FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998 or
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 33-64820
AMERICO LIFE, INC.
(exact name of registrant as specified in its charter)
MISSOURI
(State of other jurisdiction of incorporation or organization)
43-1627599
(I.R.S. Employer Identification No.)
1055 BROADWAY
KANSAS CITY, MISSOURI 64105
(Address of principal executive offices)
(816) 391-2000
(Registrant's telephone number, including area code)
NOT APPLICABLE
Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class and Title of Shares Outstanding
Capital Stock as of May 12, 1998
------------- ------------------
Common Stock $1.00 Par Value 10,000
<PAGE>
See notes to consolidated financial statements
5
AMERICO LIFE, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEET
(In thousands - unaudited)
<TABLE>
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (market: $866,030 and $ 843,000 $ 851,823
$873,935)
Available for sale, at market (amortized cost: $731,032 and 753,418 761,084
$735,955)
Equity securities, at market (cost: $77,926 and $50,837) 110,722 78,949
Investment in equity subsidiaries 14,005 21,670
Mortgage loans on real estate, net 183,778 165,630
Investment real estate, net 27,487 27,630
Policy loans 198,994 200,137
Other invested assets 17,649 18,890
----------- -----------
Total investments 2,149,053 2,125,813
Cash and cash equivalents 30,021 36,859
Accrued investment income 27,575 27,620
Amounts receivable from reinsurers 1,447,150 1,429,679
Other receivables 22,244 23,875
Deferred policy acquisition costs 88,074 87,840
Cost of business acquired 289,045 300,180
Other assets 32,809 29,370
----------- -----------
Total assets $ 4,085,971 $ 4,061,236
=========== ===========
Liabilities and stockholder's equity
Policyholder account balances $ 2,500,256 $ 2,486,436
Reserves for future policy benefits 857,622 881,583
Unearned policy revenues 31,839 36,063
Policy and contract claims 36,577 36,570
Other policyholder funds 80,611 75,960
Notes payable 132,929 132,884
Amounts payable to reinsurers 17,881 12,200
Federal income taxes payable 368 164
Deferred income taxes 59,754 58,126
Due to broker 44,443 31,836
Amounts due to affiliates 3,130 3,137
Other liabilities 69,986 59,415
----------- -----------
Total liabilities 3,835,396 3,814,374
Stockholder's equity:
Common stock ($1 par value; 30,000 shares authorized,
10,000 shares issued and outstanding) 10 10
Additional paid-in capital 3,745 3,745
Net unrealized investment gains 57,117 56,973
Retained earnings 189,703 186,134
----------- -----------
Total stockholder's equity 250,575 246,862
----------- -----------
Commitments and contingencies
Total liabilities and stockholder's equity $ 4,085,971 $ 4,061,236
=========== ===========
</TABLE>
AMERICO LIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts - unaudited)
<TABLE>
Three Months
Ended March 31,
1998 1997
<S> <C> <C>
Income
Premiums and policy revenues $ 53,972 $ 41,323
Net investment income 56,087 49,608
Net realized investment gains 461 493
Other income 1,084 110
----------- -----------
Total income 111,604 91,534
Benefits and Expenses
Policyholder benefits:
Death benefits 29,899 26,111
Interest credited on universal life and annuity products 26,666 23,120
Other policyholder benefits 12,679 13,440
Change in reserves for future policy benefits (5,977) (4,435)
Commissions 3,139 2,929
Amortization expense 15,133 6,660
Interest expense 2,985 3,007
Other operating expenses 21,112 15,287
----------- -----------
Total benefits and expenses 105,636 86,119
----------- -----------
Income before provision for income taxes 5,968 5,415
Provision for income taxes 1,899 1,651
----------- -----------
Net income $ 4,069 $ 3,764
=========== ===========
Net income per common share $ 406.90 $ 376.40
=========== ===========
</TABLE>
<PAGE>
AMERICO LIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands - unaudited)
<TABLE>
Three Months
Ended March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities
Net income $ 4,069 $ 3,764
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization 17,516 6,973
Deferred policy acquisition costs (9,566) (4,346)
Undistributed earnings of equity subsidiaries (335) (893)
Distribution of earnings from equity subsidiaries 6,750 -
Amortization of unrealized gains (2,163) (1,485)
(Increase) decrease in assets:
Accrued investment income 45 754
Amounts receivable from reinsurers (21,055) (13,965)
Other receivables 2,881 (11,697)
Amounts due from affiliates - (1,821)
Other assets, net of amortization expense (4,178) (2,211)
Increase (decrease) in liabilities:
Policyholder account balances (1,048) (3,397)
Reserves for future policy benefits and unearned policy revenues (19,774) (2,616)
Policy and contract claims 7 (2,147)
Other policyholder funds 4,651 2,846
Amounts payable to reinsurers 5,681 (2,767)
Provision for deferred income taxes 1,550 3,067
Federal income tax payable 204 -
Amounts due to affiliates (7) (2,168)
Other liabilities 10,571 9,930
Net realized gains on investments sold (461) (493)
Amortization on bonds and mortgage loans (144) 1,279
Other changes 445 (1,639)
----------- -----------
Total adjustments (8,430) (26,796)
----------- -----------
Net cash used by operating activities (4,361) (23,032)
----------- -----------
(continued)
</TABLE>
<PAGE>
AMERICO LIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(In thousands - unaudited)
<TABLE>
Three Months
Ended March 31,
1998 1997
<S> <C> <C>
Cash flows from investing activities
Purchases of fixed maturity investments $ (39,988) $ (31,826)
Purchases of other investments (58,490) (79,102)
Mortgage loans originated (22,999) -
Maturities or redemptions of fixed maturity investments 2,673 9,679
Sales of fixed maturity available for sale investments 51,863 113,601
Sales of other investments 31,347 69,082
Repayments from mortgage loans 5,026 14,002
Change in due to broker 12,607 (49,984)
Change in policy loans 1,143 1,860
----------- -----------
Net cash provided (used) by investing activities (16,818) 47,312
Cash flows from financing activities
Receipts credited to policyholder account balances 67,049 45,662
Return of policyholder account balances (52,181) (25,983)
Dividends paid (500) (500)
Repayments of notes payable (27) (10)
----------- -----------
Net cash provided by financing activities 14,341 19,169
----------- -----------
Net increase (decrease) in cash and cash equivalents (6,838) 43,449
----------- -----------
Cash and cash equivalents at beginning of period 36,859 96,069
----------- -----------
Cash and cash equivalents at end of period $ 30,021 $ 139,518
=========== ===========
</TABLE>
<PAGE>
8
AMERICO LIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Three Months Ended March 31, 1998 and 1997
(In thousands, except per share amounts - unaudited)
The following notes should be read in conjunction with the notes to the
consolidated financial statements contained in the Americo Life, Inc. ("the
Company") December 31, 1997 Form 10-K as filed with the Securities and Exchange
Commission.
1. ACCOUNTING POLICIES
The unaudited consolidated financial statements as of March 31, 1998 and for the
three months ended March 31, 1998 and 1997 reflect all adjustments, consisting
of normal recurring adjustments, which are necessary for a fair statement of
financial position and results of operations on a basis consistent with
accounting principles described fully in Note 1 of the Company's December 31,
1997 consolidated financial statements. The results of operations for the three
months ended March 31, 1998 and 1997 are not necessarily indicative of the
expected results for the full year 1998, nor the results experienced for the
year 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS No. 130 establishes standards for the reporting and display
of comprehensive income and its components in financial statements. SFAS No. 131
establishes new guidelines for public business enterprises to report financial
and descriptive information about their operating segments. These statements are
effective for financial statement periods beginning after December 15, 1997, but
are not required disclosures for interim period financial statements in 1998.
Comprehensive income for the three months ended March 31, 1998 and 1997 is as
follows:
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Net income $ 4,069 $ 3,764
Other comprehensive income 144 (5,624)
---------- --------
Comprehensive income $ 4,213 ($ 1,860)
========== ========
</TABLE>
In December 1997, the American Institute of Certified Public Accountants
("AICPA") approved Statement of Position ("SOP") 97-3, "Accounting by Insurance
and Other Enterprises for Insurance-Related Assessments." SOP 97-3 provides
guidance for determining when an entity should recognize a liability for
guaranty-fund and other insurance-related assessments and a related asset for
assessments which may be recovered through future premium tax offsets. The SOP
is effective for financial statements for fiscal years beginning after December
15, 1998, with early adoption encouraged. Management has not determined the
effects, if any, of adopting this SOP on the Company's consolidated financial
statements.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Previously
reported amounts for the prior year have in some instances been reclassified to
conform to the current year presentation.
<PAGE>
AMERICO LIFE, INC. AND SUBSIDIARIES
2. STOCKHOLDER'S EQUITY
Following are the components of net unrealized investment gains:
<TABLE>
March 31, December 31, Three Months Ended
1998 1997 March 31, 1998
------ ------ -----------------
<S> <C> <C> <C>
Investment securities:
Fixed maturities available for sale $ 22,417 $ 25,129 $ (2,712)
Fixed maturities reclassified from
available for sale to held to maturity 43,406 44,550 (1,144)
Equity securities 32,796 28,112 4,684
----------- ----------- -----------
98,619 97,791 828
Effect on other balance sheet accounts (11,996) (11,321) (675)
Deferred income-taxes (29,506) (29,497) (9)
----------- ----------- -----------
Net unrealized investment gains $ 57,117 $ 56,973 $ 144
=========== =========== ===========
</TABLE>
During the three months ended March 31, 1998, the Company paid dividends to
Financial Holding Corporation (FHC) totaling $500.
3. COMMITMENTS AND CONTINGENCIES
The Company's subsidiary, Great Southern Life Insurance Company ("Great
Southern"), is a defendant in lawsuits filed as purported class actions
asserting claims related to sales practices of certain life insurance products.
Great Southern intends to defend these cases vigorously. The amount of any
liability that may arise as a result of these cases, if any, cannot be
reasonably estimated at this time and no provision for loss has been made in the
accompanying financial statements.
4. SUBSEQUENT EVENT
On May 10, 1998, Great Southern sold all of the outstanding common stock of
Investors Guaranty Life Insurance Company ("Investors Guaranty"), a wholly-owned
subsidiary, resulting in a gain of approximately $5.0 million. The total assets
of Investors Guaranty at March 31, 1998 were $31.5 million. The insurance
business of Investors Guaranty is reinsured to an unaffiliated insurance company
under a coinsurance agreement and subsequently reinsured to Great Southern under
a modified coinsurance agreement on a 70% quota share basis. These reinsurance
agreements are unaffected by the sale.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company entered into a transaction in 1997 which affects the comparability
of the Company's results of operations for the three month periods ended March
31, 1998 and 1997.
In April 1997, Great Southern acquired all of the outstanding common stock of
The Ohio State Life Insurance Company ("Ohio State") and Investors Guaranty from
Farmers Group, Inc. pursuant to a stock purchase agreement. The acquisition was
accounted for using the purchase method of accounting. In April 1997, Ohio State
and Investors Guaranty entered into separate coinsurance agreements to reinsure
100% of their insurance liabilities to an unaffiliated insurance company (the
"Reinsurer") in exchange for a ceding commission of $145.7 million. On the same
day, the Reinsurer and Great Southern entered into a modified coinsurance
agreement under which the Reinsurer ceded certain risks on a 70% quota share
basis on the same insurance liabilities to Great Southern. At March 31, 1998,
the insurance business of Ohio State and Investors Guaranty, consisting
primarily of annuities and universal life policies, had aggregate insurance
liabilities of $656.7 million. The results of operations of this acquired
business from the date of the acquisition, less the net 30% coinsurance retained
by the Reinsurer, are included in the Company's results of operations for the
three months ended March 31, 1998.
The Ohio State and Investors Guaranty transaction will hereinafter be referred
to as the Acquisition. The following table summarizes the effects on the
individual income statement components of the Acquisition for the three months
ended March 31, 1998 (in millions):
<TABLE>
<S> <C>
Premiums and policy revenues $ 14.0
Net investment income 6.9
Other income 0.9
Policyholder benefits 11.8
Commissions 0.6
Amortization expense 4.2
Other operating expense 4.8
</TABLE>
The other operating expenses in the above table include only the direct expenses
related to providing administration of the policies and assets of the
Acquisition. The other operating expenses shown do not include any allocation of
indirect or overhead expenses.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Income before income taxes for the three months ended March 31, 1998 was $6.0
million compared to $5.4 million for the three months ended March 31, 1997. The
primary reasons for the increase, excluding the impact of the Acquisition, were
(i) an increase in amortization expense, partially offset by (ii) a decrease in
policyholder benefits. These items and other significant changes in individual
income statement components are discussed in more detail below.
Premiums and policy revenues. Premiums and policy revenues totaled $54.0 million
for the three months ended March 31, 1998 compared to $41.3 million for the
three months ended March 31, 1997. Excluding the effect of the Acquisition,
premiums and policy revenues decreased $1.3 million from 1997 to 1998. This
decrease is primarily due to the Company currently writing small amounts of new
traditional life insurance products; therefore, traditional life insurance
premiums are decreasing as the amount of in-force business decreases.
Net investment income. Net investment income increased $6.5 million for the
three months ended March 31, 1998 from the three months ended March 31, 1997.
Excluding the effect of the Acquisition, net investment income was substantially
unchanged between 1998 and 1997.
<PAGE>
Other income. Other income totaled $1.0 million for the three months ended March
31, 1998 compared to $0.1 million for the three months ended March 31, 1997.
Other income in 1998 includes a servicing fee paid to the Company associated
with the reinsurance of 30% of the Ohio State and Investors Guaranty policies.
Excluding the effect of the Acquisition, other income was substantially
unchanged between 1998 and 1997.
Policyholder benefits. Policyholder benefits totaled $63.3 million for the three
months ended March 31, 1998 compared to $58.2 million for the three months ended
March 31, 1997. Excluding the effect of the Acquisition, policyholder benefits
decreased $6.7 million from 1997 to 1998. This decrease resulted primarily from
(i) a $1.7 million decrease in interest credited on universal life and annuity
fund balances and (ii) a $1.7 million decrease in death benefits from 1997 to
1998.
Amortization expense. Amortization expense totaled $15.1 million for the three
months ended March 31, 1998 compared to $6.7 million for the three months ended
March 31, 1997. Excluding the effect of the Acquisition, amortization expense
increased $4.2 million from 1997 to 1998. The higher amortization expense in
1998 includes the effect of increased surrenders in a closed block of annuity
business acquired during 1996.
Other operating expenses. Other operating expenses totaled $21.1 million for the
three months ended March 31, 1998 compared to $15.3 million for the three months
ended March 31, 1997. Excluding the effect of the Acquisition, other operating
expenses increased $1.0 million from 1997 to 1998. The primary reasons for the
increase in operating expenses from 1997 to 1998 is increased depreciation
expense in 1998 resulting from purchases of computer equipment during 1997, and
increased professional fees in 1998.
FINANCIAL CONDITION AND LIQUIDITY
The changes occurring in the Company's consolidated balance sheet from December
31, 1997 to March 31, 1998 primarily reflect the normal operations of the
Company's life insurance subsidiaries.
The quality of the Company's investment in fixed maturity investments at March
31, 1998 remained consistent with December 31, 1997. Non-investment grade
securities totaled less than 0.6% of the Company's total fixed maturity
investments at March 31, 1998. The Company has not made any significant changes
to its investment philosophy during 1998.
The Company's net unrealized investment gains increased $0.1 million during the
first three months of 1998. Offsetting the $4.7 million increase in the net
unrealized investment gains on equity securities, the market values of the
Company's fixed maturity investment securities decreased. The components of the
change during the three months ended March 31, 1998 were (in millions):
<TABLE>
<S> <C>
Gross unrealized investment gains $ 0.8
Effect on insurance assets and liabilities (0.7)
Deferred income tax effect -
-----
$ 0.1
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
From time to time the Company is party to litigation and arbitration proceedings
in the ordinary course of its business, none of which is expected to have a
material adverse effect on the Company.
As previously reported in the Company's December 31, 1997 Form 10-K, Great
Southern is a defendant in four purported class action lawsuits alleging
deceptive sales practices in the marketing of its whole life and universal life
insurance policies and seeking unspecified compensatory, punitive and/or treble
damages. On May 5, 1998, the U.S. Judicial Panel on Multidistrict Litigation
ordered that these lawsuits be transferred to the U.S. District Court for the
Northern District of Texas for consolidated pretrial proceedings. A fifth
purported class action lawsuit making similar allegations, Ernest Marqoquin v.
Great Southern Life Insurance Company and Dale Darnell, was filed against Great
Southern on February 11, 1998 in Cameron County District Court, Texas. On March
19, 1998, Great Southern removed this case to the United States District Court
for the Southern District of Texas. Great Southern is seeking to have this case
added to the consolidated multidistrict litigation proceedings. Great Southern
intends to defend all of these cases vigorously. There can be no assurance that
the foregoing or any future litigation relating to pricing and sales practices
will not have a material adverse effect on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<S> <C>
2.4 Stock Purchase Agreement dated February 27, 1998 between Great Southern Life Insurance
Company and John Hancock Mutual Life Insurance Company.
4.2(c)(3) Amendment No. 2 to the amended and restated credit agreement dated as of February 27,
1997, between the Registrant and The Chase Manhattan Bank as administrative agent.
4.2(c)(4) Amendment No. 3 to the amended and restated credit agreement dated as of February 27,
1997, between the Registrant and The Chase Manhattan Bank as administrative agent.
27 Financial Data Schedule.
- ------------ ----------------- ----------------------------------------------------------------------------------------
</TABLE>
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the three months ended March 31,
1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERICO LIFE, INC.
BY: /s/ Gary E. Jenkins
Name: Gary E. Jenkins
Title: Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: May 15, 1998
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into as of this 27th day of February, 1998, by and between GREAT SOUTHERN LIFE
INSURANCE COMPANY, a Texas stock life insurance company ("Seller"), and JOHN
HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts mutual life insurance
company ("Buyer").
WHEREAS, Seller, as the immediate parent corporation of Investors
Guaranty Life Insurance Company, a California stock life insurance company
("IGL"), owns 833,334 shares of common stock of IGL, par value $3.00 per share,
representing all of the issued and outstanding shares of capital stock of IGL
(the "Shares"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the Shares upon the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the agreements set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
I. ARTICLE
DEFINITIONS
1.1 Defined Terms
"Acquisition Date" shall mean April 15, 1997, the date on which Seller
acquired IGL from Farmers.
"Affiliate" shall mean, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person. For purposes of this
definition, "control" (including the terms "controls" and "controlled by") shall
mean the possession of the power to direct or cause the direction of the
management and policies of a Person, unless such power is solely the result of
an official position with or corporate office held by the Person. Control shall
be presumed to exist if any Person, directly or indirectly, owns, controls,
holds with the power to vote, or holds shareholders' proxies representing 10% or
more of the voting securities of any other Person.
"Agent" shall mean any current or former insurance agent, general
agent, managing general agent, broker or other similarly situated person with
respect to IGL or of any organization with which IGL has or had a marketing
relationship.
"Annual Statement" shall mean any annual statement of IGL filed with or
submitted to the insurance regulatory authorities of the State of California on
a form or forms prescribed or permitted by such authorities.
"Arbiter" shall have the meaning provided in Section 2.4(b).
"Audit" shall mean any audit, assessment of Taxes or other examination
by any Tax Authority, or any judicial or administrative proceeding or appeal of
such proceeding relating to Taxes.
"Benefit Plans" shall mean all Employee Pension Benefit Plans, all
Employee Welfare Benefit Plans, all stock bonus, stock ownership, stock option,
stock purchase, stock appreciation rights, phantom stock and other stock plans
(whether qualified or non-qualified), and all other pension, welfare, severance,
retirement, bonus, deferred compensation, incentive compensation, insurance
(whether life, accident and health or other and whether key man, group, workers
compensation or other), profit sharing, disability, thrift, day care, legal
services, leave of absence, vacation, sick leave, layoff and supplemental or
excess benefit plans, and all other written or unwritten benefit contracts,
group or individual arrangements or procedures having the effect of a plan,
whether or not more than one person is covered, in each case, existing on or
before the Closing Date, under which IGL is or may hereafter become obligated in
any manner as an employer or obligated to any current or former Agent
(including, without limitation, obligations to make contributions or other
payments). For purposes of this definition, (a) "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 IGL is or would hereafter become obligated in any
manner as an employer, including any similar plan covering any current or former
Agent, (b) "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 IGL is
or would hereafter become obligated in any manner as an employer, including any
similar plan covering any current or former Agent, and (c) "ERISA" shall mean
the Employee Retirement Income Security Act of 1974, as amended, and any
regulations or published rulings promulgated or issued thereunder, as amended.
"Business Day" shall mean a day on which banks are open for business in
Kansas City, Missouri, other than a Saturday or Sunday.
"Buyer" shall have the meaning provided in the preamble to this
Agreement.
"Claim Notice" shall mean written notification of a Third Party Claim
by an Indemnified Party to an Indemnifying Party pursuant to Section 11.3
hereof, enclosing a copy of all papers served, if any.
"Closing" shall mean the satisfaction or waiver of the conditions to
and the sale and purchase of the Shares, as set forth in Article VIII hereof.
"Closing Date" shall mean the date mutually agreed upon by the Parties
on which the Closing occurs, as set forth in Section 3.1.
"Closing Date Balance Sheet" shall have the meaning provided in Section
2.4.
"Closing Date Policyholders' Surplus" shall have the meaning provided
in Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder, as amended.
"Commercially Reasonable Efforts" of a party shall mean the reasonable
efforts that a prudent Person desirous of achieving a result would use in
similar circumstances, without the requirement that such party incur any
unanticipated (as of the date hereof) out-of-pocket expenses or incur any other
unanticipated burden or commence or pursue litigation in any Proceeding.
"Contract" shall mean any material contract, agreement, indenture,
instrument, obligation, promise, undertaking, relationship or commitment,
whether written or oral and whether express or implied.
"Damages" shall mean any and all costs, damages, liabilities, fines,
fees, penalties, interest obligations, deficiencies, losses, and expenses
(including, without limitation, punitive, treble or other exemplary or
extra-contractual damages, amounts paid in settlement, interest, court costs,
costs of investigation, reasonable fees and expenses of attorneys, accountants,
actuaries and other experts, and other reasonable expenses of litigation or of
any claim, default or assessment, but specifically excluding any and all
consequential damages).
"Dispute Notice" shall have the meaning provided in Section 2.4(b).
"Dispute Notice Date" shall have the meaning provided in Section
2.4(b).
"Encumbrances" shall mean any and all liens, security interests,
pledges, charges, claims, conditions, equitable interests, restrictions,
limitations, options, rights of first refusal, or other encumbrances of any
kind, character or description, whether or not of record, including any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership, but specifically excluding any lawful restriction on the
payment of dividends or any other regulatory restriction.
"ERC" shall mean Employers Reassurance Corporation, a Kansas
corporation.
"ERC Coinsurance Agreement" shall mean that certain Automatic
Coinsurance Reinsurance Agreement effective as of April 16, 1997, between IGL
and ERC, as amended by Amendment No. 1 effective as of April 16, 1997.
"ERC Escrow Agreement" shall mean that certain Escrow Agreement (Ohio
State and Investors Guaranty) dated as of May 21, 1997, among ERC, Seller and
Bankers Trust Company.
"Farmers" shall mean Farmers Group, Inc., a Nevada corporation.
"Farmers Agreement" shall mean that certain Stock Purchase Agreement
dated as of January 21, 1997, as amended by amendment dated as of April 14,
1997, between Farmers, as seller, and Seller, as purchaser.
"Governmental Body" shall mean any (a) nation, state, county, city,
town, village, district or other jurisdiction of any nature, (b) federal, state,
local, municipal, foreign or other government, (c) governmental or
quasi-government authority of any nature (including any governmental agency,
branch, department, official or entity and any court or other tribunal), or (d)
body exercising or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power of any
nature.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder, as
amended.
"IGL" shall have the meaning provided in the recitals to this
Agreement.
"Indemnified Party" shall mean a Person claiming indemnification under
Article XI hereof.
"Indemnifying Party" shall mean a Person against whom claims of
indemnification are being asserted under Article XI hereof.
"IRS" shall mean the United States Internal Revenue Service, or any
successor agency.
"Knowledge," when used to refer to the knowledge of a Person (other
than an individual), shall be deemed to mean the knowledge of any director or
executive officer of such Person. An individual will be deemed to have knowledge
of a fact or other matter if such individual is actually aware of such fact or
other matter.
"Licenses" shall mean all licenses, permits, certificates of authority
and other documents authorizing IGL to transact insurance, as disclosed on
Schedule T of the SAP Statement.
"Material Adverse Effect" of any Person shall mean an event affecting
such Person that is, or under the circumstances would reasonably be expected to
be, materially adverse to (i) the income, operations, financial condition,
assets, liabilities or revenues of such Person, after giving effect to this
Agreement and the Prior Business Reinsurance Agreements and the actions
contemplated hereby and thereby or (ii) the ability of such Party to execute and
deliver this Agreement and to consummate the transactions and perform the
obligations contemplated hereby and thereby.
"Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any arbitrator,
court, administrative agency or other Governmental Body.
"Party" shall mean either of Seller or Buyer; the term "Parties" shall
mean Seller and Buyer, collectively.
"Person" shall mean any individual, corporation, general or limited
partnership, association, limited liability company, joint venture, trust,
unincorporated association or organization or government or political
subdivision thereof.
"Policyholders' Surplus" of a Person shall mean the capital and
surplus, asset valuation reserve and interest maintenance reserve of such
Person, calculated in accordance with SAP.
"Prior Business" shall mean all insurance policies and annuity
contracts of any kind issued or assumed by IGL at any time prior to the Closing
Date.
"Prior Business Liabilities" shall mean all liabilities and obligations
of IGL arising out of or related to the Prior Business, regardless of whether
such liabilities and obligations are primary or secondary, direct or indirect,
absolute or contingent, contractual or tortious or otherwise, and regardless of
whether such liabilities arise before or after the Closing Date.
"Prior Business Reinsurance Agreements" shall mean the reinsurance
agreements between IGL, on the one hand, and ERC or any insurance company
subsidiary of Americo Life, Inc., on the other hand, including, without
limitation, the ERC Coinsurance Agreement and the ERC Escrow Agreement.
"Proceeding" shall mean any action, arbitration, audit, examination,
hearing, investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any court, administrative agency or
arbitrator, whether at law, equity or otherwise.
"Purchase Price" shall have the meaning provided in Section 2.2.
"Purchase Price Adjustment Amount" shall have the meaning provided in
Section 2.4.
"Quarterly Statement" shall mean any quarterly statement of IGL filed
with or submitted to the insurance regulatory authorities of the State of
California on a form or forms prescribed or permitted by such authorities.
"Reinsurance Agreements" shall mean all reinsurance treaties or
agreements under which IGL has ceded, on an indemnity basis, any Prior Business
Liabilities, other than the Prior Business Reinsurance Agreements.
"SAP" shall mean, with respect to IGL (or its SAP Statement), the
accounting practices required or permitted by the National Association of
Insurance Commissioners and the insurance regulatory authorities of the State of
California, consistently applied throughout the specified period and in the
immediately prior comparable period.
"SAP Statement" shall have the meaning provided in Section 4.6 hereof.
"Seller" shall have the meaning provided in the preamble to this
Agreement.
"Services Agreement" shall mean the administrative services agreement
described in Section 8.3(d).
"Shares" shall have the meaning provided in the recitals to this
Agreement.
"Tax" or "Taxes" shall mean all Federal, state, local and foreign
taxes, assessments, and governmental charges (whether imposed directly or
through withholdings), including any interest, penalties and additions to Tax
applicable thereto.
"Tax Authority" shall mean the Internal Revenue Service and any other
domestic or foreign governmental authority responsible for the administration of
any Taxes.
"Tax Claim" shall have the meaning provided in Section 11.1(f).
"Tax Returns" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment to such documents and any amendment of such documents.
"Third Party Claim" shall have the meaning provided in Section 11.3(a).
"Threatened" means a claim, Proceeding, dispute or other matter
regarding which a demand or statement has been made (orally or in writing) or a
notice has been received (orally or in writing).
1.2 Other Terms. Where used herein, and unless the context otherwise
requires:
(a) words importing the singular number or plural number shall include
the plural number and singular number, respectively;
(b) words importing the masculine gender shall include the feminine
and neuter genders and vice versa;
(c) reference to "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation;" and
(d) reference in this Agreement to "herein," "hereby" or "hereunder,"
or any similar formulation, shall be deemed to refer to this Agreement as a
whole, including the Schedules and Exhibits.
I. ARTICLE
PURCHASE AND SALE OF SHARES
2.1 Transfer of Shares. Upon the terms and subject to the conditions contained
herein on the Closing Date, Seller will deliver to Buyer, and Buyer will
purchase, the Shares from Seller for the Purchase Price free and clear of all
Encumbrances.
2.2 Purchase Price. The purchase price for the Shares (the "Purchase Price")
shall be the sum of the following, adjusted as provided in Section 2.4:
<PAGE>
(a) Five Million Four Hundred Ninety-Nine Thousand Three Hundred and
Three Dollars ($5,499,303); plus
(b) the Policyholders' Surplus of IGL as of the Closing Date, as set
forth in the Closing Date Balance Sheet (the "Closing Date Policyholders'
Surplus"), which shall not exceed Nine Million Dollars ($9,000,000).
<PAGE>
2.3 Provisional Purchase Price. At the Closing, as payment of a "Provisional
Purchase Price," Buyer shall deliver to Seller, by wire transfer of immediately
available funds to such bank account(s) as Seller shall designate in writing to
Buyer the sum of (a) that portion of the Purchase Price set forth in Section
2.2(a) hereof; plus (b) Seven Million Dollars ($7,000,000).
2.4. Adjustment to Purchase Price.
(a) As soon as practicable, but in any event within 90 calendar days following
the Closing Date, Seller shall, at its expense, prepare and deliver to Buyer the
statements of assets, liabilities, surplus and other funds of IGL as of the
Closing Date, which shall be prepared in conformity with SAP (the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall present fairly, in all
material respects (except for adjustment as provided in the following sentence),
in accordance with SAP the financial position of IGL and the results of its
operations and cash flows as of the date and for the period specified. The
Closing Date Balance Sheet shall mark IGL's assets to market value and will
account for the effect of all of the transactions contemplated by this Agreement
and the Farmers Agreement. For purposes of this Section 2.4, the Closing Date
Balance Sheet shall assign to any guaranty fund assessment carryovers existing
at Closing a value of zero.
(b) If Buyer does not agree to the determination of the Closing Date
Policyholders' Surplus, Buyer shall provide notice of such disagreement to
Seller (the "Dispute Notice," and the date of its delivery, the "Dispute Notice
Date"). If Seller and Buyer are unable to agree on the resolution of such
disagreement within ten Business Days following the Dispute Notice Date, Seller
and Buyer shall resolve such disagreement in accordance with the following
procedures.
Buyer and Seller shall each select an independent certified public
accountant within ten Business Days after the Dispute Notice Date for the
purpose of selecting a third independent certified public accountant with a
regional or national accounting practice in the life insurance industry (the
"Arbiter"). Such accountants shall mutually select the Arbiter and give a
written notice to Buyer and Seller identifying the Arbiter, including a written
acceptance of such appointment from the Arbiter, within twenty Business Days
after the Dispute Notice Date. The Arbiter shall not have performed services for
either Buyer or Seller within the preceding three years and shall not have
testified in any dispute in which either Buyer or Seller was involved as a
party; provided, however, that Buyer and Seller may waive such restriction in
writing if they mutually agree to such waiver.
Each party shall submit to the Arbiter all information reasonably
requested by the Arbiter to enable the Arbiter to independently resolve the
issue which is the subject of the Dispute Notice. The Arbiter shall make its own
determination of the Closing Date Policyholders' Surplus, which may not be
greater than Buyer's calculation thereof and may not be less than Seller's
calculation thereof. The Arbiter shall issue a written report of its
determination in reasonable detail and shall deliver a copy of such report to
Seller and Buyer within twenty Business Days following the Arbiter's receipt of
the Dispute Notice. The determination made by the Arbiter shall be final and
binding and may be enforced by any court having jurisdiction. The Parties shall
cooperate fully in assisting the Arbiter in calculating the Closing Date
Policyholders' Surplus and shall take such actions as are necessary to expedite
and to cause the Arbiter to expedite such calculation.
Each of Seller and Buyer shall pay one-half of the total fees and
expenses of the Arbiter. Each party shall bear all costs associated with its own
appointed independent certified public accountant.
(c) The Closing Date Balance Sheet shall be deemed to be final upon the earliest
of (i) the date on which Seller and Buyer jointly agree that the Closing Date
Balance Sheet are final, (ii) the 31st calendar day following the date of
delivery of the Closing Date Balance Sheet pursuant to Section 7.9, if Buyer has
not notified Seller of a dispute in amounts shown on the Closing Date Balance
Sheet, and (iii) the date on which all disputes relating to the Closing Date
Balance Sheet between Buyer and Seller are resolved in accordance with Section
2.5(b).
(d) The difference between the Closing Date Policyholders' Surplus and Seven
Million Dollars ($7,000,000 ) shall be the "Purchase Price Adjustment Amount."
If the Closing Date Policyholders' Surplus is greater than Seven Million Dollars
($7,000,000), Buyer shall pay to Seller an amount equal to the Purchase Price
Adjustment Amount. If the Closing Date Policyholders' Surplus is less than Seven
Million Dollars ($7,000,000), Seller shall pay to Buyer an amount equal to the
Purchase Price Adjustment Amount. On or before the 20th Business Day following
the date on which, pursuant to Section 2.4(c) hereof, the Closing Date Balance
Sheet are deemed to be final, Seller or Buyer, as the case may be, shall pay the
Purchase Price Adjustment Amount to the other Party by wire transfer of
immediately available funds to such bank account(s) as the recipient shall
designate in writing, together with interest from the Closing Date at a rate per
annum equal to 6%.
I. ARTICLE
CLOSING
3.1 Time and Place of Closing. Upon the terms and subject to the conditions
contained in this Agreement, the Closing of the transactions contemplated by
this Agreement will take place at the offices of Lathrop & Gage L.C., 2345 Grand
Boulevard, Suite 2800, Kansas City, Missouri, as of the close of business on
such date (the "Closing Date") as the Parties may mutually agree, but in no
event later than April 30, 1998; provided, however, that if the only condition
that has not been satisfied or waived pertains to obtaining regulatory approval,
then the Closing shall occur five Business Days after such regulatory approval
is obtained (assuming all other conditions are still satisfied or waived),
provided, further, that all conditions precedent set forth in this Agreement
shall have been satisfied or (to the extent permitted under this Agreement)
waived, or if the Parties mutually agree in writing to an extension of such
date, the date so agreed to.
I. ARTICLE
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization, Standing and Corporate Power of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas and has the requisite corporate power to
enter into this Agreement and to perform its obligations under this
Agreement. Seller is duly licensed, qualified or admitted to do business
and is in good standing in all jurisdictions in which it is required to be
so licensed, qualified or admitted to do business by the laws thereof,
except such as would not have a Material Adverse Effect on Seller.
4.2 Authority of Seller. The execution and delivery of this Agreement by Seller
and the performance by Seller of its obligations under this Agreement have been
duly and validly authorized by all necessary corporate action in accordance with
applicable law and its Articles of Incorporation and Bylaws. This Agreement has
been duly and validly executed and delivered by Seller and constitutes a valid
and binding obligation of Seller and is enforceable against Seller in accordance
with its terms, except to the extent that enforcement hereof may be limited by
or subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in equity or
at law).
4.3 Organization of IGL. IGL is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
corporate powers required to carry on its business as now conducted. IGL is duly
licensed, qualified or admitted to do business as an insurer and is in good
standing in all jurisdictions in which it is required to be so licensed,
qualified or admitted to do business by the laws thereof, except such as would
not have a Material Adverse Effect on IGL.
4.4 Capital Stock. The authorized capital stock of IGL consists solely of
8,500,000 shares of common stock, par value $3.00 per share, of which 833,334
shares are issued and outstanding. The Shares have been duly authorized and
validly issued, are fully paid and nonassessable and free of preemptive rights
and are owned beneficially and of record by Seller, free and clear of all
Encumbrances. Except as provided by this Agreement, there are no outstanding
obligations, securities, options, contracts or other rights that give any Person
the right to purchase or acquire any shares of capital stock of IGL (or any
other interest therein).
4.5 Conflicts or Violations. Except as set forth in Schedule 4.5, neither the
execution and delivery of this Agreement by Seller, nor the performance by
Seller of its obligations hereunder, will:
<PAGE>
(a) subject to obtaining the approvals, authorizations and
clearances, and making the filings, contemplated hereby prior to the Closing
Date, violate any term or provision of any law or any Order applicable to Seller
or IGL or require any action by or in respect of, or filing with, any
Governmental Body on the part of Seller;
(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 Seller or
IGL; or
(c) result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default under, or give rise to any right of
termination, cancellation or acceleration, or result in the creation of any
Encumbrance under, any Contract to which IGL or Seller is a party or by which
any of their assets or properties may be bound;
<PAGE>
except, in each case, such as would not have a Material Adverse Effect on Seller
or IGL.
4.6 SAP Statement. Seller has previously delivered to Buyer a true and complete
copy of the Quarterly Statement for the nine-month period ended September 30,
1997 (and the exhibits and schedules relating thereto) (the "SAP Statement").
The SAP Statement complied in all material respects with the applicable laws of
the State of California when so filed and was timely filed with all required
insurance regulatory authorities. No deficiencies, other than as set forth in
Schedule 4.6, have been asserted or are otherwise known by Seller with respect
thereto. The SAP Statement was prepared in accordance with SAP applied on a
consistent basis (except for changes, if any, disclosed therein) and is complete
in all material respects. The SAP Statement fairly presents (in accordance with
SAP) the financial condition of IGL as of the date thereof, or its results of
operations or cash flows, as the case may be, for and during the period covered
thereby.
4.7 Absence of Changes. Except as disclosed in Schedule 4.7 or in the SAP
Statement or as contemplated by this Agreement or the Prior Business Reinsurance
Agreements, since September 30, 1997:
(a) 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 had or would reasonably be expected to
have a Material Adverse Effect on IGL; and
(b) without limiting the generality of the foregoing, IGL has not:
(i) declared, set aside or paid any dividend or other distribution in
respect of its capital stock, or redeemed, purchased or otherwise
acquired any of its capital stock;
(ii) created any Encumbrance on or in any of its assets or properties or
assumed any Encumbrance with respect to any of its assets or properties;
(iii) incurred any liability for borrowed money;
(iv) suffered any damage, destruction or loss (whether or not covered by
insurance) affecting any of its assets or properties;
(v) suffered the termination or lapse of, or otherwise failed to preserve,
any of the Licenses;
(vi) amended its Articles of Incorporation or Bylaws;
(vii) entered into, amended or terminated any Reinsurance Agreement; or
(viii) entered into any contract or agreement to take any of the actions set
forth in paragraphs (i) through (vii) of this Section 4.7.
4.8 Taxes.
(a). Except as disclosed in Schedule 4.8:
<PAGE>
(i) all federal and state income Tax Returns and other material income
Tax Returns required to have been filed since the Acquisition Date by or on
behalf of IGL were filed, and all such returns were true and complete in all
material respects as of the filing date thereof;
ii) there are no Encumbrances in respect of Taxes arising after the Acquisition
Date upon the properties of IGL, except for Encumbrances in respect of property
Taxes not yet delinquent; and
iii) IGL is not a party to, is not bound by and does not have any
obligation arising after the Acquisition Date under any tax sharing Contract.
b. to Seller's Knowledge solely in reliance on the representations and
warranties of Farmers in the Farmers Agreement:
(i) all federal and state income Tax Returns and other material income Tax
Returns required to have been filed on or prior to the Acquisition Date by or on
behalf of IGL were filed, and all such returns were true and complete in all
material respects as of the filing date thereof;
(ii) there are no Encumbrances in respect of Taxes arising on or before the
Acquisition Date upon the properties of IGL, except for Encumbrances in respect
of property Taxes not yet delinquent.
4.9 Litigation. Except as disclosed in Schedule 4.9, there are no Proceedings
pending or, to the Knowledge of Seller, threatened, against Seller or IGL that,
individually or in the aggregate, would have a Material Adverse Effect on Seller
or IGL or that would impair the ability of Seller to perform its obligation
hereunder.
4.10 Compliance With Laws. Except as disclosed in Schedule 4.10, IGL is not in
violation of any law or any Order applicable to it, except such as would not
have a Material Adverse Effect on IGL.
4.11 Benefit Plans and Employee Matters. Since the Acquisition Date, IGL has had
no employees. Except as disclosed in Schedule 4.11:
<PAGE>
(a) IGL does not have (i) any liability arising after the Acquisition
Date under or in connection with any past or present Benefit Plan maintained by,
or contributed to by or on behalf of, Seller or IGL that has not been paid or
assumed by Farmers, Seller or an Affiliate of Seller or Farmers (other than
IGL), or (ii) any liability, direct or indirect, arising after the Acquisition
Date to any employees or Agents of Seller or any Affiliate of Seller (other than
IGL); and
(b) to Seller's Knowledge solely in reliance on the representations and
warranties of Farmers in the Farmers Agreement, IGL does not have (i) any
liability arising on or prior to the Acquisition Date under or in connection
with any past or present Benefit Plan maintained by, or contributed to by or on
behalf of, Seller or IGL that has not been paid or assumed by Farmers, Seller or
an Affiliate of Seller or Farmers (other than IGL), or (ii) any liability,
direct or indirect, arising on or prior to the Acquisition Date to any employees
or Agents of Seller or any Affiliate of Seller (other than IGL).
<PAGE>
IGL is not a party to any collective bargaining or similar labor contract.
4.12 Contracts. Schedule 4.8 and Schedule 4.12 together set forth a true and
complete list of the Contracts that are currently in effect to which IGL is a
party or by which any of the assets of IGL is bound. Neither IGL nor, to the
knowledge of Seller, any other party to any Contract set forth on Schedule 4.12
is currently in violation, breach 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 such as would not have a Material
Adverse Effect on IGL. Neither Seller nor, to the knowledge of Seller, Farmers
is currently in violation, breach or default under the Farmers Agreement or,
with or without notice or lapse of time or both, would be in violation or breach
of or default under the Farmers Agreement, except such as would not have a
Material Adverse Effect on Seller.
4.13 Intercompany Liabilities. Except as reflected in the SAP Statement or as
disclosed in Schedule 4.13 or as otherwise provided in this Agreement, there are
no liabilities, contracts or commitments between IGL, on the one hand, and
Seller or any Affiliate of Seller (other than IGL), on the other, except for
liabilities that have been incurred on a basis consistent with past practice
since April 17, 1997. Except as disclosed in Schedule 4.13, since September 30,
1997, no such intercompany liabilities have been paid and no settlements of such
intercompany liabilities have been made except intercompany liabilities that
have been paid or settled on a basis consistent with past practice since April
17, 1997.
4.14 Bank Accounts. Schedule 4.14 sets forth (a) a true and complete list of
the names and locations of all banks, trust companies, securities brokers and
other financial institutions at which IGL has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship, and (b) a
true and complete list and description of each such account, box and
relationship, indicating, in each case, the account number and the names of the
Persons authorized to transact business with respect thereto.
4.15 Prior Business. Except as disclosed in Schedule 4.15 or as otherwise
described in this
--------------
Agreement:
<PAGE>
(a) since Seller acquired IGL, IGL has not been involved in any
type of business activities other than the Prior Business; and
(b) no outstanding insurance or annuity contract issued, reinsured or
underwritten by IGL that is part of the Prior Business entitles the holder
thereof or any other person or entity to receive dividends, distributions or
other benefits based on the revenues or earnings of IGL or any other entity.
4.16 Conduct of Business. Since September 30, 1997, except as disclosed in
Schedule 4.16, IGL has conducted its business in the ordinary course and
consistent with past practice since April 17, 1997, and without limiting the
generality of the foregoing, has not, during such period, engaged in any
activity of the kind that is prohibited by Section 4.7.
I. ARTICLE
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization, Standing and Corporate Power Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Massachusetts and has the requisite corporate power to enter into this
Agreement and to perform its obligations under this Agreement.
5.2 Authority. The execution and delivery of this Agreement by Buyer and the
performance by Buyer of its obligations under this Agreement have been duly
authorized by all necessary corporate action in accordance with applicable law
and its Articles of Incorporation and Bylaws. This Agreement has been duly and
validly executed and delivered by Buyer and constitutes the valid and binding
obligation of Buyer, enforceable in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
5.3 Investment Representation. Buyer acknowledges that the Shares are not
registered under the securities laws of any jurisdiction and that it is
acquiring the Shares for its own account, and not with a view to the
distribution thereof. Buyer is purchasing the Shares for investment purposes and
not with the intention of reselling or distributing the Shares.
5.4 Conflicts or Violations. Neither the execution and delivery of this
Agreement by Buyer, nor the performance by Buyer of its obligations hereunder,
will:
<PAGE>
1. subject to obtaining the approvals, authorizations and clearances, and
making the filings, contemplated hereby prior to the Closing Date, violate
any term or provision of any law or any Order applicable to Buyer or require any
action by or in respect of or filing with, any Governmental Body on the part of
Buyer;
5.4 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 Buyer;
or
1. result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default under, or give rise to any right of
termination, cancellation or acceleration, or result in the creation of any
Encumbrance under, any contract to which Buyer is a party or by which any of its
assets or properties may be bound; except, in each case, such as would not have
a Material Adverse Effect on Buyer.
5.5 Litigation. There are no Proceedings pending or, to Buyer's Knowledge,
Threatened against Buyer that would impair the ability of Buyer to perform its
obligations hereunder.
I. ARTICLE
COVENANTS OF SELLER
Seller agrees as follows:
6.1 Maintenance of Business; Certain Transactions. Except as otherwise provided
in this Agreement and the Prior Business Reinsurance Agreements, from the date
hereof to the Closing Date, Seller will cause IGL to not take any action that
may result in any of the changes or events listed in Section 4.7.
6.2 Corporate Existence; Licenses. From the date hereof to the Closing Date:
(a) Seller will cause IGL to:
(i) maintain its corporate existence;
(ii) pay all Taxes, charges and assessments on a timely basis unless the same
are being contested and adequate reserves therefor have been established on
IGL's books and records (including, if applicable, the Closing Date Balance
Sheet);
(iii) make all necessary filings with any insurance departments or other
Governmental Bodies; and
(iv) pay all accounts payable and other liabilities on a timely basis; and
(b) Seller shall use its Commercially Reasonable Efforts, at its expense, to
preserve and maintain the Licenses. If, in connection with the consummation of
this Agreement, any License is revoked or altered or a material limitation or
restriction is placed thereon, Seller will provide such assistance to Buyer as
Buyer may reasonably request, at Buyer's expense, in reinstating such License
and/or removing such limitation or restriction.
6.3 Further Assurances. From time to time after the Closing Date, without
further consideration, Seller shall, at its own expense, execute and deliver
such additional documents to Buyer as Buyer may reasonably request to vest more
effectively in Buyer good title to the Shares.
6.4 Access. From the date hereof to the Closing Date, Seller will afford Buyer's
employees, auditors, legal counsel and other authorized representatives all
reasonable opportunity and access to inspect, investigate and audit the
contracts, operations and business of IGL.
6.5 Consents. Seller will use its Commercially Reasonable Efforts (and will
cause IGL to use its Commercially Reasonable Efforts) to obtain all consents
or approvals of, and provide all notices to, oher Persons required for such
Persons to authorize, approve or permit the consummation of the transactions
contemplated hereby and will cooperate (and will cause IGL to cooperate) with
Buyer in connection with Buyer's efforts to obtain all consents or approvals of,
and to provide notices to, other Persons required for Buyer to authorize,
approve or permit the consummation of the transactions contemplated by this
Agreement. Seller shall provide Buyer with a copy of, and the opportunity to
comment on, all filings and material correspondence with regulatory officials in
connection with such consents and approvals and shall provide Buyer with a copy
of all correspondence or notices from regulatory officials concerning the
transactions contemplated by this Agreement.
6.6 Negotiations. Until such time, if any, as this Agreement is terminated
pursuant to Article X, Seller will not, either directly or through its
representatives, directly or indirectly solicit, initiate or encourage any
inquiries or proposals from, discuss or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries or proposals
from, any Person (other than Buyer) relating to any transaction involving the
sale of any of the capital stock of IGL or any merger, consolidation, business
combination or similar transaction involving IGL.
6.7 Closing Date Policyholders' Surplus. On or prior to the Closing Date, Seller
may cause IGL to declare and pay dividends, or take any other actions, deemed
appropriate by Seller to minimize the Closing Date Policyholders' Surplus.
6.8 Contracts. Seller will take all necessary action to ensure that, on or
before the Closing Date, IGL will not be a party to any Contracts and there will
be no Contracts by which it, or any asset owned or used by it, is or may become
bound, or by which it has or may acquire rights, other than (a) this Agreement,
(b) the Prior Business, (c) the Prior Business Reinsurance Agreements, (d) the
Reinsurance Agreements, and (e) any contracts related to the Scheduled Assets.
6.9 Financial Statements. Seller shall promptly deliver to Buyer such Annual or
Quarterly Statements of IGL as may be required to be filed with the California
Department of Insurance or any other Governmental Body after the date of this
Agreement but on or prior to the Closing Date (and such additional Annual or
Quarterly Statements shall thereafter be deemed to be part of the "SAP
Statement" for purposes of this Agreement). Seller shall promptly deliver to
Buyer copies of any Tax Returns of IGL that are filed between the date hereof
and the Closing Date.
6.10 Scheduled Assets. Attached hereto as Schedule 6.10 is a complete and
accurate list of the assets that will be owned or held by IGL on the Closing
Date (the "Scheduled Assets"). The following rights and/or assets of IGL shall
be assigned by IGL to Seller on or prior to the Closing:
<PAGE>
(a) the right to receive any amounts due to IGL under any tax sharing agreement
covering periods prior to the Closing; and
(b) any claim of IGL, for taxes or otherwise, against Farmers, whether or not
such claim has been asserted prior to the Closing.
Buyer agrees to cooperate fully with Seller, at Seller's expense, in Seller's
efforts to pursue any of the claims and rights described above.
6.11 Reinsurance Agreements. Seller will provide to Buyer true and complete
copies of the Prior Business Reinsurance Agreements and all Reinsurance
Agreements, including all amendments or modifications thereto.
6.12 Indemnity Rights Relating to Farmers. Seller shall use its Commercially
Reasonable Efforts to assign to Buyer at the Closing (with the consent of
Farmers, if necessary) all of Seller's rights under the Farmers Agreement, but
only to the extent such rights pertain to the representations and warranties
made by, and indemnification agreements of, Farmers contained in the Farmers
Agreement respecting IGL; such assignment shall be effective only upon the
insolvency of Seller or any other event resulting in the inability of Seller to
perform its obligations under Article XI of this Agreement. Pending such
effectiveness, Seller reserves such rights under the Farmers Agreement. Seller
makes no representation or warranty regarding the validity or enforceability by
Buyer of such rights against Farmers. Seller shall assist Purchaser, upon
request and at Purchaser's expense, in asserting and enforcing such rights.
ARTICLE VII
COVENANTS OF BUYER
Buyer agrees as follows:
7.1 Further Assurances. Buyer shall use its Commercially Reasonable Efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things reasonably necessary, proper, or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
7.2 Consents. Buyer shall use its Commercially Reasonable Efforts to obtain all
consents or approvals of, and provide all notices to, other Persons required for
Buyer to authorize, approve or permit the consummation of the transactions
contemplated by this Agreement and will cooperate with Seller and IGL in
connection with their efforts to obtain all consents and approvals of, and to
provide notices to, other Persons required for Seller and IGL to authorize,
approve or permit the consummation of the transactions contemplated by this
Agreement. Buyer shall provide Seller with a copy of, and the opportunity to
comment on, all filings and material correspondence with regulatory officials in
connection with such consents and approvals and shall provide Seller with a copy
of all correspondence or notices from regulatory officials concerning the
transactions contemplated by this Agreement.
7.3 Access. During the period of time between the Closing Date and the delivery
of the Closing Date Balance Sheet to Buyer, Buyer shall give Seller and its
accountants, actuaries, counsel, and other representatives reasonable access to
the books and records of IGL in order to make such investigations as Seller
shall reasonably desire in conjunction with the preparation and evaluation by
Seller of the Closing Date Balance Sheet. Following the Closing Date, Buyer
shall give Seller and its representatives reasonable access to the books and
records of IGL for the purpose of confirming the extent to which IGL is able to
offset against premium tax liabilities any guaranty fund assessment either (i)
existing at the Closing Date or (ii) for which Seller has reimbursed IGL after
the Closing Date, for which offset Buyer is obligated under Section 11.2(d)
below to reimburse Seller.
Buyer will conduct its inspection, investigation and audit of IGL under
Section 6.4 above in a reasonable manner during regular business hours. Buyer
shall treat (and cause its representatives to treat), all information thus
obtained by Buyer and its representatives as confidential, except to the extent
that any such information may be available to Buyer from sources available to
the general public and except as required by law. If the transactions
contemplated by this Agreement are not consummated, Buyer will return all
documents, instruments, work papers, all copies of any of the foregoing, and any
other materials submitted or provided by Seller or any of its representatives.
<PAGE>
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the transactions contemplated hereby shall be subject
to the following conditions:
(a) At the Closing Date, there shall be no Proceeding pending or
Threatened to restrain, prohibit, challenge, invalidate or set aside in whole or
in part the consummation of this Agreement or any of the transactions
contemplated hereby, or to obtain damages or other relief in connection
therewith. There shall be in effect no Order that may have the effect of
preventing, delaying, making illegal or otherwise interfering with the
consummation of this Agreement or any of the transactions contemplated hereby.
(b) To the extent that any HSR Act filings are required with respect to the
transactions contemplated by this Agreement, the applicable waiting period under
the HSR Act shall have expired without any objection of the Federal Trade
Commission or any other governing regulatory body, or any such objection shall
have been waived by the objecting regulatory body.
(c) Buyer and Seller shall have obtained the unconditional approval or consent
of all necessary insurance departments or similar Governmental Bodies with
respect to the consummation of the transactions contemplated by this Agreement.
8.2 Conditions to Seller's Obligations. The obligations of Seller to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
on or prior to the Closing Date of each of the following conditions (any or all
of which may be waived by Seller):
<PAGE>
(a) Buyer shall have performed or complied with, in all material
respects, all of its obligations under this Agreement to be performed or
complied with on or prior to the Closing Date, and Seller shall have received a
certificate of an authorized officer of Buyer, dated as of the Closing Date, to
such effect.
(b) All of Buyer's representations and warranties in this Agreement shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date and Seller shall have received a certificate from Buyer, dated as
of the Closing Date and executed by an authorized officer of Buyer, to such
effect.
(c) Seller shall have received from Michael H. Studley, counsel to Buyer, an
opinion dated as of the Closing Date, in the form of Exhibit 8.2(c).
(d) At the Closing, Buyer shall have delivered to Seller:
(i) a certificate of its jurisdiction of incorporation dated not earlier than
the 10th day preceding the earlier of (A) the Closing Date and (B) April 30,
1998, to the effect that Buyer is a corporation validly existing and in good
standing and/or compliance (as applicable) under the laws of such jurisdiction
as of such date;
(ii) a certificate of Buyer's Secretary or Assistant Secretary as of the Closing
Date (A) to the effect that all necessary corporate action required for the
execution and delivery of this Agreement by Buyer and the performance by Buyer
of its obligations under this Agreement has been taken, and (B) with respect to
the due authorization of the officers of Buyer executing and delivering this
Agreement;
(iii) the Provisional Purchase Price, as set forth in Section 2.3, in
immediately available funds to such bank account(s) as Seller designates in
writing to Buyer;
(iv) evidence of the regulatory approvals required by Section 8.1(c); and
(v) all other documents and instruments required to be delivered by Buyer
pursuant to this Agreement.
<PAGE>
8.3 Conditions to Buyer's Obligations. The obligations of Buyer to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
on or prior to the Closing Date of each of the following conditions (any or all
of which may be waived by Buyer):
(a) Seller shall have performed or complied with, in all material
respects, all of its obligations under this Agreement to be performed or
complied with on or prior to the Closing Date, and Buyer shall have received a
certificate of an authorized officer of Seller, dated as of the Closing Date, to
such effect.
(b) All of Seller's representations and warranties in this Agreement shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, and Buyer shall have received a certificate from Seller, dated as
of the Closing Date and executed by an authorized officer of Seller, to such
effect;
(c) IGL and Seller (or its Affiliates) shall have entered into Prior Business
Reinsurance Agreements for the assumption reinsurance of the Prior Business,
each in the form of the Exhibit 8.3(c);
(d) IGL and Americo Services, Inc., an Affiliate of Seller, shall have entered
into an administrative services agreement in the form of Exhibit 8.3(d) for the
servicing of the Prior Business.
(e) Buyer shall have received from Lathrop & Gage L.C., counsel to Seller, an
opinion dated as of the Closing Date in the form of Exhibit 8.3(e);
(f) At the Closing, Seller shall have delivered to Buyer:
(i) stock certificates representing the Shares, accompanied by stock power(s)
duly executed in blank;
(ii) a certificate of the California Department of Insurance dated not earlier
than the date of the 10th day preceding the earlier of (A) the Closing Date and
(B) April 30, 1998, to the effect that IGL is a corporation validly existing and
in good standing and/or in compliance (as applicable) under the laws of
California as of such date;
(iii) a copy of the Articles of Incorporation of IGL, as amended, certified by
the California Department of Insurance as of a date not earlier than 30 days
prior to the earlier of (A) the Closing Date and (B) April 30, 1998;
(iv) the stock books, stock ledgers, minute books, corporate seals and all
other books and records of IGL in the possession of Seller and IGL;
(v) resignations, effective as of the Closing Date, of all of the directors and
officers of IGL;
(vi) all of IGL's Insurance Licenses;
(vii) evidence of the regulatory approvals required by Section 8.1(c);
(viii) a certificate of Seller's jurisdiction of incorporation dated not earlier
than the 10th day preceding the earlier of (A) the Closing Date and (B) April
30, 1998, to the effect that Seller is a corporation validly existing and in
good standing and/or compliance (as applicable) under the laws of such
jurisdiction as of such date;
(ix) a certificate of Seller's Secretary or Assistant Secretary attaching duly
enacted resolutions of Seller's Board of Directors and, if required by law,
Seller's shareholders with respect to the approval of this Agreement and the
performance and consummation by Seller of the transactions contemplated hereby
and the authorization of the officers of Seller to sign and deliver this
Agreement, which resolutions shall continue to be in force as of the Closing
Date;
(x) certificates of Compliance with respect to IGL from the Insurance Department
of each state (other than California) in which IGL holds a License, dated as of
a date no earlier than 30 days prior to (A) the Closing Date and (B) April 30,
1998; and
(xi) all other documents and instruments required to be delivered by Seller
pursuant to this agreement.
<PAGE>
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement (except for Sections 6.4 (regarding
confidentiality), 12.3, 12.4 and 12.15, which will continue in effect) may be
terminated and the transactions contemplated hereunder abandoned:
(a) by either Buyer or Seller if a material breach of any
provision of this Agreement has been committed by the other Party and such
breach has not been waived;
(b) (i) by Buyer if any of the conditions in Sections 8.1 or 8.3 has not been
satisfied as of the Closing Date, or if Seller has failed to satisfy its
obligation under Section 6.12 to obtain the consent of Farmers to the assignment
described in Section 6.12, and Buyer has not waived such condition or obligation
on or before the Closing Date; or (ii) by Seller, if any of the conditions in
Sections 8.1 or 8.2 has not been satisfied as of the Closing Date and Seller has
not w-aived such condition on or before the Closing Date;
(c) by mutual consent of the Parties; or
(i)by either Buyer or Seller if the Closing has not occurred (other than through
the failure of any Party seeking to terminate this Agreement to comply fully
with its obligations under this Agreement or because of delays in obtaining the
necessary regulatory consents) on or before April 30, 1998, or, if the Parties
mutually agree in writing to an extension of such date, the date so agreed to.
9.2 Effect of Termination. Each Party's right of termination for breach of
contract under Section 9.1(a) is in addition to any other rights it may have
under this Agreement or otherwise, and the exercise of a right of termination
will not be an election of remedies. The termination of this Agreement pursuant
to Section 9.1 does not affect any Party's obligations under Sections 6.4
(regarding confidentiality), 12.3, 12.4 and 12.15.
<PAGE>
ARTICLE X
SURVIVAL OF PROVISIONS; REMEDIES
10.1 Survival. The representations, warranties and agreements made by Seller
and Buyer in this Agreement, or in any certificate delivered by Seller or Buyer
pursuant to the provisions of this Agreement, shall survive the Closing:
(a) for two years in the case of all representations and warranties of Seller
not specified in Section 10.1(b) below; and
(b) until the expiration of all applicable statutes of limitations (including
all periods of extension, whether automatic or permissive) in the case of (i)
the representations and warranties of Seller set forth in Sections 4.4 and 4.8
hereof or in any certificate delivered pursuant to Section 8.3 hereof (to the
extent such certificate refers to such sections), and (ii) the indemnification
provisions set forth in Article XI applicable to such Sections.
<PAGE>
If a Claim Notice is given in accordance with Section 11.3 hereof before
expiration of the applicable time period referenced above, then (notwithstanding
such time period) the representation, warranty or agreement applicable to such
claim shall survive until, but only for purposes of resolution of such claim.
This Article X shall survive the Closing or the termination of this Agreement.
10.2 Available Remedies. The rights and remedies provided for in this Agreement
are cumulative and are not exclusive of any rights or remedies that any party
may otherwise have at law or in equity. The rights and remedies of any party
based upon, arising out of or otherwise in respect of any breach of any
representation, warranty or agreement contained in this Agreement shall in no
way be limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such breach is based may also be the subject
matter of any other representation, warranty or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no breach.
ARTICLE XI
INDEMNIFICATION
11.1 Tax Indemnification and Other Tax Matters.
(a) Seller shall be liable for, shall pay to the appropriate Tax Authorities and
shall hold IGL and Buyer harmless against, all Taxes that relate to any taxable
period ending on or before the Closing Date, including, without limitation, any
deficiencies in Tax, any Tax attributable to the Section 338(h)(10) election
that will be made under (e) below and any Taxes of Seller or any affiliate of
Seller assessed against IGL under Treasury Regulations ss.1.1502-6.
(b) Buyer and IGL shall be liable for, shall pay to the appropriate Tax
Authorities, and shall hold Seller harmless against, all Taxes that relate to
any taxable period that ends after the Closing Date (including any taxable
period that begins prior to the Closing Date and ends after the Closing Date).
The Closing Date Balance Sheet shall reflect a proper accrual basis reserve for
Taxes, if any, due and owing as of the Closing Date. Seller hereby indemnifies
Buyer against all liability for Taxes (including interest and penalties) to the
extent that actual Taxes relating to activity prior to Closing exceed the
reserve for Taxes on the Closing Date Balance Sheet. For taxing jurisdictions
that do not recognize a "short" period ending on the Closing Date, the Closing
Date Balance Sheet reserve for Taxes, and Seller's indemnification obligation
under this Section 11.1(b), shall be computed based on a hypothetical "short
period."
(c) Seller and Buyer shall maintain all records necessary to support the Tax
Returns as filed for all Tax years until closed.
(d) In the event that IGL is, becomes entitled to, or receives any refund of
Taxes in respect of any taxable period ending on or prior to the Closing Date,
(i) Buyer, IGL and Seller shall cooperate with each other and take all
reasonable actions necessary to obtain such refund and (ii) the amount thereof,
plus any interest related thereto shall be the property of (and paid over to)
Seller.
(e) Within 30 days after the Closing Date Balance Sheet becomes final, Seller
and Buyer shall execute a completed joint election under Section 338(h)(10) of
the Code (and any corresponding elections under state, local, or foreign tax
law) on Form 8023 and any comparable forms employed in those states where IGL
is subject to tax (collectively a "Section 338(h)(10) Election") with respect
to the purchase and sale of the Shares. Seller and Buyer agree that the
Purchase Price and the liabilities of IGL (plus other relevant items) will
be allocated in accordance with the instructions for IRS Form 8023 to the
Scheduled Assets for Tax, financial accounting, and all other purposes as
shown on Schedule 11.1(e)attached hereto. Seller and Buyer will file all Tax
Returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation.
(f) Seller shall be responsible for, prepare and have ultimate discretion with
respect to, all Tax Returns required or permitted by applicable law to be filed
by IGL (or by Seller on its behalf) with respect to taxable periods ending on or
before the Closing Date. Buyer and IGL shall (i) cooperate with Seller for the
purpose of making any election under applicable law to permit IGL to end at the
end of the Closing Date all taxable periods that have begun prior to the Closing
Date that have not otherwise ended and (ii) provide access to all relevant books
and records for purposes of preparing any Tax Returns in respect thereof.
(g) Buyer or IGL shall promptly (i) notify Seller of the commencement of any
Audit by any Tax Authority concerning any Tax for which Seller may be
responsible under Section 11.1(a) of this Agreement (a "Tax Claim") and (ii)
furnish Seller with copies of any correspondence received from any Tax Authority
related thereto. Seller shall promptly (i) notify Buyer or IGL of the
commencement of any Audit by any Tax Authority concerning any Tax for which
Buyer or IGL may be responsible under Section 11.1(b) of this Agreement and (ii)
furnish Buyer or IGL with copies of any correspondence received from any Tax
Authority related thereto; provided, however, that the failure of a party to
give prompt notice pursuant to this Section 11.1(f) shall not relieve the other
party from any indemnification obligations hereunder unless the failure to give
such notice jeopardizes the other party's ability to defend any claim arising
from or related to such Audit.
(h) Seller may control the conduct of any Audit covered by Section 11.1(f) for
which it is responsible by having its personnel rather than personnel of Buyer
or IGL deal directly with the applicable Tax Authority. At its election, Seller
may contest or settle any Tax Claim in any legally permissible manner at its
sole cost and expense and, upon Seller's payment of such Taxes to the relevant
Tax Authority, may sue for a refund thereof. Seller shall control all
correspondence, responses and proceedings related to any such contest or refund
suit, and may pursue or forego any administrative proceedings, appeals or
litigation in respect of such Tax Claim. Buyer and IGL, as appropriate, will
cooperate fully, provide access to all books and records, and will take all
lawful action in connection with such contest or refund suit as Seller may
reasonably request. Seller shall keep Buyer and IGL, as appropriate, regularly
apprised of the progress of any such contest or refund suit. In the event that
such contest or refund suit may reasonably be expected to increase materially
the liability of IGL for Taxes described in Section 11.1(b) hereof, Seller shall
consult with Buyer in good faith as to any considerations that Buyer may have
regarding such contest or refund suit and shall not settle such matter without
Buyer's consent. Should Buyer and Seller be unable to agree on the resolution of
the matter, an independent public accounting firm shall be appointed, in the
manner set forth in Section 2.4(b) above, as arbitrator to resolve the matter.
Buyer and Seller agree to share equally the fees of such arbitrator.
(i) In the event that Seller does not elect to contest a Tax Claim pursuant to
Section 11.1(g) of this Agreement, Buyer or IGL may (but shall not be required
to) contest such claim for the account of Seller, in which case (i) Seller shall
have the right to review and approve in advance any correspondence or responses
sent to any Tax Authority by or on behalf of IGL with respect to any Tax Claim
and to participate in any subsequent administrative proceedings, appeals, and
litigation, if any, and (ii) Buyer and IGL, as appropriate, shall provide access
to all relevant books and records. Buyer and IGL, as appropriate, shall keep
Seller regularly apprised of the of progress any such Audit. In the event that
Buyer or IGL elects to contest a Tax claim, Buyer and IGL shall indemnify and
hold harmless Seller for any Tax liability in excess of the amount of the Tax
liability that would have arisen under the settlement that Seller was willing to
accept.
11.2 Other Indemnification.
(a) Subject to the provisions of Article X and Sections 11.4 and 11.5 hereof,
Seller agrees to indemnify IGL and Buyer in respect of, and hold each of them
harmless against:
(i) any and all Damages (other than indemnification for Taxes, which shall be
governed solely by Section 11.1 hereof) resulting from or relating to (A) any
breach of any representation or warranty in Article IV or in any certificate
delivered by Seller pursuant to Section 8.3 hereof, or (B) any failure of Seller
to perform any agreement included in this Agreement and required to be performed
by Seller; and
(ii) any and all Damages resulting from a failure on the part of Seller to
comply with the provisions of Section 11.1 of this Agreement; provided, however,
that such failure does not result from any act or omission on the part of Buyer
or, after the Closing Date, by IGL.
(b) In the event the Prior Business Reinsurance Agreements do not provide IGL
with full indemnification against the Prior Business Liabilities, Seller agrees
to indemnify IGL and Buyer in respect of, and hold each of them harmless
against, the Prior Business Liabilities.
(c) Subject to the provisions of Article X and Sections 11.4 and 11.5 hereof,
Buyer agrees to indemnify Seller in respect of, and hold Seller harmless against
(i) any and all Damages (other than indemnification for Taxes, which shall be
governed solely by Section 11.1 hereof) resulting from or relating to (A) any
breach of any representation or warranty in Article V or in any certificate
delivered by Buyer pursuant to Section 8.2 hereof, or (B) any failure of Buyer
to perform any agreement included in this Agreement and required to be performed
by Buyer or, after the Closing Date, by IGL; and
(ii) any and all Damages resulting from or relating to liabilities or
obligations of IGL arising out of events or circumstances occurring in their
entirety after the Closing Date, other than liabilities and obligations of IGL
to Seller or any Affiliate of Seller (other than IGL).
(d) Seller shall reimburse IGL for any guaranty fund assessments incurred and
paid by IGL after the Closing Date that are based on earned premium levels prior
to such date, regardless of when the insolvency giving rise to such guaranty
fund assessment occurs. To the extent that IGL is able to offset against premium
tax obligations any guaranty fund assessment either (i) existing at the Closing
Date or (ii) for which Seller has reimbursed IGL after the Closing Date, Buyer
shall reimburse Seller for such premium tax offsets at the time that such
premium tax offset occurs.
11.3 Method of Asserting Claims. All claims for indemnification by an
Indemnified Party under Section 11.2 hereof shall be asserted and resolved as
follows:
(a) Third Party Claims. If any claim or demand, or any Proceeding is commenced,
for which an Indemnifying Party would be liable for Damages to an Indemnified
Party, is asserted against or sought to be collected from such Indemnified Party
by a Person other than a party hereto or any Affiliate thereof (a "Third Party
Claim"), the Indemnified Party shall deliver a Claim Notice within 30 days of
receipt by the Indemnified Party of a written notice of claim or demand that
constitutes a Third Party Claim and with reasonable promptness with respect to
any other Third Party Claim; provided, however, no failure or delay in giving
any such Claim Notice shall relieve the Indemnifying Party of its obligations
except, and only to the extent, that it is prejudiced thereby.
The Indemnifying Party shall give notice to the Indemnified Party
within 30 days of receipt of a Claim Notice setting forth whether the
Indemnifying Party disputes its liability with respect to matters covered by
such Claim Notice and whether the Indemnifying Party, at the sole cost and
expense of the Indemnifying Party, desires to assume the defense of the matters
set forth in such Claim Notice. The Indemnified Party may take any action it
deems to be necessary to preserve its rights prior to receipt of such response
from the Indemnifying Party but shall not settle or proceed to final judgment
with respect to such Third Party Claim prior to the expiration of such 30 day
period.
(b) Defense. The Indemnifying Party shall have the right to direct, through
counsel of its own choosing, the defense or settlement of any action or
proceeding brought against the Indemnified Party in respect of Third Party
Claims; provided, however, that the Indemnifying Party shall not settle any
matter without obtaining the Indemnified Party's prior consent thereto if such
settlement provides for any remedy other than the payment of money damages or
does not provide for a full release of the Indemnified Party or, regardless of
the terms of such settlement, if the Indemnifying Party disputes its liability
with respect to the Third Party Claim. If the Indemnifying Party elects to
assume the defense of any such claim or proceeding, the Indemnified Party may
participate in such defense at its own expense. If the Indemnifying Party fails
to defend or, after commencing or undertaking any such defense, fails to
prosecute or withdraws from such defense other than as a result of a settlement,
the Indemnified Party shall have the right to direct, through counsel of its own
choosing, the defense or settlement of any such action or proceeding; provided,
however, that if the Indemnified Party assumes the defense of any such claim or
proceeding pursuant to this Section 11.3 and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego appeal with respect
thereto, then the Indemnified Party shall give the Indemnifying Party prompt
written notice thereof and the Indemnifying Party shall have the right to
participate in and consent (which consent shall not be unreasonably withheld) to
the settlement or assume or reassume the defense of such claim or proceeding.
Notwithstanding the foregoing provisions of this Section 11.3(b), if
the Indemnifying Party disputes its liability to the Indemnified Party and if
such dispute is resolved in favor of the Indemnifying Party by final,
nonappealable order of a court of competent jurisdiction, the Indemnifying Party
shall not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 11.3(b), and the Indemnified Party shall
reimburse the Indemnifying Party in full for all costs and expenses incurred by
the Indemnifying Party in connection with such Third Party Claim. The party
directing the defense shall pursue such defense diligently and promptly. The
parties shall cooperate in the defense of all Third Party Claims. In connection
with the defense of any Third Party Claim, each party shall make available to
the party controlling such defense any books, records or other documents within
its control that are reasonably requested in the course of or necessary or
appropriate for such defense; provided, however, that appropriate arrangements
are made to safeguard the confidentiality of such materials.
(c) Claims Between the Parties and their Affiliates. If the Indemnified Party
has a claim against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall give written notice to the Indemnifying Party
with reasonable promptness of such claim, specifying the nature, estimated
amount and the specific basis for such claim. The Indemnifying Party shall
respond within 30 days of receipt of such notice. If the Indemnifying Party
timely disputes such claim, the Indemnified Party and the Indemnifying Party
shall negotiate in good faith to resolve such dispute. If not so resolved or if
no timely response is made, either party may pursue whatever remedies it may
have.
11.4 After-Tax Damages; Refunds. With respect to the indemnification agreements
set forth in this Article XI, Seller and Buyer agree that the amount of any
payment shall be (i) promptly paid to the Indemnifying Party or offset against
indemnification payments then owed to the Indemnifying Party or (ii) in the case
of any payment due under Section 11.1, payable by either party 30 days after the
"final determination" within the meaning of Section 1313 of the Code. Any
payment (other than interest thereon) made under this Agreement by Seller to (or
at the direction of) Buyer or IGL or by Buyer or IGL to (or at the direction of)
Seller shall be treated by all parties hereto for all purposes as an adjustment
to the Purchase Price.
11.5 Claims Limitation.
(a) Seller shall not have any liability or obligation for any Damages under this
Agreement unless (i) the aggregate amount of all such Damages equals or exceeds
$500,000, and then for the full amount of such Damages; and (ii) notice of the
claim for such Damages shall have been given to Seller prior to the end of the
survival period for such claim.
(b) The limitation contained in subsection (i) of Section 11.5(a) shall not
apply to Damages arising under Sections 4.2, 4.4, 4.8, 4.11 or 11.1 of this
Agreement.
(c) Seller shall not be liable or obligated for any Damages under this Agreement
(other than in respect of Damages arising under Sections 4.4, 4.8, 4.11 or 11.1)
that, together with all other Damages for which Seller is liable or obligated
under this Agreement, exceed $60,000,000. Seller shall not be liable or
obligated for any Damages under this Agreement as a result of a breach of
Section 4.4 or 4.11 that, together with all other Damages for which Seller is
liable or obligated under this Agreement, exceed the amount of the Consideration
(as defined in the Farmers Agreement).
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement; Waiver. This Agreement, the Schedules and Exhibits
attached hereto and the other writings specifically identified herein or
executed and delivered by the Parties to be bound thereby in conjunction with
this Agreement or the transactions contemplated hereby contain the entire a
greement among the Parties with respect to the transactions contemplated
hereby and thereby and supersede all previous written or oral negotiations,
commitments, letters of intent and writings. No supplement or waiver of this
Agreement shall be binding unless executed in writing and signed by the
Party to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed to be, or shall constitute, a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
12.2 Amendment and Modification. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by written agreement of the Parties,
which written agreement shall specifically refer to this Agreement.
12.3 Confidentiality.
(a) None of the Parties to this Agreement nor any of their Affiliates shall
issue any press release or public announcement concerning the contemplated
transaction, the existence of this Agreement, or of the terms, conditions and
provisions of this Agreement (i) unless mutually agreed by Seller and Buyer or
(ii) except as required by law, in which event the disclosing Party shall
consult with the other Party to the extent practicable before making such
disclosure.
(b) Between the date of this Agreement and the Closing Date, each Party will
maintain in confidence, and will cause the directors, officers, employees,
agents, Affiliates and advisors of such Party to maintain in confidence, any
written, oral or other information obtained from another Party or IGL in
connection with this Agreement or the Prior Business Reinsurance Agreements,
unless (a) such information is already known to such Party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such Party, (b) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the transactions contemplated by this
Agreement, or (c) the furnishing or use of such information is required by, or
necessary or appropriate in connection with any legal proceedings.
If this Agreement is terminated pursuant to Section 10.1, each Party
will return or destroy as much of such written information as the
furnishing/disclosing Party may reasonably request.
12.4 Expenses. Each Party hereto shall bear its own expenses, including the
fees of any attorneys, accountants or others engaged by such Party, in
connection with this Agreement and the transactions contemplated hereby,
except as otherwise expressly provided herein.
12.5 Notices. All notices, requests, demands, consents, approvals, agreements or
other communications to or by a Party to this Agreement shall:
(a) be in writing addressed to the authorized address of the recipient set out
in this Section 12.5 or to such other address as the recipient has designated
by the notice procedure of this Section 12.5;
(b) be delivered in person or sent by registered or certified mail return
receipt requested, courier, or facsimile transmission and be deemed to be duly
given or made:
(i) in the case of delivery in person or by courier, when delivered to the
recipient at such address; or
(ii) in the case of facsimile transmission, when received in legible form by the
recipient at such address and when the recipient has been requested to
acknowledge receipt of the entire facsimile transmission upon the sending or
receiving the acknowledgment of receipt (which acknowledgment of the recipient
will be promptly given);
but if such delivery or dispatch is later than 5:00 pm local time (at the place
to which such communication is sent) on a day on which business is generally
carried on in the place to which such communication is sent or occurs on a day
on which business is not generally carried on in the place to which such
communication is sent, it will be deemed to have been duly given or made at the
commencement of business on the next day on which business is generally carried
on in that place.
Notices to Buyer shall be sent to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attn: Thomas E. Maloney
FAX: (617) 572-5170
with a copy to:
Michael H. Studley, Vice President
and Counsel
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, MA 02117
FAX: (617) 572-1565
Notices to Seller shall be sent to:
Great Southern Life Insurance Company
300 W. 11th Street
Kansas City, Missouri 64105
Attn: Gary L. Muller, President and Chief Executive Officer
FAX: (816) 391-2018
with a copy to:
Lathrop & Gage L.C.
2345 Grand Boulevard
Kansas City, Missouri 64108-2684
Attn: Thomas M. Higgins, III
FAX: (816) 292-2001
12.6 Severability. If any one or more of the provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby.
12.7 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
Seller or Buyer hereto without the prior written consent of the other Party.
12.8 Third Parties. Nothing in this Agreement is intended to confer any right on
any Person, other than the Parties hereto and their respective successors and
assigns and the Indemnified Persons; nor is anything in this Agreement intended
to modify or discharge the obligation or liability of any third Person to any
Party to this Agreement, nor shall any provision give any third Person any right
of subrogation or action over against any Party to this Agreement.
12.9 Captions. The captions in this Agreement are for convenience only, do not
form a part hereof, and do not in any way modify, interpret or indicate the
intentions of the Parties hereto.
12.10 Governing Law. This Agreement shall be governed by the laws of the
State of Missouri (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law).
12.11 Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
12.12 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
12.13 Books and Records. Seller and Buyer agree that, so long as any books,
records and files related to the business, properties, assets or operations
of IGL, to the extent that they pertain to the operations of IGL prior to the
Closing Date, remain in existence and are available, on and after the Closing
Date each Party (at its expense) shall have the right to inspect and to make
copies of the same at any time during business hours for the purpose of
complying with regulatory requirements, meeting auditing needs, or similar
obligations for which such books, records or files are reasonably necessary.
12.14 Governmental Notices. After Closing, Buyer shall provide to any
governmental or regulatory authority with jurisdiction over such matters,
all required notices of the consummation of this transaction.
12.15 Broker's Fees. Buyer and Selling Parties represent and warrant that they
have not incurred or agreed to pay any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby, other than the fees and commissions of Protectogon, Inc., which shall be
Buyer's responsibility.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
GREAT SOUTHERN LIFE INSURANCE COMPANY
By
Name
Title
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By
Name
Title
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Exhibit 8.2(c) Matters to be covered in opinion of counsel to Buyer
Exhibit 8.3(c) Form of Prior Business Reinsurance Agreement for the
Assumption Reinsurance of the Prior Busienss by
Seller and/or Seller's Affiliates
Exhibit 8.3(d) Form of Services Agreement
Exhibit 8.3(e) Matters to be covered in opinion of counsel to Seller
Schedule 4.5 Conflicts regarding Articles, Bylaws, Agreements,
Orders
Schedule 4.6 Deficiencies regarding SAP Statement
Schedule 4.7 Changes
Schedule 4.8 Taxes
Schedule 4.9 Litigation
Schedule 4.10 Violations of Law
Schedule 4.11 Liabilities under Benefit Plans
Schedule 4.12 Contracts
Schedule 4.13 Intercompany Liabilities not reflected on SAP
Statement
Schedule 4.14 Bank Accounts
Schedule 4.15 Prior Business
Schedule 4.16 Conduct of Business since 9/30/97
Schedule 6.10 Scheduled Assets
Schedule 11.1(e) 338(h)(10) Allocation
<PAGE>
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of April 6, 1998 between AMERICO
LIFE, INC., a corporation duly organized and validly existing under the laws of
the State of Missouri (together with its successors and assigns, the "Company");
each of the banks that is a signatory hereto (individually, a "Bank" and,
collectively, the "Banks"); and THE CHASE MANHATTAN BANK, as administrative
agent for the Banks (in such capacity, together with its successors in such
capacity, the "Administrative Agent".
The Company, the Banks and the Administrative Agent are party
to an Amended and Restated Credit Agreement dated as of July 6, 1995, amended
and restated as of December 17, 1996, as amended February 26, 1997 (the "Credit
Agreement"). The parties hereto desire to amend the Credit Agreement in certain
respects, and accordingly the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used but not
otherwise defined herein have the meanings given them in the Credit Agreement.
Section 2. Amendments. Subject to Section 4 hereof, but
effective as of the date hereof, the Credit Agreement shall be amended as
follows:
2.01. The definition of "Investments" in Section 1.01 is amended by
amending clause (b) thereof to provide as follows:
"(b) any deposit with, or advance, loan or other extension of
credit to, such Person or Guarantee of, or other contingent obligation with
respect to, Indebtedness or other liability (other than a contingent obligation
or liability of the type permitted in clause (iv) of the proviso to Section 8.18
of this Agreement, except to the extent payments thereon are made) of such
Person and (without duplication) any amount committed to be advance, lent or
extended to such Person;"
2.02. Section 8.18 of the Credit Agreement shall be amended by:
(i) amending clause (a) thereof to provide as follows:
"(a) make any Investment in any Affiliate of the Company or
any of its Subsidiaries, other than an Investment in any Person that became an
Affiliate as a result of an Investment permitted by clauses (c) or (k) of
Section 8.08, provided such Investment is otherwise permitted by this
Agreement;"
and (ii) deleting the word "and" appearing before clause (iii) and the period at
the end of clause (iii) in the proviso to such section, and (iii) adding the
following after clause (iii) of such section:
"and (iv) the Company and any of its Subsidiaries may enter
into agreements to indemnify lenders and other creditors of an Affiliate against
any liability, loss or cost suffered by such lender or other creditor by reason
of the failure of the Affiliate to comply with its representations, warranties
and covenants under any agreement, other than any liability, loss or cost
resulting from the failure of such Affiliate to repay Indebtedness."
2.03. Schedule 3 and Schedule 7 to the Credit Agreement are hereby
deleted in their entirety and replaced by Exhibit A and Exhibit B, respectively
attached hereto.
Section 3. Representations and Warranties. The Company hereby
represents and warrants to the Banks and the Administrative Agent that the
representations and warranties set forth in Section 7 of the Credit Agreement
are true and complete on the date hereof as if made on and as of the date hereof
and as if each reference in such representations and warranties to the Credit
Agreement included reference to this Amendment No. 2.
Section 4. Conditions Precedent. As provided in Section 2
above, the amendments to the Credit Agreement set forth in said Section 2 shall
become effective as of the date hereof, subject to the conditions precedent that
counterparts of this Amendment No.2, shall have been duly executed and delivered
by the Company, the Majority Banks and the Administrative Agent and FHC shall
have executed and delivered its consent hereto as provided on the signature
pages hereof.
Section 5. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 2 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument
and any of the parties hereto may execute this Amendment No. 2 by signing any
such counterpart and sending the same by telecopier, mail messenger or
courier to the Administrative Agent or counsel to the Administrative Agent.
This Amendment No. 2 shall be governed by, and construed in accordance with,
the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed as of the day and year first above written.
AMERICO LIFE, INC.
By:
Title:
THE BANKS
THE BANK OF NEW YORK
By:
Title:
BANK ONE, TEXAS, N.A.
By:
Title:
THE CHASE MANHATTAN BANK
By:
Title:
COMMERCE BANK, N.A.
By:
Title:
FIRST BANK NATIONAL ASSOCIATION
By:
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
Title:
FLEET NATIONAL BANK
By:
Title:
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
Title:
CONSENT
By its signature below, FHC consents to the foregoing Amendment No. 2
FINANCIAL HOLDING CORPORATION
By__________________________________
Title:
AMENDMENT NO. 3
AMENDMENT NO. 3 dated as of April 30, 1998, between AMERICO
LIFE, INC., a corporation duly organized and validly existing under the laws of
the State of Missouri (together with its successors and assigns, the "Company");
each of the banks that is a signatory hereto (individually, a "Bank" and,
collectively, the "Banks"); and THE CHASE MANHATTAN BANK, as administrative
agent for the Banks (in such capacity, together with its successors in such
capacity, the "Administrative Agent").
The Company, the Banks and the Administrative Agent are party
to an Amended and Restated Credit Agreement dated as of July 6, 1995, amended
and restated as of December 27, 1996 (the "Restatement Date"), as amended by
Amendment No. 1 dated as of February 26, 1997 and as further amended by
Amendment No. 2 dated as of April 6, 1998 (the "Credit Agreement"). The parties
hereto desire to amend the Credit Agreement in certain respects, and accordingly
the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used but not
otherwise defined herein have the meanings given them in the Credit Agreement.
Section 2. Amendments. Subject to Section 4 hereof, but
effective as of the date hereof, the Credit Agreement shall be amended as
follows:
2.01. Section 3.03(b)(i) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(i) Dispositions. Without limiting the obligations of the Company
to obtain the consent of the Majority Banks for any Disposition not
otherwise permitted under this Agreement, as promptly as practicable
after the end of each fiscal year but in no event later than March 15
of the subsequent fiscal year, the amount of the Commitments shall be
reduced by, and/or the Company shall prepay the Loans in, an amount
equal to the aggregate amount of any Disposition Proceeds (other than
Disposition Proceeds arising from (u) Dispositions by GSSW Limited
Partnership, (v) Dispositions of ownership interests in GSSW Limited
Partnership, (w) Dispositions of capital stock of Loyalty Life
Insurance Company, (x) Dispositions of partnership interests (or of
their underlying properties) previously held by GSSW Limited
Partnership and transferred to the Company in connection with the
redemption of its ownership interests in GSSW Limited Partnership, (y)
Dispositions related to the OSL/IGL Transactions and (z) Dispositions
of capital stock of IGL) received by the Company or any of its
Subsidiaries during such fiscal year in excess of $3,000,000 (rounded
upward to the nearest $1000)."
2.02. Section 8.05 of the Credit Agreement is amended by
deleting "and" at the end of clause (f) thereof, substituting "; and" for the
period at the end of clause (g) thereof and inserting new clause (h) immediately
after clause (g) thereof, to read as follows:
"(h) the Company and its Subsidiaries may Dispose of the
capital stock of IGL."
2.03. The last sentence of Section 8.19 of the Credit
Agreement is amended to read in its entirety as follows:
"Notwithstanding the foregoing provisions of this Section 8.19, the
Company and its Subsidiaries may Dispose of (w) ownership interests in
GSSW Limited Partnership, (x) capital stock of Loyalty Life Insurance
Company, (y) capital stock of VLIC and (z) capital stock of IGL."
Section 3. Representations and Warranties. The Company hereby
represents and warrants to the Banks and the Administrative Agent that the
representations and warranties set forth in Section 7 of the Credit Agreement
are true and complete on the date hereof as if made on and as of the date hereof
and as if each reference in such representations and warranties to the Credit
Agreement included reference to this Amendment No. 3.
Section 4. Conditions Precedent. As provided in Section 2
above, the amendments to the Credit Agreement set forth in said Section 2 shall
become effective as of the date hereof, subject to the conditions precedent that
(i) counterparts of this Amendment No. 3, shall have been duly executed and
delivered by the Company, the Majority Banks and the Administrative Agent, and
(ii) FHC shall have executed and delivered its consent hereto as provided on the
signature pages hereof.
Section 5. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 3 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 3 by signing any such
counterpart and sending the same by telecopier, mail, messenger or courier
to the Administrative Agent or counsel to the Administrative Agent. This
Amendment No. 3 shall be governed by, and construed in accordance with, the law
of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 3 to be duly executed as of the day and year first above written.
AMERICO LIFE, INC.
By_______________________________________
Title:
THE BANKS
THE BANK OF NEW YORK
By_______________________________________
Title:
BANK ONE, TEXAS, N.A.
By_______________________________________
Title:
THE CHASE MANHATTAN BANK
By_______________________________________
Title:
COMMERCE BANK, N.A.
By_______________________________________
Title:
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By_______________________________________
Title:
FIRST UNION NATIONAL BANK
By_______________________________________
Title:
FLEET NATIONAL BANK
By_______________________________________
Title:
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_______________________________________
Title:
CONSENT
By its signature below, FHC consents to the forgoing Amendment No. 3.
FINANCIAL HOLDING CORPORATION
By_______________________________________
Title:
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000908139
<NAME> Americo Life, Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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<REAL-ESTATE> 27,487
<TOTAL-INVEST> 2,149,053
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<RECOVER-REINSURE> 1,447,150
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0
0
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53,972
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<INCOME-PRETAX> 5,968
<INCOME-TAX> 1,899
<INCOME-CONTINUING> 4,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 4,069
<EPS-PRIMARY> 406.9
<EPS-DILUTED> 406.9
<RESERVE-OPEN> 0
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