party, or by
or to which it or its assets or properties are
bound or subject which if existing on the date
hereof would need to be disclosed on
Schedule 3.20;
(g) made any acquisition of all or a substantial part
of the assets, properties, securities or business
of any other person;
(h) terminated or failed to renew, or received any
written threat (that was not subsequently
withdrawn) to terminate or fail to renew, any
contract relating to the assets, liabilities,
business, operations, financial condition or
results of operations of the Company or any of its
Subsidiaries, except where such termination or
failure to renew would not have a Material Adverse
Effect;
(i) sold, assigned or transferred any of the assets
(including any portion of the investment
portfolio) of the Company or any Subsidiary, which
is material, individually or in the aggregate
(other than sales, assignments or transfers of
assets to parties other than Lumbermens, or
Affiliates of Lumbermens or of the Company, in the
ordinary course of business and consistent with
past practice or as permitted under Section 5.8
hereof);
(j) entered into or amended any agreement with any
labor union or association representing any
employee, or except for Plans referred to on
Schedule 3.11, made any wage or salary increase or
bonus, or increase in any other direct or indirect
compensation, for or to any of its officers,
directors, employees, consultants, agents or other
representatives, or commitment or agreement to
make or pay the same, other than to persons who
are not its officers, directors or shareholders
made in the ordinary course of business;
(k) made any loan or advance to its shareholders or to
any of its directors, officers or employees,
consultants, agents or other representatives
(other than advances made in the ordinary course
of business), or made any other loan or advance,
otherwise than in the ordinary course of business;
(l) paid, directly or indirectly, any of its material
liabilities before the same became due in
accordance with its terms or otherwise than in the
ordinary course of business; or
(m) conducted its business in any manner other than
the ordinary course except as contemplated in this
Agreement, including the Schedules hereto.
3.25 State Security Deposits. Schedule 3.25 sets forth a
true, correct and complete list of all securities deposited with
state insurance departments and other regulatory authorities, which
Schedule is completed in accordance with the instructions relative
to the Schedule of Deposits appearing in the Company's December 31,
1992 Annual Convention Statement.
3.26 Loss Reserves. Except as set forth in Schedule 3.26,
the Loss Reserves set forth in the December 31, 1992 Annual
Convention Statement and the March 31, June 30, and September 30,
1993 Quarterly Convention Statements and in any subsequent
Quarterly Convention Statements provided to the Buyer after the
date hereof and prior to the Closing Date were or will be
determined in accordance with generally accepted actuarial
standards and principles applied by the Company on a basis
consistent with prior periods. Except as disclosed in Schedule
3.26, the Loss Reserves set forth in the Company's September 30,
1993 Quarterly Convention Statement, (the "Closing Loss Reserves"),
make or will, in accordance with generally accepted actuarial
standards, make good and sufficient provision for the settlement of
the total amount of all liabilities and obligations incurred by the
Company through September 30, 1993 under all insurance and
reinsurance contracts pursuant to which the Company has any
liability or obligation.
3.27 Real Estate. Schedule 3.27 sets forth a list and
summary description of (a) all real property owned by the Company
and the Subsidiaries and all buildings located on such real
property, other than real property acquired through salvage or
subrogation; and (b)(i) all material leases, subleases or other
agreements under which the Company or any Subsidiary is lessor of
any real property; (ii) all material options held by the Company or
any Subsidiary or material contractual obligations on their part to
purchase or acquire any interest in real property; and (iii) all
material options granted by the Company or any Subsidiary or
material contractual obligations on their part to sell or dispose
of any interest in real property. The Company or a Subsidiary (as
indicated on Schedule 3.27) is the owner of record or beneficial
owner, or lessor under the leases or holder of the options (except
those set forth in response to item (b) (iii)), as the case may be,
of each of the items set forth in Schedule 3.27. Except as set
forth on Schedule 3.27, to Seller's Knowledge, neither the Company
nor any Subsidiary is in default under such leases, subleases and
other agreements and neither the Company nor any Subsidiary has
received any notice of any default thereunder, and each of the
options set forth on Schedule 3.27 is in full force and effect.
3.28 Intangible Property and Computer Software. The Company
and each Subsidiary owns (or owned), has (or had) registered or has
(or had) valid rights to use such trademarks, trade names,
copyrights and computer software as are (or were) necessary for the
conduct of their respective businesses as now being (or as
previously) conducted. To the Knowledge of the Seller, neither the
Seller, the Company nor any Subsidiary has received notice, and
neither the Seller, the Company nor any Subsidiary has reason to
believe, that the Company or any Subsidiary does (or did) not own,
have registered or have valid rights to use any such computer
software, trademark, trade name registration, copyright or any
application pending therefor as are (or were) necessary for the
conduct of their respective businesses as now being (or as
previously) conducted.
3.29 Liens. Except as set forth in Schedule 3.29, each of
the Company and its Subsidiaries owns outright and has good title
to all of its material assets and properties, including, without
limitation, all of the assets and properties reflected in the
Company's 1992 Annual Convention Statement, and all assets and
properties acquired after December 31, 1992, which would be listed
in the Company's Annual Convention Statement if an Annual
Convention Statement were prepared as of the date of this
Agreement, in each case free and clear of any Lien except as
otherwise reflected therein and except for (i) assets and
properties disposed of, or subject to purchase or sales orders, in
the ordinary course of business since December 31, 1992, or
pursuant to contracts and other agreements listed on Schedule 3.20
or Liens listed on Schedule 3.27; (ii) Liens securing Taxes,
assessments, governmental charges or levies, or the claims of
materialmen, carriers, landlords and like persons, all of which are
not yet due and payable or which are being contested in good faith;
(iii) Liens of a character that do not substantially impair the
assets or properties of the Company or any Subsidiary or detract
materially from their respective businesses which impairment or
detraction would have a Material Adverse Effect; (iv) leases to
third parties of real property beneficially owned by the Company or
any Subsidiary; (v) assets disposed of in accordance with this
Agreement; or (vi) assets on deposit with States as disclosed on
Schedule 3.25.
3.30 Employee Relations. Schedule 3.30 describes the status
of all union organizing efforts which, to the Seller's Knowledge,
have been conducted within the last five years or are now being
conducted. Neither the Company nor any Subsidiary has at any time
during the last five years had, nor is there now threatened, a
strike, picket, work stoppage, work slowdown, or other similar
labor unrest involving a group or groups of employees.
3.31 Officers, Directors and Key Employees. Schedule 3.31
sets forth (i) the name and total compensation of each officer and
director of the Company and each Subsidiary (except that for those
directors and officers who are also officers of the Seller
information regarding compensation is not provided) and of each
other employee of the Company and each Subsidiary whose total
compensation exceeds $50,000.00 per year; (ii) all bonuses received
by such persons since December 31, 1992, and any accrual for such
bonuses; and (iii) all commitments or agreements by the Company and
each Subsidiary to increase the compensation or to modify the
conditions or terms of employment of any of their respective
officers or directors, or employees whose total compensation
exceeds $50,000 per year.
3.32 Accounting Practices. Except as set forth on Schedule
3.32, since December 31, 1992, in the preparation of the Company
Financial Statements and the Annual and Quarterly Convention
Statements, the Company has not made any change in its accounting
methods, practices or policies, including, without limitation, any
change with respect to establishment of reserves for unearned
premiums, losses (including incurred but not reported losses) and
loss adjustment expenses, or made any change in depreciation or
amortization policies or rates adopted by it, except as required by
law, generally accepted accounting principles or statutory
accounting principles.
3.33 Agents. Except as set forth on Schedules 3.10 or 3.33
hereto, or as separately set forth in writing by the Seller to the
Buyer, the Company has not received any notification in writing by
its agents threatening litigation or termination of their agency
agreements with the Company or its Subsidiaries. No insurance
agent or group of related agents accounted for more than two
percent of the gross premium income of the Company and the
Subsidiaries combined for the year ended December 31, 1992.
3.34 Liabilities Other than Loss Reserves. Except as set
forth on Schedule 3.34, as of December 31, 1992, neither the
Company nor any Subsidiary had any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, of any kind other than Loss Reserves ("Non-Loss
Reserve Liabilities") required by statutory accounting principles
to be reflected or reserved against in a financial statement, which
would have a Material Adverse Effect that was not fully and
adequately reflected or reserved against on the Company's 1992
Annual Convention Statement. The Seller makes no representation or
warranty as to the adequacy of reinsurance recoverables except that
they have been prepared in accordance with statutory accounting
principles consistently applied with prior periods (except as
expressly set forth therein or required by a rule or regulation of
the Illinois Department of Insurance) and that they have not been
intentionally understated or overstated by the Company.
Program. The Securities Lending Program Agency Agreement between
the Company and Continental Bank N.A. has been terminated and no
loans of securities held in the Company's accounts are outstanding
pursuant to such securities lending program.
3.36 No Material Misrepresentations. To the Knowledge of the
Seller, no warranty or representation of the Seller on its own
behalf or with respect to the Company or any Subsidiary contained
in this Agreement, or documents furnished to Associated or the
Buyer by or for the account of Seller pursuant to this Agreement,
contains any untrue statement of a material fact, or omits to state
a material fact necessary to make the statement contained in such
warranty, representation, or documents in light of the
circumstances under which it was made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that, as of the date
hereof:
4.1 Organization, Standing and Authority of Buyer. Buyer is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite
corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder, to purchase, own
and hold the Shares and to consummate the transactions contemplated
hereby by Buyer.
4.2 Execution and Delivery. The execution, delivery and
performance of this Agreement by Buyer and the consummation by
Buyer of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been duly executed and delivered by
Buyer and constitutes the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally or by other equitable principles of
general application.
4.3 No Conflict or Violation. The execution, delivery and
performance of this Agreement and consummation of the transactions
contemplated hereby in accordance with the terms and conditions
hereof will not (i) violate any provision of the certificate of
incorporation, by-laws or other constitutive document of the Buyer;
(ii) violate, conflict with or result in the breach of any of the
terms of, otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any contract to which the Buyer is a
party or by or to which Buyer or any of Buyer's assets or
properties may be bound or subject, the impact of which would have
a Material Adverse Effect; or (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, or any
agreement with, or condition imposed by, any governmental or
regulatory body, foreign or domestic, binding upon the Buyer, which
violation would have a Material Adverse Effect.
4.4 No Defaults. Neither Buyer nor any subsidiary of Buyer
is in default under or in violation of, and no event has occurred
which with notice or lapse of time or both would constitute a
default under or violation of, its certificate of incorporation,
by-laws or other constitutive document, or any mortgage, note,
agreement, lease, license or other instrument or obligation to
which Buyer or any of its subsidiaries is a party or by which they
or any of their assets or properties are bound, or any judgment,
order, decree, ruling, injunction, franchise, license or permit,
which default or violation could have a material adverse effect on
the consummation of the transactions contemplated hereby.
4.5 Litigation. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or
regulatory body or arbitration tribunal against or involving Buyer,
or against or involving any of the directors, officers or employees
of the Buyer, which could materially adversely affect the validity
or enforceability of this Agreement, consummation by Buyer of the
transactions contemplated hereby or compliance with the terms
hereof by Buyer. There are no actions, suits or proceedings
pending or, to the Buyer's knowledge, threatened against, Buyer or
any of its subsidiaries, at law or in equity in any court, or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or other
instrumentality which, if adversely determined, would materially
adversely affect the validity or enforceability of this Agreement,
consummation by Buyer of the transactions contemplated hereby or
compliance with the terms hereof by Buyer.
4.6 Investment Purpose. The Shares to be acquired by Buyer
under the terms of this Agreement are being acquired for its own
account for the purpose of investment only and not with a view to
the public resale or public distribution of all or any part of the
Shares.
4.7 Brokers. Neither Buyer nor any party acting on its
behalf has paid or become obligated to pay any fee or commission to
any broker, finder or intermediary or financial adviser for or on
account of the transactions contemplated by this Agreement.
4.8 Annual and Quarterly Convention Statements. Buyer has
received from Seller copies of the Quarterly Convention Statements
for March 31, June 30, and September 30, 1993 and the Annual
Convention Statements of the Company for the years ended December
31, 1990, 1991 and 1992.
4.9 Disclosure. Buyer is a sophisticated investor and has
had full opportunity to make such investigation of the Company and
each of its Subsidiaries as it has deemed necessary or advisable to
make an informed decision regarding the transactions contemplated
hereby. The only representations and warranties that the Seller,
or any party acting as agent or otherwise on behalf of the Seller,
has made with respect to the Company or any of its Subsidiaries, or
their assets or otherwise in connection with the transactions
herein contemplated are those contained in this Agreement, the
Exhibits or Schedules hereto and the other writings specifically
referred to herein as delivered pursuant hereto. Except for the
representations and warranties of the Seller contained in this
Agreement, neither the Seller nor any agent or other party acting
on behalf of the Seller has made any representation or warranty to
the Buyer with respect to the financial condition of the Company
and its Subsidiaries or their prospects or the markets in which
they operate and neither the Seller nor any person acting on its
behalf has made any representation or warranty regarding the future
profitability of the Company or any of its Subsidiaries. To the
knowledge of the representatives of Buyer listed in Schedule 4.9
involved in review of the transactions contemplated herein, Buyer
is not aware of any facts or circumstances indicating that the
Seller is or may be in breach of any representation, warranty,
covenant or agreement contained in this Agreement.
4.10 Consents and Approvals. The execution and delivery by
the Buyer of this Agreement, the performance by the Buyer of its
obligations hereunder and the consummation by the Buyer of the
transactions contemplated hereby do not require any consent,
approval or action of, or any filing with or any notice to, any
corporation, person or firm or any public, governmental or judicial
authority except (a) as set forth in Schedule 3.14; and (b) those
which, if not obtained, would not have either a Material Adverse
Effect, or a material adverse effect on the transactions
contemplated hereby.
4.11 Financing. Buyer will have the funds immediately
available to it required to pay the Purchase Price referred to in
Section 2.2 and to consummate the transactions contemplated hereby.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF ASSOCIATED
Associated represents and warrants to Seller as follows:
4A.1 Organization, Standing and Authority of Associated.
Associated is a corporation duly organized, validly existing and in
good standing under the laws of the State of Indiana, and has all
requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby by Associated.
4A.2 Execution and Delivery by Associated. The execution,
delivery and performance of this Agreement by Associated and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the
part of Associated. This Agreement has been duly executed and
delivered by Associated and constitutes the valid and binding
obligation of Associated, enforceable against Associated in
accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by other
equitable principles of general application.
4A.3 No Conflict or Violation. The execution, delivery and
performance of this Agreement and consummation of the transactions
contemplated hereby in accordance with the terms and conditions
hereof will not (i) violate any provision of the certificate of
incorporation, by-laws or other constitutive document of
Associated; or (ii) violate, conflict with or result in the breach
of any of the terms of, otherwise give any other contracting party
the right to terminate, or constitute (or with notice or lapse of
time or both constitute) a default under, any contract to which
Associated is a party or by or to which Associated or any of
Associated's assets or properties may be bound or subject, the
impact of which would have a Material Adverse Effect; or (iii)
violate any order, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body against, or
binding upon, or any agreement with, or condition imposed by, any
governmental or regulatory body, foreign or domestic, binding upon
Associated, which violation would have a Material Adverse Effect.
ARTICLE V
AGREEMENTS PENDING THE CLOSING
Except as otherwise consented to in writing by Buyer prior to
the Closing Date, the following provisions shall apply until the
Closing Date:
5.1 Regular Course of Business of the Company. Except as
otherwise permitted or required by this Agreement, Seller shall
cause the Company and each of its Subsidiaries (a) to carry on
their businesses substantially in the same manner as heretofore
conducted and (b) to take no action, other than in the ordinary
course of business, that would bring about a termination or
amendment of any material contract to which the Company or any of
its Subsidiaries is a party and which is currently in force.
5.2 [Intentionally Omitted]
5.3 Pre-Closing Activities of the Company. Except as
otherwise permitted or required by this Agreement or disclosed on
Schedule 5.3 hereto, on or after the date hereof and prior to the
Closing Date, the Seller shall not take any action to cause the
Company or any of its Subsidiaries and shall not permit the Company
or any of its Subsidiaries to:
(a) create, authorize, issue, sell or deliver any of its
capital stock, bonds or other of its securities (whether authorized
and unissued or held in treasury) or any instrument convertible
into any of them, or grant or otherwise issue any options, warrants
or other rights with respect thereto, or split up, combine or
reclassify any of its outstanding stock or enter into any contract
or commitment to do any of the foregoing;
(b) other than in the ordinary course of business, incur,
assume, guarantee or otherwise become liable with respect to any
indebtedness for money borrowed, or make any payment with respect
to any obligation for money borrowed before such payment is due
except as may be necessary, due to possible transmittal delays, to
assure itself that payment will be timely made;
(c) declare or make any payment or distribution to its
shareholders in stock or purchase, redeem or otherwise acquire any
shares of its capital stock;
(d) other than in the ordinary course of business or as
required under any existing contract, make any payment to Seller,
Lumbermens or any Affiliate of Seller or of Lumbermens or forgive
any indebtedness due or owing from Seller, Lumbermens or any
Affiliate of Seller or of Lumbermens to the Company or any of its
Subsidiaries; provided, however, that the offset of credits and
debits is hereby deemed not to be the forgiveness of indebtedness;
(e) sell, assign, transfer or otherwise dispose of, or
pledge, mortgage or otherwise encumber, any material part of its
assets;
(f) amend its articles or certificate of incorporation, by-
laws or other constitutive documents or take any action with
respect to any such amendment;
(g) make any capital expenditures, capital additions or
capital improvements other than those necessary to conduct business
in the ordinary course;
(h) enter into any collective bargaining agreement;
(i) merge or consolidate with any other corporation or
acquire or agree to acquire any stock or substantially all of the
assets of any other person, firm, association, corporation or other
business organization; or
(j) materially change its overall pricing of insurance
premiums on contracts of insurance sold by the Company except for
any premium increases reflected in filings made with state
insurance departments; or
(k) without the consent of the Buyer, terminate, modify,
whether or not in the ordinary course of business, or replace any
Affiliate Agreements or any agreements between the Company or any
Subsidiary on the one hand and Lumbermens or any of its Affiliates
on the other hand. Notwithstanding the foregoing, Seller and Buyer
agree that the following Affiliate Agreements will be terminated on
or prior to the Closing Date:
(i) except as listed on Schedule 5.3 hereto,
reinsurance contracts of the Company or any of
its Subsidiaries with Seller or any Affiliate
of Seller;
(ii) except as listed on Schedule 5.3 hereto,
policies of insurance and fidelity bonds
issued to or covering the Company or any of
its Subsidiaries and issued by, or where
coverage is provided through, Seller or any
Affiliate of Seller; and
(iii) contracts of the Company or any of its
Subsidiaries with Kemper Financial Services,
Inc., a Delaware corporation ("KFS"), relating
to investment management services provided to
the Company or any of its Subsidiaries by KFS.
5.4 Corporate Examinations and Investigations.
(a) Prior to the Closing Date, the Buyer shall be entitled,
through its employees and representatives, to make such
investigation of the assets, liabilities, properties, business and
operations of the Company and each of its Subsidiaries, and such
examination of the books, records and financial condition of the
Company and each of its Subsidiaries as the Buyer wishes. Any such
investigation and examination shall be conducted at reasonable
times and under reasonable circumstances so as not to interfere
with the smooth operation of the Company, each of its Subsidiaries
and Seller, and the Company, each of its Subsidiaries and the
Seller shall cooperate fully therein. In order that the Buyer may
have full opportunity to make such business, accounting and legal
review, examination or investigation as it may wish of the business
and affairs of the Company and each of its Subsidiaries, the Seller
shall furnish and shall cause the Company and each of its
Subsidiaries to furnish the representatives of the Buyer during
such period with access to all such information and documents
concerning the affairs of the Company and each of its Subsidiaries
as such representatives may reasonably request and shall cause its
officers, employees, consultants, agents, accountants and attorneys
to cooperate fully with such representatives in connection with
such review and examination. The Buyer shall promptly notify the
Seller of any event, condition or circumstance discovered during
its investigation of the Company, any of its Subsidiaries or Seller
that could constitute a violation or breach of this Agreement by
the Seller.
(b) Prior to the Closing, Buyer, for itself, and its
Affiliates, directors, officers, employees, agents, representatives
and partners, if any, (collectively, the "Buyer's Representatives")
agrees that they will use all information relating to the Seller,
the Company and each of its Subsidiaries acquired by them pursuant
to the provisions of this Agreement or in the course of
negotiations with the Seller or examination of the Company or any
of its Subsidiaries only in connection with the transactions
contemplated hereby and shall cause all information obtained by
them pursuant to this Agreement and such negotiations and
examinations, which is not publicly available, to be treated as
confidential. In the event of termination of this Agreement, the
Buyer and the Buyer's Representatives will cause to be delivered to
the Seller all documents, work papers and other material obtained
by them from the Seller, the Company or any of its Subsidiaries and
all copies thereof, whether so obtained before or after the
execution of this Agreement, and Buyer and Buyer's Representatives
agree that they shall not use or disclose, directly or indirectly,
any information relating to the Seller, the Company or any of its
Subsidiaries acquired by them pursuant to the provisions of this
Agreement or in the course of negotiations with the Seller or
examination of the Company or any of its Subsidiaries, and will
have all such information kept confidential. All information
relating to the Seller, the Company and each of its Subsidiaries
acquired by the Buyer and the Buyer's Representatives pursuant to
the provisions of this Agreement or in the course of negotiations
with or examination of the Seller, the Company or any of its
Subsidiaries shall be deemed to be confidential information under
and shall be subject to the terms and provisions of the
Confidentiality Agreement dated December 16, 1992 between the
Seller and Associated (the "Confidentiality Agreement"), which
shall survive beyond the execution of this Agreement and shall
remain in full force and effect until the Closing or in the event
of termination of this Agreement, shall survive in accordance with
its terms.
5.5 Additional Financial Information. As soon as reasonably
practicable after they become available, the Seller shall furnish
to the Buyer the Quarterly Convention Statements of the Company for
all interim quarterly periods subsequent to December 31, 1992,
prior to the Closing Date. The financial statements included in
the Quarterly Convention Statements referred to above will present
the financial position and results of operations of the Company as
at such dates and for such periods (subject, in the case of
financial statements for interim periods, to year-end adjustments
consisting only of normal recurring accruals), in accordance with
such statutory accounting principles applied on a consistent basis
(except as set forth in Schedule 3.7, or as expressly set forth in
such Quarterly Convention Statements or required in a rule or
regulation of the Illinois Department of Insurance), and the
schedules thereto, when considered in relation to the statutory
financial statements included therein, will present fairly in all
material respects the information shown therein.
5.6 Supplements to Schedules. The Seller may at any time,
or from time to time after the date hereof, but not later than two
(2) Business Days prior to the Closing Date, supplement or amend
the Schedules required by ARTICLE III, or otherwise herein, with
respect to any matter which arises or becomes known to Seller after
the date hereof and which, if existing or occurring at the date
hereof, would have been required to be set forth or described in
such Schedules. No supplement or amendment to such Schedules shall
have any effect on the determination whether any conditions set
forth in ARTICLE VIII hereof are satisfied.
5.7 Notices. The Seller shall give prompt notice to the
Buyer of (i) any notice of, or other communication relating to, a
default or event which with notice or lapse of time or both would
become a default, received by the Company or any of its
Subsidiaries subsequent to the date of this Agreement and prior to
the Closing, under their articles or certificates of incorporation,
by-laws or other constitutive documents or any material contract to
which the Company or any of its Subsidiaries is a party, (ii) any
notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection
with the transactions contemplated hereby, and (iii) any matter
which, if it had occurred prior to the date hereof, would have been
required to be included on one or more of the Schedules to this
Agreement or would have made any representation herein materially
false or misleading.
5.8 Modification of Investment Portfolio. On or before the
Closing, Seller agrees to cause the Company to dispose of those
securities in the Company's investment portfolio set forth in
Schedule 5.8. Notwithstanding anything else to the contrary,
Seller may cause the Company to dispose of any other securities in
the Company's investment portfolio (other than the capital stock of
the Subsidiaries) prior to the Closing; provided, however, that
without the consent of Buyer, the Company will not sell any
investment security maturing in more than six months from the
proposed date of sale of the security. Any proceeds from any
disposition of securities hereunder shall be used to purchase
United States Treasury obligations. All such investments shall be
made in fully taxable, publicly-traded, United States dollar
denominated obligations which mature in five years or less.
Notwithstanding anything to the contrary (except as provided in
Section 12.5(d)), any dispositions contemplated hereunder shall not
give Buyer or Company any right to indemnification whether
hereunder or otherwise, and any Loss or Expense resulting from the
dispositions contemplated hereunder shall not be included in the
Basket in Section 11.1.
5.9 Dividends. Notwithstanding anything herein to the
contrary, on or before the Closing Date Seller will cause the
Company to declare and pay dividends to Seller from time to time on
or before the Closing Date (i) in the form of all the issued and
outstanding shares of Centre Reinsurance Holdings Limited owned by
the Company and the 7.375% municipal bonds of D.C. LaSalle due
September 1, 2021 (the "Bonds") reflected in the 1992 Annual
Convention Statement or acquired by the Company during 1993 (the
"In-Kind Dividend") and (ii) in cash or other property, provided
that the dividends paid under this subparagraph (ii) shall not
exceed Five Million Dollars ($5,000,000). The amount of the In-
Kind Dividend referred to in (i) above shall be $4,804,745.00,
which is the 1992 Annual Convention Statement carrying value of the
Centre Reinsurance Holdings Limited shares and the Bonds held as of
such date, plus the acquisition cost of the Bonds acquired by the
Company during 1993.
ARTICLE VI
COVENANTS OF SELLER
6.1 State Insurance and Other Regulatory Approvals.
(a) Seller shall cooperate reasonably, and shall cause the
Company and each of its Subsidiaries to cooperate reasonably, with
the Buyer in obtaining all Required Approvals; and
(b) Seller shall provide, and shall cause the Company and
each of its Subsidiaries to provide, such information and
communications to governmental and regulatory authorities,
including, but not limited to, insurance regulatory authorities in
Illinois and Indiana, as such regulatory authorities request or
Buyer reasonably requests.
6.2 Hart-Scott-Rodino Filings. Seller shall promptly make
the filings required under Section 7A of the Clayton Act (Title II
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976) and
the rules of the Federal Trade Commission thereunder (collectively,
the "H-S-R Act") and comply at the earliest practicable date with
any request for additional information received by it from the
Federal Trade Commission (the "FTC") or the Antitrust Division of
the Department of Justice ("Justice") pursuant to the H-S-R Act and
shall use all reasonable efforts to assist Buyer in making such
required filings. Seller shall request early termination of the
applicable waiting period under the H-S-R Act.
6.3 Non-Solicitation. Following the Closing, Seller agrees
not to solicit and shall cause its Subsidiaries not to solicit any
senior management employees to leave employment with the Company or
any Subsidiary, as the case may be, for a period of three years.
This Section shall not apply to any senior management employees to
whom employment is not offered or continued by the Company or the
Buyer during such three year period.
6.4 Continued Effectiveness of Representations and
Warranties of the Seller.
(a) From the date hereof through the Closing Date, the
Seller shall use, and the Seller shall cause the Company and each
Subsidiary to use, their respective best efforts to conduct their
affairs in such a manner so that, except as otherwise contemplated
or permitted by this Agreement, the representations and warranties
contained in Article III shall continue to be true and correct in
all material respects on and as of the Closing Date except as they
relate to a specific date or period as if made on and as of the
Closing Date; provided, however, that this covenant shall not
obligate any of the Seller, the Company or its Subsidiaries to
incur any financial or other obligations that are commercially
unreasonable under the circumstances, either in terms of human or
monetary resources or time required to correct the deficiencies.
It is expressly agreed that in no event shall any of the Seller,
the Company or its Subsidiaries be required to incur costs or
expenses in excess of One Million Five Hundred Thousand Dollars
($1,500,000) for any single deficiency or in excess of Three
Million Five Hundred Thousand Dollars ($3,500,000) in the aggregate
to correct any deficiencies hereunder.
(b) From the date hereof through the Closing Date, the
Seller shall promptly notify the Buyer of any event, condition,
fact or circumstance which comes to the Knowledge of the Seller
from the date hereof through the Closing Date that would constitute
a material violation or breach of this Agreement by the Seller, or
a material inaccuracy in any representation made by the Seller in
this Agreement.
6.5 Pre-Closing Maintenance of Insurance. From the date
hereof through the Closing Date, the Seller shall cause the Company
to maintain in force (including necessary renewals thereof) the
insurance policies listed on Schedule 3.23, except to the extent
that they may be replaced with materially equivalent policies
appropriate to insure the assets, properties and business of the
Company and the Subsidiaries to the same extent as currently
insured; provided, however, that the Seller shall cause the Company
to provide a copy or other confirmation of any such replacement
policies to the Buyer on or prior to the Closing Date.
6.6 Litigation.
(a) From the date hereof through the Closing Date, the
Seller shall notify the Buyer promptly of any actions or
proceedings of the type required to be described in Schedule 3.10
that from the date hereof are known by the Seller to be threatened
or commenced against the Company or any Subsidiary or against any
officer, director or employee (in his or her capacity as such) or
any properties or assets of the Company or any Subsidiary with
respect to its affairs, and of any requests for additional
information or documentary materials by any governmental or
regulatory body in connection with the transactions contemplated
hereby.
(b) The Company will notify the Buyer of the receipt by any
Senior Officers of the Company after due inquiry of any claim
against the Company in excess of One Hundred Thousand Dollars
($100,000) other than claims made under any policy of insurance
written by the Company.
6.7 Acquisition Proposals. Except as contemplated by this
Agreement, from the date hereof through the Closing Date, neither
the Seller nor any of its subsidiaries (including, without
limitation, the Company), nor any of their officers, directors,
affiliates, employees, representatives or agents, shall, directly
or indirectly, solicit, initiate or participate in any way in
discussions or negotiations with, or provide any information or
assistance to, or enter into any agreement with any person or group
of persons concerning any acquisition of the substantial equity
interest in, or in a merger, consolidation, liquidation,
dissolution, disposition of assets (other than in the ordinary
course of business) of the Company or any of the Subsidiaries or
any disposition of any of the Shares of the Company (each, an
"Acquisition Proposal"), or assist or participate in, facilitate or
encourage any effort or attempt by any other person to do or seek
to do any of the foregoing. The Seller shall promptly communicate
to the Buyer the terms of any Acquisition Proposal which it or any
such other person may receive.
6.8 Disposition of Affiliate Relationships. All Affiliate
Agreements, and all agreements between the Company or any
Subsidiary on the one hand and Lumbermens or any of its Affiliates
on the other hand, shall be terminated effective as of the Closing
Date except as may otherwise be provided on Schedule 6.8. Except
as provided on Schedule 6.8, all inter-Affiliate balances (except
balances for Taxes) shall be terminated by payment on or before the
Closing Date.
6.9 Certain Investments. Any cash flow of the Company and
its Subsidiaries which in the reasonable judgment of the senior
management of the Company is available for investment prior to the
Closing Date, whether from sales of securities or otherwise, shall
to the extent reinvested, be used to purchase United States
Treasury obligations. All such investments shall be made in fully
taxable, publicly-traded, United States dollar denominated
obligations which mature in five years or less. Without the
consent of the Buyer, the Company will not sell any investment
security maturing in more than six months from the proposed date of
sale of the security.
6.10 Continuation of Certain Insurance. The Seller covenants
and agrees to cause the Company and the Subsidiaries to complete
and execute such applications as may be reasonably necessary for
the Buyer to arrange for the continuation or replacement of
insurance at the Buyer's or the Company's expense for periods after
the Closing Date.
6.11 Instruments. Any monies, checks, drafts, money orders,
postal notes and other instruments received after the Closing Date
by the Seller or any of its Affiliates in payment of any amounts
due the Company or any Subsidiary shall be forthwith after receipt
by the Seller or any such Affiliate transferred and delivered by
the Seller or any such Affiliate to the Buyer for the benefit of
the Company or any Subsidiary, or any of their Affiliates, as the
case may be, and any such instruments made payable to the Seller or
any such Affiliate when so delivered shall bear all endorsements
required to effectuate the transfer of the same to the Company or
the appropriate Subsidiary, as the case may be.
6.12 Preservation of Permits and Services. The Seller shall
cause the Company to use its reasonable efforts to preserve the
Permits listed in Schedule 3.3, except where the loss of any
Permits (other than those listed in Schedule 3.19) or the services
of its Personnel (as defined in this Section) will not have a
Material Adverse Effect, and the Seller shall cause the Company to
use its reasonable efforts to preserve such other Permits in full
force and effect and to keep available the services of its present
officers, employees, consultants and agents ("Personnel"), maintain
their present suppliers and customers and preserve their goodwill.
6.13 Non-Compete Agreement.
(a) For a period of three years from the Closing Date, the
Seller shall not, and covenants that its subsidiaries will not, (i)
solicit or encourage any agent of the Company to cease acting as an
agent of the Company, (ii) make any commercial use of expirations
or other information disclosed by the Company to Seller or any
subsidiary of Seller prior to the Closing Date and has not and will
not knowingly assist Lumbermens or any Affiliate of the Seller or
of Lumbermens in making such information available, or (iii)
solicit, contract with or attempt to contract with any customers of
the Company to replace policies with the Company, either mid-term
or on renewal.
(b) For a period of two years from the Closing Date, Seller
shall not, and covenants that its subsidiaries will not, solicit or
encourage any individual who, as of the Closing Date, is acting as
an agent of Mound Agency, Inc. or any of its subsidiaries (Mound
Agency, Inc., its subsidiaries and any entity which succeeds to any
of such entities by merger, consolidation or acquisition of all or
substantially all of the assets of Mound Agency, Inc. or any of its
subsidiaries are hereinafter referred to as "Mound") to produce
business for Federal Kemper Life Assurance Company ("FKLA") other
than as an agent of Mound. Moreover, for a period of one year from
the Closing Date Seller shall cause FKLA to refuse to enter into a
general agency agreement or arrangement with any individual who, as
of the Closing Date, is acting as an agent of Mound, even if Seller
and its subsidiaries did nothing to solicit or encourage such
individual's offer or application to become a general agent for
FKLA. Notwithstanding the foregoing, the parties agree that if an
individual who, as of the Closing Date, is acting as an agent of
Mound voluntarily terminates his relationship with Mound and
establishes an agency relationship with another general agency of
FKLA, FKLA may accept business from such general agency without
violating this covenant. Moreover, it is agreed that the covenants
contained in this subparagraph (b) shall not apply if: (i) the
ownership of Mound is transferred to a non-Affiliate of Buyer; (ii)
the license(s) of Mound are lost or suspended in any state(s) in
which the individual with whom FKLA wishes to establish a general
agency relationship proposes to market FKLA's products; (iii) a
petition in bankruptcy is filed by Mound or any other voluntary
insolvency proceeding is commenced by Mound; or (iv) an involuntary
petition in bankruptcy or an involuntary insolvency proceeding is
filed against Mound and is not cured within sixty (60) days of
filing.
(c) Except for its ownership of shares of Centre Reinsurance
Holdings Limited, for a period of three years from the Closing
Date, the Seller shall not engage in any manner in the personal
lines property and casualty insurance business in the United
States; provided, however, that in the event that Seller or any of
its subsidiaries acquires any business engaged in the personal
lines property and casualty insurance business after the Closing
Date, Seller or such subsidiary shall have a reasonable period of
time, which time shall not exceed one year, to divest such
business. Nothing contained herein shall prevent Seller or any of
its subsidiaries from owning passive investments in publicly traded
companies (of less than 5% of the outstanding securities) engaged
in the personal property and casualty lines insurance business.
(d) The Seller specifically acknowledges the necessity for
this covenant not to compete and agrees that the Buyer shall be
entitled to injunctive relief, in addition to any other relief that
may be obtained by the Buyer, in the event of a breach of any of
the provisions of this covenant, the legal remedies for such breach
being inadequate to fully protect the Buyer.
6.14 [Intentionally Omitted]
6.15 Supplemental Retirement Plan. No later than the last
Business Day preceding the Closing Date, Seller shall cause the
Company to: (i) amend the FKI Supplemental Retirement Plan
effective as of such Business Day to provide that Seller shall be
the sole "plan sponsor" (as such term is defined in section
3(16)(B) of ERISA) of the FKI Supplemental Retirement Plan
effective as of such Business Day; and (ii) at Seller's option, and
to the extent permitted under the FKI Supplemental Retirement Plan
and applicable law, terminate the FKI Supplemental Retirement Plan
and make the distributions from the Company to participants under
that plan of their respective benefits thereunder. As of the date
of this Agreement, there are no participants in the FKI
Supplemental Retirement Plan with accrued benefits other than J.D.
Strong.
6.16 Other Benefit Programs.
(a) Executive Deferred Compensation Program. No later than
the last Business Day preceding the Closing Date, Seller shall
cause the Company to: (i) amend the Company's Executive Deferred
Compensation Program effective as of such Business Day to provide
that Seller shall be the sole "plan sponsor" (as such term is
defined in section 3(16)(B) of ERISA) of the Company's Executive
Deferred Compensation Program effective as of such Business Day;
and (ii) at Seller's option, and to the extent permitted under the
Company's Executive Deferred Compensation Program and applicable
law, terminate the Company's Executive Deferred Compensation
Program and make the distributions from the Company to participants
under that plan of their respective benefits thereunder. As of the
date of this Agreement there are no unpaid accrued liabilities
under the Company's Executive Deferred Compensation Program.
(b) Kemper Corporation Anniversary Award Plan. As of the
date of this Agreement the Company has no unpaid obligations under
the Kemper Corporation Anniversary Award Plan with respect to
employees or former employees of Company or its Subsidiaries that
retired before the date of this Agreement.
(c) Bonus Programs. As of the Date of this Agreement there
are no bonuses payable by the Company or its Subsidiaries to
employees or former employees of the Company or its Subsidiaries
except for the bonuses payable under the FKI Management Annual
Bonus Program and the FKI Marketing Bonus Program described in
Schedules 3.11 and 3.31.
6.17 Pennsylvania Agents Litigation.
(a) With respect to the class action litigation regarding
Pennsylvania agents described in Schedule 3.10 ("Pennsylvania
Agents Litigation"): (i) Seller shall reimburse the Company for
fifty percent of its actual and reasonable defense costs of outside
counsel which share of such costs shall not exceed $150,000 per
year for amounts paid in each twelve month period for two years
commencing on the Closing Date, up to a maximum of $300,000; and
(ii) Seller shall reimburse the Company for fifty percent of any
expenses of settlement of the Pennsylvania Agents Litigation when
paid relating to acts or omissions occurring on or before the
Closing Date. Seller shall have no liability to the Company, the
Buyer or Associated with respect to the Pennsylvania Agents
Litigation except as set forth above and shall not be liable to
indemnify Associated or Buyer with respect thereto pursuant to
Section 11.1 hereof or otherwise. Any costs of defense or
settlement expenses relating to acts or omissions occurring after
the Closing Date shall be solely the responsibility of the Company
and Buyer. Any amounts payable by Seller hereunder shall be net of
any amounts recovered or recoverable by the Company under insurance
policies with respect to such costs of defense and settlement
expenses.
(b) Although Buyer shall have the right to conduct and
control, through counsel of its own choosing, the defense,
compromise or settlement of the Pennsylvania Agents Litigation, the
Seller may participate, through counsel chosen by it and at its
expense, in the defense of any such claim.
6.18 Covenants of Buyer and Seller Concerning PIP Claims.
With respect to the claims described in Schedule 6.18 ("PIP
Claims"), the Company shall either, within sixty (60) days of the
Closing Date (i) purchase a reinsurance contract providing up to an
additional $10,000,000 of aggregate reinsurance coverage in excess
of the $10,200,000 of reinsurance protection currently provided by
Lumbermens Mutual Casualty Company, or (ii) with the consent of
Seller, establish a self-insurance arrangement providing for the
protection described in clause (i) above. Seller shall reimburse
the Company for fifty percent of the costs of the one-time premium
for the reinsurance contract referred to in clause (i) above, or
fifty percent of the amount agreed between the Buyer and Seller as
sufficient to fund the self-insurance arrangement referred to in
clause (ii) above; provided however that such reimbursement share
shall in no event exceed $1,250,000. Seller shall have no other
liability to the Company or the Buyer with respect to the PIP
Claims, or with respect to the collection of any reinsurance
recoverables pertaining to the PIP Claims, except as set forth in
this Section 6.18, and shall not be liable to indemnify Buyer with
respect thereto for any amounts under Section 11.1 hereof or
otherwise. In the event that the Company or any Affiliate of the
Buyer directly or indirectly recovers (whether in cash, as a credit
or otherwise) any portion of the premium for such excess
reinsurance, Buyer will refund fifty percent of such recovery to
the Seller; provided, however, that such refund shall in no event
exceed $1,250,000.
6.19 Name Change. Seller shall on or before the Closing Date
reimburse the Company for the costs incurred related to a
prospective name change up to a maximum of $42,000.
6.20 Confidential Nature of Information Obtained by the
Seller. If this Agreement terminates, Seller shall keep
confidential and shall not use in any manner any information or
documents obtained from the Buyer concerning its assets,
liabilities, properties, business and operations, unless readily
ascertainable from public or published information, or trade
sources, or already known or subsequently developed by the Seller
independently of the transactions contemplated by this Agreement,
or received from a third party not under any obligation to Buyer to
keep information confidential.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees with Seller that:
7.1 State Insurance and Other Regulatory Approvals.
(a) Buyer shall take all steps necessary or appropriate to
obtain, as promptly as possible, all Required Approvals and to
cooperate reasonably with Seller, the Company and each of its
Subsidiaries to obtain any Required Approvals; and
(b) Buyer shall provide such information and communications
to governmental and regulatory authorities, including without
limitation insurance regulatory authorities in Illinois and
Indiana, as such regulatory authorities request or Seller
reasonably requests.
7.2 H-S-R Filings. Buyer shall promptly make the filings
required under the H-S-R Act and comply at the earliest practicable
date with any request for additional information received by it
from the FTC or Justice pursuant to the H-S-R Act and shall use all
reasonable efforts to assist Seller in making such required
filings. Buyer shall pay the filing fees required to be paid in
connection with said H-S-R Act filing, and shall request early
termination of the applicable waiting period under the H-S-R Act.
7.3 Continued Employment of Certain Personnel. For a period
of at least three years from the Closing Date Buyer shall maintain
an office in Decatur, Illinois at the present facility and continue
the employment of at least a majority of employees of the Company
as of the Closing Date.
7.4 Covenants of Buyer and Seller Concerning Benefit Plans
of the Company.
(a) Severance Benefits. Buyer shall cause the Company to
retain the Basic Severance Policy shown on Schedule 3.11 for a
period of six months following the Closing Date, except that Buyer
need not require the Company to retain the discretionary portion of
the Basic Severance Policy paying more than two weeks' severance
pay with the approval of Company's Human Resources Department.
Seller's liability for severance benefits for employees of the
Company or its Subsidiaries, whether arising before or after the
Closing, shall be limited to those obligations under the memoranda
dated August 31, 1993 from A.J. Baltz to J.D. Strong, K.D. Sievers,
J.K. Bay, R.D. Garrett, K.J. Humphreys, and K.W. Nattrass, which
memoranda are attached to Schedule 7.8.
(b) Welfare Benefits. Effective as of the Closing Date,
Buyer shall cause the Company to provide medical and dental
benefits to employees of the Company and its Subsidiaries
reasonably comparable to those provided to employees of Buyer's
Shelby division with immediate eligibility and without exclusion
for pre-existing conditions. Buyer will be deemed to have complied
with this requirement during the 90-day period immediately
following the Closing Date if it offers employees of the Company
and its Subsidiaries Option 3 for medical benefits and Option 3 for
dental benefits as those options are described in the medical
benefits summary provided to employees of Buyer's Shelby division,
a copy of which has been furnished to Seller. Effective as soon as
practicable after the Closing Date, but in no event later than 90
days after the Closing Date, Buyer shall cause the Company to
provide welfare benefits (other than medical and dental benefits)
to employees of the Company and its Subsidiaries reasonably
comparable to those provided to employees of Buyer's Shelby
division with immediate eligibility and without exclusion for pre-
existing conditions. If agreed to by Buyer and Seller, Seller may
cause the Company to provide medical and dental benefits for a
transition period beginning on January 1, 1994, for employees and
former employees of the Company and its Subsidiaries by arranging
coverage in the new medical program for employees of employers
within the Kemper Group, it being understood by the parties hereto
that medical and dental benefits under the new program will be
deemed comparable to those provided to employees of Buyer's Shelby
division. Buyer shall cause the Company to provide employees of
the Company with full past service credit for purposes of
eligibility and vesting in all employee welfare plans and for
purposes of service in the severance, disability and vacation plans
of the Company.
(c) Retirement Benefits.
(i) No later than the Business Day preceding the
Closing Date, Seller shall cause the Company
to amend the Retirement Plan effective as of
such Business Day to: (A) provide that Seller
shall be the sole "plan sponsor" (as such term
is defined in section 3(16)(B) of ERISA) of
the Retirement Plan effective as of such
Business Day; (B) cease benefit accruals for
all participants under the Retirement Plan as
of the Closing Date; and (C) fully vest each
employee in his or her accrued benefit under
the Retirement Plan as of the Closing Date,
whether or not fully vested in such benefit
prior to the Closing Date. Effective as of
such Business Day, Seller shall assume all of
the rights, liabilities and obligations of the
Company under the Retirement Plan and for any
other pension benefits except that the Company
shall be required to make a contribution to
the Plan for the 1993 plan year equal to the
minimum required contribution for 1993 as
determined by the Plan's actuary (but not in
excess of $500,000), which such contribution
shall be made prior to the Closing Date.
(ii) Effective as of the Closing, Buyer shall cause
the Company to provide retirement benefits to
employees of the Company and its Subsidiaries
reasonably comparable to those provided to
employees of Buyer's Shelby division. Buyer
shall cause the Company to provide employees
of the Company with full past service credit
for purposes of eligibility and vesting in all
retirement plans, but not for purposes of
benefit accrual.
(d) Profit Sharing Benefits. Notwithstanding any other
provision of this Agreement, the Seller shall cause the Company to
terminate the participation of the Profit Sharing Plan in The
Kemper Corporation Profit Sharing Trust ("Profit Sharing Trust")
effective as of the Closing and to provide for the transfer
following Closing to one or more separate trusts designated in
writing by Buyer of the amounts credited to the Profit Sharing Plan
under the equity and fixed income funds under the Profit Sharing
Trust as of the close of the accounting date under the Profit
Sharing Trust that coincides with or immediately precedes the
Closing Date (the "Initial Transfer Date"). Unless otherwise
agreed by Buyer and Seller, the transfers contemplated by this
Section shall be made in accordance with the following procedures:
(i) Seller shall continue to administer the Profit
Sharing Plan, including withdrawals and
distributions, to and including the Initial
Transfer Date;
(ii) the transfers from the equity fund under the
Profit Sharing Trust shall consist of: (A) the
amount credited to the Profit Sharing Plan
under the equity fund as of the Initial
Transfer Date (excluding participant loans as
of the Initial Transfer Date) in cash; and (B)
loans under the Profit Sharing Plan as of the
Initial Transfer Date to participants employed
by the Company. Buyer shall have the right to
consolidate any and all such loans to the
extent permitted by law;
(iii) the value to be transferred from the fixed
income fund under the Profit Sharing Trust
shall total the amount credited to the Profit
Sharing Plan under the fixed income fund as of
the Initial Transfer Date and shall consist of
the following: (A) group annuity contract
number 50735 issued by Protective Life
Insurance Company, which is scheduled to
mature on April 29, 1994; (B) a proportionate
share of group annuity contract number GA 9126
issued by The Lincoln National Life Insurance
Company, which is scheduled to mature in part
on June 2, 1994 and the remainder on June 2,
1995; (C) a proportionate share of group
annuity contract number GR-15407 issued by The
Travelers Insurance Company, which is
scheduled to mature in part on April 19, 1994
and the remainder on April 19, 1995; and (D)
the remainder in cash. For purposes of this
paragraph a group annuity investment contract
(commonly known as a "GIC") will be divided by
substituting two or more contracts with terms
substantially similar to the original contract
and Buyer and Seller shall share equally the
cost of dividing any such group annuity
investment contracts; and
(iv) an initial transfer shall be made as soon as
practicable following the establishment of the
separate trust(s), but no later than 45 days
following the Closing Date, equal to at least
90 percent of the amount of assets credited to
the Profit Sharing Plan as of the Initial
Transfer Date, with the final transfer to be
made as soon as practicable thereafter, but no
later than 90 days following the Closing Date.
The final transfer shall reflect (to the
extent not reflected in the initial transfer)
any actual gain or loss between the Initial
Transfer Date and the date of the final
transfer as determined by the equity fund and
fixed income fund managers (excluding any loss
attributable to the cost of selling equities
to effect the cash transfer described in
subsection (d)(i) above), as well as any
withdrawals and contributions by participants
between the Initial Transfer Date and the date
of the final transfer.
Buyer and Seller shall take all steps
necessary or appropriate to effect the above
described transfers.
Seller shall cause the Company to remove or obtain the
resignations of, effective as of the Closing Date, all members of
the Profit Sharing Plan Committee who are not employees of the
Company.
(e) Kemper VEBA. It is understood by Buyer that as of
Closing, the participation of the Company and its Subsidiaries in
the Kemper Corporation Employees 501(c)(9) Benefit Trust (the
"Kemper VEBA") shall terminate. Seller shall further cause the
Kemper VEBA (or Subsidiary, if applicable) to make all payments
required of the Company and its Subsidiaries, including all
assessments attributable to coverage provided to employees of the
Company and its Subsidiaries prior to 9:00 A.M. on the Closing Date
under the Plans. Buyer acknowledges that neither the Company nor
any of its Subsidiaries shall have any right to any of the assets
of the Kemper VEBA, it being understood by the parties hereto that
Article VIII of the trust document establishing the Kemper VEBA
provides that if a subsidiary company separates from the Kemper
VEBA (or otherwise terminates its participation in the Kemper
VEBA), and Seller continues the Kemper VEBA for its participants,
there shall be no segregation or allocation of assets of the Kemper
VEBA for or on behalf of the terminating or separating company or
its participants. Accordingly, notwithstanding anything in this
Stock Purchase Agreement to the contrary, the assets of the Kemper
VEBA shall not be used to provide for any benefits or payments
under the FKI Tax Saver Benefit Plan or the FKI Benefit Program
after the Closing Date except for the payment of the following:
(A) health and dental benefits - expenses incurred
prior to the Closing Date; and
(B) HMO, PPO and vision benefits - monthly premiums
due prior to the Closing Date.
The Seller shall be liable for all costs, obligations, funding
deficiencies, excise taxes and penalties or any other expenses that
result or may arise in connection with or incident to the Internal
Revenue Service's audit of the Kemper VEBA with respect to all open
taxable years.
No assets of the Company have been transferred after April 13,
1993, to the Kemper National Insurance Companies 501(c)(9) Benefit
Trust in satisfaction of or in anticipation of any claim of
Lumbermens.
7.5 Use of Seller Name and Logo.
(a) As soon as practicable but in no event later than 30
days after the Closing Date Buyer shall cause the Company and each
of its Subsidiaries to take all necessary corporate action and make
all necessary regulatory applications to change their corporate
names to a name which does not include the name "Kemper," the
letter "K," or any word or expression similar thereto or derivative
thereof, and after approval of such name changes Buyer shall
promptly deliver to Seller a copy of the amendment to the articles
or certificates of incorporation of the Company and each of its
Subsidiaries, certified by the Secretary of State or other
appropriate official of the jurisdiction of incorporation of the
Company and each of its Subsidiaries, reflecting such corporate
name change.
(b) As soon as practicable after the name changes referred
to in (a) above have been effected, but in no event later than 60
days after the Closing Date, Buyer shall cause the Company and each
of its Subsidiaries to physically affix a notice of the name change
to all written materials used by the Company or any of its
Subsidiaries that contain the name "Kemper," the letter "K," or any
word or expression similar thereto or derivative thereof and each
and every logo, trademark, service mark and tradename used by
Seller or any Affiliate of Seller in their businesses (referred to
herein collectively as the "Kemper Marks"). Such notice shall also
contain a prominent statement that as of the Closing Date neither
the Company nor any of its Subsidiaries are affiliated with the
Seller or any Affiliate of the Seller.
(c) As soon as practicable after the Closing, but in no
event later than four (4) months after the Closing Date, Buyer
shall cease, and shall cause the Company and each of the
Subsidiaries to cease, using in any written or other communication
any Kemper Mark; provided, however, that for a period of up to
sixteen (16) months after the Closing the Company and each of its
Subsidiaries may advise current or prospective customers and
producers, orally or in writing, that the Company was "formerly
known as Federal Kemper Insurance Company."
(d) Nothing contained herein is meant to prohibit the
continued use by the Subsidiaries of any of the Kemper Marks in
connection with the sale of products on behalf of any Affiliate of
Seller.
7.6 Indemnification. The Buyer agrees that all rights to
indemnification now existing in favor of the employees, agents,
directors or officers of the Company or any of its Subsidiaries, as
provided in their respective articles or certificates of
incorporation or by-laws shall survive the Closing and shall
continue in full force and effect, as obligations of the Company
and each of its Subsidiaries and of Buyer as a guarantor of such
obligations, for a period of not less than six years from the
Closing Date.
7.7 Continued Access by the Seller.
At any time on or after the Closing Date, the Buyer shall
allow and enable Seller, during regular business hours upon
reasonable notice to Buyer, through its employees and
representatives, to examine and make copies of documents in the
Company's and any of its Subsidiaries' possession or control
pertaining to business conducted by the Company or any of its
Subsidiaries prior to Closing, in order to permit the preparation
of the Seller's 1993 audited consolidated financial statements and
any interim financial statements covering each fiscal quarter of
the Seller through the Closing Date. Any information obtained
pursuant to this Section 7.7 from Buyer shall be kept confidential
except as may otherwise be necessary in connection with the actions
described herein. All reasonable out-of-pocket costs and expenses
incurred by Buyer in complying with this Section 7.7 shall be borne
by Seller. Such costs and expenses shall be limited to reasonable
amounts paid to outside parties and which otherwise would not be
paid but for the request of Seller.
7.8 Buyer's and Seller's Indemnity for Certain Employment
Liabilities. Except as set forth in Schedule 7.8, and except with
respect to liabilities retained or assumed by the Seller pursuant
to this Agreement, or which arise out of facts which are in breach
of a representation of Seller under this Agreement, Buyer shall
indemnify and hold Seller harmless from any and all Losses and
Expenses, whether direct or indirect, with respect to all claims
made by Company employees or former employees (or their
beneficiaries or dependents) arising from acts or omissions of the
Company or its post-Closing Affiliates which occurred after the
Closing Date. Seller shall indemnify and hold Buyer harmless from
any and all Losses and Expenses, whether direct or indirect, with
respect to all claims made by Company employees or former employees
(or their beneficiaries or dependents) arising from acts or
omissions of the Company or its pre-Closing Affiliates which
occurred on or before the Closing Date. If a claim is made by any
employee or former employee of the Company (or a beneficiary or
dependent of such employee or former employee) with respect to acts
or omissions of the Company or its Affiliates (whether pre-Closing
or post-Closing) that allegedly occurred both before and after the
Closing Date, Buyer and Seller shall equitably share any Losses or
Expenses resulting from such claim based on a joint good-faith
determination of their respective responsibility for such claim.
If the parties are unable to agree as to the proper apportionment
of such Losses and Expenses, they shall refer the dispute to
binding arbitration pursuant to the commercial arbitration rules of
the American Arbitration Association. Notwithstanding the
foregoing, with respect to J.D. Strong, in addition to the
severance benefits referred to in Section 7.4(a) of this Agreement,
Seller shall be liable for any and all Losses and Expenses, whether
direct or indirect, and whether arising with respect to acts
occurring prior to or after the Closing Date except for benefits
under the FKI Supplemental Retirement Plan and bonus(es) in
accordance with Section 7.2, 7.11. Liabilities under this Section
7.8 shall include, but not be limited to, Losses or Expenses in
connection with:
(a) the employment or termination of any Company employee,
including claims arising under the common law of contract, implied
contract, tort, or statute, such as Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act, the
Age Discrimination in Employment Act, as amended, the Civil Rights
Act of 1991, and the Illinois Human Rights Act;
(b) severance plans or agreements, employment agreements,
deferred compensation plans or agreements;
(c) Plans;
(d) post-retirement medical benefits and medical benefits
required to be offered to employees by sections 601-608 of ERISA or
section 4980B of the Code; and
(e) the Worker Adjustment and Retraining Notification Act
(WARN).
7.9 Buyer's and Seller's Covenants Concerning the Lease.
(a) Seller agrees to pay for and hold the Company harmless
from any rent arising under the lease ("Lease") of the Decatur home
office (the "Premises"), which Lease is included in Schedule 3.20,
commencing five years after the Closing Date as provided below
("Seller's Rent Obligation"). If the Company (or any Affiliate of
Associated succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets)
chooses to remain in the Decatur metropolitan area ("Decatur")
after the five year period commencing on the Closing Date ("Five
Year Period"), however the Company shall directly be liable for
Seller's Rent Obligation, including its share of taxes, operating
expenses, and other Lease items as described in subparagraph (b)
below. The Company's responsibility for Lease obligations arising
during the Five Year Period shall include any such obligations
which are payable after said Five Year Period but which arise
during and are applicable to the Five Year Period; provided,
however, that Seller agrees to reimburse the Company for the
portion of any costs expended by the Company during the Five Year
Period for capital repairs to the building as it is presently
configured, which under the Lease remain to be amortized during any
portion of the two years subsequent to the Five Year Period.
(b) If the Company elects to vacate the Premises at the end
of the Five Year Period and before termination of the Lease, the
Company must notify the Seller in writing of such election at least
six months before the end of the Five Year Period. If no such
timely notice is received by the Seller, the Company shall be
deemed to have elected to stay in the Premises for the remainder of
the Lease. In the event the Company elects to remain in the
Premises after the Five Year Period, Seller's indemnity under (a)
above shall terminate upon receipt of the notice. If the Buyer
elects to vacate the Premises and does not vacate by the end of the
Five Year Period or any later period during which Buyer has elected
to remain, the Company shall be liable for and shall hold Seller
harmless from any damages of the Seller, including incidental and
consequential damages, as well as for all obligations under the
Lease for the period of time it remains in the Premises. The
Company will be responsible for repairing any damages (normal wear
and tear excepted) to the Premises and restoring the Premises at
any time it vacates all or a portion thereof.
(c) Buyer agrees to assist Seller in obtaining subtenants
for such vacated space by permitting agents of the Seller to
exhibit the space during the fifth year of the Five Year Period or
any later periods during which Buyer has elected to remain,
referring any inquiries from prospective tenants, and placing signs
on or around the Premises, unless the Company has notified the
Seller that it intends to remain in the Premises for the duration
of the Lease.
7.10 Profit Sharing Plan. Buyer shall cause the Company to
calculate and contribute to the Profit Sharing Plan a year-end
profit sharing contribution for the 1993 plan year. Such
contribution shall be calculated, contributed and allocated in a
manner consistent with the year-end profit sharing contribution for
the 1992 plan year (including the consistent application of
statutory accounting principles). With the agreement of Buyer and
Seller, the Company may make such contribution prior to Closing.
7.11 Bonus Programs. Buyer shall cause the Company to pay
bonuses for 1993 under the FKI Management Annual Bonus Program and
the FKI Marketing Bonus Program described in Section 3.11. Such
bonuses shall be calculated and distributed in accordance with the
descriptions of the Programs set forth in Schedule 3.31 and in a
manner consistent with the calculation and distribution of the
bonuses under such programs for 1992 (including the consistent
application of relevant accounting principles) except that the
bonus(es) payable to J.D. Strong shall be paid to him even if he is
not an employee of the Company at the time of the payment. With
the agreement of Buyer and Seller, the Company may pay such bonus
payments prior to Closing.
7.12 Continued Effectiveness of Representations and
Warranties of Associated and Buyer.
(a) From the date hereof through the Closing Date,
Associated and Buyer shall use their respective best efforts to
conduct their respective affairs in such a manner so that, except
as otherwise contemplated or permitted by this Agreement, the
respective representations and warranties contained in Articles IV
and IV-A shall continue to be true and correct in all material
respects on and as of the Closing Date except as they relate to a
specific date or period as if made on and as of the Closing Date;
provided, however, that this covenant shall not obligate Associated
or Buyer to incur any financial or other obligations that are
commercially unreasonable under the circumstances, either in terms
of human or monetary resources or time required to correct the
deficiencies. It is expressly agreed that in no event shall
Associated or Buyer (collectively) be required to incur costs or
expenses in excess of One Million Five Hundred Thousand Dollars
($1,500,000) for any single deficiency or in excess of Three
Million Five Hundred Thousand Dollars ($3,500,000) in the aggregate
to correct any deficiencies hereunder.
(b) From the date hereof through the Closing Date,
Associated and Buyer shall promptly notify the Seller of any event,
condition, fact or circumstance which comes to the knowledge of any
representatives of the Buyer listed in Schedule 4.9 from the date
hereof through the Closing Date that would constitute a material
violation or breach of this Agreement by Associated or Buyer, or a
material inaccuracy in any representation made by Associated or
Buyer in this Agreement.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
Except as may be waived in writing by Buyer, the obligations
of Buyer to consummate this Agreement and the transactions to be
consummated by Buyer hereunder on the Closing Date shall be subject
to the satisfaction, prior to or concurrently with the Closing, of
each of the conditions set forth in this ARTICLE VIII.
8.1 Performance. Seller shall have complied with and
performed in all material respects the terms, conditions, acts,
undertakings, covenants and obligations required by this
Agreement to be complied with and performed by Seller on or before
the Closing Date.
8.2 Representations and Warranties True as of Closing Date.
All representations and warranties of Seller set forth in this
Agreement shall be true and correct in all material respects on and
as of the Closing Date, except for such inaccuracies or
deficiencies that would not have a Material Adverse Effect. The
Seller shall have delivered to the Buyer a certificate dated the
Closing Date and signed by the president, an executive vice
president, or a senior vice president of the Seller to the
foregoing effect.
8.3 Governmental Orders and Consents.
(a) No request for voluntary postponement of the Closing
shall have been received by any party to this Agreement from any
federal, state or local governmental agency or department, nor
shall any action, suit or proceeding seeking to enjoin or restrain
the Closing have been instituted or threatened by any federal,
state or local governmental agency or department. No injunction,
temporary restraining order or other administrative or judicial
order shall have been issued enjoining or restraining the
transaction in whole or in part.
(b) The applicable provisions of the H-S-R Act shall have
been fully satisfied and any and all applicable waiting periods
thereunder shall have expired or otherwise terminated.
(c) All Required Approvals necessary for the execution and
performance of this Agreement shall have been obtained and be in
full force and effect and without conditions or limitations which
unreasonably restrict the ability of the parties hereto to perform
this Agreement or the Company's or any of its Subsidiaries' ability
to conduct their respective businesses as presently conducted and
Buyer and Seller shall have been furnished with appropriate
evidence, reasonably satisfactory to them and their respective
counsel, of the granting of such consents and approvals. There
shall not have been any action taken by any court or governmental
or regulatory body prohibiting or making illegal on the Closing
Date the transactions contemplated by this Agreement.
8.4 Corporate Action. Buyer shall have received:
(a) a copy of the resolution or resolutions duly adopted by
the board of directors or the executive committee of Seller
authorizing the execution, delivery and performance of this
Agreement by Seller, certified by the Corporate Secretary or other
duly authorized officer of Seller;
(b) a certificate of the Corporate Secretary or other duly
authorized officer of Seller as to the incumbency and signatures of
the officers of Seller executing this Agreement; and
(c) a copy certified by the Department of Insurance of the
State of Illinois of the articles of incorporation of the Company
and any amendment thereto and a copy certified by the Corporate
Secretary or other duly authorized officer of the Company of the
by-laws of the Company.
8.5 Third Party Consents. All consents, permits and
approvals from the parties to contracts or other agreements with
the Company, any of its Subsidiaries or with the Seller that are
set forth in paragraph (ii) of Schedule 3.6 and that may be
required in connection with the performance by the Seller of its
obligations under this Agreement or the continuance of such
contracts or other agreements with the Company or any of its
Subsidiaries in full force and effect after the Closing shall have
been obtained.
8.6 Opinion of Counsel to the Seller. The Buyer shall have
received the opinion of Kathleen A. Gallichio, Esq., General
Counsel of the Seller, dated the date of the Closing, addressed to
the Buyer and Associated, substantially in the form of Schedule
8.6.
8.7 Litigation. No action, suit or proceeding shall have
been instituted and be continuing by any governmental or regulatory
body to restrain, modify or prevent the carrying out of the
transactions contemplated hereby, or to seek damages in connection
with such transactions.
8.8 Transfer Taxes. The Seller shall have paid, or caused
to be paid, all stock transfer and other taxes, if any, required to
be paid in connection with the sale and delivery to the Buyer of
the Shares owned by the Seller, and shall have caused all
appropriate stock transfer tax stamps to be affixed to the
certificate or certificates representing the Shares so sold and
delivered.
8.9 No Material Adverse Change. Except as contemplated by
this Agreement, no material adverse change shall have occurred with
respect to the properties and assets or the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole
between the date of this Agreement and the Closing Date.
8.10 Directors. The Seller shall have caused such of the
directors of the Company and the Subsidiaries as have been
designated by the Buyer five Business Days prior to the Closing
Date to have tendered to the Company or such Subsidiary, effective
as of the Closing Date, their resignations as directors of the
Company, or shall provide for their removal.
8.11 Delivery of Certificate(s) for Shares. The Seller shall
have delivered to the Buyer, against receipt of the Purchase Price,
the certificate(s) evidencing ownership of the Shares by the
Seller, endorsed in blank or accompanied by separate stock power(s)
duly executed in blank.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER
Except as may be waived in writing by Seller, the obligations
of Seller to consummate this Agreement and the transactions to be
consummated by Seller hereunder on the Closing Date shall be
subject to the satisfaction, prior to or concurrently with the
Closing, of each of the conditions set forth in this ARTICLE IX.
9.1 Performance. Buyer shall have complied with and
performed in all material respects the terms, conditions, acts,
undertakings, covenants and obligations required by this Agreement
to be complied with and performed by Buyer on or before the Closing
Date.
9.2 Representations and Warranties True as of Closing Date.
All representations and warranties of Associated and Buyer set
forth in this Agreement shall be true and correct on and as of the
Closing Date, except for such inaccuracies or deficiencies that
would not have a Material Adverse Effect. Associated and Buyer
shall have delivered to the Seller a certificate dated the Closing
Date and signed by the respective chief executive officer or
president of Associated and Buyer to the foregoing effect.
9.3 Governmental Orders and Consents.
(a) No request for voluntary postponement of the Closing
shall have been received by any party to this Agreement from any
federal, state or local governmental agency or department, nor
shall any action, suit or proceeding seeking to enjoin or restrain
the Closing have been instituted or threatened by any federal,
state or local governmental agency or department. No injunction,
temporary restraining order or other administrative or judicial
order shall have been issued enjoining or restraining the
transaction in whole or in part.
(b) The applicable provisions of the H-S-R Act shall have
been fully satisfied and any and all applicable waiting periods
thereunder shall have expired or otherwise terminated.
(c) All Required Approvals necessary for the execution and
performance of this Agreement shall have been obtained and be in
full force and effect and without conditions or limitations which
unreasonably restrict the ability of the parties hereto to perform
this Agreement, and Buyer and Seller shall have been furnished with
appropriate evidence, reasonably satisfactory to them and their
respective counsel, of the granting of such consents and approvals.
There shall not have been any action taken by any court or
governmental or regulatory body prohibiting or making illegal on
the Closing Date the transactions contemplated by this Agreement.
9.4 Corporate Action. Seller shall have received:
(a) a copy of the resolution or resolutions duly adopted by
the respective boards of directors of Associated and Buyer
authorizing the execution, delivery and performance of this
Agreement by Associated and Buyer, certified by the respective
Secretaries or other duly authorized officers of Associated and
Buyer; and
(b) a certificate of the respective Secretaries or other
duly authorized officers of Associated and Buyer as to the
incumbency and signatures of the officers of Associated and Buyer
executing the Agreement.
9.5 Payment of Purchase Price. The Buyer shall have made
payment of the Purchase Price against receipt of the certificate(s)
evidencing ownership of the Shares by the Seller, endorsed in blank
or accompanied by separate stock power(s) duly executed in blank.
9.6 Opinions of Counsel to Associated and Buyer. The Seller
shall have received the opinion of Donald C. Trigg, Esq., General
Counsel of Associated and the Buyer, dated the date of the Closing,
addressed to the Seller, substantially in the form of Schedule 9.6.
9.7 Litigation. No action, suit or proceeding shall have
been instituted and be continuing by any governmental or regulatory
body to restrain, modify or prevent the carrying out of the
transactions contemplated hereby, or to seek damages in connection
with such transactions.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties made by the respective
parties in this Agreement shall survive the Closing for two years
except for (a) those of Seller contained in Sections 3.1, 3.2, 3.3,
3.4, 3.5 and 3.13 which shall last indefinitely, Section 3.9, which
shall survive for seven years after the Closing, and Section 3.26
which shall survive for five years, and (b) those of Associated and
Buyer contained in Sections 4.1, 4.2, 4.7, 4A.1 and 4A.2, which
shall last indefinitely. This Article X shall not apply to Tax
representations and warranties in Article XII.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by Seller. Except as otherwise provided
herein, including Sections 6.17 and 6.18, Seller agrees to
indemnify and hold harmless Buyer, the Company, the Subsidiaries
and their respective successors and assigns from and against any
and all Losses and Expenses incurred by any of them in connection
with or arising from:
(a) any breach by Seller of any of its covenants or
agreements in this Agreement;
(b) any failure of Seller to perform any of its
obligations in this Agreement; or
(c) any breach of any warranty or the inaccuracy of
any representation of Seller contained or referred
to in this Agreement or any certificate delivered
by or on behalf of Seller pursuant hereto;
provided, however, that Seller shall be required to indemnify and
hold harmless Buyer (except for Sections 6.17, 6.18 and 6.19) with
respect to Loss and Expense incurred by Buyer, the Company, the
Subsidiaries and their respective successors and assigns (the
"Buyer Group") only if the aggregate amount of such Losses and
Expenses on a pre-tax basis exceeds One Million Dollars
($1,000,000) ("Basket"). Seller's liability hereunder shall be
ninety percent (90%) of the amount (one hundred percent (100%) in
the case of Loss or Expense arising out of Sections 3.1, 3.2, 3.3,
3.4, 3.5 or 3.13 hereof) by which such aggregate Losses and
Expenses (i) exceed the Basket, but (ii) do not exceed Eleven
Million Dollars ($11,000,000) on a pre-tax basis; but in no event
shall such liability exceed $9,000,000 (or $10,000,000 with respect
to Sections 3.1, 3.2, 3.3, 3.4, 3.5 or 3.13 hereof).
11.2 Indemnification by Buyer. Except as otherwise provided
in Section 6.18, Buyer agrees to indemnify and hold harmless
Seller, the Company, the Subsidiaries and their respective
successors and assigns from and against any and all Losses and
Expenses incurred by any of them in connection with or arising
from:
(a) any breach by Buyer of any of its covenants or
agreements in this Agreement;
(b) any failure by Buyer to perform any of its
obligations in this Agreement; or
(c) any breach of any warranty or the inaccuracy of
any representation of Associated or Buyer
contained or referred to in this Agreement or in
any certificate delivered by or on behalf of
Associated or Buyer pursuant hereto;
provided, however, that Buyer shall be required to indemnify and
hold harmless under clause (c) of this Section 11.2 with respect to
Loss and Expense incurred by Seller, the Company, the Subsidiaries
and their respective successors and assigns (the "Seller Group")
only if the aggregate amount of such Losses and Expenses on a pre-
tax basis exceeds the Basket. Buyer's liability hereunder shall be
ninety percent (90%) of the amount (one hundred percent (100%) in
the case of Loss or Expense arising out of Section 4.1, 4.2, 4.7,
4A.1 or 4A.2 hereof) by which such aggregate Losses and Expenses
under clause (c) of this Section 11.2 (i) exceed the Basket, but
(ii) do not exceed Eleven Million Dollars ($11,000,000) on a pre-
tax basis; but in no event shall such liability exceed $9,000,000
(or $10,000,000 with respect to Sections 4.1, 4.2, 4.7, 4A.1 or
4A.2 hereof).
11.3 Notice of Claims. Any Person seeking indemnification
hereunder (the "Indemnified Party") shall give to the party from
whom indemnification is sought (the "Indemnitor") a notice (a
"Claim Notice") describing in reasonable detail the facts giving
rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of
computation of the amount of such claim, and a reference to the
provision of this Agreement or any other agreement, document or
instrument executed hereunder or in connection herewith upon which
such claim is based; provided, that a Claim Notice in respect of
any action at law or suit in equity by or against a third person as
to which indemnification will be sought shall be given promptly
after the action or suit is commenced; and provided further that
failure to give such notice shall not relieve the Indemnitor of its
obligations hereunder except to the extent the Indemnitor shall
have been prejudiced by such failure.
11.4 Third Person Claims.
(a) The Indemnitor shall have 30 days after receipt of any
Claim Notice relating to any third person claim, action or suit
(collectively, "Claim") to notify the Indemnified Party of its
election to conduct and control the defense, compromise or
settlement of such Claim. Unless and until the Indemnitor gives
the foregoing notice, the Indemnified Party shall have the right to
conduct and control, through counsel of its own choosing, the
defense, compromise or settlement of such Claim, and in any such
case the Indemnitor shall cooperate in connection with such Claim
and shall furnish such records, information and testimony and
attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested by the Indemnified Party
in connection therewith; provided, that the Indemnitor may
participate, through counsel chosen by it and at its own expense,
in the defense of any such claim.
(b) If Indemnitor timely gives the notice referred to in
paragraph (a) above, Indemnitor shall have the right, but not the
obligation, to conduct and control, through counsel of its
choosing, the defense, compromise or settlement of any Claim, and
in any such case the Indemnified Party shall cooperate in
connection with such Claim and shall furnish such records,
information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably
requested by the Indemnitor in connection therewith; provided, that
the Indemnified Party may participate, through counsel chosen by it
and at its own expense, in the defense of any such Claim, as to
which the Indemnitor has so elected to conduct and control the
defense thereof, and provided, further, that the Indemnitor shall
not, without the written consent of the Indemnified Party (which
written consent shall not be unreasonably withheld), pay,
compromise or settle any such Claim (i) in any case where the
Indemnitor has not acknowledged its obligation to provide
indemnification to the Indemnified Party under this Article XI, or
(ii) seeking any relief in addition to monetary damages; and
provided further, that the Indemnitor shall, at any time prior to
the settlement or commencement of trial with respect to any Claim,
tender the defense, compromise and settlement of such Claim to the
Indemnified Party should the Indemnitor reasonably determine, based
upon the information furnished to it by the Indemnified Party or
obtained by the Indemnitor in the course of defending the Claim,
that the Indemnitor is not obligated to provide indemnification to
the Indemnified Party under this Article XI.
11.5 Losses Net of Insurance. The amount of any Loss or
Expense for which indemnification is provided under this Article XI
shall be net of any amounts recovered or recoverable by the
Indemnified Party under insurance policies with respect to such
Loss or Expense.
11.6 No Representation, Warranty or Indemnification for
Salvage, Subrogation or Reinsurance Recoverables. Notwithstanding
anything contained in Article III of this Agreement, Buyer
acknowledges and agrees that Seller makes no representation,
warranty or covenant regarding the ultimate adequacy or sufficiency
of any salvage or subrogation, or the ultimate collectability of
any reinsurance recoverable reported in any financial statement of
the Company or Subsidiaries.
11.7 Additional Limitations on Indemnification. To the
extent that Buyer learned or learns of any breach of any
representation or warranty set forth in Article III hereof prior to
the Closing Date of which Seller has no Knowledge, and does not
promptly notify Seller of such breach, the amount of Losses and
Expenses incurred in connection with or arising from such breach
shall be reduced by the amount of Losses and Expenses, if any, that
could reasonably have been prevented by Seller if it had received
prompt notice of such breach.
11.8 Remedies. Notwithstanding anything contained herein to
the contrary, it is specifically understood and agreed that in the
event a misrepresentation or breach of warranty or covenant by
Seller is discovered by Buyer after the Closing, the remedy of
Buyer shall be limited to the indemnification as set forth in this
Article XI, and Buyer shall not be entitled to a rescission of this
Agreement.
11.9 Right to Cure Breaches. Any party shall have the right
to seek to cure any breach or potential breach of any
representation, warranty or covenant made by it in this Agreement
or the attachments hereto; provided, that no such cure shall affect
any rights to indemnification for Losses and Expenses incurred in
connection with or arising out of any such breach. Each party
shall cooperate with the others in connection with any attempt to
cure any such breach, or potential breach, including but not
limited to providing such other parties, their employees and
representatives, access to any necessary books and records and
making available any necessary personnel.
11.10 Closing Loss Reserve Reconciliation. Any deficiencies
or redundancies in the Closing Loss Reserves shall be calculated
and paid as follows:
(a) On or prior to November 30, 1998, the Buyer shall
deliver to Seller a statement setting forth the Closing Loss
Reserves recalculated as of September 30, 1998 (the "Adjusted
Closing Loss Reserves"). The Adjusted Closing Loss Reserves shall
be determined as of September 30, 1998 by subtracting the Closing
Loss Reserves from the sum of (1) the loss and loss adjustment
expense payments made by the Company subsequent to September 30,
1993, and (2) the actuarially determined value of Loss Reserves
then remaining (if any), in both cases solely with respect to
insurance and reinsurance liabilities incurred by the Company
through September 30, 1993. The Adjusted Closing Loss Reserves
shall be calculated only to reflect Loss Reserves and loss and loss
adjustment expense payments relating to insurance and reinsurance
claims incurred by the Company (other than the PIP Claims, as
defined in Section 6.18) through September 30, 1993 (but without
taking into account any salvage or subrogation, or any reinsurance
obtained by the Company as a reinsured to cover any part of such
claims); no liabilities for losses incurred by the Company as an
insurer or reinsurer after September 30, 1993 shall be taken into
account, nor shall any liabilities of the Company relating to the
PIP Claims be included. Buyer shall engage a Fellow of the
Casualty Actuarial Society reasonably acceptable to Seller to
perform an actuarial review and certification of the Adjusted
Closing Loss Reserves, which review shall be conducted in
accordance with generally accepted actuarial standards and
principles applied by the Company on a basis consistent with those
applied in establishing the Closing Loss Reserves. Such
certification shall be delivered to Seller along with Buyer's
statement of the Adjusted Closing Loss Reserves.
(b) If Seller disputes the Buyer's determination of the
Adjusted Closing Loss Reserves, and if Buyer and Seller are unable
to resolve such dispute within forty-five (45) days after such
redetermination, they shall jointly engage a nationally recognized
accounting firm (the "Arbitrator") to arbitrate such disputed item
or items. The Arbitrator shall be asked to render its opinion as
to the amount or treatment of the disputed item or items within
ninety (90) days after being retained. Seller and Buyer shall each
pay one-half the cost of hiring the Arbitrator. The determination
of the Arbitrator shall be final and binding on both parties.
(c) Within 60 days following Buyer's delivery to Seller of
its statement setting forth the Adjusted Closing Loss Reserves, or
within 30 days following the Arbitrator's decision rendered under
subsection (b) above, whichever is later, Seller shall pay Buyer
90% of the amount by which the Adjusted Closing Loss Reserves, if
positive (indicating a deficiency in the Closing Loss Reserves),
exceed One Million Dollars ($1,000,000)(adjusted for that portion
of the Basket already used), or alternatively, Buyer shall pay
Seller 90% of the amount by which the absolute value of the
Adjusted Closing Loss Reserves, if negative (indicating a
redundancy in the Closing Loss Reserves), exceeds One Million
Dollars ($1,000,000)(adjusted for that portion of the Basket
already used). Any amounts payable by Buyer or Seller hereunder
shall be subject to the aggregate indemnification limits set forth
in Sections 11.1 and 11.2, and it is hereby agreed by the parties
hereto that only one Basket and one maximum cap on the amount of
Seller's or Buyer's indemnification obligations exists with respect
to the provisions of this Agreement that are subject to the
indemnification limits set forth in Sections 11.1 and 11.2.
(d) The indemnities set forth in this Section 11.10 shall be
the sole remedy of Buyer with respect to Loss Reserves under this
Agreement.
11.11 Tax Indemnification. Notwithstanding anything in this
Article XI to the contrary, the rights and obligations of the
parties with respect to indemnification (and all limitations
applicable to such indemnification) for any and all
representations, warranties, covenants, and other agreements set
forth in Article XII shall be governed solely by the
indemnification provisions of Article XII.
ARTICLE XII
TAX MATTERS
12.1 Representations and Warranties. Seller represents and
warrants to Associated and the Buyer that, as of the date hereof:
(a) Seller is the "common parent" of an "affiliated group"
of corporations (as those terms are used in section 1504(a) of the
Code and the Treasury regulations promulgated under section 1502 of
the Code) that includes the Company and each Subsidiary (the
"Kemper Group"). The Seller, the Company, and each Subsidiary were
and are eligible to file consolidated federal income Tax Returns
for all Taxable Periods ending on or before the date hereof for
which the applicable statute of limitations for the assessment of
a federal income Tax against the Company or any of the Subsidiaries
has not lapsed.
(b) All Tax Returns required to be filed with respect to the
Company and each Subsidiary for all Taxable Periods ending on or
before the date hereof have been timely filed. All such Returns
(i) were prepared in the manner required by applicable law, (ii)
are true, correct, and complete in all material respects, and (iii)
reflect the liability for Taxes of the Company and each Subsidiary.
All Taxes shown to be payable on such Returns, and all assessments
of Tax made against the Company and each Subsidiary with respect to
such Returns, have been paid when due. Except as disclosed in
Schedule 12.1, no adjustment relating to such Returns has been
proposed in writing and, to the Knowledge of Seller, no such
adjustment has been proposed orally by any Taxing authority.
(c) Except as disclosed in Schedule 12.1 the Seller, the
Company and/or the Subsidiaries have paid, have caused to be paid,
or have provided a sufficient reserve, including deferred Tax
assets and liabilities (the "Tax Reserve"), on the Company
Financial Statements for the period ending December 31, 1992, for
the payment of all Taxes with respect to all Taxable Periods, or
portions thereof, ending on or before the date of such statements;
and such Taxes paid or provided for include those for which the
Company or any Subsidiary may be liable in its own right, or as the
transferee of the assets of, or as successor to, any other
corporation, association, partnership, joint venture, or other
entity. Schedule 12.1 lists the Taxes accrued in the Tax Reserve
set forth on the Company Financial Statements for the Taxable
Period ended December 31, 1992.
(d) The Company and each Subsidiary have withheld from their
employees, customers, and other payees (and timely paid to the
appropriate Governmental Authority) all amounts required by the Tax
withholding provisions of applicable federal, state, local, and
foreign laws (including, without limitation, income, social
security, and employment Tax withholding for all types of
compensation, and withholding or payments to non-United States
persons) for all periods through the date hereof.
(e) Schedule 12.1 sets forth, for each Pre-Closing Period
for which the applicable statute of limitations for the assessment
of an income or franchise Tax against the Company or a Subsidiary
has not lapsed, (i) all jurisdictions in which the Company or a
Subsidiary has filed an income or franchise Tax return and (ii) all
consolidated, combined, group, and unitary income or franchise Tax
Returns in which the Company or a Subsidiary has been included. No
other jurisdiction has claimed in writing, or otherwise to Seller's
Knowledge, that the Company or a Subsidiary is required to file an
income or franchise Tax Return in such jurisdiction.
(f) Except as set forth on Schedule 12.1, there are no
claims or investigations by the IRS or any other Taxing authority
pending or threatened in writing against the Company or any
Subsidiary for any past due Taxes, and except as set forth in
Schedule 12.1 there has been no waiver of any applicable statute of
limitations or extension of the time for the assessment of any Tax
for which the Company or any Subsidiary could be liable under any
provision of federal, state, foreign, or local law.
(g) Except as provided on Schedule 12.1, no power of
attorney has been granted to any person with respect to the Company
or any of the Subsidiaries relating to any Tax for any Taxable
Period.
(h) Except for the Tax Allocation Agreement, there is no
contract, agreement, or intercompany account system under which the
Company or any of the Subsidiaries has, or may at any time in the
future have, an obligation to assume, share, or contribute to the
payment of any portion of a Tax (or any amount calculated with
reference to any portion of a Tax) determined on a consolidated,
combined, group, or unitary basis with respect to any group of
corporations of which the Company or a Subsidiary is or was a
member. The Tax Allocation Agreement applies to the Company and
the Subsidiaries only with respect to the consolidated federal and
the State of Illinois unitary income Tax.
(i) Except as set forth in Schedule 12.1, the acquisition of
the Company and the Subsidiaries by the Buyer (or any other
transaction contemplated by this Agreement) will not cause any
payment to be made by or on behalf of the Company or a Subsidiary
to be non-deductible, in whole or in part, for federal income tax
purposes by reason of section 280G of the Code.
(j) No Tax is required to be withheld pursuant to section
1445 of the Code as a result of any of the transactions
contemplated by this Agreement.
(k) For federal income Tax purposes, to the Knowledge of
Seller neither the Company nor any Subsidiary is a partner nor
treated as a partner in any partnership, joint venture, or any
other entity treated as a partnership.
(l) Neither the Company nor any Subsidiary is a lessor (or
treated as a lessor for federal income Tax purposes) of any
property pursuant to the provisions of section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect before the
enactment of the Tax Reform Act of 1986, or of any property that is
"tax-exempt use property" within the meaning of section 168(h) of
the Code.
(m) Neither the Company nor any Subsidiary is liable under
Treasury Regulations 1.1502-6 for the federal income Tax, or
under any similar state or local law for a state or local income or
franchise Tax, of any corporation other than the members of the
Kemper Group.
(n) There are no outstanding options, warrants, or other
contractual obligations that may reasonably be treated as
outstanding stock of the Company or any Subsidiary for purposes of
section 1504(a)(5)(A) of the Code.
(o) Schedule 12.1 sets forth the taxable year of the company
and each Subsidiary for federal and state income and franchise Tax
purposes.
(p) Except as set forth on Schedule 12.1, (i) as of December
31, 1992, neither the Company nor any Subsidiary had any item of
income, gain, loss, or deduction reportable in a taxable period
ending after December 31, 1992, but attributable to an installment
sale, a deferred intercompany transaction, an excess loss account,
or a section 481 adjustment that arose in a Taxable Period ending
on or before December 31, 1992, and (ii) since December 31, 1992,
except as provided in Section 5.9 neither the Company nor any
Subsidiary has distributed any property (other than cash) with
respect to its stock.
(q) Except for liens for real and personal property Taxes
that are not yet due and payable, there are no liens for any Tax
upon any asset of the Company or any Subsidiary.
12.2 Section 338(h)(10) Election.
(a) Seller and Associated shall, and, at Seller's or
Associated's request, Associated shall cause Buyer to, join in
making the elections provided for in section 338(g) and section
338(h)(10) of the Code and the Treasury regulations promulgated
under section 338 of the Code (the "Section 338 Regulations")
(collectively, the "338 Elections") with respect to the purchase of
the Shares. The parties shall make such other similar elections as
may be necessary to achieve substantially the same results to the
parties for state and local income or franchise Tax purposes as the
338 Elections achieve for federal income Tax purposes. For
purposes of this Agreement, the term "338 Elections" shall include
any such state or local Tax elections.
(b) Within ninety (90) days after the Closing Date, Buyer
shall provide to Seller a schedule of the fair market values of all
the material assets of the Company and the Subsidiaries as of the
Closing Date. Buyer shall bear the cost of any appraisal of such
assets. The parties will negotiate in good faith and use their
reasonable efforts to agree on the fair market value of all
material assets of the Company and the Subsidiaries. To the extent
that the parties agree on such values, then each party shall apply
such values in all applicable filings related to the 338 Elections
and in all relevant Tax Returns. Whether or not the parties agree
to any such values, Seller and Buyer shall each notify the other in
writing as soon as reasonably practicable of any audit adjustment
or proposed audit adjustment by any Taxing authority that affects
the "adjusted grossed up bases" and "modified deemed sales price"
of such assets (as those terms are defined in the Section 338
Regulations.)
(c) Seller and Associated shall comply fully and, at
Seller's request, Associated shall cause Buyer to comply fully with
all filing and other requirements necessary to effectuate the 338
Elections on a timely basis and agree, subject to Section 12.2(b),
to cooperate in good faith with each other in the preparation and
timely filing of any Tax Returns required to be filed in connection
with the making of the 338 Elections, including the exchange of
information and the joint preparation and filing of Form 8023 and
related schedules.
(d) All items of income, deduction, gain or loss recognized
as a result of, and in accordance with, the 338 Elections shall be
included in the consolidated federal income Tax Return of the
Kemper Group for its Taxable Period that includes the Closing Date.
Any income, deduction, gain or loss recognized as a result of, and
in accordance with, the making of the 338 Elections under any state
or local statute or regulation similar to section 338(h)(10) of the
Code shall be included in the consolidated, combined, or unitary
state or local income or franchise Tax Return of the Seller. All
Taxes resulting from the 338 Elections, whether determined on a
consolidated, combined, unitary, or separate company basis, shall
be paid by Seller.
(e)(1) Seller represents and warrants to Associated and Buyer
that Seller is the "common parent" of an "affiliated group" of
corporations (as those terms are used in section 1504(a) of the
Code and the Treasury regulations promulgated under section 1502 of
the Code) that includes the Company and each Subsidiary and that
the Company and each Subsidiary will be included in the
consolidated federal income Tax Return filed by the Seller for the
Taxable Period including the Closing Date.
(2) Associated and Buyer represent and warrant to Seller
that to the knowledge of the persons listed on Schedule 4.9, after
due inquiry:
(i) the entity which will purchase the Shares of
the Company is a domestic corporation and is a
member of Associated's "affiliated group" as
such term is defined in Section 1504(a) of the
Code;
(ii) in the period beginning 24 months prior to and
including the Closing Date, or such longer
period as the IRS may determine under Section
338(h)(4)(B) of the Code, no member of
Associated's "affiliated group" (as such term
is defined in Section 338(h)(5) of the Code)
has "purchased" (as such term is defined in
Section 338(h)(3) of the Code) or will have
purchased more than 20% of the outstanding
shares of Seller or any of the corporations
with a name and/or a federal employer
identification number ("FEIN") listed on
Schedule 12.2(e). To the knowledge of the
persons listed in Schedule 4.9 (but without
due inquiry), and to the knowledge of Seller
(but without due inquiry), none of the
corporations listed on Schedule 12.2(e) has
changed its name or FEIN.
For purposes only of this Section 12.2(e), "due inquiry" means only
a review of the Code and Schedule 12.2(e).
(3) Schedule 12.2(e) lists the name and FEIN of each
corporation that, with respect to the acquisition of the Shares
pursuant to this Agreement, (i) is a target affiliate of the
Company or a Subsidiary and (ii) is not currently a member of
Seller's affiliated group. The terms "affiliated group" and
"target affiliate" are defined in sections 338(h)(5) and (6),
respectively, of the Code. From the date hereof until the Closing,
Seller may sell or dispose of the stock of one or more of its
target affiliates so long as Seller amends Schedule 12.2(e), if
such amendment is necessary to cause such Schedule 12.2(e) to be
true and correct, and delivers such amended schedule to Associated
on or before five business days after such sale or other
disposition.
12.3 Tax Returns.
(a) Seller shall prepare and file or cause to be prepared
and filed when due (including extensions) all Tax Returns with
respect to consolidated federal and State of Illinois unitary
income Taxes that are required to be filed by or with respect to
the Company and the Subsidiaries for all Taxable Periods ending on
or before the Closing Date. Seller shall pay or cause to be paid
all Tax reported, or required to be reported, on such Returns,
subject to reimbursement by the Company or the Subsidiaries
pursuant to the Tax sharing provisions of Section 12.8.
(b) Seller shall prepare and file, or cause the Company and
Subsidiaries to prepare and file, all Tax Returns of or including
the Company or a Subsidiary that are not described in Section
12.3(a) and that are required to be filed (with extensions) on or
before the Closing Date. Seller shall pay, or cause to be paid,
all Tax reported, or required to be reported, on such Returns.
(c) Buyer shall prepare and file, or shall cause the Company
and the Subsidiaries to prepare and file, all Tax Returns of or
including the Company and the Subsidiaries other than those Returns
described in Sections (a) and (b), above. All Taxes shown on such
Returns shall be paid by the Buyer, the Company, or the
Subsidiaries, subject to the right of indemnification of the Buyer,
the Company, and the Subsidiaries against the Seller for any Tax to
the extent the Seller is liable pursuant to Section 12.5.
(d) All Tax Returns described in Section 12.3(a), (b), and
(c) shall be prepared (i) in a manner consistent with past practice
(except for changes in applicable law) and (ii) in a manner that
generally minimizes the Tax liability of the Company and the
Subsidiaries (either directly or indirectly through the tax sharing
arrangement described in Section 12.8) so long as such treatment of
any item of income, gain, loss, or deduction is in accordance with
prudent tax planning and does not adversely affect the Tax
liability of the Seller or any Affiliate of the Seller. As an
example of the foregoing, but not by way of limitation (subject to
the previous sentence), the Company and the Subsidiaries shall not
defer the deduction of any amount that is allowable as a deduction
prior to the Closing Date or recognize in income any amount that
may be deferred until after the Closing Date (or deferred until the
deemed sale of assets pursuant to the 338 Elections).
(e)
(i) All Tax Returns described in Sections 12.3(a)
("Section 12.3(a) Returns") are subject to the
review and consent of the Buyer ("Buyer
Approval Returns") as provided herein,
provided, however, that, in each case such
consent shall not be unreasonably withheld.
Seller shall deliver to Buyer a copy of the
portion of each Section 12.3(a) Return that
relates solely to Company or its Subsidiaries
at least eighty-four (84) days prior to the
due date of such Return (including any
extensions thereof). Buyer shall provide
Seller with the Notice as provided in Section
12.3(e)(v) at least seventy (70) days prior to
the due date of such Returns (including any
extensions thereof). If Buyer does not
consent to such Returns, Seller shall have
seven (7) days to review Buyer's Notice.
(ii) All Tax Returns described in Section 12.3(c)
that are affected by the 338 Elections and Tax
Packages (described in Section 12.4)
(collectively "Seller Approval Returns") are
subject to the review and consent of the
Seller, provided, however, that in each case
such consent shall not be unreasonably
withheld. Seller shall provide Buyer with
Notice within twenty-one (21) days after
Seller receives from Buyer or Company any
Seller Approval Returns. If Seller does not
consent to such Returns, Buyer shall have
seven (7) days to review Seller's Notice.
(iii) In the event either party does not consent to
a Return or a Tax Package that requires such
party's consent, then the parties shall in
good faith attempt to resolve their
differences. If the parties are unable to
resolve their differences, the Umpire as
described in Section 12.3(e)(iv) shall be
requested to provide its resolution.
(iv) If the parties are unable to resolve their
differences with respect to any Tax Return or
Tax Package, then the parties promptly shall
jointly engage an office of a "Big Six" public
accounting firm (other than KPMG Peat Marwick,
Coopers & Lybrand or Ernst & Young) having
significant experience in the Tax issues
affecting property and casualty insurance
companies and in issues similar to the issues
which are the subject of the disagreement
between Buyer and Seller (the "Umpire") to
resolve such dispute. The Umpire shall be
requested to provide its resolution at least
thirty (30) days prior to the due date of the
Return (including extensions thereof) that is
the subject of the dispute. The resolution of
the Umpire shall be binding on the parties.
The cost of the Umpire shall be shared equally
by the parties.
(v) If Buyer does not consent to any Buyer
Approval Return, or if Seller does not consent
to any Seller Approval Return, the party that
does not consent to such a Return, as the case
may be, shall give notice (the "Notice") to
the other party that it does not consent and,
in reasonable detail, the reasons why it does
not consent.
(f) At the Closing, Seller shall deliver to Buyer a schedule
that lists all Tax Returns of or including the Company or the
Subsidiaries for all Taxable Periods ending on or before the
Closing Date that are required to be filed (with extensions) within
30 days after the Closing Date.
12.4 Information to be Provided by Buyer. With respect to
federal income Taxes and unitary State of Illinois income Taxes for
all Taxable Periods of the Company and the Subsidiaries beginning
after December 31, 1992 and ending on or before the Closing Date,
Buyer shall cause the Company to prepare and provide to the Seller
a package of Tax information materials (the "Tax Package"), which
shall be completed consistent with past practice, including past
practice as to (i) the information, schedules and work papers
provided, and (ii) the method of computation of taxable income on
a separate company basis or other relevant method of calculating
taxable income of the Company and its Subsidiaries. The Buyer
shall cause the Tax Package for any Taxable Period beginning after
December 31, 1992 and ending on or before the Closing Date to be
delivered to the Seller within five months of the end of the
Taxable Period relating to the Returns for which any such Tax
Package is to be prepared.
12.5 Indemnification by Seller. The Seller agrees to
indemnify and hold harmless the Buyer, the Company, the
Subsidiaries, and their respective successors and assigns from and
against:
(a) any and all Taxes incurred in connection with or arising
from any inaccuracy, breach, or nonfulfillment of any
representation, warranty, covenant or agreement of the Seller
contained in or made pursuant to this Article XII (for which
purpose the representation in clause (i) of Section 12.1 shall be
deemed to have been made with no exception for items disclosed in
Schedule 12.1 or otherwise);
(b) subject to Section 12.8, any and all consolidated
federal and State of Illinois unitary income Taxes imposed on the
Company or the Subsidiaries for all Taxable Periods ending on or
before the Closing Date;
(c) any and all Taxes imposed on the Company or the
Subsidiaries (other than those described in Section 12.5(b)) for
all Taxable Periods or portions thereof ended on or before
December 31, 1992, except to the extent that such Taxes are
included in the December 31, 1992 Tax Reserve (without regard to
deferred Tax assets and liabilities);
(d) any and all federal, foreign, state and local Taxes,
whether determined on a separate, consolidated, combined, or
unitary basis, including any penalties and interest in respect
thereof, (i) pursuant to Treasury Regulations Section 1.1502-6 or
any comparable provision of state, local, or foreign law by reason
of the Company or any Subsidiary having been a member of a
consolidated, combined, or unitary group for a Pre-Closing Period;
(ii) except as provided by Section 12.8, pursuant to any guaranty,
indemnification, tax sharing, or similar agreement made on or
before the Closing Date relating to the sharing of liability for,
or payment of, Taxes; (iii) arising out of, resulting from, or
attributable to (A) the 338 Elections or (B) any item of income or
gain realized by the Company or a Subsidiary on any Specified
Transactions;
(e) any Additional Tax or Expense incurred by Buyer as
result of the breach by Seller of any covenant, representation or
warranty contained in Section 12.2 (for purposes of this Section
12.5(e) the term "Additional Tax" shall mean with respect to the
applicable Tax Period the difference between (i) all Taxes incurred
by the Company and its Subsidiaries or the amount of the refund due
the Company and its Subsidiaries, and (ii) all Taxes the Company
and its Subsidiaries would have incurred or the amount of the
refund that would have been due the Company and its Subsidiaries if
no such breach had occurred);
(f) any Expense incurred by Buyer, the Company, or a
Subsidiary in connection with any Tax described in this Section
12.5.
12.6 Indemnification by Buyer. The Buyer agrees to indemnify
and hold harmless Seller and its successors and assigns from and
against:
(a) any and all Taxes incurred in connection with or arising
from any inaccuracy, breach, or nonfulfillment of any
representation, warranty, covenant, or agreement of Buyer or
Associated contained in or made pursuant to this Article XII;
(b) any and all consolidated federal or State of Illinois
unitary income Taxes imposed on the Company or the Subsidiaries for
all Taxable Periods beginning after the Closing Date;
(c) any and all Taxes imposed on the Company or the
Subsidiaries (other than those described in Section 12.6(b)) for
all Taxable Periods or portions thereof beginning on or after
December 31, 1992; and
(d) any Additional Tax or Expense incurred by Seller as
result of the breach by Buyer or Associated of any covenant,
representation or warranty contained in Section 12.2 (for purposes
of this Section 12.6(d) the term "Additional Tax" shall mean with
respect to the applicable Tax Period the difference between (i) all
Taxes incurred by Seller or the amount of the refund due Seller,
and (ii) all Taxes Seller would have incurred or the amount of the
refund that would have been due the Seller if no such breach had
occurred);
(e) any Expense incurred by the Seller in connection with
any Tax described in this Section 12.6.
12.7 Refunds of Tax.
(a) The Seller shall be entitled to any refund or credit of
(i) any and all consolidated federal or State of Illinois unitary
income Taxes imposed on the Company or the Subsidiaries for Taxable
Periods ending on or before the Closing Date, including any Tax
that results from an increase in Seller's liability for Tax as
described in Section 12.2(d), (except for refunds or credits of Tax
described in Section 12.7(b)(ii)) and (ii) any Tax paid by Seller
to Buyer, the Company, or the Subsidiaries pursuant to Section
12.5.
(b) The Company and/or a Subsidiary shall be entitled to the
refund or credit of (i) any Tax imposed upon the Company and/or
such Subsidiary other than Taxes described in Section 12.7(a) and
(ii) any Tax paid by the Buyer to the Seller pursuant to Section
12.6.
(c) The Seller shall be entitled to any refund or credit of
Taxes resulting from any carryback to any consolidated federal
income Tax Return of the Kemper Group, or to any unitary Illinois
income Tax Return of the Seller or its subsidiaries for a Taxable
Period ended on or before the Closing Date.
(d) Any refund or credit of a Tax received by one party to
which the other party is entitled hereunder, in whole or in part,
shall be paid to such party within ten (10) business days after
receipt of such refund or credit from the relevant Taxing
authority. Each party shall certify in writing to the other upon
request whether, and the extent to which, such other party is or
may be entitled to a refund or credit under this Section 12.7.
12.8 Tax Sharing Agreements.
(a) Except as provided in Section 12.8(b), the Tax
Allocation Agreement and all other contracts, agreements, and
intercompany account systems under which the Company or any of the
Subsidiaries has, or may at any time in the future have, an
obligation to assume, share, or contribute to the payment of any
portion of a Tax (or any amount calculated with reference to any
portion of a Tax) with respect to any group of corporations of
which the Company or a Subsidiary is or was a member shall
terminate with respect to the Company and each of the Subsidiaries
as of the Closing Date, and the Company and each of the
Subsidiaries shall thereafter be released from any and all
liability thereunder.
(b) Within fifteen (15) business days after the initial
filing of a Final Consolidated Return, the Seller shall pay to the
Company, or the Company shall pay to the Seller, as the case may
be, the difference between (i) the aggregate amount of Tax reported
on such Return that is allocable to the Company and/or the
Subsidiaries pursuant to Section 12.8(c) and (ii) the aggregate
payments of such Tax previously made by the Company and/or the
Subsidiaries pursuant to the Tax Allocation Agreement or otherwise,
together with interest at six percent of such amount from the
Closing Date until the date of payment.
(c) For purpose of Section 12.8(b), the amount of Tax
reported on a Final Consolidated Return that is allocable to the
Company and the Subsidiaries shall be (i), with respect to the
federal income Tax, the amount of Tax that would have been imposed
on the Company and the Subsidiaries for the Taxable Period ending
on the Closing Date if the Company and the Subsidiaries had filed
a consolidated federal income Tax Return for such period with the
Company as the common parent and the Company and the Subsidiaries
as the includable member corporations, and (ii), with respect to
the State of Illinois unitary income Tax, the Tax that would have
been imposed on each of the Company and the Subsidiaries for the
Taxable Period ending on the Closing Date if each of such
corporations had filed a separate company Return for such period
provided, however, that (A) the Tax allocable to the Company and/or
a Subsidiary pursuant to this Section 12.8(c) shall not include any
Tax for which Seller is liable pursuant to Sections 12.5(a), (d)(i)
or (d)(ii); (B) the items of income, gain, loss, and deduction that
are allocable to the Company and/or the Subsidiaries pursuant to
this Section 12.8(c) shall not include any such item arising from,
attributable to, or resulting from the 338 Elections or the
Specified Transactions; (C) on each of the Returns described in (i)
and (ii) above, the Company and each Subsidiary shall be treated as
eligible for the 100 percent dividends received deduction with
respect to dividends received from a Subsidiary; (D) any net
operating loss or net capital loss arising in a Return described in
(i) or (ii) above shall be treated as if such loss created an
immediate refund of Tax to the Company or a Subsidiary (as the case
may be) from the absorption of such loss by other members of the
Kemper Group in the current Taxable Year; and (E) the taxable
income and Tax on each of the Returns described in (i) and (ii)
above shall be determined without regard to any separate or
consolidated Return limitation on the allowance of any deduction or
credit. If the taxable income of the Kemper Group for the Taxable
Period that includes the Closing Date equals or exceeds $12.5
million, the tax rate for the Return described in (i) above shall
be 35%; otherwise, the tax rate for such Return shall be 34%.
(d) If the Closing Date occurs after December 31, 1993, the
amount of consolidated federal and State of Illinois unitary income
Tax allocable to the Company and the Subsidiaries for the Taxable
Period ending on December 31, 1993, shall be determined in
accordance with Section 12.8(c).
(e) The amount of Tax reported on a Final Consolidated
Return (or the consolidated federal or State of Illinois unitary
income Tax Return, if any, for the Taxable Period ending
December 31, 1993) that is allocable to the Company and the
Subsidiaries pursuant to Section 12.8(c) and (d) is subject to the
review and consent of the Company and/or Associated, which consent
shall not be unreasonably withheld. If Buyer and Seller are unable
to agree to the amount of such Tax, the amount of such Tax shall be
determined by the Umpire whose determination shall be binding on
the parties. Seller shall not be prohibited from filing any Final
Consolidated Return prior to the date Buyer consents to the amount
of such Tax.
12.9 Apportionment. For purposes of Section 12.5(c), the
portion of a Tax imposed on the Company and/or a Subsidiary for a
Taxable Period beginning on or before and ending after December 31,
1992, that is allocable to the period ending on December 31, 1992,
is (i), in the case of a Tax that is not based on income or gross
receipts, the total amount of such Tax for the Taxable Period
multiplied by a fraction, the numerator of which is the number of
days in the Taxable Period ending on (and including) December 31,
1992, and the denominator of which is the total number of days in
such Taxable Period and (ii), in the case of a Tax that is based on
income or gross receipts, the amount of Tax that would be due for
the period ending on (and including) December 31, 1992, based on
actual operations of the Company and/or the Subsidiaries during
such period as shown on their permanent books and records.
12.10 Access to Information. From the date hereof, Seller
shall, and shall cause the Company and each of the Subsidiaries to
make available to Buyer and its authorized representatives: (i) all
Tax Returns of the Company and the Subsidiaries for Taxable Periods
ended on or before the Closing Date and any examination reports and
statements of deficiencies assessed against, proposed to be
assessed against, or agreed to by the Company or any Subsidiary for
such Taxable Periods; (ii) any tax sharing or allocation agreement
or arrangement involving the Company or any Subsidiary and a true
and complete description of any such unwritten or informal
agreement or arrangement; (iii) any pro forma federal or State of
Illinois unitary income Tax Returns of the Company or the
Subsidiaries, together with any schedule reconciling the items in
the pro forma Tax Return to the items as included in the
consolidated federal or State of Illinois unitary income Tax Return
for the Kemper Group for all Taxable Periods ended on or before the
Closing Date; and (iv) information in connection with Taxes paid
after December 31, 1992. Notwithstanding the foregoing Buyer shall
have no right to the Returns of or any information or materials of
Seller or to any subsidiary of Seller other than those of Company
or its Subsidiaries.
12.11 Cooperation.
(a) After the Closing, Seller and Buyer shall provide, and
shall cause each of their Subsidiaries to provide, to the other
party and its subsidiaries such information (including access to
books and records) relating to the Company and the Subsidiaries as
Seller or Buyer may reasonably request in order to permit (i) the
filing of any Tax Return, amended Tax Return, or claim for refund,
(ii) the determination of any Tax liability, right to the refund of
Taxes, or the amount of any foreign Tax credit, and (iii) the
conduct or defense of any audit, claim, suit, or other proceeding
in respect of Taxes. Any information obtained pursuant to this
Section 12.11 from the other party shall be kept confidential
except as may otherwise be necessary in connection with the filing
of any Return, amended Return, or claim for refund, determining any
Tax liability or right to refund of Taxes, or conducting or
defending any audit, claim, suit, or other proceeding in respect of
Taxes. Seller and Buyer shall cooperate with each other in the
conduct of any audit, claim, suit, or other proceeding with respect
to any Tax involving the Company or any Subsidiary. The reasonable
out-of-pocket costs and expenses incurred ("Out-of-Pocket
Expenses") by a party in complying with this Section 12.11 shall be
borne by the party requesting such compliance. Out-of-Pocket
Expenses shall be limited to amounts paid to outside parties and
which otherwise would not be incurred but for the request of the
party requesting such compliance.
(b) No party shall be under an obligation to prepare any
information requested by the other pursuant to Section 12.11(a)
unless (i) the information has been prepared by such party prior to
the date of the request, (ii) the information will be prepared by
such party on or after the date of the request in the ordinary
course of such party's trade or business, or (iii), with respect to
information relating to any general matter, such party reasonably
expects that the information can be prepared by an employee within
eight hours provided, however, that the costs and expenses
reasonably incurred by the Company and the Subsidiaries in
preparing the Tax Packages shall be borne entirely by the Company
and the Subsidiaries. If a party requests information pursuant to
Section 12.11(a) that the other party is not required to provide by
reason of this Section 12.11(b), then both parties shall cooperate
and work together in good faith to have such information prepared,
at their mutual agreement, by either (i) the party from whom the
information is requested, in consideration for the reimbursement by
the party making the request of costs and expenses reasonably
incurred in preparing the information or (ii) by an outside party
at the sole expense of the requesting party.
12.12 Books and Records. Seller and Buyer shall retain or
cause to be retained all books and records pertinent to the Company
and each Subsidiary for each Taxable Period or portion thereof
ending on or prior to the Closing Date until the expiration of the
applicable statute of limitations (giving effect to any and all
extensions and waivers) and to abide by or cause compliance with
all record retention agreements entered into by or on behalf of the
Company or any Subsidiary with any Taxing authority.
12.13 Notice of Audit. If any party to this Agreement
receives any written notice from any Taxing authority proposing an
adjustment to any Tax for which any other party hereto may be
obligated to indemnify under this Agreement, such party shall give
prompt written notice thereof to the other that describes such
proposed adjustment in reasonable detail. The failure to give
notice pursuant to this Section 12.13, however, shall not reduce
the obligations of a party hereunder unless, and to the extent
that, such failure prejudices the rights of the other party to
contest such Tax.
12.14 Tax Contests. The Indemnitor and its duly appointed
representatives shall have the sole right to negotiate, resolve
settle, or contest any claim for Tax made by any Taxing authority
with respect to which the Indemnitor has indemnified the
Indemnified Party (and acknowledged its liability to the
Indemnified Party) under this Article XII, provided, however, that
the Indemnitor shall not initiate any claim, settle any issue, file
any amended Tax Return, take or advocate any position or otherwise
take any action that could adversely affect the Indemnified Party
or any of its affiliates (including, but not limited to, the
imposition of income Tax deficiencies, the reductions of asset
basis, or cost adjustments, the lengthening of any amortization or
depreciation period, the denial of amortization or depreciation
deductions, or the reduction of loss or credit carryforwards),
without the written consent of the Indemnified Party, which consent
shall not be unreasonably withheld. If the Indemnitor does not
assume the defense of a claim for the Tax made by a Taxing
authority with respect to which the Indemnitor has indemnified the
Indemnified Party under this Article XII, the Indemnified Party may
defend the same in such manner as it may deem appropriate
including, but not limited to, settling such audit or proceeding
with the consent of the Indemnitor, which consent shall not be
unreasonably withheld. All Expenses reasonably incurred by the
Indemnified Party in connection with such defense shall be
reimbursed by the Indemnitor.
12.15 Closing Date Conduct of Company and Subsidiaries. Buyer
shall cause the Company and its Subsidiaries not to take any action
on the Closing Date that (i) is not in the ordinary course of
business, (ii) increases any Loss Reserves (except with respect to
insurance written on the Closing Date), (iii) is not consistent
with prior periods (except for the transactions contemplated by
this Agreement). Buyer shall cause the Company to prepare the
December 31, 1993 Annual Convention Statement in conformity with
statutory accounting principles applied on a basis consistent with
prior periods and on the Closing Date Buyer and its Affiliates
shall not transfer to the Company or its Subsidiaries any property.
12.16 Transfer Taxes. Seller shall bear the cost of any
documentary, stamp, stock transfer, or similar transfer Tax payable
with respect to the transfer of the Shares to Buyer.
12.17 Miscellaneous.
(a) The representations and warranties of Seller contained
in Section 12.1, and the representation and warranty of Seller,
Associated, and Buyer contained in Section 12.2(e), with respect to
any Tax shall survive until (i) for a Tax for which the Company or
a Subsidiary is primarily liable, the later to occur of (A) the
lapse of the statute of limitations for the assessment of such Tax
against the Company or the Subsidiary or (B) sixty (60) days after
the administrative or judicial determination of such Tax or (ii)
for a Tax for which the Company or a Subsidiary is not primarily
liable, the later to occur of (A) the lapse of the statute of
limitations for the collection of such Tax against the Company or
a Subsidiary or (B) sixty (60) days after the final administrative
or judicial determination of the collectibility of such Tax against
the Company or the Subsidiary.
(b) All consolidated federal and State of Illinois unitary
income Tax liabilities of the Company and the Subsidiaries for all
Taxable Periods ending on or before the Closing Date shall be
determined without regard to the carryback of any net operating
loss, capital loss, general business credit, or other Tax attribute
from Taxable Periods beginning after the Closing Date.
(c) Schedule 12.17(c) lists the Taxes accrued in the Tax
Reserve (including deferred Tax assets and liabilities) set forth
on the Company Financial Statements for the period ended September
30, 1993.
(d) Any indemnification payment made to the Seller or the
Buyer pursuant to this Agreement shall be treated for federal
income Tax purposes as an adjustment to the purchase price of the
Shares, unless otherwise required by applicable law.
(e) If the Closing Date occurs within thirty days after the
beginning of the taxable year of the Company or a Subsidiary,
neither Associated, the Seller, nor the Company shall make the
election provided for in Treasury Regulations Section 1.1502-
76(b)(5).
(f) (i) On or before December 15, 1993, Seller shall cause
the Company to calculate a reasonable estimate of the Tax to be
incurred by the Company and the Subsidiaries with respect to the
Returns described in Section 12.8(c). If the amount of such Tax is
less than the sum of the Taxes paid by the Company and the
Subsidiaries with respect to such Returns, then Seller shall refund
the difference to Company and if the amount of such Tax is greater
than the sum of the Taxes paid to Seller by Company and the
Subsidiaries with respect to such Returns, then Company shall pay
the difference to Seller and, (ii) subject to Section 12.8, on or
before the Closing Date, the Seller shall, and shall cause the
Company and the Subsidiaries, with respect to all periods prior to
the Closing Date, to satisfy all intercompany Tax receivables and
payables.
ARTICLE XIII
MODIFICATION, WAIVERS AND TERMINATION
13.1 Modification. Buyer and Seller may, by mutual consent
of their duly and properly authorized representatives, amend,
modify or supplement this Agreement in such manner as may be agreed
upon by them in writing at any time.
13.2 Waivers. Buyer and Seller pursuant to action by their
duly and properly authorized representatives and by an instrument
in writing may extend the time for or waive the performance of any
of the obligations of the other or waive compliance by the other
with any of the covenants or conditions contained herein. The
failure of any party at any time or times to require performance of
any provisions hereof shall in no manner affect such party's right
at a later date to enforce the same. No waiver by either party of
a condition or a breach of any term, covenant, representation or
warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be
construed as a further or continuing waiver of such condition,
breach or waiver of any condition or of the breach of any other
term, covenant, representation or warranty contained in this
Agreement.
13.3 Termination.
(a) This Agreement may be terminated, and the transactions
contemplated hereby abandoned, prior to Closing:
(i) by the mutual written consent of Buyer and
Seller;
(ii) subject to the provisions of Section 13.3(v)
below, by Buyer or Seller at any time after
April 30, 1994 if any necessary regulatory
approvals have not been obtained by such date,
or by such extension thereof as may be agreed
to in writing by the parties subject to the
provisions of Section 13.3(a)(iii) and (iv)
which allow the parties 30 days to cure a
breach of nonperformance;
(iii) by Buyer if there has been any failure on the
part of Seller to comply with or perform its
agreements, covenants or obligations hereunder
in any material respect and such non-
performance shall not have been cured or
eliminated by Seller within 30 days from
receipt of written notice to Seller from Buyer
of such breach, or waived by Buyer on or
before the Closing Date, unless Seller in good
faith will have commenced the curing of such
non-performance within such 30-day period and
cannot with reasonable diligence cure such
nonperformance within said 30-day period in
which event Seller shall have a reasonable
time, not to exceed an additional 30 days, to
do so;
(iv) by Seller if there has been any failure on the
part of Buyer to comply with or perform its
agreements, covenants or obligations hereunder
in any material respect and such
nonperformance shall not have been cured or
eliminated by Buyer within 30 days from
receipt of written notice to Buyer from Seller
of such breach, or waived by Seller on or
before the Closing Date, unless Buyer in good
faith will have commenced the curing of such
nonperformance within such 30-day period and
cannot with reasonable diligence cure such
nonperformance within said 30-day period in
which event Buyer shall have a reasonable
time, not to exceed an additional 30 days, to
do so; and
(v) at the election of the Seller or Buyer, if any
action, suit or proceeding shall have been
instituted and be continuing by any governmental or
regulatory agency to restrain, modify or prohibit
the carrying out of the transactions contemplated
hereby, provided that neither the Seller nor Buyer
shall have any termination right hereunder if the
other conditions to the obligation of Buyer or the
Seller, as the case may be, to consummate the
transactions contemplated herein shall have been
satisfied, unless such action, suit or proceeding
shall not have been stayed or terminated by the
later of (x) April 30, 1994 or (y) sixty (60) days
after the commencement of such action, suit or
proceeding becomes known to Buyer or the Seller, as
the case may be.
(b) The power of termination provided for by this Section
13.3 may be exercised for Buyer or for Seller only by or on the
authority of their respective boards of directors or executive
committees and will be effective only after written notice thereof
(signed on behalf of the party or parties for which it is given by
the respective chairman of the board or president) shall have been
given to the others.
13.4 Effect of Termination. In the event of a termination
pursuant to Section 13.3, this Agreement shall become void and of
no effect, except that (i) in the event of such a termination
because of any breach of covenant the breaching party shall be
liable to the other party for actual damages; and (ii) Sections
5.4(b), 15.3 and 14.7, and Articles XI and XII shall remain in full
force and effect. In the event of termination of this Agreement,
the Confidentiality Agreement entered into by and between the
Seller and Associated and Buyer shall survive in accordance with
its terms.
ARTICLE XIV
ASSOCIATED'S GUARANTY OF BUYER'S OBLIGATIONS
14.1 Guaranty. Associated, for value received, hereby
absolutely, unconditionally, and irrevocably guarantees to Seller
and to Seller's successors and assigns full and prompt payment when
due and at all times thereafter of any and all obligations of every
nature and kind, now or hereafter owing from Buyer to Seller, and
also of any successor in interest, including without limit any
debtor-in-possession or trustee in bankruptcy which succeeds to the
interests of Buyer, arising under the terms of this Agreement (the
"Obligations"). The Obligations guaranteed include without limit
any and all indebtedness or obligations for which the Buyer would
otherwise be liable to the Seller under the terms of this Agreement
were it not for the invalidity, irregularity or unenforceability of
them by reason of any bankruptcy, insolvency or other similar law
or order affecting creditors' rights generally.
14.2 Waivers.
(a) Associated agrees that it will not exercise or enforce,
and hereby waives, any right of contribution, reimbursement,
recourse or subrogation available to Associated against Buyer or
any other person who is an assignee pursuant to Section 15.5 hereof
(an "Assignee") unless and until all of the Obligations have been
satisfied in full. In addition, if Associated is or becomes an
"insider" or "affiliate" (as defined in Section 101 of the Federal
Bankruptcy Code, as it may be amended) with respect to the Buyer or
with respect to any Assignee, then Associated irrevocably and
absolutely waives any and all rights of subrogation, contribution,
indemnification, recourse, reimbursement and any similar rights
against the Buyer or against any such Assignee with respect to this
Guaranty, whether such rights arise under an express or implied
contract or by operation of law. It is the intention of the
parties that Associated shall not be (or be deemed to be) a
"creditor" (as defined in Section 101 of the Federal Bankruptcy
Code, as it may be amended) of the Buyer by reason of the existence
of this Guaranty in the event that the Buyer becomes a debtor in
any proceeding under the Federal Bankruptcy Code. This waiver is
given to induce the Seller to enter into this Agreement.
Notwithstanding the foregoing, if Buyer or an Assignee becomes a
debtor under the United States Bankruptcy Code (a "Debtor"), the
foregoing waiver by Associated will not apply with respect to any
payment made by Associated in respect of the Obligations after the
date on which Buyer or the Assignee becomes a Debtor. Furthermore,
notwithstanding the foregoing, if Buyer or an Assignee becomes a
Debtor, and Buyer or the Assignee has not made any payments to
Seller in respect of the Obligations in the period between the date
Buyer or the Assignee became a Debtor and one year before such
date, the foregoing waiver will not apply.
(b) Associated waives (i) presentment, protest, notice,
demand or action with respect to any default by Buyer in payment of
all or any part of the Obligations, and with respect to any default
by Associated in Associated's obligations under this Guaranty, and
(ii) any right to require Seller to sue Buyer or any other person
obligated with respect to all or any part of the Obligations.
Associated further agrees that the Seller may compromise, extend,
renew or forbear to enforce payment of any or all the Obligations,
all without notice to Associated and without affecting in any
manner the unconditional obligation of Associated under this
Guaranty.
(c) If any payment applied by Seller to the Obligations is
set aside, recovered, rescinded or required to be returned for any
reason (including, without limitation, the bankruptcy, insolvency
or reorganization of Buyer, but excluding any act of fraud,
misrepresentation, or other willful misconduct of the Seller), the
Obligations to which the payment was applied shall for the purposes
of this Guaranty be deemed to have continued in existence,
notwithstanding the application, and this Guaranty shall be
enforceable as to such Obligations as fully as if Seller had not
made the application.
14.3 No Obligation of Seller to Pursue Buyer. Associated
acknowledges and agrees that the liabilities created by this
Guaranty are direct and are not conditioned upon pursuit of
remedies the Seller may have against the Buyer or any other person.
No invalidity, irregularity or unenforceability of any part or all
of the Obligations or any documents evidencing the same, by reason
of any bankruptcy, insolvency or other similar law or order
affecting creditors' rights generally shall impair, affect or be a
defense or setoff to the obligations of Associated under this
Guaranty.
14.4 Acts or Omissions.
The validity and enforceability of this Guaranty shall not be
impaired or affected by any act or omission by Seller with respect
to any part of the Obligations including, but not limited to (i)
any extension, modification, renewal, indulgence, or substitution;
(ii) any failure or omission to enforce any right, power or remedy;
or (iii) any waiver of any right, power or remedy or of any
default; all whether or not Associated shall have had notice or
knowledge of any act, omission or circumstance referred to in this
paragraph.
ARTICLE XV
MISCELLANEOUS
15.1 Notices. Any notices or other communications required
or permitted hereunder shall be deemed to have been duly given when
delivered personally or when deposited in the U.S. mail if sent by
registered or certified mail, postage prepaid (return receipt
requested), to the party to whom such notice or communication is
addressed at the following addresses (or at such other address for
a party as shall be specified by a notice provided pursuant hereto)
and a copy is sent by facsimile to the following telephone number
prior to or at the time such notices or other communications are
deposited in the U.S. mail:
If to Associated:
Associated Insurance Companies, Inc.
120 Monument Circle
Indianapolis, Indiana 46204
Attention: Donald C. Trigg, Esq.
Facsimile Telephone Number:
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: William W. Rosenblatt, Esq.
Facsimile Telephone No.: 212-259-6333
If to Buyer:
Anthem P & C Holdings, Inc.
120 Monument Circle
Indianapolis, Indiana 46204
Attention: Donald C. Trigg, Esq.
Facsimile Telephone Number: 317-488-6466
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: William W. Rosenblatt, Esq.
Facsimile Telephone No.: 212-259-6333
If to Seller:
John H. Fitzpatrick
Executive Vice President
and Chief Financial Officer
Kemper Corporation
One Kemper Drive, Executive, C-2
Long Grove, Illinois 60049
Facsimile Telephone Number: (708) 540-4694
with copies to:
Kathleen A. Gallichio, Esq.
General Counsel
Kemper Corporation
One Kemper Drive, Legal, C-3
Long Grove, Illinois 60049
Facsimile Telephone Number: (708) 540-4692
Lawrence M. Friedman, Esq.
Lord, Bissell & Brook
115 South LaSalle Street
Chicago, Illinois 60603
Facsimile Telephone Number: (312) 443-0336
15.2 Gender and Number. All words or terms used in this
Agreement, regardless of the number or gender in which they are
used, shall be deemed to include any other number and any other
gender as the context may require. The words "hereof", "herein",
and "hereunder" and words of similar import shall be construed to
refer to this Agreement as a whole, and not to any particular
Section or provision, unless expressly so stated.
15.3 Expenses. Except as otherwise provided herein, all
legal, accounting and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and
expenses.
15.4 Further Assurances. At any time and from time to time
after the Closing Date, each party hereto will execute and deliver
to any other party such further instruments or documents as may
reasonably be required to give effect to the transactions
contemplated hereunder.
15.5 Non-Assignment. Neither this Agreement nor any right
hereunder shall be assignable by any party without the written
consent of the others and any attempted assignment in contravention
of this provision shall be void and of no legal force or effect,
except that the Buyer may assign its interest hereunder without the
consent of the Seller to any wholly owned subsidiary or to an
Affiliate, provided that, notwithstanding any such assignment, the
Buyer and Associated shall remain liable to perform all obligations
required to be performed hereunder and such assignee shall
specifically agree to be similarly bound, and shall also provide
written representations and warranties to Seller substantially
equivalent to those of Buyer set forth in Article IV (except
Sections 4.7, 4.8 and 4.9) and Article XII hereof. Subject to the
foregoing, this Agreement shall be binding upon and inure to the
benefit of the respective successors and permitted assigns of the
parties hereto.
15.6 No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict
construction will be applied against any person.
15.7 Press Releases and Publicity. So long as this Agreement
is in effect, Seller and Buyer will consult with each other as to
the form and substance of any publication of any press release or
other announcement or public disclosure of matters related to this
Agreement or the transactions contemplated herein. Any such press
release or other announcement or public disclosure must be
consented to in writing by Seller and Buyer prior to any such
publication, announcement or public disclosure.
15.8 Information Provided to Associated. The parties agree
that all information or documents provided by Seller, Company or
any of their respective Affiliates to Associated in connection with
the transactions contemplated by this Agreement shall be deemed to
have been received by Buyer.
15.9 Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if the signatures to
each counterpart were upon the same instrument.
15.10 Entire Agreement. This Agreement and the Exhibits and
Schedules and other attachments to it and the Confidentiality
Agreement constitute the entire understanding of Associated, Buyer
and Seller and supersede all prior agreements, arrangements and
communications, whether oral or written, among Associated, Buyer
and Seller with respect to the subject matter hereof, and shall not
be modified or amended other than by written agreement of
Associated, Buyer and Seller. Captions appearing in this Agreement
are for convenience of reference only and shall not be deemed to
explain, limit or amplify the provisions hereof.
15.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois,
without regard to principles of conflicts of law.
15.12 Severability. If any provision or portion of this
Agreement shall become invalid or unenforceable for any reason,
there shall be deemed to be made such minor changes in such
provision or portion as are necessary to make it valid or
enforceable. The invalidity or unenforceability of any provision
or portion hereof shall not affect the validity or enforceability
of the other provisions or portions hereof.
15.13 No Third Party Beneficiaries. Nothing in this Agreement
is intended or shall be construed to give any person, other than
the parties hereto, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained
herein.
15.14 Exhibits and Schedules. The Exhibits and Schedules are
part of this Agreement as if fully set forth herein. All
references herein to ARTICLES, Sections, subsections, clauses,
Exhibits and Schedules shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed on the day and year first above written.
SELLER:
KEMPER CORPORATION
______________________________
By:
Title:
ASSOCIATED:
ASSOCIATED INSURANCE COMPANIES,
INC.
______________________________
By:
Title:
BUYER:
ANTHEM P&C HOLDINGS, INC.
______________________________
By:
Title:
