UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of the earliest event reported): August 1, 1996
(July 18,1996)
Standard Management Corporation
(Exact name of registrant as specified in its charter)
0-20882
(Commission file number)
Indiana No. 35-1773567
(State of incorporation) (IRS employer identification no.)
9100 Keystone Crossing
Indianapolis, Indiana 46240
(Address of principal executive offices) (Zip Code)
(317) 574-6200
(Telephone)
<PAGE>
STANDARD MANAGEMENT CORPORATION
Item 5. Other Events
On July 18, 1996, Standard Life Insurance Company of Indiana
("Standard Life"), a wholly owned subsidiary of Standard
Management Corporation ("SMC" or the "Registrant"), and Delta
Life and Annuity Company ("DLAC") entered into a Stock Purchase
Agreement to purchase Shelby Life Insurance Company ("Shelby"), a
wholly owned subsidiary of DLAC. This Stock Purchase Agreement
is attached hereto as Exhibit 2.3 and incorporated herein by
reference. In addition, on July 18, 1996, SMC issued a press
release announcing the execution of the Stock Purchase Agreement,
which press release is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
2.3 Stock Purchase Agreement dated as of July 18, 1996
by and among DLAC, Shelby, and Standard Life.
99.1 Press release dated July 18, 1996, issued by SMC.
STANDARD MANAGEMENT CORPORATION
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.
STANDARD MANAGEMENT CORPORATION
(Registrant)
Date: August 1, 1996 By: /s/ Ronald D. Hunter
------------------ -------------------------
Ronald D. Hunter
Chairman of the Board,
President and Chief Executive
Officer
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 1996
By and Among
DELTA LIFE AND ANNUITY COMPANY
Memphis, Tennessee;
SHELBY LIFE INSURANCE COMPANY
Memphis, Tennessee;
and
STANDARD LIFE INSURANCE COMPANY OF INDIANA
Indianapolis, Indiana
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.1 Terms Defined. . . . . . . . . . . . . . . . . . . . . . . . . .5
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . .5
ARTICLE II SALE OF SHARES AND CLOSING . . . . . . . . . . . . . . . . .5
2.1 Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . .5
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . .6
2.3 Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.4 SMC Common Stock . . . . . . . . . . . . . . . . . . . . . . . .6
2.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . .7
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.3 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 No Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .8
3.5 No Conflicts or Violations . . . . . . . . . . . . . . . . . . .8
3.6 Books and Records. . . . . . . . . . . . . . . . . . . . . . . .9
3.7 SAP Statements . . . . . . . . . . . . . . . . . . . . . . . . .9
3.8 No Other Financial Statements. . . . . . . . . . . . . . . . . 10
3.9 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.10 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . 10
3.11 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 13
3.12 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . 16
3.15 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Overtime, Back Wages, Vacation, Minimum Wages, and
Discrimination Claims. . . . . . . . . . . . . . . . . . . . . 17
3.17 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19 Insurance Issued by the Company. . . . . . . . . . . . . . . . 20
3.20 Threats of Cancellation. . . . . . . . . . . . . . . . . . . . 21
3.21 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . 21
3.22 Operations Insurance . . . . . . . . . . . . . . . . . . . . . 22
3.23 Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . 22
3.24 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 22
3.25 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.26 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . 23
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 No Conflicts or Violations . . . . . . . . . . . . . . . . . . 23
4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.5 Purchase for Investment. . . . . . . . . . . . . . . . . . . . 24
4.6 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.7 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V COVENANTS OF SELLER AND THE COMPANY. . . . . . . . . . . . . . 25
5.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 25
5.2 Investigation by the Buyer . . . . . . . . . . . . . . . . . . 25
5.3 No Negotiations, etc . . . . . . . . . . . . . . . . . . . . . 26
5.4 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . 26
5.5 Financial Statements and Reports . . . . . . . . . . . . . . . 28
5.6 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . 28
5.8 No Charter Amendments. . . . . . . . . . . . . . . . . . . . . 29
5.9 No Issuance of Securities. . . . . . . . . . . . . . . . . . . 29
5.10 No Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 No Disposal of Property. . . . . . . . . . . . . . . . . . . . 30
5.12 No Breach or Default . . . . . . . . . . . . . . . . . . . . . 30
5.13 No Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 30
5.14 No Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . 30
5.15 Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . 30
5.16 Resignations of Officers and Directors . . . . . . . . . . . . 31
5.17 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.18 Declaration of Extraordinary Dividend. . . . . . . . . . . . . 31
5.19 Section 338 Election . . . . . . . . . . . . . . . . . . . . . 31
5.20 Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . 32
5.21 Notice and Cure. . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . 32
6.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 32
6.2 Notice and Cure. . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII CONDITIONS TO OBLIGATIONS OF BUYER. . . . . . . . . . . . . 33
7.1 Representations and Warranties . . . . . . . . . . . . . . . . 33
7.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Officer's Certificates . . . . . . . . . . . . . . . . . . . . 33
7.4 No Injunction. . . . . . . . . . . . . . . . . . . . . . . . . 34
7.5 No Proceeding or Litigation. . . . . . . . . . . . . . . . . . 34
7.6 Consents, Authorizations, etc. . . . . . . . . . . . . . . . . 34
7.7 No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . 34
7.8 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . 35
7.9 Hart-Scott.. . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.10 Resignation of Officers and Directors. . . . . . . . . . . . . 35
7.11 Voting Trust Agreement . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLER. . . . . . . . . . . . 35
8.1 Representations and Warranties . . . . . . . . . . . . . . . . 35
8.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 Officer's Certificates . . . . . . . . . . . . . . . . . . . . 35
8.4 No Injunction. . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 No Proceeding or Litigation. . . . . . . . . . . . . . . . . . 36
8.6 Consents, Authorizations, etc. . . . . . . . . . . . . . . . . 36
8.7 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX SURVIVAL OF PROVISIONS; REMEDIES . . . . . . . . . . . . . 36
9.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 Available Remedies . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 37
10.1 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 37
10.2 Defense by the Seller. . . . . . . . . . . . . . . . . . . . . 38
10.3 Defense by Buyer . . . . . . . . . . . . . . . . . . . . . . . 39
10.4 Manner of Indemnification. . . . . . . . . . . . . . . . . . . 39
10.5 Non-Exclusive. . . . . . . . . . . . . . . . . . . . . . . . . 39
10.6 Assignment of Indemnification. . . . . . . . . . . . . . . . . 39
ARTICLE XI TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . 39
11.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 41
12.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 42
12.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . 42
12.5 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 43
12.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 43
12.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.8 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.10 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . 44
12.11 Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . 44
12.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 44
12.13 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 44
12.14 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.15 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . 44
12.16 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . 44
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and
entered into as of July 18, 1996 by and among Standard Life
Insurance Company of Indiana, an Indiana corporation (the "Buyer");
Shelby Life Insurance Company, a Tennessee corporation (the
Company ); and Delta Life and Annuity Company, a Tennessee
corporation (the "Seller").
W I T N E S S E T H:
WHEREAS, Seller is the beneficial owner of all 25,000 shares
of the authorized, issued and outstanding capital common stock
("Common Stock"), $100.00 par value per share ("the Shares") of
Shelby Life Insurance Company; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase
from Seller, all of the Shares of Shelby Life Insurance Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Terms Defined. The capitalized terms used in this
Agreement and not defined herein shall have the meanings specified
in Exhibit A.
1.2 Other Definitional Provisions. Unless the context
otherwise requires, (a) references in this Agreement to the
singular number shall include the plural, and the plural number
shall include the singular; (b) words denoting gender shall include
the masculine, feminine and neuter; (c) the words "hereof,"
"herein" and "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular provision of this
Agreement, (d) unless otherwise specified, all Article and Section
references pertain to this Agreement; (e) the term "or" means
"and/or"; and (f) the phrase "ordinary course of business and
consistent with past practice" refers to the business and practice
of the Seller or the Company, as the case may be.
ARTICLE II
SALE OF SHARES AND CLOSING
2.1 Purchase and Sale. The Seller agrees to sell to the
Buyer and the Buyer agrees to purchase from the Seller the Shares
at the Closing upon the terms and subject to the conditions set
forth in this Agreement.
2.2 Purchase Price. (a) Subject to adjustment pursuant to
Section 2.3 hereof, the purchase price for the Shares payable at
the Closing shall be $13,000,000 in cash from Buyer, $3,000,000
cash dividend from the Company, and the issuance of 250,000 shares
of Standard Management Corporation s restricted common stock ( SMC
Common Stock ); (b) Not later than two (2) business days prior to
the Closing Date, the Seller shall prepare and deliver to the Buyer
a statutory balance sheet of the Company as of the last day of the
most recent calendar month prior to the Closing, adjusted to take
into account any dividends to the stockholder paid or to be paid
from such date to and including the Closing Date (the Closing
Balance Sheet ), together with a list of the investment securities
to be held by the Company at the Closing and the respective Fair
Market Value and statutory carrying value of each such investment
security as of the date which is three (3) business days prior to
the Closing Date (the Closing Asset Statement ). The foregoing
documents shall be accompanied by a certificate of the Seller,
executed by its chief financial officer, to the effect that (i) the
Closing Balance Sheet has been prepared in accordance with the
books and records of the Company and SAP, and fairly presents the
financial position of the Company as of the date thereof, in each
case talking into account the foregoing dividend adjustment, and
(ii) the Closing Asset Statement has been prepared in accordance
with the books and records of the Company and this Agreement.
2.3 Adjustment.
(a) Not later than two (2) business days prior
to Closing, the Seller will determine and will deliver to the
Buyer a certificate of the chief financial officer of the
Seller setting forth the Seller's determination of the
Adjusted Capital and Surplus of Company as of the Closing
Date, together with true and complete copies of all Work
Papers related thereto (collectively, the "Closing Adjusted
Capital and Surplus").
(b) The Adjusted Capital and Surplus of the
Company shall be determined in accordance with the Formula set
forth on Exhibit B hereto.
(c) If the Closing Adjusted Capital and
Surplus is less than $8,214,000, the Seller shall cause the
difference to be paid to the Company at Closing in cash or in
securities acceptable to Buyer.
2.4 SMC Common Stock. The SMC Common Stock transferred to
the Seller pursuant to Section 2.2 hereof shall be non-
transferrable by the Seller for a period of two (2) years from the
date of Closing. Buyer shall have the right to call any portion of
the SMC Common Stock at any time during the first twenty-five (25)
months after Closing at a price of $5.00 per share, adjusted for
stock splits and stock dividends. Subject to applicable rules and
regulations, Seller shall have the right to sell or transfer any
portion of the SMC Common Stock at any time after the twenty-fifth
month anniversary of the Closing Date. If the SMC Common Stock is
not equal in value to the sum of $1,250,000, adjusted for stock
splits and dividends, based upon the closing market price on the
twenty-fifth month anniversary of the Closing Date, the Buyer shall
issue to Seller sufficient additional shares of SMC Common Stock to
equal the value of $1,250,000.
2.5 Closing. The Closing of the transactions contemplated
by this Agreement will take place at the offices of Shelby Life
Insurance Company, 530 Oak Court, Suite 200, Memphis, Tennessee
38117, or at such other place as both parties shall agree, at 10:00
a.m., local time, on the Closing Date. At the Closing, the Seller
will deliver to the Buyer such documents and instruments as the
Buyer may reasonably request for the purpose of effectuating the
purchase and sale of the Shares and the transactions contemplated
hereby, including, without limitation, a certificate or
certificates representing the Shares issued in the name of the
Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to the Buyer as of
the date of this Agreement and as of the Closing as follows:
3.1 Organization. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the State
of Tennessee and has full corporate power and authority to enter
into this Agreement and to perform its obligations under this
Agreement. The Company is an insurance company duly organized,
validly existing, and in good standing under the Laws of the State
of Tennessee. The Company is duly licensed, qualified, or admitted
to do business and is in good standing in all jurisdictions in
which the failure to be so licensed, qualified, or admitted and in
good standing, individually or in the aggregate with other such
failures, has or may reasonably be expected to have a material
adverse effect on the validity or enforceability of this Agreement,
on the ability of the Company to perform its obligations under this
Agreement, or on the Business or Condition of the Company.
Section 3.1 of the Disclosure Schedule contains a true and complete
list of the states in which the Company is licensed to write life
and health insurance. The Seller has furnished to the Buyer true
and complete copies of the articles of incorporation (as certified
by the appropriate governmental or regulatory authorities) and the
Bylaws of the Company, including all amendments thereto.
3.2 Authority. The Boards of Directors of the Seller and
the Company, respectively, have duly and validly approved this
Agreement and the transactions contemplated hereby. The execution
and delivery of this Agreement by the Seller and the Company and
the performance by the Seller and the Company of their respective
obligations under this Agreement have been duly and validly autho-
rized by all necessary corporate action on the part of the Seller
and the Company. This Agreement constitutes a legal, valid, and
binding obligation of the Seller and the Company and is enforceable
against the Seller and the Company in accordance with its terms,
except to the extent that (a) enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium,
or similar Laws now or hereafter in effect relating to or limiting
creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the
court or other similar Person before which any proceeding therefor
may be brought.
3.3 Capital Stock. The authorized capital stock of the
Company consists of 25,000 shares of common stock, $100.00 par
value per share, of which all 25,000 shares are validly issued and
outstanding, fully paid and nonassessable, and owned beneficially
and of record by the Seller, free and clear of all Liens, except
for Liens disclosed in Section 3.3 of the Disclosure Schedule.
Except as disclosed in Section 3.3 of the Disclosure Schedule,
there are no outstanding securities, obligations, rights,
subscriptions, warrants, options, charter or founders insurance
policies, phantom stock rights, or (except for this Agreement)
other Contracts of any kind that give any Person the right to (a)
purchase or otherwise receive or be issued any shares of capital
stock of the Company (or any interest therein) or any security or
Liability of any kind convertible into or exchangeable for any
shares of capital stock of the Company (or any interest therein) or
(b) receive any benefits or rights similar to any rights enjoyed by
or accruing to a holder of the Common Stock, or any rights to
participate in the equity, income, or election of directors or
officers of the Company.
3.4 No Subsidiaries. The Company does not control (whether
directly or indirectly, whether through the ownership of securities
or by Contract or proxy, and whether alone or in combination with
others) any corporation, partnership, business organization, or
other similar Person.
3.5 No Conflicts or Violations. The execution and delivery
of this Agreement by the Seller and the Company does not, and the
performance by the Seller and the Company of their respective
obligations under this Agreement will not:
(a) subject to obtaining the approvals
contemplated by Sections 5.1 and 6.1 hereof, violate any term
or provisions of any Law or any writ, judgment, decree,
injunction, or similar order applicable to the Seller or the
Company;
(b) conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of
time or both) a default under, any of the terms, conditions,
or provisions of the articles or certificate of incorporation
or Bylaws of the Seller or the Company;
(c) result in the creation or imposition of
any Lien upon the Seller or the Company or any of their
respective Assets and Properties that individually or in the
aggregate with any other Liens has or may reasonably be
expected to have a material adverse effect on the validity or
enforceability of this Agreement, on the ability of the Seller
or the Company to perform their respective obligations under
this Agreement;
(d) conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of
time or both) a default under, or give to any Person any right
of termination, cancellation, acceleration, or modification in
or with respect to, any Contract to which the Company is a
party or by which any of their respective Assets or Properties
may be bound and as to which any such conflicts, violations,
breaches, defaults, or rights individually or in the aggregate
have or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement, on
the ability of the Seller or the Company to perform its
respective obligations under this Agreement, or on the
Business or Condition of the Company; or
(e) require the Seller or the Company to
obtain any consent, approval, or action of, or make any filing
with or give any notice to, any Person except: (i) as contem-
plated in Section 5.1 hereof; (ii) as disclosed in
Section 3.5(e) of the Disclosure Schedule; or (iii) those
which the failure to obtain, make, or give individually or in
the aggregate with any other such failures has or may
reasonably be expected to have no material adverse effect on
the validity or enforceability of this Agreement, on the
ability of the Seller or the Company to perform its respective
obligations under this Agreement.
3.6 Books and Records. The minute books and other similar
records of the Company contain a true and complete record, in all
material respects, of all actions taken at all meetings and by all
written consents in lieu of meetings of the stockholder, Board of
Directors, and each committee thereof of the Company. The Books
and Records of the Company accurately reflect in all material
respects the Business or Condition of the Company.
3.7 SAP Statements. The Seller has previously delivered to
the Buyer true and complete copies of the following SAP Statements:
(a) Annual Statements of the Company for each
of the years ended December 31, 1993, 1994, and 1995 (and the
notes relating thereto, whether or not included therein); and
(b) Audited SAP statements of the Company for
each of the years ended December 31, 1993, 1994 and 1995 (and
the notes thereto, whether or not included therein); and
(c) Quarterly Statements of the Company for
the first quarter of 1996 (and the notes, if any, relating
thereto, whether or not included therein).
Except as disclosed in Section 3.7 of the Disclosure
Schedule, each such SAP Statement complied in all material respects
with all applicable Laws when so filed, and all material
deficiencies known to Seller or Company with respect to any such
SAP Statement have been cured or corrected. Each such SAP
Statement (and the notes relating thereto, whether or not included
therein), including, without limitation, each balance sheet and
each of the statements of operations, capital and surplus account,
and cash flow contained in the respective SAP Statement, was
prepared in accordance with SAP, is true and complete in all
material respects, and fairly presents the financial condition, the
Assets and Properties, and the Liabilities of the Company as of the
respective dates thereof and the results of operations and changes
in capital and surplus and in cash flow of the Company for and
during the respective periods covered thereby.
3.8 No Other Financial Statements. Except for the financial
statements described in Section 3.7 (collectively, the "Financial
Statements"), and the December 31, 1993 GAAP financial statements,
since March 31, 1996 no other audited financial statements have
been prepared by or with respect to the Company (whether on a GAAP,
SAP, or other basis).
3.9 Reserves. All reserves and other similar amounts with
respect to insurance and annuities as established or reflected in
the SAP Statements of the Company dated as of December 31, 1995 and
March 31, 1996 were determined in accordance with generally
accepted actuarial principles that are in accordance with those
called for by the provisions of the related insurance and annuity
Contracts and in the related reinsurance, coinsurance, and other
similar Contracts of Company, and meet the requirements of the
insurance Laws of the State of Tennessee and states in which such
insurance and annuity Contracts were issued or delivered. All such
reserves and other similar amounts will be adequate (under gener-
ally accepted actuarial principles consistently applied) to cover
the total amount of all reasonably anticipated matured and
unmatured benefits, dividends, claims, and other Liabilities of the
Company under all insurance and annuity Contracts under which the
Company has or will have any Liability (including, without
limitation, any Liability arising under or as a result of any
reinsurance, coinsurance, or other similar Contract) on the
respective dates of such SAP Statements. The Company owns assets
that qualify as legal reserve assets under applicable insurance
Laws in an amount at least equal to all such required reserves and
other similar amounts.
3.10 Absence of Changes. Except as disclosed in Section 3.10
of the Disclosure Schedule or as specifically reflected in the
March 31, 1996 SAP Statement, or except for changes or developments
relating to the conduct of the business of the Company after the
date of this Agreement in conformity with this Agreement or the
requests of the Buyer, since March 31, 1996, there has not been,
occurred, or arisen any change in, or any event (including without
limitation any damage, destruction, or loss whether or not covered
by insurance), condition, or state of facts of any character that
individually or in the aggregate has or may reasonably be expected
to have a material adverse effect on the Business or Condition of
the Company. Except as disclosed in Section 3.10 of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below), or except as specifically reflected in the March 31,
1996 SAP Statement, or except for changes or developments relating
to the conduct of the business of the Company after the date of
this Agreement in conformity with this Agreement or the requests of
the Buyer since March 31, 1996, the Company has operated only in
the ordinary course of business and consistent with past practice,
and (without limiting the generality of the foregoing) there has
not been, occurred, or arisen:
(a) any declaration, setting aside, or payment
of any dividend or other distribution in respect of the
capital stock of the Company or any direct or indirect
redemption, purchase, or other acquisition by the Company of
any such stock or of any interest in or right to acquire any
such stock;
(b) any employment, deferred compensation, or
other salary, wage, or compensation Contract entered into
between the Company and any of its officers, directors,
employees, agents, consultants, or similar representatives,
except for normal and customary Contracts with agents and
consultants in the ordinary course of business and consistent
with past practice; or any increase in the salary, wages, or
other compensation of any kind, whether current or deferred,
of any officer, director, employee, agent, consultant, or
other similar representative of the Company other than routine
increases that were made in the ordinary course of business
and consistent with past practice and that did not result in
an increase of more than ten percent (10%) of the respective
salary, wages, or compensation of any such Person; or any
creation of any Benefit Plan or any contribution to or
amendment or modification of any Benefit Plan;
(c) any issuance, sale, or disposition by the
Company of any debenture, note, stock, or other security
issued by the Company, or any modification or amendment of any
right of the holder of any outstanding debenture, note, stock,
or other security issued by the Company;
(d) any Lien created on or in any of the
Assets and Properties of the Company, or assumed by the
Company with respect to any of such Assets and Properties,
which Lien relates to Liabilities individually or in the
aggregate exceeding $50,000 for the Company or which Lien
individually or in the aggregate with any other Liens has or
may reasonably be expected to have a material adverse effect
on the Business or Condition of the Company;
(e) any prepayment of any Liabilities
individually or in the aggregate exceeding $20,000;
(f) any Liability involving the borrowing of
money by the Company;
(g) any Liability incurred by the Company in
any transaction (other than pursuant to any insurance or
annuity Contract entered into in the ordinary course of
business and consistent with past practice) not involving the
borrowing of money, except such Liabilities incurred by the
Company, the result of which individually or in the aggregate
cannot reasonably be expected to have a material adverse
effect on the Business or Condition of the Company;
(h) any damage, destruction, or loss (whether
or not covered by insurance) affecting any of the Assets and
Properties of the Company, which damage, destruction, or loss
individually exceeds $25,000 or the result of which
individually or in the aggregate has or may reasonably be
expected to have a material adverse effect on the Business or
Condition of the Company;
(i) any work stoppage, strike, slowdown, or
(to the best knowledge of the Seller or the Company) union
organizational campaign (in process or threatened) at or
affecting the Company;
(j) any material change in any underwriting,
actuarial, investment, financial reporting, or accounting
practice or policy followed by the Company, or in any
assumption underlying such a practice or policy, or in any
method of calculating any bad debt, contingency, or other
reserve for financial reporting purposes or for any other
accounting purposes;
(k) any payment, discharge, or satisfaction by
the Company of any Lien or Liability other than Liens or
Liabilities that were paid, discharged, or satisfied since
December 31, 1995 in the ordinary course of business and
consistent with past practice, or were paid, discharged, or
satisfied as required under this Agreement;
(l) any cancellation of any Liability in
excess of $10,000 individually or in the aggregate owed to the
Company by any other Person;
(m) any write-off or write-down of, or any
determination to write off or down any of, the Assets and
Properties of the Company or any portion thereof, except for
write-offs or write-downs that do not exceed $10,000
individually or in the aggregate for the Company;
(n) any sale, transfer, or conveyance of any
investments, or any other Assets and Properties, of the
Company with an individual book value or with an aggregate
book value in excess of $50,000, except as contemplated in
Section 5.6 and except in the ordinary course of business and
consistent with past practice;
(o) any amendment, termination, waiver,
disposal, or lapse of, or other failure to preserve, any
license, permit, or other form of authorization of the
Company, the result of which individually or in the aggregate
has or may reasonably be expected to have a material adverse
effect on the Business or Condition of the Company;
(p) any transaction or arrangement under which
the Company paid, lent, or advanced any amount to or in
respect of, or sold, transferred, or leased any of its Assets
and Properties or any service to, (i) any officer or director
of the Seller or the Company (except for payments of salaries
and wages in the ordinary course of business and consistent
with past practice, and except for payments made pursuant to
any Contract disclosed in Section 3.10(b) or Section 3.17(a)
of the Disclosure Schedule), or of any Affiliate of the Seller
or the Company, or of any such officer of director; (ii) any
business or other Person in which the Seller or the Company,
any such officer or director, or any such Affiliate has any
material interest, except for advances made to, or
reimbursements of, officers or directors of the Seller or the
Company for travel and other business expenses in reasonable
amounts in the ordinary course of business and consistent with
past practice; or any Affiliate of the Company pursuant to any
Contract of the type described in Section 3.17(g);
(q) any material amendment of, or any failure
to perform all of its obligations under, or any default under,
or any waiver of any right under, or any termination (other
than on the stated expiration date) of, any Contract (except
good faith disputes over claims) that involves or reasonably
would involve the annual expenditure or receipt by the Company
of more than $25,000 or that individually or in the aggregate
is material to the Business or Condition of the Company;
(r) any material decrease in the amount of, or
any material change in the nature of, the insurance or
annuities in force of the Company or any material change in
the amount or nature of the reserves, liabilities or other
similar amounts of the Company with respect to insurance and
annuity Contracts (including, without limitation, reserves and
other similar amounts of a type required to be reflected
respectively on lines 1 through 10 on page 3 of an Annual
Statement of the Company);
(s) any amendment to the articles or
certificate of incorporation or Bylaws of the Company;
(t) any termination, amendment, or execution
by the Company of any reinsurance, coinsurance, or other
similar Contract, as ceding or assuming insurer;
(u) any expenditure or commitment for
additions to property, plant, equipment or other tangible or
intangible capital assets of the Company, except for any
expenditure or commitment that does not exceed $25,000
individually or the result of which individually or in the
aggregate does not have and may not reasonably be expected to
have a material adverse effect on the Business or Condition of
the Company;
(v) any amendment or introduction by the
Company of any insurance or annuity Contract other than in the
ordinary course of business and consistent with past practice;
or
(w) any Contract to take any of the actions
described in this Section other than actions expressly per-
mitted under this Section.
3.11 No Undisclosed Liabilities. Except to the extent
specifically reflected in the balance sheet included in the
December 31, 1995 SAP Statement (or in the notes relating thereto),
or except as disclosed in Section 3.11 of the Disclosure Schedule,
there were no Liabilities (other than policyholder benefits payable
in the ordinary course of business and consistent with past
practice) against, relating to, or affecting the Company as of
December 31, 1995 that individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the
Business or Condition of the Company. Except to the extent
specifically reflected in the balance sheet included in the March
31, 1996 SAP Statement (or in the notes relating thereto), or
except as disclosed in Section 3.11 of the Disclosure Schedule,
since March 31, 1996, the Company has not incurred any Liabilities
(other than policyholder benefits payable in the ordinary course of
business and consistent with past practice) that individually or in
the aggregate have or may reasonably be expected to have a material
adverse effect on the Business or Condition of the Company.
3.12 Tax Matters.
(a) The Company and its subsidiaries have
filed all Tax Returns and other federal and state, local and
foreign information returns and payee statements (including,
but not limited to, Internal Revenue Service forms 1096, 1098,
1099-MISC, 1099-R, and 5498) that they are required to file.
All such Tax Returns, information returns, and payee
statements were correct and complete in all material respects.
All Taxes owed by the Company and any of its subsidiaries
(whether or not shown on any Tax Return) have been paid when
due or adequately reserved for. Except for the taxable year
1995, the Company and any of its subsidiaries is/are not
currently the beneficiary of any extension of time within
which to file any Tax Return, information returns, or payee
statements. To the best of the Seller s knowledge for the
years 1965 through and including 1994 and without
qualification thereafter, no claim has ever been made by an
authority in a jurisdiction where the Company and any of its
subsidiaries does/do not file Tax Returns, information
returns, or payee statements that it/they is/are or may be
subject to taxation by that jurisdiction, which would have an
adverse material affect on the Business or Condition of the
Company. There are no security interests attached to any of
the assets of the Company or any of its subsidiaries that
arose in connection with any failure (or alleged failure) to
pay any Tax when due.
(b) The Company and any of its subsidiaries
have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to
any employee, creditor, independent contractor, policyholder,
or other third party.
(c) Neither Seller nor the Company nor any of
its subsidiaries expect any authority to assess any additional
Taxes for any period for which Tax Returns have been or should
have been filed. There is no dispute or claim concerning any
Tax Liability of the Company or any of its subsidiaries either
(A) claimed or raised by any authority in writing or (B) as to
which Seller and the Company and its subsidiaries have
knowledge based upon personal contact with any agent of such
authority. Section 3.12(c) of the Disclosure Schedule lists
all federal, state, local, and foreign income Tax Returns
filed with respect to the Company and its subsidiaries for the
taxable years ending 1994 and 1995. Section 3.12(c) of the
Disclosure Schedule further lists all Tax Returns for taxable
years since 1986 that have been audited and lists all Tax
Returns for any taxable year that are currently the subject of
audit. The Seller has delivered to the Purchaser correct and
complete copies of all federal income Tax Returns listed on
Section 3.12(c) of the Disclosure Schedule, examination
reports, and statements of deficiencies assessed against or
agreed to by any of the Company and its subsidiaries for any
taxable year covered by any such Tax Return.
(d) Except as disclosed on Section 3.12(d) of
the Disclosure Schedule, the Company and its subsidiaries have
not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company and its subsidiaries are not
a party to any Tax allocation or sharing agreement. The
Company and its subsidiaries have not been (or has any
Liability for unpaid Taxes because it once was) a member of an
affiliated group during any part of any consolidated return
year.
(f) Section 3.12(f) of the Disclosure Schedule
sets forth the tax basis of the Company in its assets.
(g) The unpaid Taxes of the Company and its
subsidiaries do not exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set
forth on the face of the Company s SAP or GAAP Financial
Statements (rather than in any notes thereto) as adjusted for
the passage of time through the Closing Date in accordance
with the past custom and practice of the Company and its
subsidiaries in filing its/their Tax Returns.
(h) Section 3.12(h) of the Disclosure Schedule
sets forth all federal Tax Returns for any taxable year for
which the applicable statute of limitations has not expired.
3.13 Litigation. Except as disclosed in Section 3.13 of the
Disclosure Schedule (with paragraph references corresponding to
those set forth below):
(a) There are no actions, suits,
investigations, or proceedings pending (assuming the legal
department of the Company has received actual notice thereof),
or (to the best knowledge of the Seller) threatened, against
the Seller or the Company or any of their Assets and
Properties, at law or in equity, in, before, or by any Person
that individually or in the aggregate have or may reasonably
be expected to have a material adverse effect on the validity
or enforceability of this Agreement, on the ability of the
Seller or the Company to perform its respective obligations
under this Agreement, or on the Business or Condition of the
Seller or the Company.
(b) There are no actions, suits,
investigations, or proceedings pending, or (to the best
knowledge of the Seller) threatened, against the Company or
any of their respective Assets and Properties, at law or in
equity, in, before, or by any Person that individually involve
a claim or claims for any injunction or similar relief or for
Damages exceeding $25,000 or an unspecified amount of Damages.
(c) There are no writs, judgments, decrees, or
similar orders of any Person outstanding against the Seller or
the Company that individually exceed $10,000 or that
individually or in the aggregate have or may reasonably be
expected to have a material adverse effect on the Business or
Condition of the Seller or the Company, and there are no
injunctions or similar orders of any Person outstanding
against the Seller or the Company.
3.14 Compliance With Laws. Except as disclosed in
Section 3.14 of the Disclosure Schedule, the Company is not in
violation (or with or without notice or lapse of time or both,
would be in violation) of any term or provision of any Law or any
writ, judgment, decree, injunction, or similar order applicable to
the Company or any of its Assets and Properties, the result of
which violation individually or violations in the aggregate has or
may reasonably be expected to have a material adverse effect on the
Business or Condition of the Company. Without limiting the
generality of the foregoing:
(a) Since January 1, 1996, the Company has
duly and validly filed or caused to be so filed all reports,
statements, documents, registrations, filings, or submissions
that were required by Law to be filed with any Person and as
to which the failure to so file, individually or in the
aggregate with other such failures, has or may reasonably be
expected to have a material adverse effect on the Business or
Condition of the Company; all such filings complied with
applicable Laws in all material respects when filed and, no
material deficiencies have been asserted by any Person with
respect to any such filings.
(b) The Seller has previously delivered to the
Buyer the reports reflecting the results of the most recent
financial examination of the Company issued by either the
State of Ohio or the State of Tennessee. Except as disclosed
in Section 3.14(b) of the Disclosure Schedule, all material
deficiencies or violations in such report have been resolved
to the satisfaction of either the State of Ohio or the State
of Tennessee.
(c) Except as disclosed in Section 3.14(c) of
the Disclosure Schedule, all outstanding insurance and annuity
Contracts issued, reinsured, or underwritten by the Company
are, to the extent required under applicable Laws, on forms
approved by the insurance regulatory authority of the juris-
diction where issued or have been filed with and not objected
to by such authority within the period provided for objection.
(d) Section 3.14(d) of the Disclosure Schedule
contains a true and complete list of each master or prototype
(as well as any individually designed) pension, profit
sharing, defined benefit, Code Section 401(k), and other
retirement or employee benefit plan or Contract (including,
but not limited to, simplified employee pension plans, Code
Section 403(a), (b) and (c) annuities, Keogh plans, and
individual retirement accounts and annuities) offered or sold
by the Company to, or maintained or sponsored for the benefit
of any employees of, any other Person, and each determination
letter relating to the creation or amendment of any such plan
or Contract. Except as disclosed in Section 3.14(d) of the
Disclosure Schedule, each such plan or Contract in all
material respects conforms with, and has been offered, sold,
maintained, and sponsored in accordance with, all applicable
Laws. Except as disclosed in Section 3.14(d) of the
Disclosure Schedule, the Company is not a fiduciary with
respect to any plan or Contract referenced in this
Section 3.14(d).
(1) The Company does not provide
administrative or other contractual services for any
plan or Contract referenced in this Section 3.14(d),
including, but not limited to, any third party
administrative services for an Employee Welfare Benefit
Plan.
(2) To the extent that the Company maintains
any collective or commingled funds or accounts which
restrict the Persons who may invest therein to
tax-exempt entities or qualified plans, each such fund
or account (of which a true and complete list and
description is disclosed in Section 3.14(d)(2) of the
Disclosure Schedule) has been established, maintained
and operated in accordance with all applicable Laws,
has maintained its tax-exempt status and has no non-
qualified plans or trusts or other taxable entities
investing in it.
(3) In addition to the representations and
warranties contained in Section 3.13, there are no
claims pending, or (to the best knowledge of the Seller
or the Company) threatened, against the Company or any
of its Assets and Properties, under any fiduciary
liability insurance policy issued by or to the Company
that individually or in the aggregate has or may
reasonably be expected to have a material adverse
effect on the Business or Condition of the Company.
3.15 Employee Benefits. Neither the Company nor any of its
subsidiaries have ever had any Employee Benefit Plans and no
Liabilities or obligation of any kind whatsoever with respect to
any current or former Employee Benefit Plans. The Seller and the
Company and any of its subsidiaries have no knowledge of any basis
for any charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand with respect to any former Employee
Benefit Plans of the Company or any of its subsidiaries.
3.16 Overtime, Back Wages, Vacation, Minimum Wages, and
Discrimination Claims. There are no present or former employees of
the Company or any of its subsidiaries who have any claims against
it/them (whether under federal or state law, any employment
agreement, or otherwise) on account of or for: (a) wages or
salaries (excluding bonuses in amounts accruing under pension and
profit sharing plans) for any period other than the current payroll
period, (b) overtime pay, other than overtime paid for the current
payroll period, (c) vacation, time off or pay in lieu of vacation
or time off, other than that earned and accrued for, in respect to
the current fiscal year, or (d) any violation of any statute,
ordinance or regulation relating to minimum wages or maximum hours
of work or pertaining to discrimination in employment.
3.17 Properties. Except as disclosed in Section 3.17 of the
Disclosure Schedule (with paragraph references corresponding to
those set forth below):
(a) The Company has good and valid title to
all debentures, notes, stocks, securities, and other assets
that are of a type required to be disclosed in Schedules B
through DB of its Annual Statement and that are owned by it,
free and clear of all Liens.
(b) The Company neither owns nor has a valid
leasehold interest in any tangible personal property other
than policy files and Books and Records of the Company.
(c) The Company has, and at all times after
the Closing will have, the right to use, free and clear of any
royalty or other payment obligations, claims of infringement
or alleged infringement, or other Liens, all marks, names,
trademarks, service marks, patents, patent rights, assumed
names, logos, trade secrets, copyrights, trade names, and
service marks that are used in the conduct of its business,
operations, or affairs (of which a true and complete list and
description is disclosed in Section 3.17(c) of the Disclosure
Schedule), and all computer software, programs, and similar
systems owned by or licensed to the Seller or the Company or
any Affiliate of the Company or used in the conduct of its
business, operations, or affairs (of which a true and complete
list and description is disclosed in Section 3.17(c) of the
Disclosure Schedule). Neither the Seller nor the Company is in
conflict with or in violation or infringement of, nor has the
Seller or the Company received any notice of any conflict with
or violation or infringement of or any claimed conflict with,
any asserted rights of any other Person with respect to any
intellectual property or any computer software, programs, or
similar systems, including, without limitation, any of such
items disclosed in Section 3.17(c) of the Disclosure Schedule.
3.18 Contracts. Section 3.18 of the Disclosure Schedule
(with paragraph references corresponding to those set forth below)
contains a true and complete list of each of the following
Contracts or other documents or arrangements (true and complete
copies, or, if none, written descriptions, of which have been made
available to the Buyer, together with all amendments thereto), to
which the Company is a party or by which any of its Assets and
Properties is or may be bound:
(a) all employment, agency, consultation, or
representation Contracts or other Contracts of any type
(including, without limitation, loans or advances) with any
present officer, director, employee, agent, consultant, or
other similar representative of the Company (or former
officer, director, employee, agent, consultant or similar
representative of the Company, if there exists any present or
future liability with respect to such Contract, whether now
existing or contingent) (other than Contracts with consultants
and similar representatives who do not receive compensation of
$50,000 or more per year and other than employment or agency
Contracts, not containing terms which are unduly burdensome to
the Company, with agents who do not receive compensation of
$50,000 or more per year), and the name, position, and rate of
compensation of each such Person and the expiration date of
each such Contract, as well as all sick leave, vacation,
holiday, and other similar practices, procedures, and policies
of the Company established or administered other than as
Benefit Plans;
(b) all Contracts with any Person containing
any provision or covenant limiting the ability of the Company
to engage in any line of business or to compete with or to
obtain products of services from any Person or limiting the
ability of any Person to compete with or to provide products
or services to the Company;
(c) all partnership, joint venture,
profit-sharing, or similar Contracts with any Person (other
than Benefit Plans);
(d) all Contracts relating to the borrowing of
money by the Company or to the direct or indirect guarantee by
the Company of any obligation for borrowed money in excess of
$25,000 in the aggregate for the Company or any of its
Affiliates, or any other Liability in respect of indebtedness
of any other Person, including without limitation any Contract
relating to the maintenance of compensating balances that are
not terminable by the Company without penalty upon not more
than sixty (60) calendar days' notice, any line of credit or
similar facility, the payment for property, products, or
services of any other Person even if such property, products,
or services are not conveyed, delivered, or rendered, or the
obligation to take-or-pay, keep-well, make-whole, or maintain
surplus or earnings levels or perform other financial ratios
or requirements; Section 3.18(d) of the Disclosure Schedule
contains a true and complete list of any requirements for
consents or approvals of creditors needed to consummate the
transactions contemplated hereby;
(e) all leases or subleases of real property
used in the Company's business, operations, or affairs, and
all other leases, subleases, or rental or use Contracts for
which the Company is liable;
(f) all Contracts relating to the future
disposition or acquisition of any investment in or security of
any Person or of any interest in any business enterprise
(other than the disposition or acquisition of investments in
the ordinary course of business and consistent with past
practice);
(g) all Contracts or arrangements (including,
without limitation, those relating to the sharing or
allocation of expenses, personnel, services, or facilities)
between or among the Seller and the Company and any of their
respective Affiliates or any other Person who is described in
Section 3.10(p);
(h) all reinsurance, coinsurance, or other
similar Contracts indicating, with respect to each such
Contract, the information required to be disclosed in
Schedule S of the Company's Annual Statement;
(i) all outstanding proxies, powers of
attorney, or similar delegations of authority of the Company,
except for powers of attorney for the service of process
pursuant to applicable insurance Laws with respect to the
Company;
(j) all Contracts for any product, service,
equipment, facility, or similar item (other than insurance and
annuity Contracts issued, reinsured, or underwritten by the
Company and other than reinsurance, coinsurance, and other
similar Contracts) that by their respective terms do not
expire or terminate or are not terminable by the Company,
without penalty or other Liability, within six (6) months
after March 31, 1996; and
(k) all other Contracts (other than insurance
and annuity Contracts issued, reinsured, or underwritten by
the Company) that involve the payment or potential payment
pursuant to the terms of such Contracts, by or to the Company
of more than $50,000 individually or in the aggregate or that
are otherwise material to the Business or Condition of the
Company.
Each Contract disclosed or required to be disclosed in the
Disclosure Schedule pursuant to this Section is in full force and
effect and constitutes a legal, valid, and binding obligation of
the Company (and to the best knowledge of the Seller) of each other
Person that is a party thereto in accordance with its terms; and
neither the Company (to the best knowledge of the Seller) nor any
other party to such Contract is in violation or breach of or
default under any such Contract (or with or without notice or lapse
of time or both, would be in violation or breach of or default
under any such Contract). Except as disclosed in Section 3.18 of
the Disclosure Schedule (with a specific reference to this
sentence), the Company is not a party to or bound by any Contract
that was not entered into in the ordinary course of business and
consistent with past practice or that has or may reasonably be
expected to have, individually or in the aggregate with any other
Contracts, a material adverse effect on the Business or Condition
of the Company. The Company is not a party to or bound by any
collective bargaining or similar labor Contract.
3.19 Insurance Issued by the Company. Except as required by
Law or except as disclosed in Section 3.19 of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below):
(a) All insurance or annuity Contract benefits
payable to the Company by any other Person that is a party to
or bound by any reinsurance, coinsurance, or other similar
Contract with the Company have in all material respects been
paid in accordance with the terms of the insurance, annuity,
and other Contracts under which they arose, except for such
benefits for which the Company reasonably believes there is a
reasonable basis to contest payment.
(b) No outstanding insurance or annuity
Contract issued, reinsured, or underwritten by the Company
entitles the holder thereof or any other Person to receive
dividends, distributions, or to share in the income of the
Company or receive any other benefits based on the revenues or
earnings of the Company or any other Person.
(c) The underwriting standards utilized and
ratings applied by the Company and (to the best knowledge of
the Seller and the Company) by any other Person that is a
party to or bound by any reinsurance, coinsurance, or other
similar Contract with the Company conform in all material
respects to industry accepted practices and to the standards
and ratings required pursuant to the terms of the respective
reinsurance, coinsurance, or other similar Contracts.
(d) To the best knowledge of the Seller and
the Company, all amounts to which the Company is entitled
under reinsurance, coinsurance, or other similar Contracts
(including without limitation amounts based on paid and unpaid
losses) are fully collectible.
(e) Except as set forth on Section 3.19 (e) of
the Disclosure Schedule, and except for such instances as in
the aggregate would not have a material adverse effect on the
Company, neither the Seller nor the Company nor any of its
subsidiaries have knowledge of any instance where (i) any
insurance agent who, at the time such agent wrote, sold or
produced business for the Company or any of its subsidiaries,
was not duly licensed as an insurance agent for the type of
business written, sold or produced by such agent for the
Company or any of its subsidiaries in the particular
jurisdiction in which such agent wrote, sold or produced such
business for the Company or any of its subsidiaries, or (ii)
any such insurance agent violated any law or order applicable
to the writing, sale or production of business for the Company
or any of its subsidiaries with respect to any business
written, sold or produced by such agent for the Company or any
of its subsidiaries.
(f) The tax treatment under the Code of all
insurance, annuity or investment policies, plans, or
contracts; all financial products, employee benefit plans,
individual retirement accounts or annuities; or any similar or
related policy, contract, plan, or product, whether
individual, group, or otherwise, issued or sold by the Company
is and at all times has been the same to the Buyer,
policyholder or intended beneficiaries thereof as the tax
treatment under the Code for which such contracts qualified or
purported to qualify at the time of its issuance or purchase.
For purposes of this Section 3.19(f), the provisions of the
Code relating to the tax treatment of such contracts shall
include, but not be limited to, Sections 72, 79, 89, 101, 104,
105, 106, 125, 130, 401, 402, 403, 404, 408, 412, 415, 419,
419A, 501, 505, 817, 818, 7702, and 7702A of the Code.
3.20 Threats of Cancellation. Except as disclosed in
Section 3.20 of the Disclosure Schedule, since March 31, 1996 no
policyholder, group of policyholder Affiliates, or Persons writing,
selling, or producing insurance business that individually or in
the aggregate accounted for five percent 5% or more of the premium
or annuity income of the Company for the year ended December 31,
1995, has terminated or (to the best knowledge of the Seller or the
Company) threatened to terminate its relationship with the Company.
3.21 Licenses and Permits. Except as disclosed in
Section 3.21 of the Disclosure Schedule (with paragraph references
corresponding to those set forth below):
(a) The Company has previously delivered to
the Buyer true and complete copies of all certificates of
authority that are required for its business, operations, and
affairs and that the failure to so own or hold has or may
reasonably be expected to have a material adverse effect on
its Business or Condition.
(b) All such certificates of authority are
valid and in full force and effect, and free of any
restrictions imposed by any Person.
3.22 Operations Insurance. Section 3.22 of the Disclosure
Schedule contains a true and complete list and description of all
liability, property, workers compensation, directors and officers
liability, and other similar insurance Contracts that insure the
business, operations, or affairs of the Company or affect or relate
to the ownership, use, or operations of any of the Assets and
Properties of the Company and that have been issued to the Company
or any of its Affiliates (including, without limitation, the names
and addresses of the insurers, the expiration dates thereof, and
the annual premiums and payment terms thereof) or that are held by
the Company or by any Affiliate of the Seller for the benefit of
the Company following the Closing. All such insurance is in full
force and effect and (to the best knowledge of the Seller and the
Company) is with financially sound and reputable insurers and, in
light of the business, operations, and affairs of the Company, is
in amounts and provides coverage that are reasonable and customary
for Persons in similar businesses.
3.23 Intercompany Accounts. Other than reimbursed direct
expenses as reflected in the March 31, 1996 SAP Statement, or
except as disclosed in Section 3.23 of the Disclosure Schedule,
there are no intercompany accounts (receivable or payable) other
than in the ordinary course of business and consistent with past
practice between the Company and any of its Affiliates. Except as
disclosed in Section 3.23 of the Disclosure Schedule, since
March 31, 1996 all settlements of such intercompany accounts have
been made, and all allocations of such intercompany expenses have
been applied, in the ordinary course of business and consistent
with past practice.
3.24 Bank Accounts. Section 3.24 of the Disclosure Schedule
contains a true and complete list of the names and locations of
all banks, trust companies, securities brokers, and other financial
institutions at which the Company has an account or safe deposit
box or maintains a banking, custodial, trading, or other similar
relationship and a true and complete list and description of each
such account, box, and relationship, indicating in each case the
account number.
3.25 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
the Seller directly with the Buyer, without the intervention of any
Person on behalf of the Seller in such manner as to give rise to
any valid claim by any Person against the Buyer or the Seller for
a finder's fee, brokerage commission, or similar payment.
3.26 Disclosure. Neither this Agreement nor any certificate
furnished by the Seller or the Company to the Buyer in connection
with this Agreement or the transactions contemplated hereby
contains any untrue statement of a material fact by the Seller or
the Company or omits to state a material fact by the Seller or the
Company necessary to make the statements herein or therein not
misleading in light of the circumstances in which they were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Seller as of
the date of this Agreement and as of the Closing as follows:
4.1 Organization. The Buyer is a corporation duly
organized, validly existing, and in good standing under the Laws of
the State of Indiana and has full corporate power and authority to
enter into this Agreement and to perform its obligations under this
Agreement. The Buyer is duly licensed, qualified, or admitted to
do business and is in good standing in all jurisdictions in which
the failure to be so licensed, qualified, or admitted and in good
standing, individually or in the aggregate with other such failure,
has or may reasonably be expected to have a material adverse effect
on the validity or enforceability of this Agreement, on the ability
of the Buyer to perform its obligations under this Agreement or on
the Business or Condition of the Buyer.
4.2 Authority. The Board of Directors of the Buyer has duly
and validly approved this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement
by the Buyer and the performance by the Buyer of its obligations
under this Agreement have been duly and validly authorized by all
necessary corporate action on the part of the Buyer. This
Agreement constitutes a legal, valid, and binding obligation of the
Buyer and is enforceable against the Buyer in accordance with its
terms, except to the extent that enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium,
or similar Laws now or hereafter in effect relating to or limiting
creditors' rights generally and the remedy of specific performance
and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court or
other similar Person before which any proceeding therefor may be
brought.
4.3 No Conflicts or Violations. The execution and delivery
of this Agreement by the Buyer do not, and the performance by the
Buyer of its obligations under this Agreement will not:
(a) subject to obtaining the approvals
contemplated by Section 6.1 hereof, violate any term or provi-
sion of any Law or any writ, judgment, decree, injunction, or
similar order applicable to the Buyer;
(b) conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of
time or both) a default under, any of the terms, conditions,
or provisions of the articles of incorporation or Bylaws of
the Buyer;
(c) result in the creation or imposition of
any Lien upon the Buyer or any of its Assets and Properties
that individually or in the aggregate with any other Liens has
or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement or
on the ability of the Buyer to perform its obligations under
this Agreement;
(d) conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of
time or both) a default under, or give to any person any right
of termination, cancellation, acceleration, or modification in
or with respect to, any Contract to which the Buyer is a party
or by which any of its Assets and Properties may be bound and
as to which any such conflicts, violations, breaches,
defaults, or rights individually or in the aggregate have or
may reasonably be expected to have a material adverse effect
on the validity or enforceability of this Agreement or on the
ability of the Buyer to perform its obligations under this
Agreement; or
(e) require the Buyer to obtain any consent,
approval, or action of, or make any filing with or give any
notice to, any Person except as contemplated in Section 6.1,
as disclosed in writing to the Seller, or those which the
failure to obtain, make, or give individually or in the
aggregate with other such failures has or may reasonably be
expected to have no material adverse effect on the validity or
enforceability of this Agreement or on the ability of the
Buyer to perform its obligations under this Agreement.
4.4 Litigation. There are no actions, suits investigations,
or proceedings pending against the Buyer, or (to the best knowledge
of the Buyer) threatened against the Buyer, at law or in equity,
in, before, or by any Person, that individually or in the aggregate
have or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement, on the
ability of the Buyer to perform its obligations under this
Agreement or on the Business and Condition of the Buyer.
4.5 Purchase for Investment. The Shares will be acquired
by the Buyer for its own account for the purpose of investment.
The Buyer agrees that: it will not offer, sell, pledge, hypothe-
cate, or otherwise dispose of the shares unless such offer, sale,
pledge, hypothecation or other disposition is (i) registered under
the Securities Act of 1933 and any other applicable securities
laws, or (ii) in compliance with an opinion of counsel to the
Buyer, delivered to the Seller and reasonably acceptable to it, to
the effect that such offer, sale, pledge, hypothecation or other
disposition does not violate the Securities Act of 1933 or such
other securities laws; and the certificate(s) representing the
Shares shall bear a legend evidencing the restrictions or transfer
set forth in the foregoing clause.
4.6 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
the Buyer directly with the Seller, without the intervention of any
Person on behalf of the Buyer in such manner as to give rise to any
valid claim by any Person against the Seller or the Buyer for a
finder's fee, brokerage commission, or similar payment.
4.7 Disclosure. Neither this Agreement nor any certificate
furnished by the Buyer to the Seller in connection with this
Agreement or the transactions contemplated hereby contains any
untrue statement by the Buyer of material fact or omits to state a
material fact by the Buyer necessary to make the statements herein
or therein not misleading in light of the circumstances in which
they were made.
ARTICLE V
COVENANTS OF SELLER AND THE COMPANY
The Seller and the Company covenant and agree with the Buyer
that, at all times before the Closing, the Seller and the Company
will comply with all of the covenants and provisions of this
Article V, except to the extent the Buyer may otherwise consent in
writing or to the extent otherwise required or permitted by this
Agreement.
5.1 Regulatory Approvals. The Seller and Company will take
all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all commercially
reasonable efforts to obtain, as promptly as practicable, all
approvals, authorizations, and clearances of governmental and
regulatory authorities required of the Seller or the Company to
consummate the transactions contemplated hereby, and provide such
other information and communications to such governmental and
regulatory authorities as the Buyer or such authorities may
reasonably request; and cooperate with the Buyer in obtaining, as
promptly as practicable, all approvals, authorizations, and
clearances of governmental, lender or regulatory authorities and
others required of the Buyer to consummate the transactions
contemplated hereby, including, without limitation, all filings
required under the Hart-Scott-Rodino Antitrust Improvements Act (15
U.S.C. ss 18(a)) ( Hart-Scott ), and any required approvals of the
insurance regulatory authorities in the States of Tennessee and
Indiana, including without limitation, as requested by the Buyer,
the approval of the Insurance Commissioner of the State of
Tennessee to the extraordinary dividend in the amount of $3,000,000
to be declared by the Board of Directors of the Company pursuant to
Section 5.18.
5.2 Investigation by the Buyer. The Seller and the Company
will provide (a) the Buyer, its lenders, and their respective
counsel, accountants, actuaries, and other representatives with
full access, upon prior notice and during normal business hours, to
all facilities, officers, employees, agents, accountants,
actuaries, Assets and Properties, and Books and Records of the
Seller and the Company and will furnish the Buyer and such other
Persons during such period with all such information and data
(including, without limitation, copies of Contracts, Benefit Plans,
and other Books and Records) concerning the business, operations,
and affairs of the Company as the Buyer or any of such other
Persons reasonably may request and (b) the Buyer with timely notice
of and full access to all meetings (and all actions by written
consent in lieu thereof) of the board of directors and stockholders
of the Company involving matters which are not in the ordinary
course of business and consistent with past practice, except such
meetings as involve only matters related to the consummation of the
transactions contemplated herein.
5.3 No Negotiations, etc. The Seller and the Company will
not take, and will not permit any Affiliate of the Seller or the
Company (or permit any other Person acting for or on behalf of the
Seller or the Company or any Affiliate of the Seller or the
Company) to take, directly or indirectly, any action (a) to seek or
encourage any offer or proposal from any Person to acquire any
shares of capital stock or any other securities of the Company or
any interest therein or Assets and Properties thereof or any
interest therein; (b) to merge, consolidate, or combine, or to
permit any other Person to merge, consolidate or combine, with the
Company; (c) to liquidate, dissolve, or reorganize the Company in
any manner; (d) to acquire or transfer any Assets and Properties of
the Company or any interests therein, except as contemplated by the
terms of this Agreement, except in the ordinary course and
consistent with past practice; (e) to reach any agreement or
understanding (whether or not such agreement or understanding is
absolute, revocable, contingent, or conditional) for, or otherwise
to attempt to consummate, any such acquisition, transfer, merger,
consolidation, combination, or reorganization; or (f) to furnish or
cause to be furnished any information with respect to the Company
to any Person (other than the Buyer) that the Seller or the Company
or any Affiliate of the Seller or the Company (or any Person acting
for or on behalf of the Seller or the Company or any other
Affiliate of the Seller or the Company) knows or has reason to
believe is in the process of attempting or considering any such
acquisition, transfer, merger, consolidation, combination,
liquidation, dissolution, or reorganization.
5.4 Conduct of Business. Prior to Closing and except as
specifically permitted herein, the Company will conduct its
business only in the ordinary course and consistent with past
practice. Without limiting the generality of the foregoing:
(a) The Seller and the Company will use all
commercially reasonable efforts to (i) preserve intact the
Company's present business organization, reputation, and
policyholder relations; (ii) keep available the services of
the Company's present officers, directors, employees, agents,
consultants, and other similar representatives; (iii) maintain
all licenses, qualifications, and authorizations of the
Company to do business in each jurisdiction in which it is so
licensed, qualified, or authorized; (iv) maintain in full
force and effect all Contracts, documents, and arrangements
referred to in Section 3.17 hereof, (v) maintain all Assets
and Properties of the Company in good working order and
condition, ordinary wear and tear excepted and (vi) continue
all current marketing and selling activities relating to the
business, operations, or affairs of the Company.
(b) The Seller and the Company will cause the
Books and Records of the Company to be maintained in the usual
manner and consistent with past practice and will not permit
a material change in any underwriting, investment, actuarial,
financial reporting, or accounting practice or policy of the
Company or in any assumption underlying such practice or
policy, or in any method of calculating any bad debt,
contingency, or other reserve for financial reporting purposes
or for other accounting purposes (including, without
limitation, any practice, policy, assumption, or method
relating to or affecting the determination of the Company's
investment income, reserves or other similar amounts, or
operating ratios with respect to expenses, losses, or lapses).
(c) Assuming actual knowledge thereof, the
Seller and the Company will: (i) properly prepare and duly and
timely file all reports and all Tax Returns required to be
filed with any governmental or regulatory authorities with
respect to the business, operations, or affairs of the
Company; and (ii) duly and fully pay all Taxes indicated by
such Tax Returns or otherwise levied or assessed upon the
Company or any of its Assets and Properties, and withhold or
collect and pay to the proper taxing authorities or hold in
separate bank accounts for such payment all Taxes that the
Company is required to so withhold or collect and pay assuming
actual knowledge of such Taxes, unless such Taxes are being
contested in good faith and, if appropriate, reasonable
reserves therefor have been established and reflected in the
Books and Records of the Company in accordance with SAP.
(d) The Company will: (i) cause all reserves
and other similar amounts with respect to insurance and
annuity Contracts established or reflected in the Company's
Books and Records to be (A) established and reflected on a
basis consistent with those reserves and other similar amounts
and reserving methods followed by the Company at December 31,
1995 and (B) good, sufficient and adequate (under generally
accepted actuarial principles consistently applied) to cover
the total amount of all reasonably anticipated matured and
unmatured benefits, dividends, losses, claims, expenses, and
other Liabilities of the Company under all insurance and
annuity Contracts pursuant to which the Company has or will
have any Liability (including, without limitation, any
Liability arising under or as a result of any reinsurance,
coinsurance, or other similar Contract); and (ii) continue to
own assets that qualify as legal reserve assets under all
applicable insurance Laws in an amount at least equal to the
required reserves of the Company.
(e) The Company will use all commercially
reasonable efforts to maintain in full force and effect until
the Closing substantially the same levels of coverage as the
insurance afforded under the Contracts listed in Section 3.21
of the Disclosure Schedule. Any and all benefits under such
Contracts paid or payable (whether before or after the
effective date of this Agreement) with respect to the busi-
ness, operations, affairs, or Assets and Properties of the
Company will be paid to the Company.
(f) The Company will continue to comply, in
all material respects, with all Laws applicable to its
business, operations, or affairs.
(g) The Company will determine its Adjusted
Capital and Surplus consistent with past practice for
determining capital and surplus on its Financial Statements
for any interim period and will not take any actions the
effect of which may be to cause its Adjusted Capital and
Surplus to be less than $8,214,000 immediately after the
Closing.
5.5 Financial Statements and Reports.
(a) The Seller will deliver to the Buyer a
true and complete copy of the Annual Statement filed by the
Company for the year ended December 31, 1995, prepared in
accordance with SAP and which shall present fairly the
financial condition, the Assets and Properties, and the
Liabilities of the Company as of the date thereof and the
results of operations, capital and surplus account, and cash
flow of the Company for and during each of the periods covered
thereby; prior to Closing, the Seller will deliver to the
Buyer audited SAP statements of the Company for the year ended
December 31, 1995, including notes thereto; and
(b) As promptly as practicable, the Seller
will deliver to the Buyer true and complete copies of such
other material financial statements, reports, or analyses as
have been actually prepared by the Company or any Affiliate of
the Company in accordance with past practice and as relate to
the Company's business, operations, or affairs, including,
without limitation, normal internal reports (such as those
reflecting monthly premiums, claims, and cash flow) and
special reports (such as those of consultants).
(c) The Seller will cooperate with the Buyer
to cause to be prepared at Buyer s expense audited GAAP
Financial Statements for the Company for each of the years
ended December 31, 1994 and 1995 (and the notes relating
thereto).
5.6 Investments. The Company will invest its future cash
flow, any cash from matured and maturing investments, any cash
proceeds from the sale of its Assets and Properties, and any cash
funds currently held by the Company, exclusively in cash equivalent
assets, short-term investments or fixed maturity securities (all of
which permissible investments shall consist only of United States
government issued or guaranteed securities, commercial paper rated
A-I or PI, or certificates of deposit issued by one or more of the
banks or financial institutions listed in Section 5.6 of the
Disclosure Schedule), except as otherwise required by Law or except
as required to provide cash (in the ordinary course of business and
consistent with past practice) to meet the Company's reasonably
anticipated current obligations or except as consented to or
required by the Buyer. The Company will take such steps as are
necessary to ensure that such investment Assets that are classified
as Non-Admitted Assets under SAP or by the applicable insurance
regulatory authorities for the Company, do not at any time exceed
the respective amounts of Non-Admitted assets for the Company as of
December 31, 1995.
5.7 Employee Matters.
(a) Except as may be required by Law or as
disclosed in Section 5.7 of the Disclosure Schedule, or except
for such representations, promises, changes, alterations, or
amendments that do not and will not result in any Liability to
the Company, or the Buyer, the Seller and the Company will
refrain from directly or indirectly:
(i) making any representation or promise, oral
or written, to any officer, director, employee, agent,
consultant, or other similar representative of the
Company concerning any Benefit Plan;
(ii) making any change to, or amending in any
way, the Contracts, salaries, wages, or other compen-
sation of any officer, director, employee, agent,
consultant, or other similar representative of the
Company whose annual compensation exceeds $50,000,
other than routine changes or amendments that (a) are
made in the ordinary course of business and consistent
with past practice, (b) do not and will not result in
increases of more than ten percent (10%) in the salary,
wages, or other compensation of any such Person, and
(c) do not and will not exceed, in the aggregate, ten
percent (10%) of the total salaries, wages, and other
compensation of all employees of the Company;
(iii) adopting, entering into, amending, alter-
ing, or terminating, partially or completely, any
Benefit Plan;
(iv) adopting, entering into, amending, alter-
ing, or terminating, partially or completely, any
employment, agency, consultation, or representation
Contract that is, or had it been in existence on the
effective date of this Agreement would have been,
required to be disclosed in Section 3.18(a) of the
Disclosure Schedule;
(v) approving any general or company-wide pay
increases for officers, directors, employees, agents,
consultants, or other similar representatives of the
Company; or
(vi) entering into any Contract with any
officer, director, employee, agent, consultant, or
other similar representative of the Company that is not
terminable by the Company, without penalty or other
Liability, upon not more than sixty (60) calendar days'
notice.
5.8 No Charter Amendments. The Company will not amend the
articles or certificate of incorporation or Bylaws of the Company
and will refrain from taking any action with respect to any such
amendment.
5.9 No Issuance of Securities. The Company will refrain
from authorizing or issuing, any shares of capital stock or other
equity securities of the Company, or from entering into any
Contract or granting any option, warrant, or right calling for the
authorization or issuance of any such shares or other equity
securities, or creating or issuing any securities directly or
indirectly convertible into or exchangeable for any such shares or
other equity securities, or issuing any options, warrants, or
rights to purchase any such convertible securities.
5.10 No Dividends. Except for dividends and distributions
declared after the date of this Agreement in conformity with this
Agreement or which have been approved in writing by the Buyer and
for which any required regulatory approvals have been received, the
Company will refrain from declaring, setting aside, or paying any
dividend or other distribution in respect of its capital stock and
from directly or indirectly redeeming, purchasing, or otherwise
acquiring any of its capital stock or any interest in or right to
acquire any such stock.
5.11 No Disposal of Property. Except as set forth in
Section 5.11 of the Disclosure Schedule or as expressly provided in
this Agreement, the Company will not (a) dispose of any of its
Assets and Properties or permit any of its Assets and Properties to
be subjected to any Liens, except to the extent any such dis-
position or any such Lien is made or incurred in the ordinary
course of the business and consistent with past practice, (b) sell
any material part of its insurance products, operations, or
business to any third party (other than sales of insurance products
in the ordinary course of business consistent with past practice),
(c) enter into any contracts obligating the Company to administer
the insurance operations of any Person other than any Affiliate or
(d) enter into any Contracts permitting any Person other than any
Affiliate of the Company to administer the Company's insurance
operations.
5.12 No Breach or Default. The Company will not violate or
breach, and will not take or fail to take any action that (with or
without notice or lapse of time or both) would constitute a
material violation, breach, or default in any way under any term or
provision of any Contract to which the Company is a party or by
which any of its Assets and Properties is or may be bound.
5.13 No Indebtedness. The Company will not create, incur,
assume, guarantee, or otherwise become liable for, and will not
cancel, pay, agree to cancel or pay, or otherwise provide for a
complete or partial discharge in advance of a scheduled payment
date with respect to, any Liability, and will not waive any right
to receive any direct or indirect payment or other benefit under
any Liability owing to the Company.
5.14 No Acquisitions. The Company will not (a) merge, con-
solidate, or otherwise combine or agree to merge, consolidate, or
otherwise combine with any other Person, (b) acquire or agree to
acquire blocks of business of, or all or substantially all the
Assets and Properties or capital stock or other equity securities
of any other Person, or (c) otherwise acquire or agree to acquire
control or ownership of any other Person.
5.15 Intercompany Accounts. At least five Business Days
before the Closing, the Seller will deliver to the Buyer a true and
complete list and description of all intercompany accounts
(receivable or payable) between the Company and any Affiliate of
the Company to be outstanding on the Closing Date. The Company
will not enter into any Contract or, except as required by any
Contract disclosed in Section 3.18(g) of the Disclosure Schedule,
engage in any transaction with any of its Affiliates.
5.16 Resignations of Officers and Directors. Seller and the
Company will cause the members of the Board of Directors and
officers of the Company to tender, effective at the Closing, their
resignations from the Board of Directors and offices then held by
such officers in the Company.
5.17 Tax Matters. The Seller will refrain and will cause the
Company to refrain (a) from making, filing, or entering into
(whether before or after the Closing) any election, consent, or
agreement with respect to the Company or any of its Assets and
Properties and (b) from amending or cancelling any reinsurance,
coinsurance, or other Contract without the written consent of the
Buyer.
5.18 Declaration of Extraordinary Dividend. As soon as
practicable after the receipt by the Company of the written request
of the Buyer, the Board of Directors of the Company shall declare
an extraordinary dividend upon the Common Stock of the Company in
the amount of $3,000,000, payable to the Seller on the Closing
Date, and shall promptly thereafter make application to the
Tennessee Commissioner of Insurance for approval of such dividend
simultaneously with the Commissioner s approval of Buyer s
application for approval of its acquisition of the Shares.
5.19 Section 338 Election. At Buyer s option, Seller and
Company will join with Buyer or Buyer s subsidiary in making an
election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local, or foreign tax law)
(collectively a Section 338(h)(10) Election ) with respect to the
purchase and sale of the shares of the Company. Seller will pay
any tax attributable to the making of any Section 338(h)(10)
Election and will indemnify Buyer against any Damages arising out
of any failure to pay such tax. Seller will also pay any state,
local, or foreign Tax (and indemnify Buyer against any Damages
arising out of any failure to pay such Tax) attributable to an
election under state, local, or foreign law similar to the election
under Section 338(g) of the Code (or which results from the making
of an election under Section 338(g) of the Code) with respect to
the purchase and sale of the shares of the Company. Buyer shall
reimburse Seller for any additional taxes incurred with respect to
a Section 338(h)(10) Election, including any state, local or
foreign Tax, by increasing the amount of the purchase price in
Section 2.2 by an amount equal to any additional taxes incurred by
Seller with respect to the Section 338(h)(10) Election.
The allocation of the value of the transferred assets shall be
in accordance with and as provided by Section 338 and the
regulations thereunder of the Code. Within thirty (30) days of the
Closing Date, Buyer shall provide Seller with a preliminary
allocation of the value of the transferred assets for Seller s
review and approval, which approval shall not be unreasonably
withheld or delayed. In the event that the Buyer and Seller cannot
agree upon the allocation of value, the parties shall engage Ernst
& Young to determine such allocation, which determination shall be
binding on both parties. Buyer shall pay the cost of any
allocation by Ernst & Young. The parties agree that any tax
returns or other tax information that they may file or cause to be
filed with any governmental agency shall be prepared and filed
consistently with such agreed upon allocation. In this regard the
parties agree that, to the extent required, they will each properly
prepare and timely filed Form 8023-A in accordance with the Code.
5.20 Disclosure Schedule. The Seller shall deliver the
Disclosure Schedule to the Buyer no later than twenty (20) business
days after the date hereof.
5.21 Notice and Cure. The Seller will notify the Buyer
promptly in writing of, and contemporaneously will provide the
Buyer with true and complete copies of any and all information or
documents relating to, and will use all commercially reasonable
efforts to cure before the Closing, any event, transaction, or
circumstance occurring after the effective date of this Agreement
that causes or will cause any covenant or agreement of the Seller
under this Agreement to be breached, or that renders or will render
untrue any representation or warranty of the Seller contained in
this Agreement as if the same were made on or as of the date of
such event, transaction, or circumstance. The Seller also will use
all commercially reasonable efforts to cure, before the Closing,
any violation or breach of any representation, warranty, covenant,
or agreement made by it in this Agreement, whether occurring or
arising before or after the effective date of this Agreement.
ARTICLE VI
COVENANTS OF BUYER
The Buyer covenants and agrees with the Seller that, at all
times before the Closing, the Buyer will comply with all covenants
and provisions of this Article VI, except to the extent the Seller
may otherwise consent in writing or to the extent otherwise
required or permitted by this Agreement.
6.1 Regulatory Approvals. The Buyer will (a) take all
commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable
efforts to obtain, as promptly as practicable, all approvals,
authorizations, and clearances of governmental and regulatory
authorities required of the Buyer to consummate the transactions
contemplated hereby, including without limitation all filings
required under Hart-Scott and any required approvals of the
insurance regulatory authorities in the States of Tennessee and
Indiana, including the filing by the Buyer of a Form A with such
regulatory authorities within thirty (30) business days after the
effective date of this Agreement; (b) provide such other
information and communications to such governmental and regulatory
authorities as the Seller or such authorities may reasonably
request; and (c) cooperate with the Seller in obtaining, as
promptly as practicable, all approvals, authorizations, and
clearances of governmental or regulatory authorities required of
the Seller to consummate the transactions contemplated hereby.
6.2 Notice and Cure. The Buyer will notify the Seller
promptly in writing of, and contemporaneously will provide the
Seller with true and complete copies of any and all information or
documents relating to, and will use all commercially reasonable
efforts to cure before the Closing, any event, transaction, or
circumstance occurring after the effective date of this Agreement
that causes or will cause any covenant or agreement of the Buyer
under this Agreement to be breached, or that renders or will render
untrue any representation or warranty of the Buyer contained in
this Agreement as if the same were made on or as of the date of
such event, transaction, or circumstance. The Buyer also will use
all commercially reasonable efforts to cure, before the Closing,
any violation or breach of any representation, warranty, covenant,
or agreement made by it in this Agreement, whether occurring or
arising before or after the effective date of this Agreement.
6.3 Disclosure Schedule. The Buyer shall deliver the
Disclosure Schedule to the Seller no later than twenty (20)
business days after the date hereof.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of the Buyer hereunder are subject to the
fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part
by the Buyer).
7.1 Representations and Warranties. The representations and
warranties made by the Seller in this Agreement and the statements
of the Seller contained in the Disclosure Schedule shall be true as
of the effective date of this Agreement, the certifications given
pursuant to Section 5.5(d) shall be true as of the date given, and
all of such representations, warranties, certifications and
statements shall be true on and as of the Closing Date as though
such representations, warranties, certifications and statements
were made on and as of the Closing Date.
7.2 Performance. The Seller and the Company shall have
performed and complied with all agreements, covenants, obligations,
and conditions required by this Agreement to be so performed or
complied with by the Seller and/or the Company at or before the
Closing, including those specifically referred to elsewhere in this
Article VII.
7.3 Officer's Certificates. The Seller shall have delivered
to the Buyer a certificate, dated the Closing Date in the form of
Exhibit C hereto and executed by the chief executive officer, chief
operating officer, or chief financial officer of the Seller,
certifying (with respect to the Seller and, as appropriate, the
Company) as to the fulfillment of the conditions set forth in this
Article VII. In addition, the Seller shall have delivered to the
Buyer a certificate, dated the Closing Date and executed by the
secretary or any assistant secretary of the Seller, certifying that
the Seller has duly and validly taken all corporate action
necessary to authorize its execution and delivery of this Agreement
and its performance of its obligations under this Agreement, and
that the resolutions (true and complete copies of which shall be
attached to the certificate) of the Board of Directors with respect
to this Agreement and the transactions contemplated hereby have
been duly and validly adopted and are in full force and effect.
7.4 No Injunction. There shall not be in effect on the
Closing Date any writ, judgment, injunction, decree, or similar
order of any court or similar Person restraining, enjoining, or
otherwise preventing consummation of any of the transactions con-
templated by this Agreement.
7.5 No Proceeding or Litigation. There shall not be
instituted, pending, or (to the best knowledge of the Buyer or the
Seller) threatened any action, suit, investigation, or other
proceeding in, before, or by any court, governmental or regulatory
authority, or other Person to restrain, enjoin, or otherwise
prevent consummation of any of the transactions contemplated by
this Agreement or to recover any Damages or obtain other relief as
a result of this Agreement or any of the transactions contemplated
hereby or as a result of any Contract entered into in connection
with or as a condition precedent to the consummation hereof, which
action, suit, investigation, or other proceeding may, in the
reasonable opinion of the Buyer, result in a decision, ruling, or
finding that individually or in the aggregate has or may reasonably
be expected to have a material adverse effect on the validity or
enforceability of this Agreement, on the ability of the Seller, the
Company, or the Buyer to perform its respective obligations under
this Agreement, or on the Business or Condition of the Buyer, or
the Company. There shall not be in effect on the Closing Date any
voluntary or involuntary bankruptcy, receivership, conservatorship,
or similar proceeding with respect to the Company or the Seller.
7.6 Consents, Authorizations, etc. All orders, consents,
permits, authorizations, approvals, and waivers of every Person
disclosed pursuant to Section 4.3 and necessary to permit the Buyer
to perform its obligations under this Agreement and to consummate
the transactions contemplated hereby and to permit the Buyer to
acquire the Shares pursuant to this Agreement (including, without
limitation, any requisite action of the insurance regulatory
authorities in the State of Tennessee and the State of Indiana, in
each case without the abrogation or diminishment of the Company's
authority or license or the imposition of significant restrictions
upon the transactions contemplated hereby) shall have been obtained
and shall be in full force and effect, and the Seller and the
Company shall have obtained all consents, approvals, authorizations
and clearances referred to in Section 5.1 and the Buyer shall have
received evidence satisfactory to it of the receipt of such con-
sents, approvals, authorizations and clearances.
7.7 No Adverse Change. Except as disclosed in Section 3.10
of the Disclosure Schedule or as specifically reflected in the
December 31, 1995 Annual Statement of the Company (it being under-
stood that no material adverse trend has been so disclosed or
reflected), or except for changes or developments relating to the
conduct of the Company's business after the effective date of this
Agreement in conformity with the requests of the Buyer, since
December 31, 1995 there shall not have been, occurred, or arisen
any change in, or any event (including, without limitation, any
damage, destruction, or loss whether or not covered by insurance),
condition, or state of facts of any character that individually or
in the aggregate has or may reasonably be expected to have a
material adverse effect on the Business or Condition of the
Company.
7.8 Opinion of Counsel. The Seller shall have delivered to
the Buyer the opinion, dated the Closing Date, of Waring Cox, PLC,
counsel to the Seller, substantially in the same form as set forth
in Exhibit D hereto.
7.9 Hart-Scott. Buyer and Seller shall have made all
filings required under Hart-Scott, and all waiting periods shall
have been passed without any action having been taken by the
Department of Justice or any other governmental department. Buyer
will bear the cost of all filing fees required pursuant to Hart-
Scott.
7.10 Resignation of Officers and Directors. The resignations
of the members of the Board of Directors and officers of the
Company pursuant to Section 5.16, effective as of the Closing Date,
shall have been delivered to the Buyer on or before the Closing
Date.
7.11 Voting Trust Agreement. The Seller shall execute and
deliver a Voting Trust Agreement with the Buyer substantially in
the same form as set forth in Exhibit E hereto on or before the
Closing.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of the Seller hereunder are subject to the
fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part
by the Seller).
8.1 Representations and Warranties. The representations and
warranties made by the Buyer in this Agreement shall be true as of
the effective date of this Agreement and shall be true on and as of
the Closing Date as though such representations and warranties were
made on and as of the Closing Date.
8.2 Performance. The Buyer shall have performed and
complied with all agreements, covenants, obligations, and condi-
tions required by this Agreement to be so performed or complied
with by the Buyer at or before the Closing.
8.3 Officer's Certificates. The Buyer shall have delivered
to the Seller a certificate, dated the Closing Date in the form of
Exhibit F hereto and executed by the chief executive officer or the
chief financial officer of the Buyer, certifying with respect to
the Buyer as to the fulfillment of the conditions set forth in this
Article VIII. In addition, the Buyer shall have delivered to the
Seller a certificate, dated the Closing Date and executed by the
secretary or any assistant secretary of the Buyer certifying that
the Buyer has duly and validly taken all corporate action necessary
to authorize its execution and delivery of this Agreement and its
performance of its obligations under this Agreement, including,
without limitation, that Buyer has taken all action necessary to
authorize the acquisition of the Shares, and that the resolutions
(true and complete copies of which shall be attached to the cer-
tificate) of the Board of Directors of the Buyer with respect to
this Agreement and the transactions contemplated hereby have been
duly and validly adopted and are in full force and effect.
8.4 No Injunction. There shall not be in effect on the
Closing Date any writ, judgment, injunction, decree, or similar
order of any court or similar Person restraining, enjoining, or
otherwise preventing consummation of any of the transactions con-
templated by this Agreement.
8.5 No Proceeding or Litigation. There shall not be
instituted, pending, or (to the best knowledge of the Buyer or of
the Seller) threatened any action, suit, investigation, or other
proceeding in, before, or by any court, governmental or regulatory
authority, or other Person to restrain, enjoin, or otherwise
prevent consummation of any of the transactions contemplated by
this Agreement or to recover any Damages or obtain other relief as
a result of this Agreement or any of the transactions contemplated
hereby or as a result of any Contract entered into in connection
with or as a condition precedent to the consummation hereof, which
action, suit investigation, or other proceeding may, in the
reasonable opinion of the Seller, result in a decision, ruling, or
finding that individually or in the aggregate has or may reasonably
be expected to have a material adverse effect on the validity or
enforceability of this Agreement, on the ability of the Buyer or
the Seller to perform its obligations under this Agreement, or on
the Business or Condition of the Seller.
8.6 Consents, Authorizations, etc. All orders, consents,
permits, authorizations, approvals, and waivers of every Person
disclosed pursuant to Section 3.5 and necessary to permit the
Seller to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby shall have been
obtained and shall be in full force and effect, and the Buyer shall
have obtained all consents, approvals, authorizations and
clearances referred to in Section 6.1 and the Seller shall have
received evidence satisfactory to it of the receipt of such
consents, approvals, authorizations and clearances.
8.7 Opinion of Counsel. The Buyer shall have delivered to
the Seller the opinion, dated the Closing Date, of Stephen M.
Coons, counsel to the Buyer, substantially in the same form as set
forth in Exhibit G hereto.
ARTICLE IX
SURVIVAL OF PROVISIONS; REMEDIES
9.1 Survival. The representations, warranties, covenants,
and agreements respectively made by the Seller and the Buyer in
this Agreement, in the Disclosure Schedule, or in any certificate
respectively delivered by the Seller or the Buyer pursuant to
Section 7.3 or Section 8.3 will survive the Closing:
(a) until the expiration of all applicable statutes of
limitations (including all periods of extension, whether
automatic or permissive) in the case of the representations
and warranties of the Seller respectively set forth in
Sections 3.1, 3.2, 3.3, and 3.12 hereof; and
(b) until the second anniversary of the Closing in the
case of all other representations, warranties, covenants, and
agreements, except that covenants and agreements to be
performed after the Closing in accordance with their terms
will survive until the last period to which any such Tax
benefit could be carried pursuant to the Code.
9.2 Available Remedies. Each party expressly agrees that,
consistent with its intention and agreement to be bound by the
terms of this Agreement and to consummate the transactions
contemplated hereby, subject only to the performance or satisfac-
tion of precedent conditions or of precedent requirements imposed
upon another party hereto, the remedy of specific performance shall
be available to a non-breaching and non-defaulting party to enforce
performance of this Agreement by a breaching or defaulting party,
including, without limitation, to require the consummation of the
Closing on the Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification. Seller shall indemnify and hold Buyer,
Company, and its Affiliates and the officers, directors,
shareholders, employees, and agents of Buyer and its Affiliates
( Indemnified Persons ) harmless from and against and in respect of
each and all of the following:
(a) any and all Liabilities of the Company or any of
its subsidiaries of any nature, whether accrued, absolute,
contingent or otherwise, existing on the dates of the SAP or
GAAP Financial Statements, to the extent not reflected,
disclosed or reserved against in full in the SAP or GAAP
Financial Statements or as specifically referred to in any
Schedule hereto;
(b) any and all Liability, damage, deficiency or
expense to any Indemnified Party resulting from any
misrepresentation, breach of any warranty, or nonfulfillment
of any agreement on the part of Seller contained in this
Agreement or from any misrepresentation or omission contained
in any statement or certificate furnished to the Buyer
pursuant hereto or in connection with the transactions
contemplated hereby; and
(c) any and all Liability, damage, deficiency or
expense to any Indemnified Party resulting from Seller s
failure to deliver to Buyer good and marketable title to all
of the issued and outstanding shares of capital stock of the
Company, free and clear of any restrictions on transfer (other
than any restrictions under state insurance laws, the
Securities Act and state securities laws), claims, Taxes,
security interests, options, warrants, rights, contracts,
calls, commitments, equities, and demands; and
(d) any and all accounts, claims, suits, proceedings,
audits, investigations, demands, assessments or judgment,
costs and expenses including reasonable attorneys fees and
court costs, incident to any of the foregoing, regardless of
the outcome thereof, including without limitation, the
litigation referred to in 3.13 of the Disclosure Schedule
attached hereto; and
(e) the indemnification provided for in Section 10.1
(a) and (b) shall be further restricted by the requirement
that Buyer and/or Company may not seek indemnity from Seller
until claims, damages, etc. have been sought or assessed
against Buyer and/or Company as evidenced by some
correspondence or proceeding believed to be legitimate by
Buyer and/or Company in the aggregate amount of at least
$100,000.
10.2 Defense by the Seller.
(a) Buyer and/or Company shall promptly give notice to
Seller after the Buyer and/or Company has knowledge of any
claim or the commencement of legal proceedings, whichever
shall first occur, against an Indemnified Party or any of the
Company s subsidiaries in respect of which recovery may be
sought by an Indemnified Party against Seller under the
indemnity set forth in this Article and shall permit Seller at
its sole cost and expense, to assume the defense of any such
claim or any litigation resulting from such claim. Failure of
the Seller to notify Buyer and/or Company of its election to
defend any such action within ten (10) business days after
notice thereof shall have been given to them shall be deemed
a waiver by Seller of their right to so defend such action.
If Seller assumes the defense of any such claim or litigation
resulting therefrom, the obligations hereunder of Seller as to
such claim shall be limited to taking all reasonable steps
necessary in the defense or settlement of such claim or
litigation resulting therefrom and using reasonable care in
defending or settling such claims and to holding Indemnified
Parties harmless from and against any losses, damages or
liabilities caused by or arising out of any settlement
approved by Seller or any judgment in connection with such
claim or litigation resulting therefrom. Except with the
consent of Buyer and/or Company, Seller shall not, in the
defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any settlement
which, in each case, does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect
of such claim or litigation. Buyer and/or Company shall be
entitled to join in the defense of any such action, with its
own counsel, at its sole cost and expense.
(b) The obligations of the Seller enumerated in
Sections 10.1 and 10.2(a) are subject to the following: (i)
Buyer shall notify Seller in writing, after Buyer obtains
actual knowledge of any claim or matter asserted by Buyer to
fall within Sections 10.1 and/or 10.2(a), of any such claim or
matter, in a manner which will not materially adversely affect
the ability of Seller to protect its interests and to perform
its obligations under Sections 10.1 and/or 10.2(a); and (ii)
Buyer shall take no action or fail to take any action to admit
liability, waive any applicable statute of limitation, affect
coverage rights under any applicable policy of insurance,
and/or otherwise to materially adversely affect the ability of
Seller to protect its interests and to perform its obligations
under Sections 10.1 and/or 10.2(a); and (iii) If Seller
assumes the defense of any claim or litigation resulting from
any such claim or matter, the Buyer shall cooperate in good
faith with Seller in the defense thereof.
10.3 Defense by Buyer. If Seller does not assume the defense
of any such claim or litigation resulting therefrom, Buyer and/or
Company may defend against such claim or litigation in such matter
as it may deem appropriate including but not limited to settling
such claim or litigation, on such terms as Buyer and/or Company may
deem appropriate and Seller will promptly reimburse Buyer and/or
Company for the amount of such settlement, together with the amount
of all expenses and costs, legal or otherwise, incurred by Buyer
and/or Company in connection with the defense or settlement of such
claim or litigation. If no settlement of such claim or litigation
is made, in the sole discretion of Buyer and/or Company, Seller
shall promptly reimburse Buyer and/or Company for the amount of any
judgment rendered with respect to such claim or in such litigation
and for all expenses and costs, legal or otherwise, incurred by
Buyer and/or Company in defending against such claim or litigation.
The reimbursement required herein by Seller shall be made within
twenty (20) business days after Buyer and/or Company has demanded
such reimbursement in writing from Seller.
10.4 Manner of Indemnification. Buyer and/or Company shall
be entitled to set off any indemnification arising hereunder
against any indebtedness owed Seller, if any, after giving prior
written notice to Seller against the earliest installment payment
due the Seller, or, at the sole option of Buyer and/or Company,
such indemnification shall be effected by payment of cash or
delivery of a certified or bank cashiers check for the amount of
such indemnification without set-off.
10.5 Non-Exclusive. The provisions of this Article X shall
be in addition to any other rights which Buyer and/or Company may
otherwise have in connection with this Transaction.
10.6 Assignment of Indemnification. The Buyer and the
Company may assign its rights to indemnification under this
Article X to any direct or indirect transferee or transferees of
all the Shares, and each such transferee shall have the same rights
to indemnification under this Article X as the Buyer and the
Company.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, upon notice by
the terminating party to the other party:
(a) at any time before the Closing, by mutual written
agreement of the Seller and the Buyer; or
(b) by the Buyer effective on the giving of written
notice from the Buyer to the Seller stating the Buyer's
disapproval of any aspect of the Business or Condition of the
Company (including, without limitation, any aspect disclosed
pursuant to the information included in the Disclosure
Schedule); provided, that such written notice must be received
by the Seller within ten (10) business days after delivery of
the Disclosure Schedule pursuant to Section 5.21. Delivery of
the notice provided in this Section 11.1(b) shall not be
deemed to create any express or implied obligation on the part
of the Buyer to negotiate concerning or to justify its
termination pursuant to this Section, such termination being
in the Buyer's sole and absolute discretion; or
(c) at any time by the Seller if any of the covenants
set forth in Article VI shall have been breached or any of the
conditions set forth in Article VIII hereof shall not have
been satisfied, performed, or complied with, in any material
respect, at or before the Closing Date and such breach,
non-satisfaction, non-performance, or non-compliance has not
been cured or eliminated within thirty (30) calendar days
after notice thereof has been given to the Buyer, or if the
Disclosure Schedule is not delivered to the Seller within
twenty (20) business days after the date hereof, or if the
Disclosure Schedule or other information provided to the
Seller discloses any change in, or event, trend, condition or
state of facts of any character that individually or in the
aggregate has or may reasonably be expected to have a material
adverse effect on the Business or Condition of the Buyer and
such change, event, trend, condition or state of facts has not
been cured or eliminated within ten (10) days after notice
thereof has been given to Buyer, provided that at the time of
such termination the Seller has neither breached any of the
covenants set forth in Article V nor failed to satisfy,
perform, or comply with any of the conditions set forth in
Article VII hereof, in any material respect; or
(d) at any time by the Buyer if any of the covenants
set forth in Article V shall have been breached or any of the
conditions set forth in Article VII hereof shall not have been
satisfied, performed, or complied with, in any material
respect, before the Closing Date and such breach,
non-satisfaction, non-performance or non-compliance has not
been cured or eliminated within thirty (30) days after notice
thereof has been given to the Seller, or if the Disclosure
Schedule is not delivered to the Buyer within twenty (20)
business days after the date hereof, or if the Disclosure
Schedule or other information provided to the Buyer discloses
any change in, or event, trend, condition or state of facts of
any character that individually or in the aggregate has or may
reasonably be expected to have a material adverse effect on
the Business or Condition of the Company and such change,
event, trend, condition or state of facts has not been cured
or eliminated within ten (10) days after notice thereof has
been given to the Seller, provided that at the time of such
termination the Buyer has neither breached any of the
covenants set forth in Article VI nor failed to satisfy,
perform, or comply with any of the conditions set forth in
Article VIII hereof, in any material respect; or
(e) at any time after November 30, 1996, by the Seller
or the Buyer, if the transactions contemplated by this
Agreement have not been consummated on or before such date and
such failure to consummate is not caused by a breach of this
Agreement (or any representation, warranty, covenant, or
agreement included herein) by the party electing to terminate
pursuant to this clause (e).
11.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 11.1, this Agreement will forthwith
become null and void, and there will be no Liability on the part of
the Seller or the Buyer (or any of their respective officers,
directors, employees, agents, consultants, or other
representatives), except that the provisions relating to confi-
dentiality in Section 12.4 will continue to apply following any
such termination; provided, however, that notwithstanding anything
in this Section to the contrary, no party electing to terminate
this Agreement pursuant to Section 11.1 will be relieved of any
Liability for Damages that the electing party may have to the other
party by reason of the electing party's breach of this Agreement
(or any representation, warranty, covenant, or agreement included
herein).
ARTICLE XII
MISCELLANEOUS
12.1 Notices. All notices and other communications under
this Agreement must be in writing and will be deemed to have been
duly given if delivered, telecopied or mailed, by certified mail,
return receipt requested, first class postage prepaid, to the
parties at the following addresses:
If to the Seller, to:
Gerald Tsai, Jr.
Chairman and CEO
Delta Life and Annuity Company
530 Oak Court, Suite 200
Memphis, TN 38117
Telecopy: (910) 684-0337
With a copy to:
Delta Life and Annuity Company
530 Oak Court, Suite 200
Memphis, Tennessee 38117
Attention: Ms. Bettye S. Adams
Telecopy: (901) 684-0337
If to the Buyer, to:
Standard Life Insurance Company of Indiana
9100 Keystone Crossing
Suite 600
Indianapolis, Indiana 46240
Attention: Ronald D. Hunter, Chairman & Chief
Executive Officer
Telecopy: (317) 574-6227
With a copy to:
Stephen M. Coons, Esq., General Counsel
9100 Keystone Crossing, Suite 600
Indianapolis, Indiana 46240
Telecopy: (317)574-6227
All notices and other communications required or permitted under
this Agreement that are addressed as provided in this Article XII
will, if delivered personally, be deemed given upon delivery, will,
if delivered by telecopy, be deemed delivered when confirmed and
will, if delivered by mail in the manner described above, be deemed
given on the third Business Day after the day it is deposited in a
regular depository of the United States mail. Any party from time
to time may change its address for the purpose of notices to that
party by giving a similar notice specifying a new address, but no
such notice will be deemed to have been given until it is actually
received by the party sought to be charged with the contents
thereof.
12.2 Entire Agreement. Except for documents executed by the
Seller and the Buyer pursuant hereto, this Agreement supersedes all
prior discussions and agreements between the parties with respect
to the subject matter of this Agreement, and this Agreement
(including the exhibits thereto, the Disclosure Schedule, and other
Contracts and documents delivered in connection herewith) contains
the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
12.3 Expenses. Except as otherwise expressly provided in
this Agreement (including, without limitation, as provided in
Article X), each of the Seller and the Buyer will pay its own costs
and expenses in connection with this Agreement and the transactions
contemplated hereby.
12.4 Public Announcements. At all times at or before the
Closing, the Seller and the Buyer will each consult with the other
before issuing or making any reports, statements, or releases to
the public with respect to this Agreement or the transactions
contemplated hereby and will use good faith efforts to agree on the
text of a joint public report, statement, or release or will use
good faith efforts to obtain the other party's approval of the text
of any public report, statement, or release to be made solely on
behalf of a party. If the Seller and the Buyer are unable to agree
on or approve any such public report, statement, or release and
such report, statement, or release is, in the opinion of legal
counsel to a party, required by Law or may be appropriate in order
to discharge such party's disclosure obligations, then such party
may make or issue the legally required report, statement, or
release. Any such report, statement, or release approved or
permitted to be made pursuant to this Section may be disclosed or
otherwise provided by the Seller or the Buyer to any Person,
including without limitation to any employee or customer of either
party hereto and to any governmental or regulatory authority.
12.5 Confidentiality. Each of the Seller and the Buyer will
hold, and will cause its respective officers, directors, employees,
agents, consultants, and other representatives to hold, in strict
confidence, unless compelled to disclose by judicial or
administrative process (including, without limitation, in
connection with obtaining the necessary approval of insurance
regulatory authorities) or by other requirements of Law, all
confidential documents and confidential information concerning the
other party furnished to it by the other party or such other
party's officers, directors, employees, agents, consultants, or
representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such
documents or information can be shown to have been (a) previously
lawfully known by the party receiving such documents or
information, (b) in the public domain through no fault of such
receiving party, or (c) later acquired by the receiving party from
other sources not themselves bound by, and in breach of, a
confidentiality agreement. Neither the Seller nor the Buyer will
disclose or otherwise provide any such confidential documents or
confidential information to any other Person, except to the Buyer's
lenders and investors and to either party's respective auditors,
actuaries, attorneys, financial advisors, and other consultants and
advisors who need such documents or information in connection with
this Agreement and except as required by the provisions of Sections
5.1 and 6.1.
12.6 Further Assurances. The Seller and the Buyer agree
that, from time to time after the Closing, upon the reasonable
request of the other, they will cooperate and will cause their
respective Affiliates to cooperate with each other to effect the
orderly transition of the business, operations, and affairs of the
Company. Without limiting the generality of the foregoing, the
Seller will give and will cause its Affiliates to give
representatives of the Buyer reasonable access to all Books and
Records of the Seller and its Affiliates reasonably requested by
the Buyer in the preparation of any post-Closing financial
statements, reports, or Tax Returns.
12.7 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit
thereof. Such waiver must be in writing and must be executed by
the chief executive officer or the chief operating officer of such
party. A waiver on one occasion will not be deemed to be a waiver
of the same or any other breach on a future occasion. All
remedies, either under this Agreement, or by Law or otherwise
afforded, will be cumulative and not alternative.
12.8 Amendment. This Agreement may be modified or amended
only by a writing duly executed by or on behalf of the Seller and
the Buyer.
12.9 Counterparts. This Agreement may be executed simul-
taneously in any number of counterparts, each of which will be
deemed an original, but all of which will constitute one and the
same instrument.
12.10 No Third Party Beneficiary. The terms and provisions
of this Agreement are intended solely for the benefit of the Seller
and the Buyer, and their respective successors or assigns, and it
is not the intention of the parties to confer third-party
beneficiary rights upon any other Person.
12.11 Jurisdiction and Venue. The parties acknowledge that
a substantial portion of negotiations, anticipated performance and
execution of this Agreement occurred or shall occur in Marion
County, Indiana and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of
the parties irrevocably and unconditionally (a) agrees that any
suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the federal district courts serving
Marion County, Indiana or Shelby County, Tennessee; (b) consents to
the jurisdiction of each such court in any suit, action or
proceeding; (c) waives any objection which it may have to the
laying of venue of any such suit, action or proceeding in such
court; and (d) agrees that service of any court paper may be
effected on such party by mail, at the address provided in this
Agreement, or in such other manner as may be provided under
applicable laws or court rules in said state.
12.12 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA
(EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES).
12.13 Binding Effect. This Agreement is binding upon and
will inure to the benefit of the parties and their respective
successors and assigns.
12.14 Assignment. Except as otherwise provided herein
(including, without limitation, as provided in Section 10.6), this
Agreement or any right hereunder or part hereof may not be assigned
by any party hereto without the prior written consent of the other
party hereto.
12.15 Headings, etc. The headings used in this Agreement
have been inserted for convenience and do not constitute matter to
be construed or interpreted in connection with this Agreement.
12.16 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid, or unenforceable under any present
or future Law, and if the rights or obligations of the Seller or
the Buyer under this Agreement will not be materially and adversely
affected thereby; (a) such provision will be fully severable;
(b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a
party hereof; (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance
herefrom; and (d) in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as a
part of this Agreement a legal, valid, and enforceable provision as
similar in terms to such illegal, invalid, or unenforceable
provision as may be possible.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto, effective as of the date first
written above.
DELTA LIFE AND ANNUITY COMPANY
By:
Name: /s/ Gerald Tsai, Jr.
-------------------------------------
Title:Chairman and CEO
-------------------------------------
SHELBY LIFE INSURANCE COMPANY
By:
Name: /s/ Allan Jones
-------------------------------------
Title:Chairman and Chief Operations Officer
-------------------------------------
STANDARD LIFE INSURANCE COMPANY
OF INDIANA
By:
Name: /s/ Ronald D. Hunter
-------------------------------------
Title:Chairman and CEO
-------------------------------------
<PAGE>
EXHIBIT A
DEFINITIONS OF TERMS
"Adjusted Capital and Surplus" as of any date shall mean the
Company's statutory capital and surplus as of such date, adjusted
pursuant to the Formula set forth on Exhibit B hereto and deter-
mined based on SAP consistently applied throughout the specified
period and in the immediately prior comparable period.
"Affiliate" shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or
is under common control with the Person specified.
"Agreement" shall mean this Stock Purchase Agreement, together
with the exhibits and the Disclosure Schedule attached hereto, and
the Contracts and other documents to be executed and delivered
respectively by Seller and Company pursuant hereto.
"Annual Statement" shall mean any annual statement of the
Company filed with or submitted to the insurance regulatory
authority in the State of Tennessee on forms prescribed or
permitted by such authority.
"Assets and Properties" shall mean all assets or properties of
every kind, nature, character, and description (whether real,
personal, or mixed whether tangible or intangible, whether abso-
lute, accrued, contingent, fixed, or otherwise, and wherever sit-
uated) as now operated, owned, or leased by a specified Person,
including without limitation cash, cash equivalents, securities,
accounts and notes receivable, real estate, equipment, furniture,
fixtures, insurance or annuities in force, goodwill, and
going-concern value.
"AVR" shall mean the asset valuation reserve required to be
established and maintained by the Company at any particular date,
calculated in accordance with SAP.
"Books and Records" shall mean all accounting, financial
reporting, Tax, business, marketing, corporate, and other files,
documents, instruments, papers, books, and records of a specified
Person, including without limitation financial statements, budgets,
projections, ledgers, journals, deeds, titles, policies, manuals,
minute books, stock certificates and books, stock transfer ledgers,
Contracts, franchises, permits, agency lists, policyholder lists,
supplier lists, reports, computer files, retrieval programs,
operating data or plans, and environmental studies or plans.
"Business Day" shall mean a day other than Saturday, Sunday,
or any day on which the principal commercial banks located in the
City of New York are authorized or obligated to close under the
Laws of the State of New York.
"Business or Condition" shall mean the organization, exist-
ence, authority, capitalization, business, licenses, financial
condition, cash flow, management, sales force, solvency, prospects,
SAP results of operations, insurance or annuities in force, SAP
capital and surplus, AVR, Liabilities, or Assets and Properties of
a specified Person.
"Buyer" shall have the meaning ascribed to it in the preamble
of this Agreement.
"Claim Notice" shall mean written notification of a Third
Party Claim by an Indemnified Party to an Indemnifying Party
pursuant to Section 10.4(a), enclosing a copy of all papers served,
if any.
"Closing" shall mean the closing of the transactions contem-
plated by this Agreement as provided in Section 2.3.
"Closing Adjusted Capital and Surplus" shall have the meaning
ascribed to in Section 2.3 hereof.
Closing Asset Statement and Closing Balance Sheet have the
respective meaning set forth in Section 2.2(b).
"Closing Date" shall mean the later of (a) the fifth Business
Day next following the date upon which the last of the orders or
approvals described in Sections 5.1, 5.2, 6.1, and 6.2 has been
obtained, including without limitation the approvals under all
applicable insurance holding company Laws, (b) November 30, 1996,
or (c) such other date as the Buyer and Seller may mutually agree
upon in writing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended (including without limitation any successor code), and the
rules and regulations promulgated thereunder.
"SMC Common Stock" shall have the meaning ascribed to it in
Section 2.2 hereof.
"Contract" shall mean any agreement, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, insurance
policy, annuity, reinsurance agreement, reinsurance treaty, or
other contract or commitment (whether written or oral).
"Damages" shall mean any and all monetary damages, Liabili-
ties, fines, fees, penalties, interest obligations, deficiencies,
losses, and expenses (including without limitation punitive, tre-
ble, or other exemplary or extra contractual damages, amounts paid
in settlement, interest, court costs, costs of investigation, fees
and expenses of attorneys, accountants, actuaries, and other
experts, and other expenses of litigation or of any claim, default,
or assessment).
"Disclosure Schedule" shall mean the bound record dated the
effective date of this Agreement, furnished by Seller to the Buyer,
and containing all lists, descriptions, exceptions, and other
information and materials as are required to be included therein
pursuant to this Agreement.
Employee Benefit Plan means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an employee
pension benefit plan, as defined in ERISA section 3 (2), (b)
qualified defined contribution retirement plan or arrangement which
is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any multi-employer plan, as defined in ERISA
section 3 (37)), or (d) employee welfare benefit plan as defined in
ERISA section 3 (1), or material fringe benefit plan, or program.
"Employee Pension Benefit Plan" shall mean each employee
pension benefit plan (whether or not insured), as defined in
Section 3(2) of ERISA, which is or was in existence on or before
the Closing Date and to which the Company is or may hereafter
become obligated in any manner as an employer.
"Employee Welfare Benefit Plan" shall mean each employee
welfare benefit plan (whether or not insured), as defined in
Section 3(1) of ERISA, which is or was in existence on or before
the Closing Date and to which the Company is or may hereafter
become obligated in any manner as an employer.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended (including without limitation any successor
act), and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean any Person under common control
(as defined in Section 414 of the Code) with the Company.
Fair Market Value means, with respect to any investment
security as of any given date, the closing price of such investment
security on such date on the national securities exchange or over-
the-counter market on which it is listed for trading or, if no
closing price is available, the average of the closing bid and
asked prices thereof on such date, in each case as published in the
Northeastern Edition of the Wall Street Journal.
"GAAP" shall mean generally accepted accounting principles,
consistently applied throughout the specified period and in the
immediately prior comparable period.
"Indemnified Party" shall mean a Person claiming indemnifi-
cation under Section 10.2 or 10.3.
"Indemnifying Party" shall mean a Person against whom claims
of indemnification are being asserted under Section 10.2 or 10.3.
"Indemnity Notice" shall have the meaning ascribed to it in
Section 10.5(e).
"IRS" shall mean the United States Internal Revenue Service or
any successor agency.
"Laws" shall mean all laws, statutes, ordinances, regulations,
and other pronouncements having the effect of law in the United
States of America, or any domestic or foreign state, province,
commonwealth, city, country, municipality, territory, protectorate,
possession, court, tribunal, agency, government, department,
commission, arbitrator, board, bureau, or instrumentality thereof.
"Liabilities" shall mean all debts, obligations, and other
liabilities of a Person (whether absolute, accrued, contingent,
fixed, or otherwise, or whether due or to become due).
"Lien" shall mean any mortgage, pledge, assessment, security
interest, lease, sublease, lien, adverse claim, levy, charge, or
other encumbrance of any kind, or any conditional sale Contract,
title retention Contract, or other Contract to give or to refrain
from giving any of the foregoing.
"Non-Admitted Assets" shall mean any assets of the Company
required to be reported as "assets not admitted" on Exhibit 13 of
any Annual Statement or Quarterly Statement filed by the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA.
"Person" shall mean any natural person, corporation, general
partnership, limited partnership, proprietorship, trust, union,
association, court, tribunal, agency, government, department,
commission, self-regulatory organization, arbitrator, board,
bureau, instrumentality, or other entity, enterprise, authority, or
business organization.
"Purchase Price" shall have the meaning ascribed to it in
Section 2.2.
"Quarterly Statement" shall mean any quarterly statement of
the Company filed with or submitted to the insurance regulatory
authority in the State of Tennessee on forms prescribed or
permitted by such authority.
"SAP" shall mean the accounting practices required or per-
mitted by the National Association of Insurance Commissioners and
the insurance regulatory authority in the State of Tennessee
consistently applied throughout the specified period and in the
immediately prior comparable period.
"SAP Statements" shall mean the Annual Statements, Quarterly
Statements, and other financial statements and presentations of the
Company prepared in accordance with SAP and delivered to the Buyer
pursuant to either or both of Sections 3.7 and 5.5.
"Seller" shall have the meaning ascribed to it in the preamble
of this Agreement and shall include the Company, unless the context
otherwise requires.
"Shares" shall have the meaning ascribed to it in the preamble
of this Agreement.
Tax means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum,
estimated, state insurance guaranty association assessments or
other taxes or assessments of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
Tax Return means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
"Work Papers" shall mean all summaries, calculations, compi-
lations and similar written documentation derived from the accounts
of the Company and used or prepared by accountants in the process
of computing Adjusted Capital and Surplus.
<PAGE>
EXHIBIT B
FORMULA FOR DETERMINING
ADJUSTED CAPITAL AND SURPLUS OF COMPANY
AS OF THE CLOSING DATE
PURSUANT TO SECTION 2.3(b)
The Adjusted Capital and Surplus of the Company on the Closing
Date shall be determined as follows (the "Formula"):
1. SAP Capital and Surplus as of the month end prior to the
Closing Date, PLUS:
2. The AVR held by the Company as of the month end prior to
the Closing Date, MINUS:
3. The $3,000,000 dividend to be paid by the Company to
Seller at Closing.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF OFFICER OF SELLER
At the Closing, the Seller shall deliver to the Buyer a
certificate, dated the Closing Date, executed by the Chief
Executive Officer, Chief Operating Officer or Chief Financial
Officer of the Seller, to the following effect:
Pursuant to the provisions of Section 7.3 of that certain
Stock Purchase Agreement dated July ____, 1996 (the Agreement ) by
and among Delta Life and Annuity Company (the Seller ), Shelby
Life Insurance Company (the Company ), and Standard Life Insurance
Company of Indiana (the Buyer ), and relating to the purchase and
sale of 25,000 shares of the common capital stock $100.00 par value
of the Company (the Stock ) by the Seller to the Buyer, I, the
undersigned [Chief Executive Officer/Chief Operating Officer/Chief
Financial Officer] of the Seller do hereby certify to the Buyer as
follows:
1. That I am the duly elected [Chief Executive
Officer/Chief Operating Officer/Chief Financial Officer] of the
Seller, and in that capacity have the requisite power and authority
to execute and deliver this certificate on behalf of the Seller
and, as appropriate, the Company;
2. That the representations and warranties of the Seller
and the Company made in connection with the Agreement and contained
in Article III thereof and in the Disclosure Schedule attached to
the Agreement and the certifications given pursuant to Section
5.5(d) of the Agreement are true and correct as of the date of this
certificate as though made by the Seller and the Company on and as
of the date, whether or not they were untrue or incorrect prior to
such date;
3. That the Seller and the Company have each performed and
complied with all agreements, covenants, obligations and conditions
required by the Agreement to be so performed or complied with by
the Seller and/or the Company at or before the Closing, including
those specifically referred to in Articles V and VII of the
Agreement; and
4. That all of the conditions to the obligations of the
Buyer to purchase the Stock from the Seller set forth in Article
VII of the Agreement have been fulfilled.
<PAGE>
EXHIBIT D
FORM OF SELLER S COUNSEL S OPINION
At the Closing, Seller shall deliver to Purchaser the opinion
of its counsel, Waring Cox, PLC, to the following effect:
1. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Tennessee and has full corporate power and authority to enter into
the Agreement and perform its obligations thereunder.
2. The Company is an insurance company duly organized,
validly existing and in good standing under the laws of the State
of Tennessee, and is duly licensed, qualified or admitted to do
business and is in good standing in all jurisdictions listed on
Section 3.1 of the Disclosure Schedule, and has full corporate
power and authority to enter into the Agreement and perform its
obligations thereunder.
3. The execution and delivery of the Agreement by the Seller
and the Company and the performance of their respective obligations
thereunder have been duly and validly authorized by all necessary
corporate action on the part of the Seller and the Company, and the
Agreement constitutes the legal, valid and binding obligation of
the Seller and the Company and is enforceable against each of them
in accordance with its terms, except to the extent that (a)
enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or
hereafter in effect relating to or limiting creditors rights
generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court or other
Person before which any such proceeding therefor may be brought.
4. The authorized capital stock of the Company is as set
forth in Section 3.3 of the Agreement; all of such shares are
validly issued and outstanding, fully paid and nonassessable, and
25,000 of such shares are owned beneficially and of record by the
Seller, free and clear of all Liens, except as may be disclosed in
Section 3.3 of the Disclosure Schedule; and there are no
securities, obligations, rights, subscriptions, warrants, options,
charter or founders insurance policies, phantom stock rights, or
Contracts of any kind of the Company which are subject of any
rights or options of the nature described in Section 3.3 of the
Agreement.
5. The execution and delivery of the Agreement by the Seller
and the Company does not, and the performance by the Seller and the
Company of their respective obligations under the agreement will
not, subject to obtaining the approvals contemplated by Sections
5.1 and 6.1 of the Agreement, (a) violate any term or provisions of
any Law or any writ, judgment, decree, injunction or similar order
applicable to the Seller or the Company; (b) conflict with or
result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default under, any of the terms,
conditions, or provisions of the articles or certificate of
incorporation or Bylaws of the Seller or the Company; (c) result in
the creation or imposition of any Lien upon the Seller, the Company
or any of their respective Assets and Properties that individually
or in the aggregate with any other Liens has or may reasonably be
expected to have a material adverse effect on the validity or
enforceability of the Agreement, on the ability of the Seller or
the Company to perform their respective obligations under the
Agreement, or on the Business or Condition of the Seller or the
Company; or (d) conflict with or result in a violation or breach
of, or constitute (with or without notice or lapse of time or both)
a default under, or give to any Person any right of termination,
cancellation, acceleration, or modification in or with respect to,
any Contract to which the Seller or the Company is a party or by
which any of their respective Assets or Properties may be bound and
as to which any such conflicts, violations, breaches, defaults or
rights individually or in the aggregate have or may reasonably be
expected to have a material adverse effect on the validity or
enforceability of the Agreement, on the ability of the Seller or
the Company to perform its respective obligations under the
Agreement, or on the Business or Condition of the Seller or the
Company.
6. Any consent, approval, order or authorization of, or any
waiting period imposed by any regulatory authority under federal or
state law, including the laws of the State of Tennessee and the
State of Indiana, which require the Seller or the Company to obtain
any consent, approval, or action of, or make any filing with or
give any notice to, any person except those which the failure to
obtain, make, or give individually or in the aggregate with any
other such failures has or may reasonably be expected to have no
material adverse effect on the validity or enforceability of the
Agreement, or in the Business or Condition of the Seller or the
Company, in connection with the execution and delivery of the
Agreement and the performance by the Seller and the Company of
their respective obligations under the Agreement has been obtained
or, in the case of any such waiting period, has expired.
7. To such counsel s actual knowledge, except as disclosed
in Section 3.13 of the Disclosure Schedule: (a) there are no
actions, suits investigations or proceedings pending or threatened
against the Seller or the Company or any of their respective Assets
and properties, at law or in equity, in, before, or by any Person
that individually or in the aggregate have or may reasonably be
expected to have a material adverse effect on the validity or
enforceability of the Agreement, on the ability of the Seller or
the Company to perform their respective obligations under the
Agreement, or on the Business or Condition of the Company; and (b)
there are no writs, judgments, decrees or similar orders of any
Person restraining, enjoining or otherwise preventing consummation
of the transactions contemplated by the Agreement.
<PAGE>
EXHIBIT E
VOTING TRUST AGREEMENT
This Agreement, dated as of the ____ day of ____, 1996, among
Delta Life and Annuity Company, a Tennessee corporation (the
Shareholder ), Ronald D. Hunter and _____________ (the Voting
Trustees ), Boatmen s Trust Company, a national banking association
(the Depositary ), and Standard Management Corporation (the
Company ):
W I T N E S S E T H:
WHEREAS, Company is a corporation organized and existing under
the laws of the State of Indiana, with an authorized capital stock
divided into 21,000,000 shares, consisting of 1,000,000 shares of
Preferred Stock, and 20,000,000 shares of Common Stock, without par
value ( Common Stock );
WHEREAS, the Shareholder owns 250,000 shares of Common Stock;
and
WHEREAS, in order to insure continuity and stability of policy
and management and for the benefit and protection of the present
and future holders of Common Stock, pursuant to the terms of the
Stock Purchase Agreement dated as of __________, 1996 by and
between the Company and the Shareholder (the Stock Purchase
Agreement ), the Company, as a condition to the purchase of all of
the issued and outstanding shares of the common capital stock of
Shelby Life Insurance Company from the Shareholder required the
deposit hereunder with the Depositary as agent of the Voting
Trustees, of the 250,000 shares of Common Stock being so deposited,
and the Shareholder deems the deposit of its stock hereunder to be
to its interest:
NOW, THEREFORE, in consideration of the premises the parties
hereby agree as follows:
1. The Shareholder, simultaneously with the execution hereof,
is causing to be issued by the Company in the name of the Voting
Trustees and to be deposited with the Depositary as agent for the
Voting Trustees, certificates for 250,000 shares of Common Stock
which the Shareholder is delivering to the Depositary as agent,
properly stamped for transfer and duly endorsed in blank or
accompanied by proper instruments of assignment and transfer
thereof in blank duly executed, and in either case accepting in
respect thereof, a certificate or certificates issued under this
agreement.
2. The Voting Trustees hereby agree with the Shareholder
that, from time to time, upon request, they will cause to be duly
issued to the Shareholder, or upon their order, in respect of all
Common Stock caused by the Shareholder to be issued in the name of
the Voting Trustees as aforesaid, or in exchange for all
certificates of shares received from the Shareholder by the
Depositary as agent of the Voting Trustees as aforesaid, trust
certificates in substantially the form attached hereto as Annex I,
to all the terms, conditions and provisions of which the
Shareholder hereby assents.
The Voting Trustees shall have full power to appoint and
remove from time to time, agents to sign in their behalf and
transfer agents and registrars to register the trust certificates.
Such agents and registrars shall at all times be banks or trust
companies.
The trust certificates issued hereunder shall be transferable
at the agency of the Voting Trustees, on surrender thereof, by the
registered holder in person or by attorney duly authorized, in
accordance with such rules as may be reasonably established for
that purpose by the Voting Trustees. Until so transferred the
Voting Trustees and the Depositary may treat the registered holders
as owners thereof for all purposes whatsoever, but the Depositary
shall not be required to deliver stock certificates hereunder
without the surrender of trust certificates calling therefor.
Every transferee of a certificate or certificates issued hereunder,
shall, by the acceptance of such certificate or certificates,
become a party hereto with like effect as though an original party
hereto, and shall be embraced within the meaning of the term
Shareholders whenever used herein. In connection with, and as a
condition of, making or permitting any transfer or delivery of
stock certificates or trust certificates under any provision of
this agreement, the Voting Trustees may require the payment of a
sum sufficient to pay or reimburse them, or the Depositary for any
stamp tax or other governmental charge in connection therewith.
The transfer books for trust certificates may be closed by the
Voting Trustees, at any time prior to the payment or distribution
of dividends.
3. The Voting Trustees hereby designate the Depositary their
agent for the custody of the certificates of Common Stock now or
hereafter delivered to them hereunder. The certificates of Common
Stock delivered to the Depositary duly endorsed in blank or
accompanied by proper instruments of assignment of transfer in
blank as aforesaid shall be surrendered by the Depositary to the
Company and cancelled, and certificates for an equal amount of said
Common Stock shall be issued in the name of the Voting Trustees as
trustees and delivered to the Depositary. Duplicates of this
Agreement shall be filed in the office of the Company in the City
of Indianapolis, State of Indiana, and in the office of the
Depositary in the City of St. Louis, State of Missouri.
4. Upon the termination of this Agreement as provided in
Section 14 hereof, or whenever earlier the Voting Trustees shall
decide to make such delivery, the Voting Trustees in exchange for,
and upon surrender of, any trust certificate then outstanding,
will, in accordance with the terms thereof and subject to Section
6 hereof, deliver, at the office or agency of the Depositary in the
City of St. Louis, Missouri, certificates of Common Stock in the
amounts called for by the respective trust certificates, and may
require the holders of the trust certificates to exchange them for
certificates of such Common Stock.
Whenever, pursuant to the foregoing provisions of Section 4,
certificates for Common Stock shall become deliverable and the
Voting Trustees shall file with the Depositary an order in writing
directing the Depositary to make delivery thereof in exchange for
trust certificates, the Depositary shall thereupon have authority
as agent to endorse the names of the Voting Trustees upon such
share certificates as may be necessary to effectuate such order of
the Voting Trustees and to deliver the appropriate certificate or
certificates to the holders of Trustees certificates upon the
surrender of such Trustees certificates. When the Voting Trustees
shall have filed their written order with the Depositary directing
the Depositary to make such delivery of share certificates in
exchange for Trustees certificates, all further obligation or duty
of the Voting Trustees under this Agreement to the holders of trust
certificates shall terminate.
5. Prior to the delivery, or the filing of an order with the
Depositary for delivery, of certificates of Common Stock in
exchange for trust certificates pursuant to Section 4 hereof, the
holder of each trust certificate shall be entitled to receive from
time to time payments equal to the dividends, if any, collected by
the Voting Trustees upon a like number of shares of Common Stock as
is called for by such trust certificate; provided, however, that if
any dividend on the Common Stock which may have been deposited
hereunder shall be declared and paid or distributed in fully paid
Common Stock, the respective holders of trust certificates
hereunder shall be entitled to the delivery of trust certificates
with respect to the amount of the Common Stock received by the
Voting Trustees as such dividend upon the number of such shares of
Common Stock called for by their respective trust certificates.
The Voting Trustees, through the Depositary, shall, in such manner
and upon such terms, as they, in their discretion, deem reasonable
and fair, accord to the holders of trust certificates, in
proportion to the number of shares of Common Stock called for
therein, the opportunity to exercise, or to dispose of, any rights
of subscription to stock or other securities of the Company which
at any time during the continuance of this Agreement may accrue in
respect of the shares registered in the name of the Voting
Trustees.
6. The term Company, for the purposes of this Agreement and
for all rights hereunder, including the issue and delivery of
stock, shall be taken to mean the above named Standard Management
Corporation, or any corporation(s) successor to it.
7. Any Voting Trustee may at any time resign, by delivering
to the other Voting Trustees or to the Depositary his resignation
in writing, to take effect 30 days thereafter, unless sooner
accepted by the remaining Voting Trustees. In every case of death,
resignation or inability of any Voting Trustee to act, the vacancy
so occurring shall be filled by the appointment of a successor(s),
to be made by the Shareholder if the resigning Voting Trustee was
originally appointed by the Shareholder, or, by the Company, if the
resigning Voting Trustee was originally appointed by the Company,
by a written instrument. The term Voting Trustees as used herein,
and in said trust certificates, shall apply to the parties of the
second part and their successors hereunder. Notwithstanding any
change in the Voting Trustees, the Voting Trustees for the time
being may adopt and issue trust certificates in the names of the
original Voting Trustees, the parties hereto of the second part.
The Depositary may at any time resign its duties, trust and
powers hereunder by giving 90 days notice thereof to the Voting
Trustees; and the Depositary may at any time be removed by a
written instrument signed by all of the then Voting Trustees and
delivered to the Depositary. In every case of the resignation,
removal or inability of the Depositary to act, the majority of the
Voting Trustees may by writing signed by them and delivered to a
successor named therein, elect as successor to the Depositary some
other bank or trust company having power to act, and having a
capital and surplus of at least Fifty Million Dollars
($50,000,000), which successor shall thereupon be entitled to all
the rights, authority and powers hereby conferred on the above-
named Depositary. The Depositary so resigning or so removed shall
thereupon transfer and deliver to such successor the stock
certificates then held by it hereunder, together with all books,
registers and other papers pertaining or relating to said stock
certificates or to the trust certificates which may from time to
time be issued hereunder. The term Depositary as used in this
Agreement and in said trust certificates shall apply to the
Depositary herein named and its successor(s) at any time hereunder.
8. The action of a majority of the Voting Trustees, expressed
from time to time at a meeting or by writing without a meeting,
shall, except as otherwise herein stated, constitute the action of
the Voting Trustees and have the same effect as if assented to by
all. Any Voting Trustee may vote or may act in person or by proxy.
Any meeting of the Voting Trustees may be held by conference
telephone. At any meeting of the Voting Trustees the presence of
all of the Voting Trustees in person or by proxy shall constitute
a quorum. The Voting Trustees may adopt their own rules of
procedure. Any Voting Trustee may act as a director of the Company
or of any controlled or subsidiary company; and he, or any firm of
which he may be member, or any corporation of which he may be a
shareholder, director of officer, may, to the extent permitted by
law, contract with the Company or with any controlled or subsidiary
company, or be or become pecuniarily interested in any matter or
transaction to which the Company or any controlled or subsidiary
company may be a party, or in which the Company or any controlled
or subsidiary company may in any way be concerned, as fully as
though he were not a Voting Trustee.
9. Until delivery, or the filing of and order with the
Depositary for delivery, of all stock certificates in accordance
with Section 4 hereof, the Voting Trustees shall possess, in
respect of any and all stock deposited hereunder, and shall be
entitled, in their discretion, but subject to the provisions of
this Agreement, to exercise, the right to vote and consent for
every purpose. The Voting Trustees shall vote or consent or issue
proxies to vote or consent, at shareholders meetings with respect
to matters relating to the election of directors of the Company,
including setting the number of such directors, in their
discretion, except that they shall vote for up to nine nominees for
director designated in its discretion by the Company in writing
(and shall take such action as may be feasible to effect the
election of such nominees, including cumulating the votes of such
shares). At or prior to each meeting of shareholders, the Voting
Trustees shall deliver to Ronald D. Hunter or his designee a proxy
entitling Hunter or such designee to vote all of the shares held by
the Voting Trustees with respect to all other matters. The Voting
Trustee appointed by the Shareholder shall vote as directed by the
Voting Trustee appointed by the Company except in the following
circumstances: (a) upon the sale or merger of the Company; (b) upon
the book value of the Company, not adjusted by FASB 115 being less
than $6.00 per share of Common Stock; (c) upon the sale of
significant assets of the Company constituting either twenty-five
percent (25%) of assets or revenues; (d) upon three (3) consecutive
calendar quarterly losses at the Company consolidated level; or (e)
if total adjusted capital is less than one hundred percent (100%)
of the Risk-Based Capital ( RBC ) authorized capital level in
Standard Life Insurance Company of Indiana. The Voting Trustee
appointed by the Company shall vote as directed by the Voting
Trustee appointed by the Shareholder with respect to each of the
items (a) through and including (e) set forth in the immediately
preceding sentence.
The Voting Trustees shall in every such case, within 10 days after
receipt of notice of any shareholders meeting called to authorize
or consider any such action, cause the Company to mail copies of
the notice of such meeting received by them to the holders of the
trust certificates hereunder, addressed to them at the address
furnished by them to the Depositary. After delivery of all of the
stock certificates to the Depositary, any proxy signed by the
Depositary as agent of the Voting Trustees shall be sufficient for
every purpose, but any proxy issued by the Depositary shall not be
recognized if the Voting Trustee shall, either before or after the
issuance of a proxy by the Depositary, issue their proxy for the
same purpose. Except as set forth above, no voting power passes to
holders of trust certificates or to others by or under the trust
certificates, or by or under this Agreement, or by or under any
agreement, whether by implication or otherwise.
In voting or giving directions for voting the stock represented by
the Stock Certificates deposited hereunder, the Voting Trustees,
subject to the provisions of this Agreement, shall exercise their
best judgment from time to time to select suitable directors, to
the end that the affairs of the Company shall be properly managed,
and, in voting or giving directions for voting and acting on other
matters for shareholders action, the Voting Trustees shall
exercise like judgment; but they assume no responsibility with
respect to such management or with respect to any action taken by
them or taken in pursuance of the issuance of a proxy by their
agent, the Depositary, and no Voting Trustee incurs any
responsibility as shareholder, trustee, or otherwise, by reason of
any error of law or of any matter or thing done or omitted under
this Agreement, except for his own individual malfeasance. The
Voting Trustees and their successors, as Trustees hereunder, shall
receive to the maximum extent permitted by law from the Company
indemnity for and against any and all claims and expenses and
liabilities by them incurred in connection with, or growing out of,
this Agreement, or the bona fide discharge of their duties
hereunder.
10. All notices to be given to the holders of trust
certificates shall be given by mail addressed to the registered
holders of such trust certificates at the addresses furnished by
such holders to the Voting Trustees or to the Depositary. Any call
or notice whatsoever, when mailed by the Voting Trustees as herein
provided, shall be taken and considered as though personally served
on all parties hereto, including the holders of said trust
certificates, and upon all parties becoming bound hereby, and such
mailing shall be the only notice required to be given under any
provision of this Agreement.
11. The Depositary assumes no responsibility for the acts of
the Voting Trustees or of the directors elected in the exercise of
the voting power of said stock. The Depositary shall not be
required to defend any suit, take any action, incur any expenses or
liability hereunder, unless requested in writing by the holders of
a majority in interest of the trust certificates or a majority of
the Voting Trustees, and indemnified to its satisfaction. The
Depositary shall be fully protected and relieved in all cases in
acting upon the written directions or with the written approval of
a majority of the Voting Trustees; and the Depositary shall in no
case be liable by or for any act or omission except only for its
own willful default.
12. No agent or registrar appointed by the Voting Trustees
shall be liable or responsible for any action taken or suffered by
it in good faith or for anything other than its own individual
willful default, and no such agent or registrar shall incur any
liability by reason of anything done or permitted to be done at the
request or by the permission of the Voting Trustees, and any such
agent or registrar shall be fully protected and relieved in all
cases in acting upon the written directions or with the written
approval of a majority of the Voting Trustees.
Any agent or registrar appointed by the Voting Trustees may
resign upon 90 days written notice to the Voting Trustees or on
such shorter notice as the Voting Trustees may accept as
sufficient.
13. This Agreement may be executed in several counterparts,
each of which, so executed, shall be deemed to be an original; and
such counterparts shall together constitute but one and the same
instrument.
14. This Agreement shall be irrevocable for a period of twenty
(25) months from its effective date and shall terminate twenty (25)
months from the effective date.
Voting Trustees BOATMEN S TRUST COMPANY
Depositary
_____________________________ By:_________________________________
Ronald D. Hunter Vice-President
_____________________________ DELTA LIFE AND ANNUITY COMPANY
By:_________________________________
STANDARD MANAGEMENT CORPORATION
By:_________________________________
<PAGE>
ANNEX I
VOTING TRUST CERTIFICATE
No. __________________ Common Stock
_____ Shares
STANDARD MANAGEMENT CORPORATION
an Indiana Corporation
This is to certify that ___________________ will be entitled
upon surrender of this certificate after payment of a sum
sufficient to reimburse the undersigned for any stamp tax or other
governmental charge payable thereon, to receive a certificate for
_______________ fully paid and nonassessable shares of Common
Stock, no par value, of Standard Management Corporation, an Indiana
corporation, deposited with the undersigned pursuant to the terms
of an agreement (the Agreement ) dated as of ______________, 1996,
among Delta Life and Annuity Company and the undersigned Voting
Trustees, the original of which is on file at the principal office
of Standard Management Corporation in Indianapolis, Indiana. In
the interval the holder hereof shall be entitled to receive
payments equal to dividends received by the Voting Trustees named
in the Agreement or their successors, upon a like number of shares
of stock of such class, less any expense chargeable to the holder
hereof under the Agreement; such dividends, if received by the
Voting Trustees in stock of Standard Management Corporation having
general or other voting power, however, to be payable in voting
trust certificates in similar form.
This certificate is issued, subject to, and the holder by
accepting the same consents to, all the terms of the Agreement and
the acceptance of this certificate shall bind successive holders
hereof to all the terms of the Agreement as if the holder were a
party to it. No voting right passes by this certificate until the
actual delivery of the stock certificates to the Depositary. Upon
such delivery, the Voting Trustee shall, according to the
provisions of the Agreement, be entitled to exercise all voting
rights with respect to the stock.
No stock certificate shall be deliverable under this
certificate until the termination of the Agreement with respect to
the shares represented by such certificate.
In case of a vacancy in the position of Voting Trustee, caused
by death, resignation or incapacity to act, the vacancy shall be
filled according to the provisions of the Agreement.
This certificate is transferrable on the books of the Voting
Trustees at their office in Indianapolis, Indiana, or at any other
place designated by the Voting Trustees, by the holder of record,
in person or by a duly authorized attorney in accord with the rules
established for that purpose by the voting Trustees, and on
surrender of the certificate properly endorsed; but until so
transferred, the voting Trustees may treat the holder of record as
the owner of the certificate for all purposes whatsoever. In
connection with any transfer or delivery of stock certificates or
voting trust certificates, the Voting Trustees may require the
payment of a sufficient sum to pay or reimburse them for any
governmental charge or any stamp tax in connection herewith.
This certificate shall not be valid until signed by the Voting
Trustees.
In witness whereof the Voting Trustees have signed this
certificate.
Dated: ___________________
__________________________________
Ronald D. Hunter
__________________________________
For value received __________________ hereby sell, assign and
transfer unto _______________________ the within certificate and
all rights represented thereby and do hereby irrevocably constitute
and appoint ________________ attorney to transfer such certificates
on the books of the Voting Trustees in the certificate with full
power of substitution in the premises.
___________________________________
Signed in the presence of
_____________________________
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE OF OFFICER OF BUYER
At the Closing, the Buyer shall deliver to the Seller a
certificate, dated the Closing Date, executed by the Chief
Executive Officer or Chief Financial Officer of the Buyer, to the
following effect:
Pursuant to the provisions of Section 8.3 of that certain
Stock Purchase Agreement dated ______________, 1996 (the
Agreement ) by and among Delta Life and Annuity Company (the
Seller ), Shelby Life Insurance Company (the Company ), and
Standard Life Insurance Company of Indiana (the Buyer ), and
relating to the purchase and sale of 25,000 shares of the common
capital stock $100.00 par value of the Company (the Stock ) by the
Seller to the Buyer, I, the undersigned [Chief Executive
Officer/Chief Financial Officer] of the Buyer do hereby certify to
the Seller as follows:
1. That I am the duly elected [Chief Executive
Officer/Chief Financial Officer] of the Buyer, and in that capacity
have the requisite power and authority to execute and deliver this
certificate on behalf of the Buyer;
2. That the representations and warranties of the Buyer in
connection with the Agreement and contained in Article IV thereof
and in the Disclosure Schedule attached to the Agreement and the
certification given pursuant to Section 6.4(d) of the Agreement are
true and correct as of the date of this certificate as though made
by the Buyer on and as of the date, whether or not they were untrue
or incorrect prior to such date;
3. That the Buyer has performed and complied with all
agreements, covenants, obligations and conditions required by the
Agreement to be so performed or complied with by the Buyer at or
before the Closing, including those specifically referred to in
Articles VI and VIII of the Agreement; and
4. That all of the conditions to the obligations of Seller
to sell the Stock to the Buyer set forth in Article VIII of the
Agreement have been fulfilled.
<PAGE>
EXHIBIT G
FORM OF BUYER S COUNSEL S OPINION
At the Closing, Buyer shall deliver to Seller the opinion of
its counsel, Stephen M. Coons, to the following effect:
1. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Indiana and has full corporate power and authority to enter into
the Agreement and perform its obligations thereunder.
2. The execution and delivery of the Agreement by the Buyer
and the performance of its obligations thereunder have been duly
and validly authorized by all necessary corporate action on the
part of the Buyer, and the Agreement constitutes the legal, valid,
and binding obligation of the Buyer and is enforceable against the
Buyer in accordance with the terms, except to the extent that (a)
enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar Laws now or
hereafter in effect relating to or limiting creditors rights
generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court or other
similar Person before which any such proceeding therefor may be
brought.
3. The execution and delivery of the Agreement by the Buyer
does not, and the performance by the Buyer of its obligations under
the Agreement will not, subject to obtaining the approvals
contemplated by Sections 5.1 and 6.1 of the Agreement, (a) violate
any term or provisions of any Law or any writ, judgment, decree,
injunction or similar order applicable to the Buyer; (b) conflict
with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under, any of
the terms, conditions, or provisions of the articles or certificate
of incorporation or Bylaws of the Buyer; (c) result in the creation
or imposition of any Lien upon the Buyer or any of its Assets and
Properties that individually or in the aggregate with any other
Liens has or may reasonably be expected to have a material adverse
effect on the validity or enforceability of the Agreement or on the
ability of the Buyer to perform its obligations thereunder; or (d)
conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under,
or give any Person any right of termination, cancellation,
acceleration, or modification in or with respect to, any Contract
to which the Buyer is a party or by which any of its Assets or
Properties may be bound and as to which any such conflicts,
violations, breaches, defaults or rights individually or in the
aggregate have or may reasonably be expected to have a material
adverse effect on the validity or enforceability of the Agreement
or on the ability of the Buyer to perform its obligations under the
Agreement.
4. Any consent, approval, order or authorization of, or any
waiting period imposed by any regulatory authority under federal or
state law, including the laws of the State of Tennessee and the
State of Indiana, which require the Buyer to obtain any consent,
approval or action of, or make any filing with or give any notice
to, any Person except those which the failure to obtain, make, or
give individually or in the aggregate with any other such failures
has or may be expected to have no material adverse effect on the
validity or enforceability of the Agreement or on the ability of
the Buyer to perform its obligations thereunder in connection with
the execution and delivery of the Agreement and the performance by
the Buyer of its obligations thereunder has been obtained or, in
the case of any such waiting period, has expired.
TO: All Media Outlets
FROM: Standard Management Corporation
9100 Keystone Crossing, 6th Floor
Indianapolis, IN 46240
DATE: July 19, 1996
CONTACT: Kevin L. Wedmore
317-574-5221
FOR IMMEDIATE RELEASE
Standard Management Announces Acquisition of
Shelby Life Insurance Company
(Indianapolis, IN) Standard Management Corporation ("SMC" or the
"Company") [NASDAQ: SMAN] Chairman, Ronald D. Hunter, and Delta Life
and Annuity ("DLAC") Chairman, Jerry Tsai, Jr., announced today their
respective companies had entered into an agreement for SMC subsidiary
Standard Life Insurance Company of Indiana to acquire Shelby Life
Insurance Company ("Shelby"), a wholly owned subsidiary of DLAC, in a
deal that involves cash and stock.
TERMS
Under terms of the agreement, SMC will purchase Shelby for
approximately $14 million, including $13 million in cash and 250,000
shares of SMC common stock. In addition, an extraordinary dividend of
$3 million will be paid to the seller at closing, with regulatory
approval. Financing for the transaction will be provided by senior
debt of $10 million from Fleet National Bank and the balance in
subordinated convertible debt from Conseco, Inc., a Carmel, IN based
financial services holding company.
RESULTS OF TRANSACTION
The transaction would increase SMC's total assets by approximately
$105 million and add over 21,000 policies to SMC's current policy
count. Shelby reported over $1 billion of life insurance in force at
year end, 1995, raising the total of in force life insurance for SMC to
over $3.1 billion upon completion of the transaction. Shelby currently
reports approximately $6 million per year in statutory life insurance
and annuity premium income. In addition, SMC will increase its agent
base by approximately 900 agents.
SMC chairman, Ronald D. Hunter, noted, "This acquisition reflects
our continued commitment to grow through strategic acquisitions as well
as internal sales. Shelby's product mix and distribution channels
provide us with over $105 million in quality assets and takes our total
in force life insurance to over $3 billion. The additional 21,000
policies we will be bringing in house will allow us to benefit from
efficiencies that would be used to significantly reduce general
expenses associated with Shelby and should have a positive impact upon
our operational earnings."
"Conseco Capital Management will continue to manage our
investments. SMC's total assets will now approach $600 million. This
acquisition takes us another step toward achieving our goal of reaching
$1 billion in assets," continued Hunter.
The transaction is expected to be completed in the fourth quarter
of 1996, subject to regulatory approval.
STANDARD MANAGEMENT CORPORATION
Standard Management Corporation is an Indianapolis, IN based
financial services holding company with operations in the U.S. and
Europe. Its stated growth strategy is through the sale and
distribution of life insurance related products and through the
acquisition of other companies and blocks of business. The company has
grown from $198 million in assets since its IPO in February, 1993, to
over $470 million at March 31, 1996. In addition, the Company has
shown an increase in shareholder equity from $4.8 million to $37.5
million during the same period.
