<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 19, 1998
THE GUARANTEE LIFE COMPANIES INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-26788 47-0785066
- ----------------- -------------- -------------
(State of Incorporation) (Commission File Number) (IRS Employer Identification
Number)
8801 Indian Hills Drive,
Omaha, Nebraska 68114
-------------------- --------------
(Address of principal executive offices) (Zip Code)
(402) 361-7300
------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
------------------------------------------
(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS.
(a) The registrant issued the following press release on March 19,
1998:
Company Contact: Contact:
- ---------------- --------
William L. Bauhard, CFO John D. Lovallo, SVP
The Guarantee Life Companies Inc. Makovsky & Company
Diane T. Kohout, Director IR John Menditto, Account Exec.
The Guarantee Life Companies Inc. Makovsky & Company
(402) 361-2848 (212) 508-9600
THE GUARANTEE LIFE COMPANIES INC. ANNOUNCES
ACQUISITION OF WESTFIELD LIFE INSURANCE COMPANY
(INCREASES CREDIT FACILITY TO $140 MILLION)
Omaha, Nebraska, March 19, 1998 -- The Guarantee Life Companies Inc.
(Nasdaq: GUAR) today announced a definitive agreement to acquire Westfield Life
Insurance Company, a wholly owned subsidiary of Ohio Farmers Insurance Company
(OFIC), for a purchase price of $100 million. The transaction will be financed
with the combination of $90 million in cash, which is primarily supported by a
Senior Secured Term Loan Facility, and $10 million in restricted stock.
Guarantee Life expects to close the transaction on May 31, 1998, unless extended
by either Guarantee or OFIC. Guarantee Life expects the acquisition to be
accretive in 1998.
The acquisition of Westfield Life has the potential to increase
Guarantee Life's Individual sales force by approximately 500 producing agents.
The transaction is expected to add nearly 87,000 policies, $280 million in
policy reserves, and $55 million in revenues to Guarantee Life's Individual
Insurance Business, which currently consists of approximately 208,000 policies,
$950 million in policy reserves, and $140 million in revenues.
Based in Westfield Center, Ohio, Westfield Life was founded in 1963 as
one of six insurance companies owned by OFIC, a multi-line insurance
organization. Westfield Life is
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licensed in 46 states and the District of Columbia, and is directly affiliated
with OFIC's relationship with 1,500 independent property-casualty agencies.
Westfield Life utilizes professional life insurance marketing managers who are
strategically located throughout its operating territory to strengthen its
relationship with these agents.
Westfield Life will be managed as a part of Guarantee Life's
Individual Insurance Business. A partnership between Guarantee Life and OFIC
will be established for the marketing and underwriting of new life sales and for
the administration of Westfield Life's in-force block of business. Under the
Marketing Agreement, many of OFIC's marketing and underwriting personnel will be
employed by Guarantee Life and located in OFIC's offices. Prior to and
subsequent to the closing, it is anticipated that most of Westfield Life's
producing agents will become licensed to sell Guarantee Life's individual life
and annuity portfolio of products, and its group products.
Under an Administrative Services Agreement, OFIC will provide all the
administrative services necessary to administer and service the individual life
insurance and annuity business previously issued by Westfield Life. This
service agreement will result in Guarantee Life avoiding the high cost of
converting the in-force business to its system while preserving the
relationships previously established between Westfield Life's customers, agents,
and service personnel. OFIC has agreed to provide these services at Guarantee
Life's direct costs. All new business will be sold on Guarantee Life's policies
and administered by Guarantee Life at its home office in Omaha.
Robert D. Bates, Chairman and Chief Executive Officer of The Guarantee
Life Companies Inc., commented, "Westfield Life is an ideal fit with Guarantee
Life's long-term growth strategy of expanding the size and breadth of our
Individual Insurance Business. Westfield Life's reputation for high-quality
customer service has consistently generated strong financial performance." Mr.
Bates continued, "We believe that the unique distribution system which OFIC has
developed linking its independent property-casualty agencies with independent
life insurance agents will be a great opportunity for a successful partnership
between the two companies. The individual and small business markets are target
markets for both companies and we believe will provide excellent marketing
opportunities for our respective products." Mr. Bates also stated, "We expect
this acquisition to increase our individual life sales by
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approximately 60% annually, while at the same time, we anticipate reducing
Westfield Life's annual overhead and operating expenses by approximately $4
million."
Mr. Cary Blair, Chairman of the Board, President and Chief Executive
Officer of OFIC, commented, "We are very excited about this new relationship
with Guarantee Life. The opportunity for Guarantee Life to expand the sales of
its high quality product portfolio through an established distribution system
will also bring added value to our property-casualty agencies." Mr. Blair
continued, "We are pleased to provide the administrative services for the in-
force block of business, and believe that will minimize any disruption to our
customers and producing agents."
The transaction has been approved by both Boards of Directors. The
definitive agreement is subject to the completion of the due diligence process,
the approval of the Ohio Department of Insurance, other regulatory agencies, as
well as customary closing conditions. The expectation is that these conditions
will be satisfied, although there can be no assurance that the transaction will
be consummated.
Separately, Guarantee Life announced that it has received a commitment
from The Chase Manhattan Bank to replace its $50 million credit agreement with
Senior Secured Credit Facilities in an aggregate principal amount of $140
million. Chase Securities Inc. will act as arranger for the financing. The
Facilities will consist of a Senior Secured Term Loan in an amount up to $90
million and a Senior Secured Revolving Credit Facility in an amount up to $50
million.
The Guarantee Life Companies Inc. operates through two subsidiaries,
including its principal subsidiary, Guarantee Life Insurance Company, and PFG,
Inc. PFG, Inc.'s principal subsidiary is AGL Life Assurance Company. Guarantee
Life markets group life and health insurance products to employers and other
groups, and life insurance and annuities to individuals. The principal business
operations are conducted in 48 states and the District of Columbia. Insurance
coverage and related benefits are provided through more than 230,000 individual
and group policies issued to almost 1.8 million customers. Guarantee Life is
headquartered in Omaha, Nebraska.
Certain statements contained in this press release, including
statements regarding the anticipated development and expansion of the Company's
business, the intent, belief or current expectations of the Company, its
directors or its officers, primarily with respect to the future operating
performance of the Company, and other statements contained herein regarding
4
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matters that are not historical facts, are "forward-looking" statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995).
Because such statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward looking
statements. Factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements include, but are
not limited to, uncertainties regarding the market, difficulties inherent in
consummating and merging acquisitions, and those risks and uncertainties
discussed in filings made by the Company with the Securities and Exchange
Commission.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
NUMBER DESCRIPTION
2 Stock Purchase Agreement among The Guarantee
Life Companies Inc., Ohio Farmers Insurance
Company and Westfield Life Insurance Company
dated as of March 19, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE GUARANTEE LIFE COMPANIES INC.
By /s/ Richard A. Spellman
------------------------
Richard A. Spellman, Senior Vice President,
General Counsel and Secretary
March 20, 1998
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-------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
Among
THE GUARANTEE LIFE COMPANIES INC.,
OHIO FARMERS INSURANCE COMPANY
and
WESTFIELD LIFE INSURANCE COMPANY
As of March 19, 1998
-------------------------------------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
----
RECITALS................................................................ 1
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.............................................. 2
Section 1.2. Interpretation............................................ 8
ARTICLE II
SALE AND TRANSFER OF SHARES; CLOSING
Section 2.1. Sale and Transfer of Shares............................... 9
Section 2.2. The Closing............................................... 12
Section 2.3. Adjustment of Purchase Price.............................. 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1. Organization and Qualification............................ 15
Section 3.2. Capitalization; Title to Stock............................ 18
Section 3.3. Authorization and Effect.................................. 18
Section 3.4. No Violation.............................................. 20
Section 3.5. Consents and Approvals.................................... 21
Section 3.6. Financial Statements; Undisclosed Liabilities............. 21
Section 3.7. Reserves.................................................. 22
Section 3.8. Absence of Certain Changes or Events...................... 22
Section 3.9. Taxes and Tax Returns..................................... 23
Section 3.10. Proceedings.............................................. 26
Section 3.11. Compliance With Law...................................... 27
Section 3.12. Employment Matters....................................... 28
Section 3.13. Employee Benefit Plan, Pension Benefit Plan and Welfare
Benefit Plan Liabilities............................. 29
Section 3.14. [Reserved]............................................... 29
Section 3.15. [Reserved]............................................... 29
Section 3.16. Assets................................................... 30
Section 3.17. Operations Insurance..................................... 31
Section 3.18. Brokerage Fees........................................... 32
Section 3.19. Environmental Matters.................................... 32
Section 3.20. Contracts................................................ 34
Section 3.21. Insurance Issued by Company.............................. 37
Section 3.22. Threat of Cancellation................................... 39
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Section 3.23. Accounting Practices..................................... 39
Section 3.24. State Insolvency Funds................................... 39
Section 3.25. Investment Representations............................... 39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GUARANTEE
Section 4.1. Organization.............................................. 41
Section 4.2. Authorization of Agreement................................ 42
Section 4.3. Consents and Approvals; No Violations..................... 42
Section 4.4. Financing; Certain Insurance Regulatory Approvals......... 43
Section 4.5. Brokers................................................... 43
Section 4.6. Guarantee Disclosure Documents............................ 44
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1. Expenses.................................................. 45
Section 5.2. Further Assurances........................................ 45
Section 5.3. Consents.................................................. 45
Section 5.4. Announcements or Communications........................... 46
Section 5.5. Access.................................................... 47
Section 5.6. Conduct of the Company's Business......................... 47
Section 5.7. Notification.............................................. 51
Section 5.8. No Solicitation or Negotiation............................ 51
Section 5.9. Tax Elections and Consolidated Tax Return................. 52
Section 5.10. Benefits................................................. 53
Section 5.11. Extraordinary Dividend................................... 53
Section 5.12. Redomestication.......................................... 53
Section 5.13. Record Retention......................................... 54
Section 5.14. Directors' Qualifying Shares............................. 54
Section 5.15. Additional Post-closing Obligations...................... 54
Section 5.16. Updated Schedules........................................ 56
Section 5.17. Financial Statements..................................... 57
Section 5.18. WARN Act................................................. 57
ARTICLE VI
CLOSING DATE CONDITIONS
Section 6.1. Conditions to Each Party's Obligations.................... 57
Section 6.2. Conditions to the Obligations of the Seller............... 59
Section 6.3. Conditions to the Obligations of Guarantee................ 60
ARTICLE VII
TAX MATTERS
Section 7.1. No Carryback of Net Operating Loss, Etc................... 62
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Section 7.2. Payments in Respect of Taxes and Tax Returns for Stub Period
Prior to and Including the Closing Date................... 62
Section 7.3. Mutual Cooperation............................................. 64
Section 7.4. Section 338(h)(10) Election.................................... 65
Section 7.5. Allocation of Purchase Price................................... 65
ARTICLE VIII
TERMINATION
Section 8.1. Termination of This Agreement.................................. 66
Section 8.2. Effect of Termination.......................................... 67
ARTICLE IX
INDEMNIFICATION
Section 9.1. Indemnification by the Seller.................................. 69
Section 9.2. Indemnification by Guarantee................................... 70
Section 9.3. Procedures for Indemnification................................. 70
Section 9.4. Survival of Indemnification.................................... 72
Section 9.5. Limitations on Liability for Certain Losses.................... 72
Section 9.6. Subrogation.................................................... 72
Section 9.7. Other Benefits................................................. 72
ARTICLE X
SURVIVAL OF REPRESENTATIONS; EFFECT OF CERTIFICATES
Section 10.1. Survival of Representations, Warranties, Covenants and
Agreements................................................ 73
Section 10.2. Effect of Certificates........................................ 74
Section 10.3. Reliance...................................................... 74
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. Amendment and Modification.................................... 74
Section 11.2. Waiver of Compliance; Consents................................ 74
Section 11.3. Notices....................................................... 75
Section 11.4. Assignment.................................................... 76
Section 11.5. No Third-Party Beneficiaries.................................. 76
Section 11.6. Confidentiality of Information and Documents.................. 76
Section 11.7. Governing Law................................................. 77
Section 11.8. [Reserved.]................................................... 77
Section 11.9. Counterparts.................................................. 77
Section 11.10. Headings..................................................... 77
Section 11.11. Knowledge of the Seller...................................... 77
Section 11.12. Entire Agreement............................................. 78
iii
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SCHEDULES
Schedule 3.1(a) Good Standing
Schedule 3.1(c) Licenses, Permits, Etc.
Schedule 3.1(d) Articles/Code of Regulations
Schedule 3.2 Capitalization
Schedule 3.4 No Violation
Schedule 3.5 Company Consents and Approvals
Schedule 3.6(a) Financial Statements
Schedule 3.6(b) Undisclosed Liabilities
Schedule 3.8 Absence of Changes
Schedule 3.9(a) Tax Returns
Schedule 3.9(b) Payment of Taxes
Schedule 3.9(c) Audit History
Schedule 3.9(f) Existing Partnerships
Schedule 3.9(i) Policyholders' Surplus Account
Schedule 3.10 Proceedings
Schedule 3.11(a) Compliance With Law
Schedule 3.11(b) Compliance With Law
Schedule 3.12 Employment Matters
Schedule 3.16(a) Assets
Schedule 3.16(b) Assets
Schedule 3.16(d) Assets
Schedule 3.17 Operations Insurance
Schedule 3.18 Brokerage Fees
Schedule 3.19(a) Environmental Matters
Schedule 3.19(b) Environmental Matters
Schedule 3.19(c) Environmental Matters
Schedule 3.20 Contracts
Schedule 3.21 Insurance Issued by Company
Schedule 3.22 Threat of Cancellation
Schedule 3.24 State Insolvency Funds
Schedule 4.3 Guarantee Consents and Approvals
Schedule 5.15 Guaranteed Policies
EXHIBITS
Exhibit A Form of Marketing Agreement
Exhibit B Form of Shareholder Agreement
Exhibit C Form of Administrative Services Agreement
Exhibit D-1 Form of Opinion of Guarantee's Special Counsel
Exhibit D-2 Form of Opinion of Guarantee's General Counsel
Exhibit E Form of Opinion of Seller's Counsel
iv
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of March 19, 1998 by and among The Guarantee Life Companies Inc., a
corporation organized and existing under the laws of the State of Delaware
("Guarantee"), Ohio Farmers Insurance Company, a corporation organized and
existing under the laws of the State of Ohio (the "Seller"), and Westfield Life
Insurance Company, a corporation organized and existing under the laws of the
State of Ohio (the "Company").
WHEREAS, at Closing (as defined below) Seller will own all of the issued
and outstanding capital stock of the Company; and
WHEREAS, subject to the terms and conditions set forth in this Agreement,
Guarantee desires to purchase from Seller, and Seller desires to sell to
Guarantee, all of the issued and outstanding capital stock of the Company; and
WHEREAS, Guarantee will pay to Seller an aggregate of $100,000,000 for the
Stock under this Agreement, subject to adjustment as set forth herein, and in
consideration of entering into the Marketing Agreement, Shareholder Agreement
and Administrative Services Agreement;
NOW, THEREFORE, for and in consideration of the promises and the mutual
covenants and agreements herein contained, the parties, intending to be legally
bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. In addition to other terms that are defined
herein, the following terms shall have the definitions set forth in this
Section:
"Affiliate" means any Person which directly or indirectly controls, or is
controlled by, or is under common control with, such other Person, including
without limitation, its direct or
<PAGE>
indirect parent and subsidiary entities. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Stock Purchase Agreement, as defined in the preamble
hereto.
"Annual Statements" shall mean annual Financial Statements prepared in
accordance with SAP and filed pursuant to state insurance laws.
"Assets" shall mean all rights, titles, franchises and interests in and to
every species of property, real, personal and mixed, tangible and intangible,
and things in action thereunto belonging, including, without limitation, cash
and cash equivalents, securities (including, without limitation, exempted
securities under the Securities Act of 1933, as amended), receivables,
recoverables (from reinsurance and otherwise), deposits and advances, loans,
agent balances, real property (together with buildings, structures and the
improvements thereon, fixtures contained therein and appurtenances thereto and
easements and other rights relating thereto), machinery, equipment, furniture,
fixtures, leasehold improvements, vehicles and other Assets or property, leases,
Licenses, permits, approvals, Authorizations, joint venture agreements,
contracts or commitments, whether written or oral, policy forms, training
materials, underwriting manuals, lists of policyholders and agents, processes,
trade secrets, know-how, software, computer programs and source codes, protected
formulae, all other Intellectual Property, research, goodwill, prepaid expense,
books of account, records, files, invoices, data, rights, claims and privileges
and any other Assets whatsoever.
"Authorization" shall have the meaning set forth in Section 3.12(b) hereof.
<PAGE>
"Business Day" means any day other than a Saturday, Sunday, federal holiday
or any other day on which banking institutions in the State of Nebraska or the
State of Ohio are authorized by law, or by executive order, to be closed.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" means the date on which the Closing described in Section 2.2
hereof takes place.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Westfield Life Insurance Company, a stock life insurance
corporation organized and existing under the laws of the State of Ohio.
"Company Operating Facility" shall mean any operating facility which is
owned or leased by the Company or in the management of which the Company
actively participates.
"DOL" shall mean the United States Department of Labor.
"Employee Benefit Plans" means all (a) "employee benefit plans," as defined
in Section 3(3) of ERISA, and (b) other plans providing money, services,
property or other benefits, in respect of any present or former employees,
directors, officers or shareholders of the Company.
"Environmental Claim" shall mean any written notice by a Person alleging
actual or potential liability (including, without limitation, potential
liability for any investigatory cost, clean-up cost, governmental response cost,
natural resources damage, property damage, personal injury or penalty) arising
out of, based on or resulting from (a) the presence, transport, disposal,
discharge or release of any Materials of Environmental Concern at any location,
whether or not owned by the Company, or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
<PAGE>
"Environmental Laws" shall mean all federal, state, local and foreign laws
relating to pollution or to protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases, or the presence of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, existence, treatment, storage, disposal,
transport, recycling, reporting or handling of Materials of Environmental
Concern.
"ERISA" means Employee Retirement Income Security Act of 1974, as amended.
"Financial Statements" means the balance sheet(s) and the related
statements of income, Shareholders' equity and cash flows, including the notes
appended thereto, prepared on a statutory basis in accordance with SAP.
"GAAP" means generally accepted accounting principles applied on a
consistent basis, subject to, in the case of unaudited interim financial
statements, normal year-end adjustments and the absence of footnote disclosure.
"Guarantee" means The Guarantee Life Companies Inc., a corporation
organized and existing under the laws of the State of Delaware, and its
successors and permitted assigns.
"HSR Act" means The Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Insurance Policies" means all life insurance policies and annuity
contracts issued by the Company.
"Intellectual Property" means all patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, service marks and service
mark rights, service names and service name rights, brand names, inventions,
processes, formulae, copyrights and copyright
<PAGE>
rights, business and product names, logos, slogans, trade secrets, processes,
designs, methodologies, computer programs (including all source codes) and
related documentation, technical information, manufacturing, know-how and all
pending applications for and registrations of patents, trademarks, service marks
and copyrights.
"IRS" shall mean the Internal Revenue Service.
"Knowledge of the Seller" shall have the meaning set forth in Section 11.11
hereof.
"Liability" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including, but not limited to, any liability related to any assumption
reinsurance or the sale or purchase of any Assets.
"License" means a license, certificate of authority, permit or other
authorization to transact an activity or business issued or granted by a
governmental entity.
"Life Target Premium" means new, annualized individual life premium, net of
first year lapses, including all term premium and fully commissioned universal
life and interest sensitive whole life premium (in the aggregate and
individually by agent) attributable to sales activities on behalf of Guarantee
and its Affiliates (including the Company for purposes of this calculation) by
persons who were life insurance agents of the Company at or prior to the Closing
Date during the one year period beginning on July 1, 1998.
"Material Adverse Effect" means a material adverse effect on the business,
operations, property or financial condition of the Company, which in the
reasonable judgment of Guarantee (i) will result in losses, damages or expenses
in excess of $100,000 per incident or $500,000 in the aggregate or (ii) is of a
nature as to effectively prevent the Company from operating in the manner in
which it presently operates.
<PAGE>
"Materials of Environmental Concern" shall mean chemical, pollutants,
contaminants, wastes, toxic or hazardous substances, petroleum and petroleum
products.
"NAIC" means the National Association of Insurance Commissioners.
"Ohio Director" means the Director of the Ohio Insurance Department.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Benefit Plan" shall mean any plan as defined in Section 3(2) of
ERISA which provides benefits to any present or former employees, officers or
directors of the Company.
"Permitted Liens" shall mean, as to any Person, (i) all liens on Assets of
such Person approved in writing by Guarantee, (ii) statutory liens arising out
of operation of law with respect to a liability which is incurred in the
ordinary course of business and can be paid without interest or penalty, (iii)
such liens and other imperfections of title as do not materially detract from
the value or impair the use of the Assets subject thereto or (iv) such liens on
the Assets of such Person as may result on or after the Closing Date from any
action or inaction by Guarantee or its Subsidiaries or such liens which
otherwise become applicable to the Assets of Guarantee on or after the Closing
Date.
"Person" means any natural person, corporation, firm, partnership, limited
liability company, association, government, governmental agency or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Proceedings" shall mean audits, hearings, investigations and examinations
(by whatever name or title) communicated orally or in writing by governmental
entities, and actions, suits and claims made orally or in writing (by whatever
name or title) by any Person.
<PAGE>
"Purchase Price" means the amount to be paid by Guarantee to the Seller as
consideration for the purchase of the Stock and Seller's covenant not to compete
contained in the Marketing Agreement, in accordance with Section 2.1 hereof.
"Quarterly Statements" shall mean the quarterly Financial Statements of the
Company prepared in accordance with SAP and filed pursuant to state insurance
law.
"SAP" shall mean accounting practices required or permitted by the Ohio
Department of Insurance applied on a consistent basis subject to, in the case of
unaudited interim financial statements, normal year end adjustments and, in the
case of all unaudited financial statements, the absence of interrogatories or
footnote disclosure to the extent required or permitted.
"Seller" shall mean Ohio Farmers Insurance Company, an Ohio corporation.
"Software" shall mean, whether used separately or as part of any other
defined term, any program or algorithm, whether in source code or object code,
and in whatever form or media stored, used in connection with the computer
processing and storage of data.
"Stock" means all of the issued and outstanding shares of capital stock of
the Company.
"Tax" or "Taxes" means any and all taxes imposed by any United States
federal, state or local taxing authority, or by any foreign taxing authority,
including, without limitation, all income, gross receipts, sales, use, personal
property, use and occupancy, business, occupation, mercantile, ad valorem,
transfer, License, withholding, payroll, employment, excise, premium, real
estate, environmental, capital stock, franchise, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalties
(including information reporting penalties) or other additions thereto, whether
disputed or not.
<PAGE>
"Tax Return" means any written return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Welfare Benefit Plans" shall mean any plan defined in Section 3(1) of
ERISA, any cafeteria plan under Section 125 of the Code, any dependent care
assistance plan under Section 129 of the Code and any educational assistance
plan under Section 127 of the Code, in each case providing benefits to any
present or former employees, directors or officers of the Company.
Section 1.2. INTERPRETATION. In this Agreement, unless a clear contrary
intention appears:
(a) the singular includes the plural and vice versa;
(b) reference to any Person includes such Person's successors and
assigns;
(c) reference to any gender includes the other gender;
(d) reference to any agreement (including this Agreement and the
Schedules and Exhibits), document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to
time in accordance with the terms thereof;
(e) reference to any Article, Section, Schedule or Exhibit means such
Article or Section hereof or Schedule or Exhibit hereto;
(f) "hereunder," "hereof," "hereto" and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof;
<PAGE>
(g) "including" (and, with correlative meaning, "include") means
including without limiting the generality of any description preceding such
term; and
(h) relative to the determination of any period of time, "from" means
"from and including" and "to" means "to and including."
ARTICLE II
SALE AND TRANSFER OF SHARES; CLOSING
Section 2.1. SALE AND TRANSFER OF SHARES. (a) Subject to the terms and
conditions of this Agreement, at the Closing Guarantee shall purchase from the
Seller and the Seller shall sell to Guarantee, the Stock for an aggregate
purchase price of One Hundred Million Dollars ($100,000,000) (the "Purchase
Price"), to be paid pursuant to this Section 2.1, subject to adjustment as
provided in Section 2.3 hereof.
(b) At the Closing, Ninety-seven Million Dollars ($97,000,000) of the
Purchase Price shall be payable by Guarantee to the Seller as follows: (i)
Eighty-seven Million Dollars ($87,000,000) shall be paid by Guarantee by wire
transfer of immediately available funds to one or more bank account(s) of the
Seller identified in writing by the Seller not less than two Business Days prior
to the Closing and (ii) delivery of one or more certificates registered in the
name of the Seller representing the number of shares of Guarantee common stock
reflecting a value of Ten Million Dollars ($10,000,000) (the "Guarantee Stock"),
with such valuation to be based upon the mean average of the respective closing
prices (as reported in The Wall Street Journal) of Guarantee Stock for each of
the 10 consecutive trading days ending on and including the date which shall be
the third Business Day immediately preceding the Closing Date (the "Average
Closing Price"). Notwithstanding any other provision of this Agreement, if such
number of shares of Guarantee Stock would be greater than 4.9% of the total
issued and
<PAGE>
outstanding shares of Guarantee Stock, including such shares to be issued to the
Seller, as of the Closing Date, then the number of shares of Guarantee Stock to
be issued to the Seller shall be reduced to a number that shall not exceed 4.9%
of the total issued and outstanding shares of Guarantee Stock, including such
shares to be issued to the Seller, as of the Closing Date and the cash portion
of the Purchase Price payable to the Seller on the Closing Date pursuant to this
Section 2.1(b) shall be increased by the amount which the value of the Guarantee
Stock, as determined pursuant to this Section 2.1(b), issued to the Seller is
less than Ten Million Dollars ($10,000,000). The closing prices of Guarantee
Stock shall be subject to appropriate adjustment in the event of a stock split,
stock dividend or other recapitalization applicable to shares of Guarantee Stock
which becomes effective during such 10 consecutive trading days. The balance of
the Purchase Price, constituting the Escrowed Purchase Price (as defined below),
shall be payable pursuant to Section 2.1(c) below.
(c) Three Million Dollars ($3,000,000) of the Purchase Price shall be held
by Guarantee in escrow for the benefit of the Seller until August 1, 1999 (the
"Escrowed Purchase Price"). As soon as practicable after June 30, 1999, but no
later than July 20, 1999, Guarantee shall deliver to the Seller a detailed
schedule setting forth the Life Target Premium. On August 1, 1999, the Escrowed
Purchase Price shall be distributed as follows. If the aggregate Life Target
Premium is greater than Five Million Dollars ($5,000,000), the Escrowed Purchase
Price shall be delivered by Guarantee to the Seller by wire transfer of
immediately available funds, together with interest thereon at a rate of 10% per
annum. If the aggregate Life Target Premium is less than Five Million Dollars
($5,000,000), the entire Escrowed Purchase Price shall be retained by Guarantee
and the Seller shall have no claim with respect thereto.
<PAGE>
(d) If requested, Guarantee shall give the Seller prompt and reasonable
access to the books and records of Guarantee and its Affiliates in order to
permit the Seller to review and confirm Guarantee's calculation of the Life
Target Premium. If the Seller disputes Guarantee's calculation of the Life
Target Premium, the obligation of Guarantee to distribute the Escrowed Purchase
Price hereunder shall be stayed pending resolution pursuant to this subsection.
If and to the extent the Seller delivers its objection to Guarantee, both
parties shall submit the dispute as promptly as reasonably possible thereafter
to KPMG Peat Marwick LLP or such other nationally recognized accounting firm
mutually agreed to by the Seller and Guarantee, which shall review Guarantee's
calculation of the Life Target Premium, the Seller's objections thereto, and
such other information as such accounting firm shall reasonably request from
Guarantee in order to arrive at an accurate calculation thereof, and which shall
deliver to both parties its determination of the proper amount of the Life
Target Premium. The determination of such accounting firm, as set forth in a
notice delivered to both parties by such accounting firm shall be binding and
conclusive on all parties, and the Seller and Guarantee shall share equally in
the expenses of such accounting firm in respect thereof. In connection with the
performance of its services, both the Seller and Guarantee shall enter into any
agreement(s) with such accounting firm as it may reasonably request in order to
permit it to render its decision.
(e) In addition to the delivery of the Stock, at the Closing the Seller
shall deliver to Guarantee a Marketing Agreement in substantially the form of
Exhibit A, a Shareholder Agreement in substantially the form of Exhibit B and an
Administrative Services Agreement in substantially the form of Exhibit C. The
parties agree to allocate $97,000,000 of the Purchase Price to the purchase of
the Stock and $3,000,000 to the Marketing Agreement.
<PAGE>
Section 2.2. THE CLOSING. Upon the terms and subject to the conditions
contained in this Agreement, the closing (the "Closing") of the transactions
contemplated by this Agreement will take place on a date which is the last
Business Day of the month in which there is satisfaction or waiver of all
conditions set forth in Article VI at least five Business Days prior to the last
Business Day of such month (the "Closing Date") and at the offices of the
Seller, or such other location mutually agreed upon by the parties at 11:00 a.m.
local time, but in no event shall the Closing Date be later than May 31, 1998,
unless such date is extended by agreement of the Seller and Guarantee; provided,
however, the Seller or Guarantee may extend the Closing Date pursuant to this
Section 2.2 for up to two consecutive 31-day periods, provided the extending
party is not in breach or default under the terms of this Agreement and the
conditions to the Closing set forth in Article VI have not been satisfied. At
the Closing Date, (a) the Seller will deliver to Guarantee the Stock and the
various agreements, certificates, instruments and documents to be delivered
pursuant to Section 6.3, (b) Guarantee will deliver to the Seller the Purchase
Price and various agreements, certificates, instruments and documents to be
delivered pursuant to Section 6.2.
Section 2.3. ADJUSTMENT OF PURCHASE PRICE. (a) The Seller and Guarantee
shall cause financial statements ("Closing Financial Statements") of the Company
to be prepared as of the Closing Date and for the period from December 31, 1997
through the Closing Date, including a computation of statutory surplus as of the
Closing Date determined on the basis of SAP (the "Closing Statutory Surplus").
The Seller and Guarantee agree to fully cooperate with each other in the
preparation of the Closing Financial Statements and to cause the Closing
Financial Statements to be delivered to each of them within 60 days after the
Closing Date. If within 30 days following delivery of the Closing Financial
Statements neither the Seller nor Guarantee has
<PAGE>
given the other party notice of its objection to the Closing Financial
Statements (such notice must contain a statement of the basis of the objection),
then the Closing Statutory Surplus reflected in the Closing Financial Statements
will be used in adjusting the Purchase Price. If and to the extent a party
delivers its objection to the other party, both parties shall submit the dispute
as promptly as reasonably possible thereafter to Ernst & Young LLP or such other
nationally recognized accounting firm mutually agreed to by the Seller and
Guarantee, which shall review the Closing Financial Statements to assure that
the Closing Statutory Surplus has been accurately calculated, the party's
objections thereto, and such other information as such accounting firm shall
reasonably request from Guarantee or the Seller in order to arrive at an
accurate calculation thereof, and which shall deliver to both parties its
determination of the matters in dispute. The determination of such accounting
firm, as set forth in a notice delivered to both parties by such accounting firm
shall be binding and conclusive on all parties, and the Seller and Guarantee
shall share equally in the fees and expenses of such accounting firm in respect
thereof. In connection with the performance of its services, both the Seller
and Guarantee shall enter into any agreement(s) with such accounting firm as it
may reasonably request in order to permit it to render its decision.
(b) On the tenth Business Day following the final determination of the
Closing Statutory Surplus, if the Closing Statutory Surplus is greater than the
Statutory Surplus of the Company at December 31, 1997 by more than $3,000,000,
Guarantee will pay to the Seller the amount by which such excess is greater than
$3,000,000 and if the Closing Statutory Surplus is less than the Statutory
Surplus of the Company at December 31, 1997 by more than $3,000,000, the Seller
will pay to Guarantee the amount by which such difference is greater than
$3,000,000; provided, however, that the Closing Statutory Surplus shall be
increased by the
<PAGE>
amount of any reduction recorded thereto on account of the payment of any
dividends as permitted or contemplated by this Agreement, including any
Schedules hereto. Any such payments shall be deemed adjustments to the Purchase
Price for all purposes. All payments will be made together with interest at the
London Interbank Offered Rate for three months as published in The Wall Street
Journal on the Closing Date, compounded daily beginning on the Closing Date and
ending on the date of payment. Payments must be made in immediately available
funds.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to Guarantee that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete in all material respects as of the
Closing Date (except that any representation or warranty that is given as of a
particular date and relates solely to a particular date or period is given as of
such date or period). Nothing in a Schedule attached to this Agreement shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, unless the Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself or
the document itself clearly represents such exceptions on its face). If and to
the extent any information required to be furnished in any Section of any
Schedule hereto is contained in another Section of such Schedule or in any other
Schedule hereto, such information will be deemed to be included in all Sections
<PAGE>
of each Schedule in which such information is required to be included, but only
if and to the extent such disclosure appropriately refers to the other
Section(s) or it is clearly apparent from the disclosure that it would apply to
another Schedule as well. Except where the context otherwise requires, (as, for
example, in Sections 3.1(a) and 3.2) all references in Article III to "the
Company" shall include the Company and WABSCO. The Seller hereby represents and
warrants to Guarantee as follows:
Section 3.1. ORGANIZATION AND QUALIFICATION.
(a) Company. The Company is duly incorporated, validly existing and
in good standing under the laws of the State of Ohio and has all corporate
power and authority necessary to own its Assets and to conduct its business
as it is currently being conducted, or, assuming all actions contemplated
by this Agreement to be taken by the Closing Date have been so taken, as it
will be conducted as of the Closing Date. The Company is duly qualified to
do business, and is in good standing as a foreign corporation, in each
jurisdiction where, due to the character of its Assets owned or leased or
the nature of its business, the failure to be so qualified does not and
would not have Material Adverse Effect. Schedule 3.1(a) sets forth for the
Company the states in which it is qualified or authorized to do business as
a foreign corporation.
(b) Subsidiaries. The only Subsidiary of the Company is Westfield
Assigned Benefits Company, an Ohio corporation ("WABSCO"), which is duly
incorporated and validly existing under the laws of the State of Ohio and
has all corporate power and authority necessary to own its Assets and to
conduct its business as currently conducted or, assuming all actions
contemplated by this Agreement to be taken by the Closing Date have been so
taken, as such business will be conducted as of the Closing Date.
<PAGE>
WABSCO is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction where, due to the character of its Assets
owned or leased or the nature of its business, it is required to be
qualified, except where the failure to be so qualified and in good standing
would not have a Material Adverse Effect.
(c) Licenses. The Company has all Licenses that are necessary for the
conduct of its businesses, as disclosed on Schedule 3.1(c) Part I, except
where failure to have such Licenses would not have a Material Adverse
Effect; such Licenses are in full force and effect and are sufficient for
the ownership of its Assets and the conduct of such businesses; the Company
has not received any written notice from any Person that any material
violations are being or have been alleged in respect of any such License;
and no Proceeding for the purpose of suspending, revoking, amending,
restricting or limiting any such License is pending or, to the Knowledge of
the Seller, threatened. Without limiting the generality of the foregoing,
Schedule 3.1(c), Part II contains a list of all jurisdictions wherein the
Company is authorized to conduct an insurance business and maintains a
valid and effective insurance License, and lists the lines, types or
classes of insurance, by jurisdiction, for which the Company is permitted
to act as a direct writer or as a reinsurer. The only states in which the
Company does not maintain an insurance License are the states listed in
Schedule 3.1(c), Part III. Except as disclosed in Schedule 3.1(c), Part
IV, the Company has not agreed with any governmental entity or other Person
to the imposition of any limitation, condition or restriction on any of the
Company's insurance Licenses other than those limitations, conditions or
restrictions as are imposed by applicable insurance law or as are set forth
on the face of the relevant insurance License, and to the Knowledge of the
Seller there has been no event or
<PAGE>
Proceeding during the last three years which should lead to the revocation,
amendment, suspension, limitation, restriction or nonrenewal of any
insurance License. Within the last three years, the Company has filed all
Annual Statements, Quarterly Statements and other reports required by
applicable insurance laws and the Seller has filed all holding company
filings required by applicable insurance laws except where failure to do so
would not have a Material Adverse Effect. Schedule 3.1(c), Part V sets
forth the most recent date of the last completed triennial financial
examination of the Company conducted by the Ohio Director, a copy of which
report has been provided to Guarantee. Except as set forth in Schedule
3.1(c), Part VI, during the past 10 years, to the Knowledge of the Seller
the Company has committed no violations of insurance law which could,
individually or in the aggregate, have a Material Adverse Effect. Except
as set forth in Schedule 3.1(c), Part VII, there are no outstanding orders
applicable to the Company issued by any governmental entity (other than an
order generally applicable to companies in the same business as the
Company) that restrict the Company's ability to pay dividends or regulate
or establish levels of reserves or other financial ratios.
(d) Articles of Incorporation, Code of Regulations and Minute Books.
Schedule 3.1(d) contains a true and complete copy of the Articles of
Incorporation and Code of Regulations of the Company as in effect on the
date hereof. The Company is not in default under or in violation of any
provision of its Articles of Incorporation or Code of Regulations. The
minute books of the Company accurately reflect all material actions taken
at all meetings and consents in lieu of meetings of the shareholders of the
Company and all actions taken at all meetings and consents in lieu of
meetings of its
<PAGE>
Board of Directors (and all committees thereof). The stock records of the
Company are complete and accurate in all material respects.
Section 3.2. CAPITALIZATION; TITLE TO STOCK. The capital stock of the
Company is as set forth in Schedule 3.2. The Company does not have any shares
of capital stock issued and outstanding except as set forth in such schedule.
All of the issued and outstanding shares of the Company have been validly
issued, are fully paid and nonassessable and are owned of record and
beneficially by the Seller (exclusive of nine shares of the Company's capital
stock which is owned by directors of the Company as qualifying shares, all of
which will be redeemed and cancelled on or prior to the Closing). There are no
outstanding subscriptions, options, warrants, calls, rights (including
unsatisfied preemptive rights), convertible securities, obligations to make
capital contributions or advances, or voting trust arrangements, proxies,
shareholders' agreements or other agreements, commitments or understandings of
any character relating to the issued or unissued capital stock of the Company or
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of such capital stock, or otherwise obligating the
Company to issue, transfer or sell any of such capital stock or such other
securities. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to the Company.
Section 3.3. AUTHORIZATION AND EFFECT.
(a) Authority. The Seller has the requisite corporate power and
authority to execute and deliver this Agreement and each of the other
agreements required to be executed and delivered by the Seller hereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each of the other agreements
required to be executed and delivered by the Seller
<PAGE>
hereunder and the consummation of the transactions contemplated hereby and
thereby have been duly approved and authorized by the Seller's Board of
Directors. No other corporate proceedings on the part of the Seller are
necessary to authorize and consummate this Agreement and each of the other
agreements required to be executed and delivered by the Seller hereunder or
the transactions contemplated hereby and thereby.
(b) Binding Obligation. This Agreement has been duly and validly
executed and delivered by the Seller and (assuming this Agreement is a
legal, valid and binding obligation of Guarantee) constitutes a legal,
valid and binding agreement of the Seller enforceable against the Seller in
accordance with its terms, except as such enforcement may be subject to
bankruptcy, rehabilitation, liquidation, conservation, dissolution,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and to general
principles of equity (regardless of whether enforcement is sought in a
Proceeding at law or in equity). Each other agreement to be executed and
delivered by the Seller pursuant to this Agreement at the Closing has been,
or by the Closing Date will be, duly approved and authorized by all
necessary corporate action of the Seller and, upon execution and delivery
thereof by the Seller (and assuming such agreement will at such time be a
legal, valid and binding obligation of the other Persons who are parties
thereto), will constitute the legal, valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, except
as such enforcement may be subject to bankruptcy, rehabilitation,
liquidation, conservation, dissolution, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and subject
<PAGE>
to general principles of equity (regardless of whether enforcement is
sought in a Proceeding at law or in equity).
Section 3.4. NO VIOLATION. The execution, delivery and performance of
this Agreement by the Seller and each of the other agreements required to be
executed and delivered by the Seller hereunder and the consummation of the
transactions contemplated hereby and thereby will not (a) constitute a breach or
violation of or default under the Articles of Incorporation or the Code of
Regulations (or similar organizational documents) of the Seller or the Company;
(b)(i) except as set forth in Schedule 3.4, violate, conflict with, or result in
a breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, result in
the termination or acceleration under, result in a modification of the effect
of, or give rise to any right of termination or acceleration under, any of the
terms, conditions or provisions of any contract to which the Seller or the
Company is a party or to which they or any of their Assets may be subject, or
(ii) result in the creation or imposition of any lien upon any of the Assets of
the Company; (c) constitute a breach or violation of or default under, or
otherwise cause any impairment of, any insurance License or any other License of
the Company (it being understood that in certain jurisdictions the Company may
be obligated to requalify or otherwise amend its certificate of authority in
connection with the change in Stock ownership contemplated by this Agreement,
and the Seller makes no representation or warranty with respect thereto); (d)
violate any order applicable to or binding upon the Company; or (e) violate any
law applicable to the Seller, the Company or any of their Affiliates.
Section 3.5. CONSENTS AND APPROVALS. Except as set forth on Schedule 3.5,
Part I, no regulatory approval or other consent, approval, order or
Authorization of, or registration,
<PAGE>
application, declaration or filing with (the required regulatory approvals plus
such other acts or filings being referred to hereafter, collectively, as the
"Consents or Filings"), any government entity is required by the Seller or the
Company in connection with the execution and delivery of this Agreement and each
of the other agreements required to be executed and delivered by Guarantee
hereunder and the consummation of the transactions contemplated hereby and
thereby. Schedule 3.5, Part II lists all material contracts relating, directly
or indirectly, to the Company's business (i) that are between other Persons and
the Company; and (ii) that expressly or by implication require the consent of
such other Persons in the event of the sale of the Stock or a change of control
of the Company (collectively, the "Third Party Contracts"). The Seller has no
Knowledge of any reason why any required regulatory approvals would not be
obtained solely as a result of any characteristic of the Company. The Seller
has no reason to believe that all necessary or appropriate approvals,
authorizations and consents required to be obtained by the Seller and its
Affiliates from applicable Ohio insurance regulatory authorities will not be
obtained in a manner to permit the timely consummation of the transactions
contemplated by this Agreement, or that any such approval, authorization or
consent will contain provisions or undertakings which will be unacceptable to
the Seller and its Affiliates.
Section 3.6. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Company. The Seller has previously delivered to Guarantee true
and complete copies of the audited Financial Statements of the Company for
each of the years ended December 31, 1995 and 1996 and shall deliver to
Guarantee true and complete copies of the audited Financial Statements of
the Company for the year ended December 31, 1997 pursuant to Section 5.17.
The Financial Statements for each of the years ended December 31, 1995 and
1996 present, and the Financial Statements for the
<PAGE>
year ended December 31, 1997 shall present, fairly in all material respects
the financial condition, results of operations and cash flows of the
Company as of the dates or for the periods covered thereby, in conformity
with SAP.
The Company is not required under any law to prepare Financial
Statements or file such with any governmental entity, except as disclosed
on Schedule 3.6(a).
(b) Undisclosed Liabilities. Except as set forth on Schedule 3.6(b),
the Company has no material liabilities of a nature requiring them to be
disclosed in Financial Statements prepared in accordance with SAP, other
than (i) liabilities fully reflected on the face of its December 31, 1997
audited Financial Statements and (ii) liabilities incurred since December
31, 1997 in the ordinary course of business without violation of this
Agreement.
Section 3.7. RESERVES. The opinion of the Company's actuary dated as of
December 31, 1997 has not been amended in any fashion and to the Knowledge of
the Seller there is no reason that it should be. Since such date:
(a) the Company has made no changes in its reserving practices or in
the actuarial assumptions on which such practices are based; and
(b) there have been no material adverse changes required to be made to
its reserves by any regulatory authority or by any change in circumstances
to the Knowledge of the Seller.
Section 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 3.8, since December 31, 1997, the Company has conducted its business
only in the ordinary course, consistent with past practices, and since December
31, 1997 there has not
<PAGE>
occurred any event, change or development specific or unique to it which,
individually or in the aggregate, has had or may reasonably be expected to have
a Material Adverse Effect.
Section 3.9. TAXES AND TAX RETURNS.
(a) Filing of Tax Returns. Except as set forth in Schedule 3.9(a),
Part I, the Company and WABSCO have properly completed and filed on a
timely basis and in correct form all Tax Returns required to be filed on or
prior to the date hereof. Except as set forth in Schedule 3.9(a), Part II,
neither the Company nor WABSCO have requested nor been granted an extension
of time within which to file any Tax Return which has not yet been filed.
(b) Payment of Taxes. (i) Except as set forth in Schedule 3.9(b),
with respect to all Taxes imposed upon the Company and WABSCO, or for which
they are or could be liable, whether to taxing authorities (as, for
example, under law) or to other Persons (as, for example, under tax
allocation agreements), for all taxable periods or portions of periods
ending on or before the Closing Date, all applicable tax laws and
agreements have been fully complied with in all material respects, and all
such amounts required to be paid by the Company and WABSCO to taxing
authorities or to other Persons (as, for example, under tax allocation
agreements) on or before the date hereof have been timely paid or accrued
on the books or records of the Company as of the Closing Date.
(ii) The Company and WABSCO have withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing by
it to any Person.
(c) Audit History. Except as set forth in Schedule 3.9(c), no
director, officer or other employee with responsibility for Tax matters of
Seller or any of its Affiliates
<PAGE>
has Knowledge of issues which have been or may be raised by any taxing
authority in connection with any Tax Returns filed or required to be filed
by the Company and WABSCO, and no waivers of statutes of limitation with
respect to any such Tax Returns have been given by or requested from the
Company or WABSCO. Schedule 3.9(c) also sets forth (i) the taxable years
of the Company or WABSCO as to which the statutes of limitations with
respect to federal and Ohio Taxes have not expired and (ii) with respect to
such taxable years, sets forth those years for which examinations have been
completed, those years for which examinations have not been initiated and
those years for which required Tax Returns have not yet been filed. Except
to the extent shown on such Schedule, all deficiencies asserted or
assessments made as a result of any examinations (i) have been fully paid
or (ii) are being contested and are fully reflected as a liability on the
face of the Financial Statements of the Company and/or WABSCO.
(d) Parachute Payment. Neither the Company nor WABSCO have any
liability under any agreement, contract, arrangement or plan that could
result, individually or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(e) Permanent Establishment. Neither the Company nor WABSCO have had
a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States of America
and such foreign country.
(f) Existing Partnerships. Except as set forth in Schedule 3.9(f),
neither the Company nor WABSCO is a party to any joint venture, partnership
or other arrangement or contract which could be treated as a partnership
for federal income tax purposes.
(g) [Reserved.]
<PAGE>
(h) Policies in Compliance With the Code. To the Knowledge of Seller,
all Insurance Policies issued by the Company are and have been, at all
times since their issuance, in compliance with Code Section 7702 and 7702A,
to the extent they are or were required to be in compliance therewith, and
contain all required policy provisions and endorsements necessary to
qualify as life Insurance Policies under the Code.
(i) Policyholders' Surplus Account. Except as set forth in Schedule
3.9(i), the Company does not maintain an account described in Section
815(d) of the Code.
(j) Miscellaneous. Neither the Company nor WABSCO have filed a
consent under Code Section 341(f) concerning collapsible corporations. The
Company and WABSCO have disclosed on their federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662. For all Taxable years ending on or before December 31, 1996, neither
the Company nor WABSCO has been a party to any Tax allocation or sharing
agreement nor has either been a member of an affiliated group filing a
consolidated federal income Tax Return other than one of which the Company
was the common parent corporation, and neither has any Liability for the
Taxes of any other Person under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local, or foreign law). The Company and
WABSCO shall be included as members in Seller's consolidated federal income
Tax Return to be filed for the tax year ended December 31, 1997.
Section 3.10. PROCEEDINGS. (a) Except as set forth in Schedule 3.10, Part
I, and except for routine contractual claims for amounts payable in accordance
with the terms of, and within the policy limits of, an Insurance Policy in the
ordinary course of business, there are no
<PAGE>
Proceedings pending or, to the Knowledge of the Seller, threatened against the
Company or any of the current or former directors, officers, employees or agents
(excluding insurance agents) of the Company (in their capacities as such) and,
to the Knowledge of the Seller, there are no Proceedings pending or threatened
against any of the current or former insurance agents of the Company nor, except
as set forth in Schedule 3.10, Part II, is the Company or any of the current or
former directors, officers, employees or agents (excluding insurance agents) of
the Company (in their capacities as such) or, to the Knowledge of the Seller,
any of the current or former insurance agents of the Company, subject to any
order issued by any court or governmental authorities relating to or arising out
of business written for the Company except orders that are generally applicable
to insurers authorized to write life insurance. Except as set forth in Schedule
3.10, Part III, and except for Proceedings that are generally applicable to
insurers authorized to write life insurance, there is no Proceeding pending or,
to the Knowledge of the Seller, threatened against the Company, or any of the
current or former directors, officers, employees or agents (excluding insurance
agents) of the Company (in their capacities as such) and, to the Knowledge of
the Seller, there is no Proceeding pending or threatened against any of the
current or former insurance agents of the Company relating to or arising out of
business written for the Company, which involves (i) claims of bad faith, claims
of fraud or claims involving other alleged tortious conduct by any such Person
or (ii) claims seeking punitive or multiple damage awards against any such
Person or claims relating to market conduct matters.
(b) None of the Proceedings set forth in Schedule 3.10, if adversely
determined, could reasonably be expected, either individually or in the
aggregate, to result in a Material Adverse Effect.
<PAGE>
Section 3.11. COMPLIANCE WITH LAW. (a) Except as set forth in Schedule
3.11(a), Part I, the operations of the Company have been conducted in compliance
in all material respects with all laws applicable to its business. None of the
violations described in Schedule 3.11(a), Part I, could reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth on
Schedule 3.11(a), Part II, the Company has filed or caused to be filed all
reports, statements, documents, registrations, filings or submissions which were
required by any law applicable to its business to be filed by it except where
the failure to file would not have a Material Adverse Effect, and all such
filings complied in all material respects with all such applicable laws when
filed. The Seller has delivered to, or will deliver to, Guarantee all reports
reflecting the results of examinations of the affairs of the Company issued
prior to Closing by insurance governmental entities for any period ending on a
date on or after December 31, 1993 and prior to the Closing Date, and all
deficiencies or violations in such reports for any prior period will be resolved
prior to Closing. Except as set forth in Schedule 3.11(a), Part III, all
outstanding Insurance Policies issued or assumed by the Company are, to the
extent required by applicable law, on forms and at rates approved by the
insurance governmental entities of the jurisdictions where issued or have been
filed with and not objected to by such authorities within the periods provided
for objections.
(b) Except as set forth in Schedule 3.11(b) and except for orders or
communications that are generally applicable to insurers authorized to write
life or health insurance or variable annuities or variable life insurance in the
jurisdiction to which such orders or communications apply, the Company is not a
party to any contract with or other undertaking to, nor is it subject
<PAGE>
to any order by, or a recipient of any supervisory letter or other oral or
written communication of any kind from, any governmental entity, which contract,
order or communication:
(i) materially and adversely affects the conduct of its business,
including, without limitation, its reserve adequacy, its investment, sales
or trade practices and policies, its underwriting and pricing practices and
policies or its management; or
(ii) may reasonably be expected to have a Material Adverse Effect on
the Company; nor has the Company been advised by any governmental entity
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, contract or other
communication.
Section 3.12. EMPLOYMENT MATTERS. (a) The Company does not have any
employees and has not had any employees since January 1, 1980.
(b) Employees of the Seller or its Affiliates have performed all services
required for the conduct of the business of the Company, other than services
rendered by insurance agents of the Company, and have all Licenses,
appointments, contracts, permits, authorizations, exemptions and approvals
(collectively, "Authorizations") needed in order to perform those functions that
they perform in all states or other jurisdictions in which such functions are or
have been performed, except where failure to obtain such Authorization would not
have or have had a Material Adverse Effect, all of which Authorizations are
listed in Schedule 3.12. To the Knowledge of the Seller, no insurance agents of
the Company or employees of the Seller and its Affiliates performing services
for the Company are, or have been during the past five years, in material
violation of any law or order relating to their conduct as insurance agents or
brokers. All Authorizations are valid and in full force and effect, and no
Proceeding with respect to the revocation, suspension, limitation, nonrenewal,
reduction or qualification of any Authorization
<PAGE>
is pending or to the Knowledge of the Seller threatened nor to the Knowledge of
the Seller are there grounds for any such or any material action with respect
thereto being taken.
Section 3.13. EMPLOYEE BENEFIT PLAN, PENSION BENEFIT PLAN AND WELFARE
BENEFIT PLAN LIABILITIES. After the Closing Date, neither the Company nor
WABSCO shall have any Liability (including, without limitation, any Liability
for Taxes) to any Person (including, without limitation, the DOL, the IRS and
the PBGC) under or in respect of any Employee Benefit Plan, Pension Benefit
Plan, Welfare Benefit Plan or any other plan or arrangement providing for the
payment of compensation or benefits to any Person with respect to services
rendered or amounts earned on or before the Closing Date or for any action taken
or omitted to be taken by the Seller or any of its Affiliates. As of the
Closing Date, the Company's and WABSCO's participation in all Employee Benefit
Plans, Pension Benefit Plans, Welfare Benefit Plans or any other plans or
arrangement providing for the payment of compensation or benefits to any Person
with respect to services rendered or amounts earned on or before the Closing
Date, maintained by the Seller or its Affiliates prior to the Closing Date for
the benefit of employees of the Seller and its Affiliates shall be terminated
without Liability to the Company or WABSCO.
Section 3.14. [RESERVED].
Section 3.15. [RESERVED].
Section 3.16. ASSETS. (a) The Company has, or will have as of the Closing
Date, good title to all of its Assets that are disclosed or otherwise reflected
in its Financial Statements as of December 31, 1997 or acquired in the ordinary
course thereafter, but prior to the Closing Date, except as set forth in
Schedule 3.16(a), and, except for those Assets used or sold in the ordinary
course, all such Assets are owned, or will be owned by the Closing Date, by the
Company free and clear of all liens, other than Permitted Liens.
<PAGE>
(b) Except as set forth in Schedule 3.16(b), the bonds, notes, debentures
and other evidences of indebtedness that constitute investment Assets and which
are disclosed or otherwise reflected in the Financial Statements as of December
31, 1997 are, and the bond, notes, debentures and other evidences of
indebtedness that constitute investment Assets, as of the date hereof, are, and
those that will constitute investment Assets as of the Closing Date will be, to
the Knowledge of the Seller, collectible in accordance with the terms of the
investment Assets and the documents relating thereto.
(c) The Company does not own or lease any real property, other than the
real property occupied by the Company pursuant to the Agreement dated October 1,
1968 between the Seller and the Company as amended (the "Management Agreement").
(d)(i) Except as set forth on Schedule 3.16(d), by the Closing Date all of
the following will be true: the Company will hold good title to, or have a valid
leasehold interest in or a valid right to use, all personal property that is
material to the conduct of its businesses, free and clear of all liens other
than Permitted Liens, and, in the aggregate, all such personal property will be
suitable and adequate for its current uses and will be in good operating
condition and repair, ordinary wear and tear excepted, and sufficient for the
conduct of the Company's business.
(ii) The Company has, or will have by the Closing Date, the right to use,
free and clear of any royalty or other payment obligations, claims of
infringement or alleged infringement or other liens, other than Permitted Liens
and other than contractual agreements with respect to licensing and maintenance
fees, all Intellectual Property that is material to the conduct of its
businesses and, to the Knowledge of the Seller the Company is not in conflict
with or violation or infringement of, nor is there any such conflict with or
violation or infringement of, any
<PAGE>
asserted rights of any other Person with respect to any Intellectual Property in
any material respect.
(iii) The Company shall have the right as of the Closing Date to use, free
and clear of any royalty or other payment obligations, claims of infringement or
alleged infringement or other liens, other than Permitted Liens, the Company's
corporate name, trade names, service marks and trade names, together with any
stylized logos incorporating those names or marks (collectively, the "Marks")
pursuant to Section 5.15.(g) and, to the Knowledge of the Seller the Company is
not in conflict with or violation or infringement of, nor is there any such
conflict with or violation or infringement of, any asserted rights of any other
Person with respect to any of the Marks in any material respect.
Section 3.17. OPERATIONS INSURANCE. Schedule 3.17 contains a true and
complete list of all liability, property, worker's compensation, directors' and
officers' liability and other Insurance Policies that currently insure the
Company's businesses or Assets and its officers, directors, employees or agents
(excluding insurance agents), or affect or relate to the ownership, use or
operations of the Company's Assets or to their leasehold interests that have
been issued to any of them (including, without limitation, the names of the
insurers, the expiration dates thereof and any deductible amounts in respect
thereof) and a description of all current claims thereunder relating to the
Company, its directors, officers, employees or agents (excluding insurance
agents). All such insurance is in full force and effect on the date of this
Agreement. Except as set forth in Schedule 3.17, insurance with substantially
comparable coverages was maintained by the Company during the five years
preceding the date hereof. To the Knowledge of the Seller, all notices of
material reportable incidents with respect to any of the foregoing insurance
policies which incidents have occurred since December 31, 1993 have been given
in
<PAGE>
writing to the appropriate carriers except where failure to give such notice
would not prevent recovery under such insurance policies.
Section 3.18. BROKERAGE FEES. Except as set forth in Schedule 3.18,
neither the Seller nor the Company, nor any of their respective officers,
directors, employees, agents or representatives, has employed any broker, finder
or agent, or entered into any contract with any Person to pay a brokerage fee,
commission or allowance on account of or with respect to this Agreement or the
transactions contemplated hereby.
Section 3.19. ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule
3.19(a), Part I, the Company is in compliance in all material respects with all
applicable Environmental Laws, and, except as set forth in said Schedule, no
Company Operating Facility (including, to the Knowledge of the Seller, all
owners or operators thereof insofar as such property is concerned) is in
violation of any applicable Environmental Laws in any material respect. Except
as set forth in Schedule 3.19(a), Part II, the Company has not received any
communication (written or oral) that alleges that the Company Operating Facility
(including, with respect to any Company Operating Facility, to the Knowledge of
the Seller any owner or operator thereof insofar as such property is concerned)
is not in such material compliance, and to the Knowledge of the Seller there are
no circumstances that may prevent or interfere with such compliance in the
future. There are no Licenses held by the Company pursuant to Environmental
Laws.
(b) Except as set forth in Schedule 3.19(b), there is no Environmental
Claim pending against the Company or any Company Operating Facility or, to the
Knowledge of the Seller, threatened against the Company or any Company Operating
Facility, or threatened or pending against any Person whose liability for any
Environmental Claims the Company has or may have retained or assumed either
contractually or by operation of law.
<PAGE>
(c) Except as set forth in Schedule 3.19(c), to the Knowledge of the Seller
there are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the release, emission,
discharge, disposal or presence of any Materials of Environmental Concern, that
will form the basis of any valid Environmental Claim against the Company, any
Company Operating Facility or any Person whose Liability for any Environmental
Claim the Company has or may have retained or assumed either contractually or by
operation of law.
(d) Without in any way limiting the generality of the foregoing, to the
Knowledge of the Seller there:
(i) are no underground storage tanks currently or formerly being
located on property currently owned or leased by the Company;
(ii) is no asbestos contained in or forming part of any building or
structure owned or leased by the Company; and
(iii) are no polychlorinated biphenyls ("PCBs") which are used or
stored at any property currently owned or leased by the Company.
Section 3.20. CONTRACTS. Schedule 3.20 contains a true and complete list
of all of the following contracts (true and complete copies of all such written
contracts will be made available to Guarantee upon request, and a written
summary of all material terms of such oral contracts will be made available to
Guarantee upon request), other than the insurance policies listed in Schedule
5.15, in force or operative in any respect to which the Company is a party or by
which any Assets of the Company are or may be bound, as such contracts may have
been amended:
(a) all employment, agency (other than contracts for retention of a
Person as an insurance agent and incidental matters related thereto),
brokerage, consultation,
<PAGE>
retirement (other than pursuant to the existing provisions of any Employee
Benefit Plan), representation or other contracts with present or former
employees, agents or consultants (including, without limitation, loans or
advances to any Person) with any Person which may not be terminated on
notice of 60 days or less without penalty or premium), and the name,
position and rate or terms of compensation of each such Person and the
expiration date of each such contract, as well as a true and accurate
summary of all leave, layoff, compensation or severance practices,
procedures and policies of the Company;
(b) all severance contracts with any Person and the name and position
of each such Person and the payment terms of each such contract;
(c) all consultation or other contracts with (including, without
limitation, loans or advances to) any former director or officer of the
Company, regardless of aggregate payments thereunder, with all current
directors or officers of the Company, and with any Person:
(i) of which any such director or officer of the Company is a
director or officer; or
(ii) in which any such director or officer of the Company has a
direct or indirect beneficial ownership interest (other than, with
respect to clause (ii), a publicly traded company in which such
director or officer of the Company beneficially owns 5% or less of any
class of its outstanding voting securities);
(d) all contracts with any Person, including, without limitation, any
governmental entity, containing any provision or covenant:
<PAGE>
(i) limiting the ability of the Company to engage in any line of
business, to compete with any Person, to do business with any Person
or in any location or to employ any Person; or
(ii) limiting the ability of any Person to compete with the
Company;
(e) all partnership, joint venture or profit-sharing contracts with
any Person;
(f) all contracts relating to the borrowing of money from Persons not
affiliated with the Company, other than ordinary trade payables and
receivables; or the direct or indirect guarantee of any obligation of any
Persons for, or contract to service the repayment by any Person of,
borrowed money or other financial obligation of any Person (other than
indebtedness in respect of investment Assets); or any other liability of
the Company in respect of indebtedness for borrowed money or other
financial obligation of any Person (other than indebtedness in respect of
investment Assets), including, without limitation, any contract relating to
or containing provisions with respect to:
(i) any lines of credit;
(ii) the payment for property, products or services of any other
Person even if such property, products or services are not conveyed,
delivered or rendered; or
(iii) any obligation to satisfy any financial obligation or
covenants, including, without limitation, take-or-pay, keep-well,
make-whole or maintenance of working capital, capital or earnings
levels or financial ratios or to satisfy similar requirements;
<PAGE>
(g) all contracts (other than Insurance Policies issued by the Company
or reinsurance contracts) with any Person containing any material provision
or covenant relating to the indemnification or holding harmless by the
Company;
(h) all leases, subleases or rental or use contracts providing for
annual payments to be paid by the Company individually in excess of $25,000
in any one year;
(i) all contracts relating to the future disposition (including,
without limitation, restrictions on transfer or rights of first refusal) or
acquisition of any investment Assets or of any interest in any business
enterprise, and all contracts requiring the Company to purchase or dispose
of any investment Assets, other than in the case of each of the foregoing:
(i) notes or other debt securities having a maturity date of 90
days or less from the date of purchase; or
(ii) the disposition or acquisition of any notes or debt
securities in the ordinary course of business;
(j) all investment advisory contracts with any investment company
registered under the Investment Company Act of 1940 or with any investment
advisory client;
(k) all reinsurance, retrocession, coinsurance or other similar
contracts, including, with respect to each such contract, the ceding and
assuming Person, the business reinsured or retroceded and the amount of
liability reinsured;
(l) any contracts of the Company with any of its officers, directors,
employees, insurance agents or marketing managers (other than, in the case
of insurance agents, the Company's routine contracts for insurance agents
or brokers and other matters incidental thereto); and
<PAGE>
(m) all other contracts (other than (x) Insurance Policies and (y)
employment, agency, brokerage, consultation, retirement or representation
contracts that are otherwise required to be set forth in Schedule 3.20)
that individually involve payments by or on behalf of the Company in excess
of $25,000 in any one year, other than contracts terminable by the Company
without penalty upon 60 days' notice.
Each of the contracts listed in Schedule 3.20 is in full force and effect
and (assuming each such contract is a valid and binding obligation of the other
parties thereto) constitutes, or will by the Closing Date constitute, a valid
and binding obligation of the Company to the extent that it is or will be a
party thereto, in accordance with its terms, and the Company is not, and to the
Knowledge of the Seller no other party to any such contract is, in material
violation, breach or default of any such listed contract or with notice or lapse
of time or both would be in material violation, breach or default of any such
contract. Except as set forth in Schedule 3.20, the Company is not a party to
or bound by any contract material to its business that was not entered into in
the ordinary course of business. The Company is not a party to or bound by any
collective bargaining or similar labor contract and the Seller has no Knowledge
of any threatened unionization.
Section 3.21. INSURANCE ISSUED BY COMPANY. (a) Except as set forth in
Schedule 3.21, all benefits payable by the Company under Insurance Policies have
been paid (or adequate provision for payment thereof has been made) in
accordance with the terms of the contracts under which they arose.
(b) Except as set forth in Schedule 3.21, to the Knowledge of the Seller
all outstanding Insurance Policies of the Company were issued in substantial
conformity with the Company's underwriting standards and ratings then in effect
and, with respect to such contracts
<PAGE>
reinsured in whole or in part, conform in all material respects to the standards
and ratings required pursuant to the terms of the related reinsurance,
coinsurance or other similar contracts.
(c) Except as set forth in Schedule 3.21:
(i) to the Knowledge of the Seller, all amounts recoverable under
reinsurance, coinsurance or other similar contracts (including,
without limitation, amounts based on paid and unpaid damages and
claims) relating to the Company are fully collectible;
(ii) since December 31, 1992 to the Knowledge of the Seller each
insurance agent or broker, at the time such agent or broker wrote,
sold or produced business for the Company, was duly licensed as an
insurance agent or broker (for the type of business written, sold or
produced by such insurance agent or broker) in the particular
jurisdiction in which such agent or broker wrote, sold or produced
such business; and
(iii) since December 31, 1992, to the Knowledge of the Seller no
such insurance agent or broker has, in the conduct of such Person's
activities for the Company, violated (or has taken any action which,
with notice or lapse of time or both, would have violated) in any
material respect any applicable law in a manner resulting in any
material liability to the Company.
Section 3.22. THREAT OF CANCELLATION. Since December 31, 1992, except as
set forth in Schedule 3.22, no policyholder, group of policyholders or Persons
writing, selling or producing insurance business which in the aggregate
accounted for 5% or more of the net premium income of the Company have
terminated or substantially reduced, or, to the Knowledge
<PAGE>
of the Seller, threatened to terminate or substantially reduce, its or their
relationship with the Company.
Section 3.23. ACCOUNTING PRACTICES. Except as described in audited
Financial Statements, or as required under applicable Tax or SAP accounting
rules, since December 31, 1992, the Company has not made any material changes in
its Tax or SAP accounting methods, practices or policies, including, without
limitation, any material change with respect to establishment of reserves for
unearned premiums, losses (including incurred but not reported losses) and loss
adjustment expenses, or made any material change in depreciation or amortization
policies or rates adopted by it.
Section 3.24. STATE INSOLVENCY FUNDS. Except as set forth on Schedule
3.24, the Company has received no notice of any assessment against the Company
by any State guaranty or insolvency fund other than those which are paid or
accrued on the books of the Company as of the date hereof or will be as of the
Closing Date.
Section 3.25. INVESTMENT REPRESENTATIONS. (a) The Guarantee Stock is
being purchased for its own account for investment and not with a view to, or
for sale in connection with, any distribution of such Guarantee Stock or any
part thereof.
(b) The Seller is an "accredited investor" within the meaning of Section
501(a)(3) of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and was not formed for the specific purpose of
acquiring the Guarantee Stock.
(c) The Seller has no agreement, arrangement or understanding for transfer
of any of the Guarantee Stock or any interest therein to any other person.
(d) The Seller (i) has such knowledge and experience in financial and
business matters to be able to evaluate the merits and risks of an investment in
such securities of Guarantee;
<PAGE>
(ii) has been given or had access to sufficient information regarding Guarantee
to evaluate the merits and risks of the investment in the Guarantee Stock being
acquired; and (iii) is able to bear the economic risk of the investment in the
Guarantee Stock to enable the Seller to hold the same for purposes of
investment.
(e) The Seller understands and acknowledges that (i) the Guarantee Stock
has not been registered under the Securities Act or any applicable state
securities or blue sky laws, and may be required to be held by the Seller
indefinitely, unless subsequently registered under the Securities Act and
applicable blue sky laws, or an exemption from such registration is available.
The Seller agrees that the certificate(s) representing the Guarantee Stock shall
bear a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, UNLESS AND UNTIL REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND SUCH APPLICABLE STATE LAW OR UNLESS
SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION REQUIREMENTS.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER
RESTRICTIONS CONTAINED IN A SHAREHOLDER AGREEMENT, DATED , 1998,
BY AND AMONG GUARANTEE AND A SHAREHOLDER, A COPY OF WHICH IS ON FILE AT THE
OFFICE OF GUARANTEE. TRANSFERS IN VIOLATION OF THE SHAREHOLDERS
<PAGE>
AGREEMENT ARE VOID. BY ACCEPTANCE OF THIS CERTIFICATE THE HOLDER HEREOF
AGREES TO BE BOUND BY THE TERMS OF THE SHAREHOLDER AGREEMENT.
(f) The Seller shall not offer for sale or sell the Guarantee Stock or any
interest therein except in accordance with the Shareholder Agreement set forth
in Exhibit B hereto and the provisions of the legend set forth on the Guarantee
Stock certificates pursuant to Section 3.25(e) of this Agreement and the
Shareholder Agreement.
(g) The Seller has received and reviewed the Guarantee Disclosure Documents
(as defined in Section 4.6) in connection with its investment decision to
purchase the Guarantee Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GUARANTEE
Guarantee represents and warrants to the Seller as follows:
Section 4.1. ORGANIZATION. Guarantee is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all corporate power and authority necessary to own, lease, and operate
Guarantee's properties and to carry on Guarantee's business as it is currently
being conducted.
Section 4.2. AUTHORIZATION OF AGREEMENT. Guarantee has all requisite
power and authority to execute and deliver this Agreement and each of the other
agreements required to be executed and delivered by Guarantee hereunder and to
consummate the transactions contemplated hereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and each
of the other agreements required to be executed and delivered by Guarantee
hereunder and the consummation of the transactions contemplated hereby and
thereby
<PAGE>
have been duly authorized by the Board of Directors of Guarantee, and no other
corporate proceedings on the part of Guarantee are necessary to authorize this
Agreement and each of the other agreements required to be executed and delivered
by Guarantee hereunder or to consummate the transactions contemplated hereby or
thereby. This Agreement has been and each of such other agreements will be duly
executed and delivered by Guarantee, and constitutes a valid and binding
agreement of Guarantee, enforceable against Guarantee in accordance with its
terms, except as such enforcement may be subject to bankruptcy, rehabilitation,
liquidation, conservation, dissolution, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally, subject to general
principles of equity (regardless of whether enforcement is sought in a
Proceeding at law or in equity).
Section 4.3. CONSENTS AND APPROVALS; NO VIOLATIONS. There is no
requirement applicable to Guarantee to make any filing with, or obtain any
permit, Authorization, consent or approval of, any governmental or regulatory
authority as a condition to the lawful consummation by Guarantee of the
transactions contemplated by this Agreement and each of the other agreements
required to be executed and delivered by Guarantee hereunder other than as set
forth in Schedule 4.3 attached hereto. The execution and delivery of this
Agreement and each of the other agreements required to be executed and delivered
by Guarantee hereunder by Guarantee will not (a) conflict with or result in any
breach of any provision of the Certificate of Incorporation or Bylaws (or other
similar charter documents) of Guarantee or violate any law or regulation
applicable to Guarantee; (b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, agreement, lease or other
instrument or obligation to which Guarantee or any of its Affiliates is a party
or by which any of their respective Assets may be
<PAGE>
bound, except for such defaults (or rights to termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained; or
(c) violate an order, writ, injunction or decree applicable to Guarantee, any of
its Affiliates or to any of their respective Assets.
Section 4.4. FINANCING; CERTAIN INSURANCE REGULATORY APPROVALS. (a)
Guarantee has (or will have prior to the Closing Date) made adequate provision
for the financing of the cash portion of the Purchase Price on terms reasonably
acceptable to Guarantee. Guarantee has previously provided to the Seller a true
and correct copy of a recently dated "stand ready" letter issued by Guarantee's
line of credit lender indicating such lender's willingness to finance an
acquisition transaction of the size contemplated by this Agreement.
(b) Guarantee has no reason to believe that all necessary or appropriate
approvals, authorizations and consents required to be obtained by Guarantee and
its Affiliates from applicable Nebraska insurance regulatory authorities will
not be obtained in a manner to permit the timely consummation of the
transactions contemplated by this Agreement, or that any such approval,
authorization or consent will contain provisions or undertakings which will be
unacceptable to Guarantee and its Affiliates.
Section 4.5. BROKERS. Neither Guarantee nor any of its officers,
directors, employees, agents or Affiliates has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Guarantee in connection with this Agreement or the transactions
contemplated hereby, other than with Guarantee's line of credit lender and its
Affiliates in connection with entering into the "stand ready" letter previously
delivered to the Seller by Guarantee and certain other contemplated transactions
related thereto. The Seller shall not be
<PAGE>
responsible for payment of the fees or expenses of the line of credit lender or
its Affiliates in connection with the transactions contemplated thereby.
Section 4.6. GUARANTEE DISCLOSURE DOCUMENTS. In connection with the sale
of the Guarantee Stock to the Seller, Guarantee has delivered to the Seller (or
shall deliver prior to the Closing) true and complete copies of each report
required to be filed by Guarantee with the Securities and Exchange Commission
(the "SEC") from January 1, 1996 through the Closing Date (the "Guarantee
Disclosure Documents"). Each of the Guarantee Disclosure Documents, as of the
date filed with the SEC, complied in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
SEC's rules and regulations promulgated thereunder and did not, as of such
dates, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since the date of the
most recent Form 10-Q (or, if applicable, Form 10-K) filed by Guarantee with the
SEC, there has occurred no material adverse change with respect to the business
or financial condition of Guarantee.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1. EXPENSES. Unless specifically provided to the contrary
herein, each party to this Agreement will be responsible for any costs and
expenses incurred by such party in connection with this Agreement or in
furthering the transactions contemplated hereby.
Section 5.2. FURTHER ASSURANCES. Subject to the terms and conditions of
this Agreement, each party to this Agreement will use its commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary,
<PAGE>
proper or advisable under applicable laws and regulations to consummate and to
make effective the transactions contemplated by this Agreement. From time to
time prior to the Closing Date, without further consideration, each party will,
at its own expense, provide such information (financial or other) to the other
parties as shall be necessary for each of them to obtain all consents required
hereunder and will execute and deliver such documents to each other party as it
may reasonably request in order more effectively to consummate the transactions
contemplated by this Agreement. Moreover, during a period commencing 15 days
after the date of this Agreement until the earlier of the termination of this
Agreement or the Closing Date, the Seller will cause the Company to use its
commercially reasonable efforts to introduce insurance products offered by
Guarantee's Affiliates which are mutually acceptable to the Company and
Guarantee to the Company's distribution system and to cooperate with Guarantee
to license the Company's insurance agents as agents of Guarantee's Affiliates
and to develop budgets and business plans for 1999.
Section 5.3. CONSENTS. (a) On or prior to Closing Date, the Seller and
the Company shall use their commercially reasonable efforts to obtain the
consents required in the contracts set forth in Schedule 3.5, Part II. On or
prior to the Closing Date, the Seller, the Company and Guarantee shall use their
commercially reasonable efforts to satisfy the provisions of Section 6.1(b)
hereof. The Seller, the Company and Guarantee shall work closely with each
other, and each shall use commercially reasonable efforts to cooperate fully
with each other to obtain any such necessary consents and to satisfy such
provisions. The Seller, the Company and Guarantee shall keep each other
reasonably informed as to the status of their progress with respect thereto and
when any such necessary consents are received or denied.
<PAGE>
(b) Without limiting the generality of the obligations described in Section
5.3(a), both Guarantee and the Seller shall, after the expiration of the period
for Guarantee to conduct its due diligence and submit written notice pursuant to
Section 8.1(f), promptly make all required filings under the HSR Act, including,
without limitation, a Notification and Report Form for Certain Mergers and
Acquisitions (or any successor form) and any amendments thereto with the Federal
Trade Commission and the Department of Justice, in connection with the
transactions contemplated by this Agreement as required by the antitrust laws of
the United States. In the event that any request for additional information is
properly made of either Guarantee or the Seller pursuant to the HSR Act,
Guarantee or the Seller, as the case may be, shall use its commercially
reasonable efforts to comply with such request as soon as practicable after
receipt thereof.
Section 5.4. ANNOUNCEMENTS OR COMMUNICATIONS. The Seller and Guarantee
acknowledge the damaging effects which could result from any premature
disclosure concerning the transactions contemplated by this Agreement.
Accordingly, unless a public disclosure or filing or communication with
policyholders of the Seller or shareholders of Guarantee is mandated by law or
regulation, neither the Seller (including its employees and agents (but
excluding its insurance agents)) nor Guarantee will make any public disclosure
or statements or issue press releases or otherwise make any public statements
with respect to this Agreement and the transactions contemplated hereby except
in a form and at a time which has been mutually agreed to among them. To the
extent that any disclosure or filing or communication shall be mandated by law
or regulation, it shall first be submitted to, reviewed and approved to the
extent practicable by all parties, which approval shall not be unreasonably
withheld.
<PAGE>
Section 5.5. ACCESS. At all times prior to the Closing Date, the Seller
will, upon commercially reasonable notice, cause the Company to permit
Guarantee, its officers and employees, and its agents commercially reasonable
access during normal working hours to the Company's business, properties,
Assets, books, records and personnel. In connection with the foregoing, the
Seller and the Company shall deliver or make available to Guarantee upon request
true and correct copies of all Tax Returns of the Company that were required to
be filed by or with respect to the Company for all taxable years which remain
subject to assessment and deficiency and the Company's accountants' tax
provision workpapers (involving both current and deferred income tax) and any
other accountants' workpapers dealing with the composition of any general loss
or contingency reserve accounts, and such other information relating to Tax
matters in the possession of the Seller or the Company as Guarantee may
reasonably request (including elections, consents, revenue agent's reports,
protests, closing agreements and ruling requests). The Seller shall also direct
the Company's independent accountants to make available for Guarantee's
inspection, or deliver copies to Guarantee, any such tax information, workpapers
and reports in the possession of such accountants.
Section 5.6. CONDUCT OF THE COMPANY'S BUSINESS. (a) Except as
contemplated by this Agreement, from the date hereof until the Closing Date, the
Seller shall cause the Company to:
(i) continue to conduct its businesses and operations in the ordinary
and usual course;
(ii) continue to exercise the same degree of care that the Company has
previously exercised with respect to its business;
<PAGE>
(iii) use its commercially reasonable efforts to maintain its
existing relationships with its reinsurers, agents, policyholders,
providers of specialty insurance products to its agents and other parties
with whom it has business relationships; and
(iv) cooperate with Guarantee to facilitate a smooth transition of
ownership of the Company, including consulting with Guarantee as to the
advisability of retaining the employees of the Seller who perform marketing
and underwriting functions and related support staff employees with respect
to the business of the Company.
(b) From the date hereof until the Closing Date, the Seller shall not and
the Seller shall cause the Company to not (except as is contemplated or
permitted by this Agreement or with the written approval of Guarantee, which
approval shall not be unreasonably withheld):
(i) sell, pledge, dispose of, lease or encumber any material Assets
(including, without limitation, any indebtedness owed to, or any claims
held by, it) except in the ordinary course of business;
(ii) terminate the insurance Licenses, insurance permits and insurance
authorities, or fail to timely file all reports required by government
agencies which administer such Licenses, permits and authorities, except in
the ordinary course of business;
(iii) redeem, purchase or otherwise acquire or offer to redeem,
purchase or otherwise acquire any shares of its capital stock (other than
directors' qualifying shares);
(iv) transfer any material Assets or liabilities of the Company to any
new Subsidiary or new Affiliate;
(v) acquire (by merger, consolidation or acquisition of stock or
Assets) any corporation, partnership or other business organization or
division thereof or make any
<PAGE>
investment either by purchase of stock or securities, contribution to
capital or property transfer other than in the ordinary course of business;
(vi) incur any indebtedness for borrowed money (other than in the
ordinary course of business consistent with past practice), issue any debt
securities, assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any Person other than the
Company, make any loans or advances, incur any other liabilities,
obligations or commitments or forgive or discharge any indebtedness, other
than in the ordinary course of business;
(vii) except in the ordinary course of business, adopt or amend any
bonus, profit-sharing, thrift, savings, compensation, stock option, pension
retirement, deferred compensation, employment or other employee benefit
plan, agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any of its employees, except where required by any state or
federal law or regulation;
(viii) increase or authorize an increase in the compensation or
fringe benefits of any employee of the Seller providing services to the
Company or pay or authorize any payment or any benefit not required by an
existing plan and arrangement of the Seller not in the ordinary course of
business, other than severance payments at the sole expense of the Seller;
(ix) promote or demote any key employee of the Seller or take any
action to reduce the staff of the Seller, providing services to the Company
(except for terminations for documented cause) in accordance with past
practice;
(x) terminate the services of the Company's present brokers, agents
and general agents and other sales personnel;
<PAGE>
(xi) issue, authorize or propose the issuance of additional shares of
the Company's capital stock of any class;
(xii) split, combine or reclassify any shares of the Company's
capital stock or declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise with respect to any of its
capital stock, except for dividends of excess surplus as provided in
Section 5.11;
(xiii) enter into any material transaction not in the ordinary course
of business;
(xiv) cancel, compromise or settle any material claim, or waive or
release any right other than in the ordinary course of business;
(xv) dispose of any investment securities of the Company without
Guarantee's prior consent (which will not be unreasonably withheld) other
than in the ordinary course of business;
(xvi) amend the Articles of Incorporation or Code of Regulations of
the Company, except in connection with the elimination, redemption and
cancellation of directors' qualifying shares or the redomestication of the
Company as an insurance company from Ohio to Nebraska pursuant to this
Agreement or as is otherwise contemplated or permitted by this
Agreement);or
(xvii) amend the Management Agreement.
Section 5.7. NOTIFICATION. The Seller and Guarantee shall each give the
other prompt written notice of (i) the existence of any fact or the occurrence
of any event which constitutes, or with the giving of notice or the passage of
time or both would constitute, a material breach of any of its respective
representations or warranties made herein or pursuant hereto and of which they
have actual knowledge and (ii) the taking of any action that would materially
breach
<PAGE>
or violate, or constitute a material default under, any of its respective
agreements or covenants made herein or pursuant hereto.
Section 5.8. NO SOLICITATION OR NEGOTIATION. (a) Until such time, if any,
as this Agreement is terminated pursuant to Article VIII, the Seller will not,
and will cause the Company and each of their Representatives not to, directly or
indirectly, solicit, initiate or encourage any inquiries or proposals from,
discuss or negotiate with, provide any nonpublic information to or consider the
merits of any unsolicited inquiries or proposals from any Person (other than
Guarantee) relating to any transaction involving the sale of the business or
assets (other than in the ordinary course of business) of the Company or its
capital stock or any merger, consolidation, business combination or similar
transaction involving the Company (each, an "Other Transaction"), except to the
extent required by the fiduciary duties of the Seller's Board of Directors under
applicable law if so advised by a written opinion of outside counsel. The
Seller shall notify Guarantee orally and in writing within two Business Days
following receipt by the Seller or the Company of any inquiry, proposal or offer
relating to an Other Transaction (an "Other Offer"), including the terms and
conditions of any such Other Offer and the Person making such Other Offer. The
Seller shall give Guarantee five calendar days' prior notice and an opportunity
to negotiate with the Seller before entering into, executing or agreeing to any
Other Offer or Other Transaction.
(b) The Seller may, by notice to Guarantee at any time prior to the Closing
Date, terminate this Agreement if the Seller enters into, executes or agrees to
an Other Offer or Other Transaction with respect to the Company following a
determination by the Board of Directors of the Seller on the written advice of
counsel that such action is required by its fiduciary duties
<PAGE>
under applicable law and compliance by the Seller with the provisions of Section
5.8 of this Agreement.
(c) In order to induce Guarantee to enter into this Agreement and to
compensate Guarantee for the time and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and the losses suffered by
Guarantee from foregone opportunities, the Seller shall pay a "Special Fee"
equal to $3,000,000 to Guarantee in immediately available funds on the date the
Seller terminates this Agreement pursuant to this Section 5.8 or within five
Business Days after any of the following occurs within six months after the date
of termination of this Agreement, provided in each case that any of the
following arises out of an offer received by the Seller or the Company prior to
the termination of this Agreement: (i) a Person unrelated to Guarantee
consummates an Other Transaction, or has announced or proposed an Other
Transaction within six months after the date this Agreement is terminated and
subsequently consummates an Other Transaction after such six month period; (ii)
the Seller has entered into an agreement with respect to an Other Transaction;
or (iii) the Seller shall have terminated this Agreement to pursue an Other
Offer or Other Transaction.
Section 5.9. TAX ELECTIONS AND CONSOLIDATED TAX RETURN. Except as set
forth in Schedule 5.9, no new elections with respect to Taxes or any changes in
current elections or practice with respect to Taxes (in each case, in respect of
any tax year ending on or before, or which includes, the Closing Date) affecting
the Company (including, without limitation, all changes which would set a
precedent for later periods) or any of its Subsidiaries shall be made after the
date of this Agreement without the prior written consent of Guarantee not to be
unreasonably withheld. Notwithstanding any other provision of this Agreement,
the Seller shall
<PAGE>
file its federal income tax return for the year ended December 31, 1997 on a
consolidated basis with respect to all of its subsidiaries on or before the
Closing Date.
Section 5.10. BENEFITS. As of the Closing Date, the Company shall have
paid or accrued all amounts of compensation, benefits, bonuses and other forms
of direct or indirect compensation to any employee, officer, director, agent or
consultant which is due or payable as of the Closing. Not later than 20 days
prior to the Closing Date, the Company shall provide Guarantee with a schedule
setting forth all such benefits.
Section 5.11. EXTRAORDINARY DIVIDEND. The Seller shall use its
commercially reasonable efforts to cause the Company to pay an extraordinary
dividend of Forty-four Million Dollars ($44,000,000) to the Seller on or before
the Closing Date. Guarantee shall have the right to determine, in consultation
with the Seller and with the consent of the Seller, which consent shall not be
unreasonably withheld, which assets of the Company will be liquidated in
connection with the payment of such extraordinary dividend. The Seller agrees
to fully cooperate with Guarantee in identifying such assets and making such
determination.
Section 5.12. REDOMESTICATION. The Seller, the Company and Guarantee
agree to take such corporate and regulatory acts, including amending the
Articles of Incorporation and Code of Regulations of the Company, as shall be
reasonably necessary to redomesticate the Company as an insurance company from
Ohio to Nebraska on the Closing Date or as promptly thereafter as possible.
Section 5.13. RECORD RETENTION. The Seller and Guarantee agree to fully
cooperate in the prompt identification of and selection of the books and records
of the Company to be disposed of or retained. Promptly after the Closing and
such identification and selection is made, the Seller and Guarantee shall make
reasonable arrangements for the disposition, storage
<PAGE>
or transfer of such books and records on mutually agreeable terms. Neither the
Seller nor the Company shall dispose of any of the books or records of the
Company prior thereto, other than in the normal course of business and pursuant
to the current practices of the Seller and the Company.
Section 5.14. DIRECTORS' QUALIFYING SHARES. The Seller and the Company
agree to take all actions necessary to amend the Articles of Incorporation, to
the extent necessary, and the Code of Regulations of the Company on or prior to
the Closing to eliminate any requirement for the directors of the Company to own
qualifying shares of the Company's capital stock and to take all actions
necessary to redeem and cancel on or prior to the Closing all of the shares of
the Company's capital stock which is owned by the directors of the Company as
qualifying shares.
Section 5.15. ADDITIONAL POST-CLOSING OBLIGATIONS. The parties will
perform and fulfill each of the following obligations after the Closing Date:
(a) Guarantee will cause the Company not to sell or otherwise assign any of
the rights or obligations of the Company under those structured settlements to
which the Company is a party as of the Closing Date (collectively, the
"Structured Settlements") to any insurance company which has a rating assigned
by A.M. Best Company of less than "A." If any Structured Settlement is sold or
otherwise assigned to another insurance company whose rating is subsequently
reduced to less than "A" or, in the event that the Company's rating assigned by
A.M. Best Company is reduced to less than "A," in either case Guarantee will
cause the Company to reinsure the Company's obligations under such Structured
Settlement with another insurance company which has a rating assigned by A.M.
Best Company of not less than "A."
<PAGE>
(b) Guarantee will cause the Company to maintain the Seller's group life
insurance plan with the Company on substantially the same terms and conditions
(including the use of the same rates and discounts) as existed prior to the
Closing through December 31, 1998.
(c) Schedule 5.15 lists certain universal life insurance policies of the
Company which are owned by the Seller or by present or former employees of the
Seller and which have above-market interest rates contained therein
(collectively, the "Executive Carve Out Policies"). Guarantee shall cause the
Company to continue to credit the current above market interest rate of nine
percent on the in force Executive Carve Out Policies for the three retired
employees of the Seller identified on Schedule 5.15 current through maturity
without additional premium therefore and to credit the in force Executive Carve
Out Policies for the 10 active employees of the Seller identified on Schedule
5.15 at an above market interest rate of eight percent through maturity;
provided, however, the annual premiums on such policies will be increased in
November 1998 to an amount sufficient to carry these policies at such rate to
maturity.
(d) Guarantee will cause the Company to continue the Company's existing
practice of reducing premiums with respect to life insurance policies owned or
held by employees of the Seller as of the date of this Agreement.
(e) In the event of any Proceeding in connection with action, failure to
act or transaction involving the Company occurring in whole or in part prior to
the Closing Date, all parties will make available their personnel, provide
testimony and access to their books, and otherwise cooperate to the extent
necessary or advisable, without jeopardizing their own adverse interest, at the
expense of the contesting or defending party unless the contesting or defending
party is entitled to indemnification pursuant to Article IX. For a period of
not less than (i) three years after the Closing Date or (ii) the conclusion of
any claim under Article IX, Guarantee shall
<PAGE>
cause the Company to afford to the Seller (or its representatives) reasonable
access to the books and records of the Company for matters pertaining to events
occurring prior to the Closing Date for any proper purpose.
(f) For a period of five years following the Closing, employees of the
Seller and its Affiliates shall be permitted to purchase individual life
insurance policies of Guarantee's Affiliates using discounted premiums, higher
than normal interest crediting rates, reduced expense or COI charges when such
policies are approved by the Ohio Insurance Department.
(g) The Seller and Guarantee shall take such actions as necessary to give
Guarantee the right to use the Marks for purposes related to the business of the
Company and with respect to insurance products offered by the Company as of the
Closing Date, for as long as the Marketing Agreement remains in effect. Such
right shall terminate if Guarantee transfers all or substantially all of the
ownership or assets of the Company through sale, merger or any other business
combination to any Person other than Guarantee or its Affiliates and upon such
termination shall revert to the Seller. Guarantee shall not have the right to
use the Marks with respect to insurance products not offered by the Company as
of the Closing Date, unless the Seller gives its prior written consent, which
shall not be unreasonably withheld.
Section 5.16. UPDATED SCHEDULES. As of the Closing Date, the Seller shall
provide updated Schedules setting forth the exceptions to the representations
and warranties in Article III of this Agreement. For all purposes under this
Agreement, as of and after the Closing such updated Schedules shall be deemed to
supersede the Schedules delivered to Guarantee as of the date of this Agreement.
Notwithstanding any provision in this Agreement to the contrary, Guarantee may
terminate this Agreement if it reasonably determines that any of the exceptions
to such representations or warranties set forth in such updated Schedules
relates to a condition
<PAGE>
which is or may have a Material Adverse Effect or of such a nature as to
effectively prevent Guarantee from owning or operating the Company in the manner
as presently conducted.
Section 5.17. FINANCIAL STATEMENTS. The Seller will provide the Company's
audited Financial Statements for the year ended December 31, 1997 prepared in
accordance with SAP to Guarantee no later than 10 days prior to the Closing.
The Seller shall cooperate and shall use commercially reasonable efforts to
cause Ernst & Young LLP and KPMG Peat Marwick to cooperate with Guarantee in the
preparation of the Closing Financial Statements, at Guarantee's expense, on the
basis of GAAP for completion and delivery on or prior to a date no later than 60
days after the Closing Date.
Section 5.18. WARN ACT. The Seller shall comply with any applicable
requirements of the federal Worker Adjustment and Retraining Notification Act of
1988 (the "WARN Act") and the applicable requirements of Ohio law similar to the
WARN Act, if any, in connection with the transactions contemplated by this
Agreement.
ARTICLE VI
CLOSING DATE CONDITIONS
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the following conditions:
(a) That all conditions to the Closing contained in this Article VI
shall have been satisfied in all material respects or waived in accordance
with the terms of this Article VI and the Closing Date shall occur on or
before May 31, 1998, unless extended in accordance with the terms of this
Agreement; provided, however, either the Seller or Guarantee may extend the
Closing Date pursuant to Section 2.2 hereof for up to two consecutive 31-
day periods, provided the extending party is not in breach or default
<PAGE>
under the terms of this Agreement and the conditions to the Closing set
forth in Article VI have not been satisfied;
(b) That all permits, approvals and consents of any governmental body
or agency (including, without limitation, the Ohio and Nebraska insurance
departments) or Person which are required in connection with the
transactions contemplated by this Agreement shall have been obtained, which
approvals shall not contain conditions to which Guarantee reasonably
objects, and such permits, approvals and consents shall be effective and
shall not be suspended, revoked or stayed by action of any governmental
authority or Person it being understood that in certain jurisdictions the
Company may be obligated to requalify or otherwise amend its certificate of
authority in connection with the change in stock ownership contemplated by
this Agreements, which amendments shall not be considered conditions to the
Closing;
(c) That all applicable waiting periods under the HSR Act shall have
expired or been terminated such that the Closing shall not violate the HSR
Act;
(d) That, at or prior to the Closing Date, none of the Seller, the
Company or Guarantee shall be subject to any order, decree or injunction of
a government regulatory agency or a court of competent jurisdiction which
(i) prevents or delays any of the transactions contemplated by this
Agreement or (ii) would impose any material limitation on the ability of
the Company to conduct its business and operations in substantially the
same form as it is presently being conducted;
(e) The Seller, the Company and Guarantee shall enter into a Marketing
Agreement and an Administrative Services Agreement in substantially the
forms attached hereto as Exhibits A and C, respectively, the Seller and
Guarantee shall have entered into
<PAGE>
the Shareholder Agreement in substantially the form of Exhibit B attached
hereto, the Seller shall have executed any additional documentation
reasonably required by Guarantee in connection with the issuance of the
Guarantee Stock and all existing management contracts between the Seller
and the Company (including the Management Agreement) shall be terminated on
the Closing Date without any liability to the Company as a result of such
termination.
(f) The Company and the Seller shall have received all necessary or
appropriate regulatory approvals from the Ohio Director to permit payment
of the dividend, which shall be treated as an extraordinary dividend for
regulatory purposes and as a liquidating dividend for tax purposes, by the
Company at or prior to Closing as contemplated by Section 5.11 in an amount
equal to $44,000,000.
Section 6.2. CONDITIONS TO THE OBLIGATIONS OF THE SELLER. The obligations
of the Seller to effect the transactions contemplated hereby shall be further
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any one or more of which may be waived by the Seller:
(a) In all material respects Guarantee shall have performed and
complied with the agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing Date, and the
representations and warranties of Guarantee set forth in this Agreement
shall be true and correct in all material respects as though made as of and
on the Closing Date. Guarantee shall have delivered to the Company a
certificate of the President of Guarantee dated as of the Closing Date, to
the foregoing effect;
<PAGE>
(b) The Seller shall have received an opinion from Kutak Rock, special
counsel to Guarantee, dated the Closing Date and in substantially the form
attached hereto as Exhibit D-1 and the opinion of Richard A. Spellman,
general counsel to Guarantee, dated the Closing Date and substantially in
the form of Exhibit D-2;
(c) The Seller shall have received from Guarantee the Purchase Price
in accordance with Article II of this Agreement;
(d) The Seller shall have received from Guarantee (i) a copy of its
Board of Directors' actions approving and authorizing the execution,
delivery and performance of this Agreement and the transactions
contemplated hereby (including the approval of this Agreement), certified
by the Secretary of Guarantee as true, correct and complete and that such
actions have not been amended or rescinded on or prior to the Closing Date
and (ii) a certificate of the Secretary of Guarantee as to the incumbency
and signature of the directors and officers of Guarantee executing this
Agreement; and
(e) The Seller shall have received all other documents, instruments
and writings required to be delivered by Guarantee at or prior to the
Closing Date pursuant to this Agreement or otherwise required in connection
herewith.
Section 6.3. CONDITIONS TO THE OBLIGATIONS OF GUARANTEE. The obligations
of Guarantee to effect the transactions contemplated hereby shall be further
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Guarantee:
(a) In all material respects the Seller shall have performed and
complied with the agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing Date, and the
representations and warranties of the Seller
<PAGE>
set forth in this Agreement shall be true and correct in all material
respects as though made as of and on the Closing Date. The Seller shall
have delivered to Guarantee a certificate of the President of the Seller
dated as of the Closing Date to the foregoing effect. Notwithstanding
anything herein to the contrary, in the event that any representation or
warranty is not true and correct in all material respects when made or at
any time on or before the Closing Date, Guarantee may terminate this
Agreement pursuant to this Section 6.3(a) only if prompt notice is given to
the Seller and the breach cannot be cured by the Seller prior to the
Closing and either (i) Guarantee reasonably determines there has been a
Material Adverse Effect or (ii) the breach is of such a nature as to
effectively prevent Guarantee from owning and or operating the Company in a
manner as presently conducted by the Company.
(b) Guarantee shall have received an opinion from Bricker & Eckler
LLP, special counsel to the Seller, dated the Closing Date and in
substantially the form attached hereto as Exhibit E.
(c) Guarantee shall have received from the Seller a Certificate of
Good Standing for the Company and WABSCO, dated as of a recent date, issued
by the Secretary of State of Ohio.
(d) Guarantee shall have received, not later than five days prior to
the Closing Date, copies of written resignations effective immediately
following the Closing Date of all the directors and officers of the Company
and WABSCO whose resignations Guarantee has requested in writing at least
20 days prior to Closing.
(e) Guarantee shall have received certificates representing the Stock,
properly endorsed for transfer to Guarantee, and evidence reasonably
satisfactory to Guarantee
<PAGE>
that the certificates representing all directors' qualifying shares of the
Company have been redeemed and cancelled.
(f) Guarantee shall have received all other documents, instruments and
writings required to be delivered by the Seller at or prior to the Closing
Date pursuant to this Agreement or otherwise required in connection
herewith.
ARTICLE VII
TAX MATTERS
Section 7.1. NO CARRYBACK OF NET OPERATING LOSS, ETC. Except as required
by applicable law, the Company (and its successors and assigns) will elect not
to carry back any net operating loss, Tax credit or other Tax item from a
taxable year beginning on or after the Closing Date to any taxable year ending
prior to the Closing Date and will waive any and all rights to any claims for
refund in respect of such net operating loss, Tax credit or other Tax item.
Section 7.2. PAYMENTS IN RESPECT OF TAXES AND TAX RETURNS FOR STUB PERIOD
PRIOR TO AND INCLUDING THE CLOSING DATE. (a) In accordance with the mutual
desire of Guarantee and Seller, Seller has covenanted to include the Company and
WABSCO as members in its consolidated federal income Tax Return for the Tax year
ended December 31, 1997 and for that portion of 1998 which is prior to and
including the Closing Date. The income of the Company and WABSCO will be
apportioned to such consolidated group for the period up to and including the
Closing Date and to Guarantee for the period after the Closing Date by closing
the books of the Company and WABSCO as of the Closing Date in a manner
consistent with such prior allocations, if any, for federal income tax purposes.
The Company and WABSCO file their own state and local tax returns and will
continue to do so after the Closing Date.
<PAGE>
(b) The Company and WABSCO have established intercompany accounts with the
Seller and its Affiliates in respect of federal income Taxes of the Company and
WABSCO which will include Taxes through and including the Closing Date
calculated in a manner consistent with the tax sharing agreement, as amended
(the "Tax Sharing Agreement"), by and among the Seller, the Seller's other
Affiliates and the Company and WABSCO. A true and correct copy of the Tax
Sharing Agreement will be provided to Guarantee by the Seller on or prior to the
Closing. These intercompany accounts shall be paid and settled between the
Seller and its Affiliates and the Company and WABSCO effective as of the Closing
Date based on the reasonable estimates of the federal income Taxes of the
consolidated group. The determination of the final amount which is to be
recorded in the intercompany account under the Tax Sharing Agreement shall be
determined when the final Tax Return is filed for the consolidated group which
includes the period ending with the Closing Date with respect to the Company and
WABSCO. Upon such final determination, the Company shall pay to the Seller or
its Affiliates any balance due (or if the Company has overpaid, Seller shall
refund to the Company such excess) within 15 Business Days of the notice of the
determination of the final amount. Such Tax Sharing Agreement shall be
terminated as between the Company and WABSCO and such consolidated group and
that agreement and any other Tax Sharing Agreement between the Seller (or any
Affiliates) and the Company and WABSCO shall be terminated as of the Closing
Date and will have no further effect for any taxable year (whether the current
year, a future year or a past year).
(c) Notwithstanding any provision in the Tax Sharing Agreement or other
provision of this Article VII, the allocation of any consolidated Tax
liabilities contemplated by this Section 7.2 shall treat all net Taxable income
or loss resulting from any transactions
<PAGE>
contemplated by this Agreement, including the election contemplated by Section
7.4, as Taxable income or loss of a member other than the Company or WABSCO.
(d) Both Guarantee and the Seller shall use their commercially reasonable
efforts to resolve any dispute regarding the calculation or computation related
to federal income Taxes to be settled pursuant to this Section 7.2. In the
event of any such dispute between Guarantee and the Seller which cannot be
resolved by Guarantee and the Seller, the parties shall each be entitled to
submit such dispute to KPMG Peat Marwick for a resolution within 25 days of
submission, the decision of which firm shall be binding on Guarantee and the
Seller; provided, however, that in no event will the resolution of such dispute
delay the filing of any Tax Returns past the date such Tax Returns are required
to be filed. The fees and expenses of such accountants shall be shared equally
by Guarantee on the one hand and the Seller on the other hand.
Section 7.3. MUTUAL COOPERATION. Guarantee and the Seller shall provide
each other with such assistance as may reasonably be requested by either of them
in connection with the preparation and execution of any Tax Return, any audit or
other examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will retain and, upon the
request of the other, provide the other with any records or information which
may be relevant to such return, audit or examination or proceedings. Such
assistance shall include making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder and shall include providing copies of any relevant Tax Returns (or
portions thereof) and supporting work schedules. The party requesting such
assistance hereunder shall reimburse the other for reasonable out-of-pocket
expenses incurred by the other in providing such assistance.
<PAGE>
Section 7.4. SECTION 338(H)(10) ELECTION. With respect to the acquisition
of the Stock, both Guarantee and the Seller agree to make an election under
Section 338(h)(10) of the Code, unless Guarantee and the Seller agree in writing
that the election is not to be made. If such election under Section 338(h)(10)
is made, Guarantee and the Seller agree to jointly and timely file Form 8023 and
Guarantee and the Seller shall allocate the purchase price in the manner
provided in Section 7.5 as soon as practicable after the election is made.
Section 7.5. ALLOCATION OF PURCHASE PRICE. Following the Closing
Guarantee and the Seller shall make a good faith allocation of the purchase
price of the Stock among the assets of the Company (the "338 Allocation") within
the requirements of Treasury Regulation Section 1.338(b)-2T with the knowledge
and understanding that the 338 Allocation will be used by both Guarantee and the
Seller for federal income tax reporting purposes. Both Guarantee and the Seller
(and their Affiliates) shall report the transactions contemplated by this
Agreement for federal income tax purposes in accordance with the 338 Allocation.
Neither Guarantee nor the Seller, nor any consolidated or unitary tax reporting
group of which either of them is a party, shall take a position inconsistent
with the 338 Allocation except with the written consent of the other party to
this Agreement. However, if the IRS or other Taxing Authority takes a position
with respect to one party to this Agreement that is inconsistent with the 338
Allocation, the other party may take a protective position adopting the
contention of the IRS or other Taxing Authority until the controversy is finally
resolved.
<PAGE>
ARTICLE VIII
TERMINATION
Section 8.1. TERMINATION OF THIS AGREEMENT. Anything herein to the
contrary notwithstanding, this Agreement may be terminated at any time before
the Closing Date as follows, and in no other manner:
(a) Mutual Consent. By mutual written consent of the Seller and the
Company, on the one hand, and Guarantee, on the other hand.
(b) Expiration Date. By the Seller and the Company, on the one hand,
or Guarantee, on the other hand, if the Closing Date shall not have
occurred by May 31, 1998, unless extended in accordance with the terms of
this Agreement; and, provided, further, that the party or parties seeking
to terminate this Agreement shall have used their commercially reasonable
best efforts to facilitate the consummation of the transactions
contemplated hereby.
(c) Breach of Representations and Warranties. By Guarantee, in
accordance with Section 6.3(a) hereof, provided that the Seller has
received 10 Business Days' written notice of the breach indicated therein
and has failed to effect a cure thereof to the reasonable satisfaction of
Guarantee prior to the expiration of such period.
(d) Breach of Covenants by Seller. By Guarantee in the event of a
material breach by the Seller of a covenant contained in this Agreement.
(e) Breach of Representations, Warranties or Covenants by Guarantee.
By the Seller in the event of a material breach by Guarantee of a
representation or warranty contained in this Agreement, provided that
Guarantee has received 10 Business Days' written notice of the breach
indicated therein and has failed to effect a cure thereof to the
<PAGE>
reasonable satisfaction of the Seller prior to the expiration of such
period, or of a covenant contained in this Agreement.
(f) Due Diligence. By Guarantee if the Seller does not cause the
Company to cooperate with and provide commercially reasonable access to the
Company's business, properties, Assets, books, records and personnel to
Guarantee in its conduct of due diligence hereunder in accordance with
Section 5.5 or in the course of its due diligence Guarantee discovers
material differences between the actual condition and operation of the
Company and the conditions and operations of the Company as represented as
of the date hereof and Guarantee delivers a written notice to the Seller
within 15 days from the date of this Agreement setting forth that Guarantee
elects to terminate this Agreement pursuant to Section 8.1(c). The parties
agree that the obligations of the Seller pursuant to Section 6.3(a) hereto
will not be affected by any information provided to or discovered by
Guarantee pursuant to its due diligence.
(g) Termination Upon Occurrence of Other Transaction. By the Seller
pursuant to the terms of Section 5.8.
Section 8.2. EFFECT OF TERMINATION. (a) In the event that this Agreement
shall be terminated pursuant to Section 8.1(a), (b) or (f) hereof, all
obligations of the parties hereto under this Agreement shall terminate and there
shall be no Liability of any party to another and each party hereto shall pay
all costs and expenses incident to this Agreement as contemplated in Section 5.1
hereof.
(b) In the event that this Agreement shall be terminated pursuant to
Section 8.1(c) or (d) hereof where the breach of the representation and warranty
or breach of covenant results from willful or intentional acts of the Seller,
other than with respect to Section 5.8, the Seller
<PAGE>
will be liable to Guarantee for all direct out-of-pocket expenses actually
incurred by Guarantee from January 1, 1998 in connection with this transaction
plus $500,000.
(c) In the event that this Agreement shall be terminated pursuant to
Section 8.1(e) hereof where the breach of the representation and warranty or
breach of covenant results from the willful or intentional acts of Guarantee,
Guarantee will be liable to the Seller for all direct out-of-pocket expenses
actually incurred by the Seller from January 1, 1998 in connection with this
transaction plus $500,000.
(d) In the event that this Agreement is terminated pursuant to Section
8.1(e) hereof where the breach of the representation or warranty or breach of
covenant relates to the inability of Guarantee to obtain adequate financing of
the transactions contemplated hereby, unless such inability to obtain such
financing is a result of the Seller's breach of its representations or
warranties in this Agreement or its failure to perform its covenants in this
Agreement, or the failure of Guarantee to obtain all necessary or appropriate
approvals from the Nebraska Department of Insurance with respect to the purchase
of the Stock pursuant to this Agreement, Guarantee will be liable to the Seller
for all direct out-of-pocket expenses actually incurred by the Seller since
January 1, 1998 in connection with this transaction, and Guarantee shall deliver
to the Seller by wire transfer of immediately available funds in the amount of
Two Million Dollars ($2,000,000) as liquidated damages (and not as a penalty);
provided, however, that Guarantee shall have no other liability for any payment
under Section 8.2(c) in such instance.
(e) Notwithstanding the foregoing, in the event this Agreement shall be
terminated pursuant to Section 8.1(c), (d) or (e) and the breaches of
representations, warranties or covenants are due to riots, storms, fires,
explosions, embargoes, interruption of computer, mail or communication systems
or any other cause or act of God which is beyond the commercially
<PAGE>
reasonable control of the Seller or Guarantee (as the case may be), then, there
shall be no Liability of any party to another, and each party hereto shall pay
all costs and expenses incident to this Agreement as contemplated in Section 5.1
hereof.
(f) In the event this Agreement is terminated pursuant to Section 8.1(g),
the obligation of the Seller to pay the Special Fee pursuant to Section 5.8
shall survive any such termination.
(g) Upon payment of the amounts provided in this Section 8.2, the Seller
and Guarantee shall have no further obligation or liability to each other under
this Agreement, except pursuant to Sections 11.6 and 11.12.
ARTICLE IX
INDEMNIFICATION
Section 9.1. INDEMNIFICATION BY THE SELLER. The Seller agrees to
indemnify and hold harmless Guarantee, and its successors and assigns, and its
officers, directors, employees, agents and Affiliates (the "Indemnified
Parties") against and in respect of any and all losses, liabilities, claims,
damages and reasonable expenses whatsoever (including, but not limited to,
commercially reasonable attorneys' and accountants' fees and all commercially
reasonable expenses incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim) arising out of or based
on (i) any breach of any of the representations, warranties, covenants or
agreements which have been made or undertaken by the Seller under this
Agreement; (ii) any inaccuracy or misrepresentation in any certificate required
to be delivered in accordance with the terms of this Agreement by the Seller;
(iii) employees or agents of the Seller providing services to the Company prior
to the Closing Date, or (iv) Welfare
<PAGE>
Benefit Plans, Pension Benefit Plans or Employee Benefit Plans maintained by the
Seller for such employees or agents prior to the Closing Date.
Section 9.2. INDEMNIFICATION BY GUARANTEE. Guarantee agrees to indemnify
and hold harmless the Seller, and its successors and assigns, and its officers,
directors, employees, agents and Affiliates (the "Indemnified Parties") against
and in respect of any and all losses, liabilities, claims, damages and
reasonable expenses whatsoever (including, but not limited to, commercially
reasonable attorneys' and accountants' fees and all commercially reasonable
expenses incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim) arising out of or based on
(a) breach of any of the representations, warranties, covenants or agreements
which have been made or undertaken by Guarantee under this Agreement and (b) any
inaccuracy, misrepresentation in any certificate required to be delivered in
accordance with the terms of this Agreement.
Section 9.3. PROCEDURES FOR INDEMNIFICATION. (a) Upon obtaining knowledge
thereof, Guarantee or the Seller shall notify the other party in writing of any
damage, claim, loss, liability or expense which the Indemnified Parties has
determined has given or could give rise to a claim under Section 9.1 or 9.2
(such written notice being hereinafter referred to as a "Notice of Claim"). A
Notice of Claim shall contain a brief description of the nature and (if known)
estimated amount of any such claim giving rise to a right of indemnification.
The failure to so notify the indemnifying party of the commencement of any such
claim, suit or Proceeding will relieve the indemnifying party from liability
under Article IX hereof only to the extent that such failure materially
adversely affects the ability of the indemnifying party to defend its interests
in such claim, action or Proceedings.
<PAGE>
(b) The indemnifying party (at its expense) shall have the right and shall
be given the opportunity to defend with its own counsel such claim, suit or
Proceedings. If the indemnifying party does not elect to undertake the defense
of any such claim, suit or proceeding, within a reasonable period after receipt
of the Notice of Claim, the indemnified party (upon further notice to the
indemnifying party) shall have the right to undertake the defense of such claim,
suit or proceeding, subject to the right of the indemnifying party to assume the
defense of such claim, suit or proceeding at any time prior to its final
determination or settlement. If the indemnifying party shall undertake such
defense, the indemnified party shall cooperate fully with the indemnifying party
and its counsel with respect thereto. The indemnified party shall, at its own
expense, have the right to participate in the defense of such claim, suit or
proceeding. The indemnified party shall not, except at its own cost, make any
settlement with respect to any such claim, suit or proceeding without the prior
consent of the indemnifying party. In the event that the indemnified party
determines to settle any such claim, suit or proceeding without such prior
consent of the indemnifying party, the indemnifying party shall have no further
indemnification obligations under this Article IX with respect to such claim,
suit or proceeding.
(c) To the extent that any Indemnified Party provides a Notice of Claim
directly to any party required by this Agreement to provide indemnification,
such Notice of Claim shall include the written acknowledgment of the Seller (if
the indemnification is claimed pursuant to Section 9.1 hereof) or of Guarantee
(if the indemnification is claimed pursuant to Section 9.2 hereof) confirming
that such Person is an Indemnified Party under this Agreement.
Section 9.4. SURVIVAL OF INDEMNIFICATION. The obligations to indemnify
and hold harmless pursuant to this Article IX shall survive the consummation of
the transactions contemplated by this Agreement.
<PAGE>
Section 9.5. LIMITATIONS ON LIABILITY FOR CERTAIN LOSSES. The Seller
shall be liable for indemnification payments under Section 9.1 or under any
other indemnification obligation set forth in this Agreement (except with
respect to the indemnification obligation described in subsection (iii) or (iv)
of Section 9.1 of this Agreement, as to which the limitations set forth in this
sentence shall not apply) only to the extent that the aggregate amount of all
such damages, claims, losses, liabilities and expenses exceeds $500,000, in
which case the Seller shall be liable for all such damages, claims, losses,
liabilities or expenses suffered by the Indemnified Parties. Notwithstanding
any other provision of this Agreement to the contrary, the aggregate liability
of the Seller for all damages, claims, losses, liabilities and expenses under
this Article IX shall not exceed $70,000,000.
Section 9.6. SUBROGATION. A party against whom a claim for
indemnification has been asserted under this Agreement shall be subrogated to
any right of action which the party being indemnified hereunder may have against
any other Person with respect to any matter giving rise to a claim for
indemnification hereunder, other than a claim in respect of Taxes.
Section 9.7. OTHER BENEFITS. If any loss, cost, damage, liability or
expenses suffered by any Indemnified Party shall result in any tax saving,
entitlement to insurance recovery or other monetary benefit to such party, then
the amounts required to be paid by the indemnifying party hereunder shall be
adjusted to reflect such benefit.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; EFFECT OF CERTIFICATES
Section 10.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. All representations, warranties, covenants and agreements contained
herein and in any certificate required to be delivered pursuant to this
Agreement shall survive the Closing of this Agreement.
<PAGE>
No claim may be asserted nor may any action be commenced against any party for
breach of any representation, warranty, covenant or agreement, unless written
notice of such claim or action is received by such party describing in
reasonable detail the facts and circumstances with respect to the subject matter
of such claim or action on or prior to the date on which the representation or
warranty on which such claim or action is based ceases to survive as set forth
in this Section 10.1 whether or not the subject matter of such claim or action
shall have accrued before or after such date.
Notwithstanding any other provision of this Agreement, the indemnification
obligations of the Seller under Section 9.1(i) and (ii) of this Agreement shall
survive only until January 1, 2000. All other indemnification obligations of
the Seller under this Agreement shall survive only until January 1, 2000;
provided, however, that the indemnification obligations of the Seller with
respect to Taxes as set forth in Section 3.9 of this Agreement shall survive
until the expiration of the applicable statute of limitations period which
relates to each such representation or warranty under applicable Tax laws and
the indemnification obligations of the Seller under Section 9.1(iii) and (iv)
shall survive until the expiration of the applicable statute of limitations
period which relates to each such representation and warranty under applicable
law. The failure by Guaranty or any other Indemnified Party to deliver a Notice
of Claim to the Seller prior to the expiration of the Seller's indemnification
obligations shall constitute an absolute bar to the institution of any
Proceedings or actions based upon, and will constitute a waiver of, all the
claims and/or actions not so asserted.
Section 10.2. EFFECT OF CERTIFICATES. Each statement contained in any
certificate required to be delivered in connection with the consummation of the
transactions contemplated hereby shall constitute the representation, warranty
and agreement of the party delivering such
<PAGE>
certificate and shall have the same force and effect as if it had been
incorporated into this Agreement as a representation, warranty and agreement by
such delivering party.
Section 10.3. RELIANCE. All warranties, representations and covenants
made by the Seller and Guarantee herein or in any certificate required to be
delivered by the Seller or Guarantee under this Agreement shall be considered to
have been relied upon by the Seller and Guarantee, as the case may be,
regardless of any investigation made by the Seller or Guarantee, as the case may
be, or on the Seller's or Guarantee's behalf, unless and to the extent such
party shall have received a notification pursuant to Section 5.7.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only in writing by the
Seller, the Company and Guarantee.
Section 11.2. WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise
provided in this Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
or parties entitled to the benefits thereof only by a written instrument signed
by the party or parties granting such waiver, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 11.2.
<PAGE>
Section 11.3. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given on the date of receipt if
delivered personally or by confirmed facsimile transmission and five days from
the date of mailing if mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof):
(a) If to the Seller or the Company, to:
Ohio Farmers Insurance Company
Post Office Box 5001
One Park Circle
Westfield Center, OH 44251-5001
Attention: Robert J. Joyce
Fax Number: (330) 887-6295
With a copy to:
Bricker & Eckler LLP
100 South Third Street
Columbus, OH 43215
Attention: John W. Cook, III
Fax Number: (614) 227-2390
(b) If to Guarantee, to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Attention: Robert D. Bates
Fax Number: (402) 361-7571
With copies to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Attention: Richard A. Spellman, Esq.
Fax Number: (402) 361-7571
and
<PAGE>
Kutak Rock
1650 Farnam Street
Omaha, NE 68102
Attention: Joe E. Armstrong, Esq.
Fax Number: (402) 346-1148
Section 11.4. 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, heirs, personal representatives and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party or parties.
Section 11.5. NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement is
intended or shall be construed to give any Person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect to
this Agreement or any provision contained herein.
Section 11.6. CONFIDENTIALITY OF INFORMATION AND DOCUMENTS. If this
Agreement terminates, the obligations of the portions with respect to use and
disclosure of information shall be as set forth in the letter agreement of
Guarantee and the Seller dated January 14, 1998. If this Agreement terminates,
any documents obtained by either party from the other or any of such other
party's Affiliates shall be promptly returned. Notwithstanding any provision of
this Agreement or the letter agreement of Guarantee and the Seller dated January
14, 1998, the parties hereto agree and acknowledge that (i) Guarantee may
provide to its line of credit lender, pursuant to its "stand ready" letter, such
information with respect to the Company and the transactions contemplated by
this Agreement, including all financial information and projections, as is
reasonably requested by the line of credit lender in connection with the
arrangement and syndication of the credit facilities contemplated in the stand
ready letter and such information with respect to the Seller as consented to by
the Seller, which consent shall not be unreasonably
<PAGE>
withheld, and (ii) Guarantee may include in a registration statement filed with
the SEC relating to securities offered to provide long term financing with
respect to the transactions contemplated by this Agreement such information
regarding the Seller and the Company as is required by law. The Seller and the
Company agree to cooperate with Guarantee in providing such information and to
use commercially reasonable efforts in providing such information.
Section 11.7. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Nebraska (regardless of the laws that might otherwise govern
under applicable principles of conflicts of law) as to all matters, including,
but not limited to, matters of validity, construction, effect, performance and
remedies.
Section 11.8. [RESERVED.]
Section 11.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.10. HEADINGS. The article and section headings contained in
this Agreement are solely for convenience of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 11.11. KNOWLEDGE OF THE SELLER. Where any representation or
warranty contained in this Agreement is qualified by reference to the Knowledge
of the Seller, Knowledge in this context means actual knowledge of any (i)
director of the Seller or the Company, (ii) executive officer of the Seller or
officer of the Company or (iii) employee responsible for Tax compliance matters
of the Seller or the Company, or the knowledge that any one or more of them
should have acquired in the ordinary course of performance of his or her duties
as a (i) director of the Seller or the Company, (ii) executive officer of the
Seller or officer of the
<PAGE>
Company or (iii) employee responsible for Tax compliance matters of the Seller
or the Company.
Section 11.12. ENTIRE AGREEMENT. This Agreement, including the exhibits
hereto and the documents, schedules, certificates and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such transactions; provided, however it does not supersede, terminate
or limit the effectiveness of the letter agreement between the Seller and
Guarantee dated January 14, 1998.
<PAGE>
IN WITNESS WHEREOF, the Seller, the Company and Guarantee have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
SELLER:
OHIO FARMERS INSURANCE COMPANY
By _________________________
Name _______________________
Title ______________________
COMPANY:
WESTFIELD LIFE INSURANCE
COMPANY
By _________________________
Name _______________________
Title ______________________
GUARANTEE:
THE GUARANTEE LIFE COMPANIES
INC.
By _________________________
Name _______________________
Title ______________________
<PAGE>
EXHIBIT A
MARKETING AGREEMENT
-------------------
This Marketing Agreement (this "Agreement") is made to be effective
this ___ day of _______, 1998, by and among The Guarantee Life Companies Inc., a
Delaware corporation ("GLC"), Westfield Life Insurance Company, an Ohio
domiciled life insurance company (the "Company"); and Ohio Farmers Insurance
Company, an Ohio corporation ("OFIC"). GLC and the Company are sometimes
collectively referred to herein as "Guarantee".
RECITALS
--------
A. OFIC has sold to GLC, and GLC has acquired from OFIC, all of the
issued and outstanding capital stock of the Company on even date
herewith.
B. OFIC has existing relationships with certain OFIC Agents (as defined
below) through which Guarantee Products (as defined below) could be
marketed by Guarantee.
C. Guarantee desires to market Guarantee Products through such OFIC
Agents with the assistance of OFIC, and OFIC is willing to provide
such assistance on the terms and subject to the conditions of this
Agreement.
D. Guarantee desires to promote OFIC as a provider of property and
casualty insurance products and Guarantee will not promote any other
provider of property and casualty insurance products, and OFIC desires
to promote Guarantee as a provider of life insurance products and OFIC
will not promote any other provider of life insurance products, all on
the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledges, the parties hereto
covenant and agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
-----------
the following meanings:
(A) The term "Guarantee Agents" means each insurance agent or agency who or
which (1) is under contract with Guarantee or an affiliate of Guarantee as a
life insurance agent on the date of this Agreement, or (2) contracts with
Guarantee or an affiliate of Guarantee as a life insurance agent during the term
of this Agreement, in each case in those jurisdictions in which OFIC or its
affiliates are Actively Writing property and casualty insurance business.
(B) The term "OFIC Agents" means each insurance agent or agency who or
which (1) is under contract with OFIC or an affiliate of OFIC as a property and
casualty insurance agent or
<PAGE>
a life insurance agent on the date of this Agreement, or (2) contracts with OFIC
or an affiliate of OFIC as a property and casualty insurance agent during the
term of this Agreement., in each case in those jurisdictions in which Guarantee
or its affiliates are Actively Writing life insurance business.
(C) The term "Guarantee Products" means individual fixed and variable life
insurance and annuities and group life, accidental death, dismemberment, short
and long-term disabilitiy, dental and vision insurance and voluntary products,
and certain specialty products, such as excess loss insurance for employees with
self-funded medical plans and medical reimbursement insurance for business
executives offered by Guarantee or any affiliate of Guarantee, and such other
similar products as Guarantee and its affiliates may develop from time to time.
(D) The term "OFIC Products" means property and casualty insurance
products, including fidelity and surety contracts, of OFIC or any affiliate of
OFIC, and such other similar products as OFIC and its affiliates may develop
from time to time.
(E) The term "Actively Writing," when used to refer to either life
insurance business or to property and casualty business, shall have the meanings
set forth on Schedule A attached hereto and incorporated herein by this
----------
reference.
SECTION 2. OBLIGATIONS OF OFIC. During the term of this Agreement:
-------------------
(A) OFIC shall use its commercially reasonable efforts to promote
Guarantee, Guarantee's affiliates and the Guarantee Products to the OFIC Agents,
and shall not promote any other insurance company to the OFIC Agents for life
insurance products similar to the Guarantee Products. In this regard, OFIC (1)
shall make available to Guarantee the names, addresses, facsimile numbers (where
available) and telephone numbers of the OFIC Agents, to facilitate Guarantee's
marketing of Guarantee Products through such OFIC Agents; (2) shall introduce
Guarantee to the OFIC Agents; (3) shall assist Guarantee in explaining the
marketing arrangement contemplated by Guarantee; and (4) shall provide Guarantee
with written notice upon becoming aware of (i) other significant marketing
activities involving life insurance products substantially similar to or
competitive with the Guarantee Products that are being conducted by a third
party with respect to OFIC Agents, to the extent inconsistent with the marketing
efforts by Guarantee contemplated by this Agreement, or (ii) any significant
dissatisfaction communicated to OFIC by the OFIC Agents with respect to the
marketing efforts by Guarantee contemplated by this Agreement.
(B) OFIC shall provide each of up to 25 underwriters and support personnel
employed by Guarantee (collectively, the "Underwriters") with a work-space, a
telephone and a non-dedicated telephone line in OFIC's home office in Westfield
Center, Ohio, and shall provide such Underwriters with such reasonable
administrative support services, including mail room and photocopying services,
as are reasonably necessary to facilitate the performance by such Underwriters
of their underwriting obligations on behalf of Guarantee, it being understood
that such provision shall include only those normal office supplies that are
readily available in the office for OFIC employees. At such time as the
services provided by OFIC under the Administrative Services Agreement of even
date herewith (the "Administrative Services
2
<PAGE>
Agreement") are no longer provided from OFIC's home office in Westfield Center,
Ohio, OFIC may request, and Guarantee shall transfer, the Underwriters to the
same office location in the State of Ohio where such administrative services are
being performed.
(C) On a space available basis, OFIC shall provide each of up to 36
marketing personnel employed by Guarantee (the "Marketing Personnel") with a
work space, a telephone and a non-dedicated telephone line in OFIC's home office
in Westfield Center, Ohio or in one or more of the regional offices identified
in Schedule B attached hereto and incorporated herein by this reference, and
----------
shall provide such Marketing Personnel with such reasonable administrative
support services, including mail room and photocopying services (and, with
respect to regional offices only, secretarial and word processing services), as
are reasonably necessary to facilitate the performance by such Marketing
Personnel of their marketing obligations on behalf of Guarantee, it being
understood that such provision shall include only those normal office supplies
that are readily available in the office for OFIC employees. At such time as
the services provided by OFIC under the Administrative Services Agreement are no
longer provided from OFIC's home office in Westfield Center, Ohio, OFIC may
request, and Guarantee shall transfer, those Marketing Personnel previously
located in the home office to the same office location in the State of Ohio
where such administrative services are being performed.
(D) Nothing herein shall be construed to prohibit OFIC from at any time and
from time to time closing or relocating any regional office identified in
Schedule B. In the event that OFIC shall close any such regional office, the
- ----------
provisions of Section 2(C) hereof with respect to such regional office shall
cease on the date of closure and the Fee (as defined in Section 4) shall be
adjusted accordingly. In the event that OFIC shall relocate any such regional
office, the provisions of Section 2(C) shall, at Guarantee's option, (1) apply
thereafter to such relocated office to the same extent as it did prior to the
relocation or (2) cease on the date of the relocation and the Fee referred to in
Section 4 shall be adjusted accordingly.
(E) OFIC shall grant the Company the opportunity to bid upon structured
settlements to be written for OFIC and its affiliates on substantially the same
terms and conditions as offered to the Company prior to the date of this
Agreement.
(F) During the term of this Agreement and for a period of one year
thereafter, OFIC shall not solicit to employ any of the employees of Guarantee
(including, without limitation, the Underwriters and the Marketing Personnel)
with whom OFIC and its employees have had contact in performing OFIC's
obligations under this Agreement, so long as they are employed by Guarantee,
without obtaining the prior written consent of Guarantee.
SECTION 3. OBLIGATIONS OF GUARANTEE. During the term of this Agreement:
------------------------
(A) (1) Guarantee shall use its commercially reasonable efforts to promote
OFIC, OFIC's affiliates and the OFIC Products to the Guarantee Agents, and shall
not promote any other insurance company to the Guarantee Agents for property and
casualty insurance products similar to the OFIC Products.
3
<PAGE>
(2) Guarantee shall provide OFIC, at Guarantee's expense, with all
software, hardware, programs, telecommunications equipment and training
(collectively, the "Systems") necessary to establish a link to Guarantee's
computer network sufficient to permit the Underwriters and, to the extent that
any OFIC personnel perform electronic data processing services on behalf of the
Underwriters, to conveniently and efficiently perform such services from OFIC's
home offices in Westfield Center, Ohio pursuant to Section 2(B) hereof.
Guarantee shall provide such modifications and enhancements to the Systems as
may be reasonably required from time to time, and shall be solely responsible
for the maintenance, repair and replacement of the Systems and all components
thereof, and for all training with respect thereto. Guarantee shall provide any
additional computer hardware which is required with respect thereto to the
extent not already owned by OFIC prior to the date of this Agreement. Upon
termination of this Agreement, Guarantee shall have the right to remove the
Systems from OFIC's home office at Guarantee's sole expense. Such removal shall
be done in a commercially reasonable manner to minimize disruption of OFIC's
business activities and damage to OFIC's premises.
(3) To the extent that OFIC employees will be required to utilize the
System or to the extent required because the System (or components thereof) are
on OFIC's premises, Guarantee hereby grants to OFIC a non-exclusive license to
use the Systems for the purpose of performing its obligations under Section 2(B)
hereof. Guarantee represents and warrants to OFIC that it owns, or has obtained
by license or consent the right to use and to permit OFIC to use, the Systems
for the purposes of this Agreement. The Systems are and shall remain the
property of Guarantee or of those third parties with whom Guarantee is licensed,
as the case may be, and OFIC shall have no rights or interest in the Systems
except as described in this Section 3(A)(2) and (3).
(B) The Underwriters and the Marketing Personnel shall be the employees of
Guarantee and shall be subject to the supervision and control of Guarantee,
provided, however, that such employees shall be obligated to comply with all
- -------- -------
policies and procedures (including, without limitation, security, office
conduct, office attire and other similar policies and procedures of OFIC)
generally applicable to employees of OFIC in such facilities. Without limiting
the generality of the foregoing, OFIC does not hereby or otherwise undertake any
obligation to any such employee of Guarantee, and Guarantee shall be solely
liable for all compensation, benefits and taxes of any nature whatsoever owing
to or with respect to such employees of Guarantee, provided, however, that such
-------- -------
Guarantee employees shall be provided with relevant portions of OFIC employee
handbooks and policies, facilities information, invitations to OFIC employee
meetings (to the extent appropriate), and access to use of OFIC cafeterias on
substantially the same terms as made generally available to OFIC employees on
the premises.
(C) Guarantee hereby grants to OFIC the non-exclusive right to use the
corporate name, trade names, service marks and trademarks, together with any
stylized logos incorporating those names or marks (collectively, the "Marks")
now or hereafter owned or used by or useful in the business of the Company or
its affiliates, but solely for the purpose of performing its obligations
hereunder. OFIC agrees that it shall not hereby or otherwise acquire any right,
title or interest in the Marks, except for the limited license granted by this
Section 3(C).
4
<PAGE>
(a) (D) During the term of this Agreement and for a period
of one year thereafter, Guarantee shall not solicit to employ any of the
employees of OFIC with whom Guarantee and its employees (including, without
limitation, the Underwriters and the Marketing Personnel) have had contact in
performing Guarantee's obligations under this Agreement, so long as they are
employed by OFIC, without obtaining the prior written consent of OFIC.
SECTION 4. COMPENSATION. In addition to the mutual obligations of the
------------
parties hereunder, in consideration of OFIC's obligations pursuant to Section
2(B) and Section 2(C) of this Agreement, Guarantee shall pay to OFIC a fee in
the amounts and at the times calculated pursuant to Schedule C attached hereto
----------
and incorporated herein by this reference (the "Fee).
SECTION 5. TERM AND TERMINATION.
--------------------
(A) The term of this Agreement shall commence on the date hereof and
continue until December 31, 2003 and shall thereafter automatically renew for up
to ten successive additional one year terms, unless earlier terminated as
follows:
(1) By the written agreement of the parties hereto;
(2) By either Guarantee or OFIC, as of December 31st of any calendar
year after 2002, upon prior written notice of termination given at
least one (1) calendar year to the other; provided, however, that
Guarantee may terminate the provisions of Section 2(B) and/or
Section 2(C) at any time in whole or in part upon ninety (90) days
prior written notice to OFIC;
(3) By either Guarantee or OFIC, in the event of a material breach of
this Agreement by the other, if such breach is not cured or
eliminated within ninety (90) days after receipt by the breaching
party of written notice thereof.
(B) The provisions of Section 14 shall survive the termination of this
Agreement.
SECTION 6. NONCOMPETITION.
--------------
(A) During the term of this Agreement and for a period of two (2) years
thereafter, OFIC and its affiliates shall not, directly or indirectly, either
individually or jointly or on behalf of or in concert with any other person or
entity, in any state within the United States in which Guarantee and its
affiliates are Actively Writing life insurance business (i) solicit or accept
sales of any insurance products that are substantially similar to the Guarantee
Products, or (ii) promote any insurance products which are substantially similar
to the Guarantee Products, other than group health and excess loss insurance for
employees with self-funded medical plans and medical reimbursement insurance for
business executives, and other than the promotion of the Guarantee Products
pursuant to this Agreement, or promote any insurance company offering insurance
products of such type other than Guarantee, provided, however, that to the
-------- -------
extent that Guarantee and its affiliates are not currently offering (and have no
plans to offer in the immediate future) a life insurance product which OFIC
desires to promote, and such life insurance product is offered by another life
5
<PAGE>
insurance company, OFIC and its affiliates shall be permitted to promote such
life insurance product without violation of this Agreement.
(B) During the term of this Agreement and for a period of two (2) years
thereafter, Guarantee and its affiliates shall not, directly or indirectly,
either individually or jointly or on behalf of or in concert with any other
person or entity, in any state within the United States in which OFIC and its
affiliates are Actively Writing property and casualty insurance business (i)
solicit or accept sales of insurance products that are substantially similar to
the OFIC Products, or (ii) promote any insurance products which are
substantially similar to the OFIC Products, other than the promotion of the OFIC
Products pursuant to this Agreement, or promote any insurance company offering
insurance products of such type other than OFIC, provided, however, that to the
-------- -------
extent that OFIC and its affiliates are not currently offering (and have no
plans to offer in the immediate future) a property and casualty insurance
product which Guarantee desires to promote, and such property and casualty
insurance product is offered by another property and casualty insurance company,
Guarantee and its affiliates shall be permitted to promote such property and
casualty insurance product without violation of this Agreement.
(C) The provisions of this Agreement shall not in any way limit the rights
of either party or its affiliates to offer or promote individual accident and
health insurance products or credit insurance products of any type, and shall
not be construed to prevent either party from conducting its insurance business
through independent agents who also offer any of the products described in
Section 6(A) or 6(B) above, as applicable, on behalf of a third-party insurer
that is not an affiliate of the other party. The provisions of this Section 6
shall also not apply to (1) Guarantee's temporary ownership, direct or indirect,
of a property and casualty insurance subsidiary of a life insurance company or
insurance holding company acquired by Guaranty or its affiliates, or (2) OFIC's
temporary ownership, direct or indirect, of a life insurance subsidiary of a
property and casualty insurance company acquired by OFIC or its affiliates;
provided, however, that in each case (i) in the event of such an acquisition,
- -------- -------
the acquiring party shall offer the referenced subsidiary to the other party
hereto at a price equal to fair market value, (ii) the other party shall have 45
days to either accept or decline such offer (and, if such offer is accepted, an
additional 180 days to close and purchase), and (iii) if such offer is declined
by the other party, or if such offer was accepted but such purchase does not
close within 180 days after such acceptance, the acquiring party shall use
commercially reasonable efforts to dispose of the referenced subsidiary as soon
as reasonably practicable after the declination of the offer by the other party
or the expiration of the 180 day period, whichever is applicable.
(D) The parties recognize that irreparable damage will result from any
violation of this Section 6 by either party. In addition to any and all other
remedies available to the non-breaching party, the non-breaching party shall
have the remedies of restraining order and injunction and any such other
equitable relief as may be declared or issued by a court to enforce the
provisions of this Section 6, without posting any bond that might be required,
and the breaching party shall not claim in any such proceedings that an adequate
remedy at law is available. The existence of any claim or cause of action by
the breaching party against the non-breaching party, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
non-breaching party of any provision of this Section 6.
6
<PAGE>
(E) Notwithstanding anything contained in this Agreement to the contrary,
if any provision of this Section 6 shall, for any reason, be held to be
excessively broad as to duration, geographical scope, activity or subject, such
provision shall be construed by limiting and reducing it so as to be enforceable
to the extent compatible with the applicable law in such jurisdiction as it
shall then exist. Each party shall reimburse the other for all reasonable
expenses incurred, including reasonable attorneys' fees, expenses and court
costs, in connection with the enforcement of its rights and the obligations
under this Section 6.
Section 7. USE OF WESTFIELD CAMPUS.
-----------------------
(A) OFIC shall permit Guarantee to use OFIC's existing campus and
facilities located in Westfield Center, Ohio (including, without limitation,
access to OFIC's golf courses, the Westfield Inn and related facilities)
(collectively, the "Westfield Campus") for the purposes of (i) meetings,
promotional events and related activities associated with the Company's proposed
35th anniversary scheduled for August, 1998, and (ii) meetings, promotional
events and related activities associated with the Company's "key producers"
meeting scheduled for September, 1998. During each summer in the years after
1998 while this Agreement remains in effect, OFIC shall permit the Company to
use the Westfield Campus for the meetings, promotional events and related
activities associated with one annual "key producers" meeting or equivalent
event on behalf of the Company.
(B) Guarantee shall comply with such reasonable scheduling, reservation and
conduct guidelines and policies relating to use of the Westfield Campus as OFIC
may require. Invoices relating to Guarantee's use of the Westfield Campus
pursuant to Section 7(A) shall be paid by Guarantee in accordance with OFIC's
then-current customary fee schedule as amended from time to time.
SECTION 8 LIMITS OF LIABILITY AND INDEMNIFICATION.
---------------------------------------
(A) OFIC will use reasonable care in performing its obligations hereunder
and represents that all such obligations shall be provided in accordance with
the standards established and adhered to historically by OFIC in performing such
obligations on its own behalf or for its affiliates. In the event that OFIC
discovers or is notified of an error or omission in the performance of its
obligations hereunder, OFIC shall use its best efforts to correct the error or
omission within a time reasonable under the circumstances, or within such a time
to furnish a correct report or the correct data and to correct Guarantee's
files. EXCEPT AS SET FORTH IN THIS SECTION 8, OFIC DISCLAIMS ALL WARRANTIES,
---------------------------------------------------------------------
WHETHER EXPRESS OR IMPLIED, REGARDING ANY SERVICES, HARDWARE, SOFTWARE,
- -----------------------------------------------------------------------
EQUIPMENT OR MATERIALS PROVIDED BY OFIC UNDER THIS AGREEMENT, INCLUDING WITHOUT
- -------------------------------------------------------------------------------
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
- -----------------------------------------------------------------------
PARTICULAR PURPOSE.
- -------------------
(B) OFIC shall at all times indemnify, protect, defend and hold harmless
Guarantee and its affiliates from and against any and all Claims (as hereafter
defined) relating to or arising from the performance by OFIC of the terms of
this Agreement, including but not limited to any act, error or omission of any
OFIC employee, provided, however, that the provisions of this
-------- -------
7
<PAGE>
Section 8(B) shall not apply in the case of any such Claim which arises out of
or relates to the negligent, intentional or reckless misconduct of Guarantee or
its agents or employees. In no event shall OFIC be responsible for special,
indirect, incidental or consequential damages or punitive damages which
Guarantee may incur or experience on account of entering into or relying on this
Agreement, even if OFIC has been advised of the possibility of such damages,
provided further, that with respect to any and all losses, claims, damages,
- -------- -------
obligations, liabilities (including reasonable expenses and costs), whether
based on an action or claim in contract, equity, negligence, intentional
conduct, tort or otherwise and whether or not involving any third party claim
(collectively, "Claims"), arising out of or related to the performance or
nonperformance of any obligations performed or to be performed hereunder, or
with respect to any error or omission with respect to such obligations,
Guarantee's sole and exclusive monetary remedy shall be for OFIC to pay to
Guarantee the lesser of: (1) the amount of actual damages incurred by Guarantee
with respect to such Claims, or (2) an amount not to exceed, in the aggregate
over the term of the Agreement, the Fee paid or payable by Guarantee hereunder
with respect to the twelve (12) month period immediately preceding the date of
such error or omission (or if more than one error or omission, the date of the
first such error or omission), and if the error or omission occurs prior to one
year from the date of this Agreement the amount will be the Fee paid or payable
by Guarantee hereunder on an annualized basis. Except as expressly provided by
the immediately preceding sentence, OFIC shall not have any monetary liability
under this Agreement for any damages resulting from any Claims. The foregoing
provisions of this Section 8 set forth the full extent of OFIC's liability under
this Agreement (monetary or otherwise) for any and all Claims and set forth
Guarantee's sole remedies therefor.
(C) Guarantee shall at all times indemnify, protect, defend and hold
harmless OFIC and its affiliates from and against any and all Claims relating to
or arising from this Agreement or the performance by Guarantee of the terms of
this Agreement, including but not limited to any act, error or omission of any
Underwriter or the Marketing Representative; provided, however, that the
-------- -------
provisions of this Section 8(C) shall not apply in the case of any such Claim
which arises out of or relates to the negligent, intentional or reckless
misconduct of OFIC in performing OFIC's obligations hereunder. In no event
shall Guarantee be responsible for special, indirect, incidental or
consequential damages or punitive damages which OFIC may incur or experience on
account of entering into or relying on this Agreement, even if Guarantee has
been advised of the possibility of such damages.
SECTION 9. RELATIONSHIP OF THE PARTIES. In performing its obligations
---------------------------
under this Agreement, OFIC is acting as an independent contractor. OFIC does
not undertake by this Agreement or otherwise to perform any obligation of
Guarantee, whether regulatory or contractual or otherwise except as provided
herein. OFIC shall not be deemed to be a joint venturer with, or a partner or
agent of, Guarantee, nor shall OFIC's employees be deemed to be employees of
Guarantee.
SECTION 10. FORCE MAJEURE. OFIC shall be excused from performance
-------------
hereunder for any period when it is prevented from performing any obligations to
be provided hereunder, in whole or in part, as a result of an act of God, fire,
war, civil disturbance, court order, insurance department regulatory order
(provided such order did not arise from the violation of any law or regulation
by OFIC), labor dispute or other cause beyond its reasonable control, and such
8
<PAGE>
nonperformance shall not be a ground for termination hereof or assertion of
default hereunder. In the event that OFIC shall be excused from performance
under this provision, it shall use its best efforts to provide, directly or
indirectly, alternative and, to the extent practicable, equivalent fulfillment
of its obligations hereunder.
SECTION 11. SEVERABILITY. If any provision of this Agreement is declared
------------
or found to be illegal, unenforceable or void by any administrative agency,
regulatory body or court of competent jurisdiction, such finding shall not
affect the remaining provisions of this Agreement, and all other provisions
hereof shall remain in full force and effect.
SECTION 12. GOVERNING LAW; FORUM. This Agreement and all rights and
--------------------
obligations of the parties hereunder shall be construed and interpreted under
and pursuant to the laws of the State of Ohio, without regard to conflicts of
law principles. Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of Ohio, County of Medina, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Northern District of Ohio, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on any
party in any jurisdiction.
SECTION 13. WAIVER. No delay or omission by any party hereto to
------
exercise any right or power arising upon any noncompliance or default by any
other party with respect to any of the terms of this Agreement shall cause any
such right or power to be construed as a waiver thereof. A waiver by any of the
parties hereto of the fulfillment of any of the covenants, conditions, or
agreements to be performed by any other shall not be construed to be a waiver of
any succeeding breach thereof or of any other covenant, condition or agreement
contained herein. No waiver or compromise of any provision or condition hereof
shall be effective unless evidenced by a written instrument duly executed by the
party hereto to be charged with such waiver or compromise.
SECTION 14. CONFIDENTIALITY.
---------------
(A) The parties hereto acknowledge that, in connection with their rights
and responsibilities hereunder, each may obtain access to information that the
other party considers proprietary and confidential, including, without
limitation, information concerning their respective financial conditions,
operations, policyholders, employees, markets, agents, marketing strategy and
techniques, computer software and systems and similar information that may
otherwise become available during the term of this Agreement that is not
generally ascertainable from public or published sources (the "Confidential
Information"). Each of the parties shall retain in strict confidence, and shall
require their respective affiliates, shareholders, officers, directors,
employees, and other representatives to retain in strict confidence, all
Confidential Information and not to use or disclose to others, or permit the use
or disclosure of, any Confidential Information, except as necessary to perform
their obligations with respect to this Agreement.
9
<PAGE>
(B) Notwithstanding anything in Section 14(A) to the contrary, the term
"Confidential Information" shall not include (1) information which comes into
the public domain other than by reason of a breach of this Agreement; (2)
information that has come to a party from a lawful source not bound to maintain
the confidentiality of the information, other than from another party to this
Agreement and (3) disclosures that, in the reasonable opinion of counsel for a
party, are required by law.
SECTION 15. NOTICES. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given on the date of receipt if
delivered personally or by confirmed facsimile transmission and ten (10) days
from the date of mailing if mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice;
provided, however, that notices of a change of address shall be effective only
upon receipt thereof):
If to Guarantee, to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Facsimile:
Attention: Robert D. Bates
with copies to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Facsimile:
Attention: Richard A. Spellman, Esq.
If to OFIC, to:
Ohio Farmers Insurance Company
P.O. Box 5001
One Park Circle
Westfield Center, Ohio 44251-5001
Facsimile: 330-887-6295
Attention: Robert J. Joyce
SECTION 16. ASSIGNMENT. This Agreement shall be binding upon and
----------
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither OFIC nor Guarantee may assign any of their
respective rights and obligations under this Agreement without the prior written
consent of the other.
10
<PAGE>
SECTION 17. COUNTERPARTS. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
SECTION 18. HEADINGS. The headings to the Sections of this Agreement
--------
are for convenience only and in no way define, limit or describe the scope or
intent of this Agreement or any party hereto, nor in any other way affect this
Agreement or any part hereof.
SECTION 19. AMENDMENT. This Agreement shall not be altered or amended
---------
except pursuant to an instrument in writing signed by the parties hereto. Each
party agrees to consent to any amendments to this Agreement required by the Ohio
Department of Insurance or the Nebraska Department of Insurance, except to the
extent that any such amendment contains terms or conditions which are not
commercially reasonable in such party's reasonable judgment.
SECTION 20. OTHER ARRANGEMENTS. Guarantee acknowledges that OFIC is
------------------
presently and may in the future provide and perform obligations which are the
same or similar to its obligations hereunder to parties other than Guarantee,
and that OFIC may utilize the same office space, equipment and personnel to
perform such obligations and functions for such other parties as it utilizes to
perform its obligations for Guarantee.
SECTION 21. CONSTRUCTION. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring any party by virtue of authorship of any of the specific
provisions of the Agreement. When used in this Agreement, the word "including"
shall mean including without limitation. Any reference to federal, state, local
or foreign statutes or laws shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. All
references to "affiliates" in this Agreement shall mean "affiliates" as such
term is defined within the meaning of federal securities laws.
SECTION 22. ENTIRE AGREEMENT. This Agreement, including all schedules
----------------
attached to this Agreement, constitutes the entire agreement between the parties
pertaining to the subject matter of this Agreement and supersedes all prior or
contemporaneous oral or written agreements, proposals and understandings.
11
<PAGE>
SIGNATURES
----------
IN WITNESS WHEREOF, GLC, OFIC and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
GLC: OFIC:
THE GUARANTEE LIFE COMPANIES INC. OHIO FARMERS INSURANCE COMPANY
By:____________________________
Name:__________________________ By:____________________________
Title:___________________________ Name:__________________________
Title:_________________________
THE COMPANY:
WESTFIELD LIFE INSURANCE
COMPANY
By:____________________________
Name:__________________________
Title:___________________________
12
<PAGE>
EXHIBIT B
FORM OF SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is made and entered into as
of the [ ] day of [ ], 1998 by and among The Guarantee
Life Companies Inc., a Delaware corporation ("Guarantee"), and Ohio Farmers
Insurance Company (the "Shareholder").
WHEREAS, Guarantee has, upon the terms and subject to the conditions of the
Stock Purchase Agreement among Guarantee, the Shareholder and Westfield Life
Insurance Company, an Ohio corporation (the "Company"), dated as of March 19,
1998 (the "Stock Purchase Agreement"), agreed to purchase from the Shareholder
all of the issued and outstanding capital stock of the Company and to issue to
the Shareholder as partial consideration therefor, shares of Guarantee common
stock, par value $0.01 per share (the "Common Stock"); and
WHEREAS, Guarantee and the Shareholder believe that it is in their mutual
best interests to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements of the parties herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to other terms that are defined herein, the following terms
shall have the definitions set forth in this Article:
"Affiliate" means any Person which directly or indirectly controls, or is
controlled by, or is under common control with, such other Person, including
without limitation, its direct or indirect parent and subsidiary entities. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
<PAGE>
"Person" means any natural person, corporation, firm, partnership, limited
liability company, association, government, governmental agency or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Securities" means the Common Stock or other securities of Guarantee
exercisable for, or convertible or exchangeable into, Common Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"Transfer" means to directly or indirectly sell, assign, hypothecate,
transfer, pledge, mortgage or in any other way encumber or dispose of Securities
and shall be defined to include the process whereby Securities are transferred.
ARTICLE II
COVENANTS OF SHAREHOLDER
Section 2.01. RESTRICTION ON TRANSFER. (a) The Shareholder agrees that it
shall not Transfer any Securities except in compliance with the Securities Act
and any applicable state securities laws and the provisions of this Agreement.
Any attempted Transfer by the Shareholder of Securities in violation of this
Agreement shall be null and void.
(b) The Shareholder agrees that for a period of two years from the date of
this Agreement, it will not Transfer all or any of the Securities it owns to any
Person other than Guarantee or its subsidiaries. If the Ohio Department of
Insurance (the "Ohio Department"), however, provides the Shareholder with a
formal written notice or order requiring the Shareholder to dispose of its
interest in the Securities for solvency reasons (after exhaustion of all
administrative rights of appeal within the Ohio Department, which the
Shareholder hereby covenants to pursue in a commercially reasonable manner), the
Shareholder shall give written notice thereof to Guarantee. Such written notice
shall be deemed an "RFR Notice" pursuant to Article III of this Agreement
wherein the Shareholder shall be deemed to offer the Securities to Guarantee.
If Guarantee does not purchase the Securities in accordance with Article III,
Shareholder may Transfer the Securities in accordance with the provisions of
subsections (a), (c) and (d) of this Section 2.01 to another Person.
(c) Notwithstanding anything to the contrary in this Agreement or in any
other agreement or understanding between the Shareholder and Guarantee, the
Shareholder agrees that for the term of this Agreement, it will not at any time
Transfer all or any of the Securities it owns to any Person who owns 2% or more
of Guarantee's issued and outstanding Common Stock at the time of such attempted
Transfer or who, with such Transfer, would own 2% or more of Guarantee's issued
and outstanding Common Stock; provided, however, that this Section 2.10(c) shall
not apply if the Ohio Department provides the Shareholder with a formal written
notice or order placing the Shareholder under supervision, rehabilitation or
liquidation.
2
<PAGE>
(d) The Shareholder hereby acknowledges and agrees that each certificate
representing shares of the Common Stock will bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, UNLESS SOLD PURSUANT TO AN
EXEMPTION FROM REGISTRATION REQUIREMENTS.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER
RESTRICTIONS CONTAINED IN A SHAREHOLDER AGREEMENT, DATED
, 1998, BY AND AMONG THE CORPORATION AND A SHAREHOLDER, A COPY OF WHICH IS
ON FILE AT THE OFFICE OF THE CORPORATION. TRANSFERS IN VIOLATION OF THE
SHAREHOLDERS AGREEMENT ARE VOID. BY ACCEPTANCE OF THIS CERTIFICATE THE
HOLDER HEREOF AGREES TO BE BOUND BY THE TERMS OF THE SHAREHOLDER AGREEMENT.
Section 2.02. STANDSTILL AGREEMENT. Except as otherwise permitted in this
Agreement, the Shareholder covenants that, for the term of this Agreement,
without the prior written consent of Guarantee, the Shareholder will not, and
will cause each of its Affiliates not to, singly or as part of a "partnership,
limited partnership, syndicate or other group" (as those terms are used within
the meaning of Section 13(d)(3) of the Exchange Act, which meanings shall apply
for all purposes of this Agreement), directly or indirectly, through one or more
intermediaries or otherwise:
(a) acquire, offer or propose to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise (other than as a result of
a stock split, stock dividend or other recapitalization relating to the
Securities or as may be otherwise permitted in this Section 2.02), any
Securities;
(b) make, or in any way participate, directly or indirectly, in, any
"solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A of the Exchange Act) by Persons other than Guarantee with
respect to the Securities (including by the execution of actions by written
consent) or become a "participant" in any "election contest" (as such terms
are defined or used in Rule 14a-11 of the Exchange Act) with respect to
Guarantee other than in concurrence with actions initiated or supported by
the Board of Directors of Guarantee;
(c) initiate, propose or otherwise solicit, or participate in the
solicitation of, shareholders for the approval of one or more shareholder
proposals with respect to Guarantee as described in Rule 14a-8 under the
Exchange Act or induce any other individual or entity to initiate any
shareholder proposal relating to Guarantee;
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(d) directly or indirectly participate in or encourage the formation
of any group that seeks control of Guarantee (other than as may be
otherwise permitted in this Section 2.02) or for the purpose of
circumventing any provision of this Agreement;
(e) other than in connection with a competing proposal in respect of
any such action taken by a third party without the direct or indirect
assistance of the Shareholder or its Affiliates, solicit, seek or offer to
effect with any third party, or make any statement or proposal, whether
written or oral, either alone or in concert with others, with respect to
any form of business combination or transaction involving Guarantee or any
subsidiary/hereof, including, without limitation, a merger, exchange offer
or liquidation of Guarantee's assets or instigate or encourage any third
party to do any of the foregoing;
(f) deposit any Securities into a trust or subject any Securities to
any arrangement or agreement with respect to the voting thereof or take any
action by written consent in lieu of a meeting, in any such case that seeks
control of Guarantee (except as may be otherwise permitted in this Section
2.02 or with respect to any such trust, arrangement or agreement entered
into by the Shareholder with Guarantee) or for the purpose of circumventing
any provision of this Agreement; or
(g) other than in connection with a competing proposal in respect of
any such action taken by a third party without the direct or indirect
assistance of the Shareholder or its Affiliates, otherwise act, directly or
indirectly, alone or in concert with others (including by providing
financing for another party), to seek or offer to acquire control of
Guarantee.
Section 2.03. VOTING AND DISSENTER'S RIGHTS. (a) The Shareholder agrees
that for the term of this Agreement it will use reasonable best efforts to: (i)
be present, in person or represented by proxy, at all shareholder meetings of
Guarantee so that all of the Common Stock beneficially owned by the Shareholder
and its Affiliates may be counted for the purpose of determining the presence of
a quorum at such meetings; and (ii) not exercise any statutory dissenter's
rights in connection with any merger, consolidation, reorganization or sale of
all or substantially all of the assets of Guarantee.
(b) The Shareholder agrees that for the term of this Agreement it will vote
all shares of Common Stock owned by it in concurrence with the recommendation of
the Board of Directors of Guarantee in all matters that are submitted to the
shareholders of Guarantee for vote or consent.
Section 2.04. PUBLIC OFFERING LOCK-UP. The Shareholder agrees and
covenants that in connection with an underwritten public offering of securities
by Guarantee, it will agree if requested by the underwriter(s) to not offer,
sell or otherwise dispose of its Securities for a period not to exceed 180 days
after the date of the underwriting agreement, without the prior consent of the
underwriter(s).
4
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ARTICLE III
RIGHT OF GUARANTEE
Section 3.01. RIGHT OF FIRST REFUSAL. (a) Guarantee shall have a right of
first refusal on the terms and conditions set forth below in this Section 3.01
to acquire any of the Securities, that the Shareholder proposes to Transfer to
any Person.
(b) The Shareholder shall give written notice (the "RFR Notice") to
Guarantee no less than 60 days prior to a proposed Transfer of the Securities
which shall include: (i) a statement of the Shareholder's intention to Transfer
the Securities; (ii) the number of shares of the Securities that the Shareholder
proposes to Transfer (the "RFR Shares"); (iii) the sale price per share which
shall equal the mean average of the respective closing prices (as reported in
The Wall Street Journal) for each of the 10 consecutive trading days ending on
and including the date which shall be the third Business Day immediately
preceding the date the RFR Notice is delivered to Guarantee; and (iv) the other
terms and conditions of the proposed Transfer.
(c) The RFR Notice shall constitute an irrevocable offer on the part of the
Shareholder to sell to Guarantee all of the RFR Shares on the same per-share
terms and conditions stated in the RFR Notice. Guarantee may elect to accept
such offer only by giving written notice to the Shareholder of its irrevocable
election to accept such offer (the "RFR Acceptance") within 30 days after
delivery to Guarantee of the RFR Notice. If Guarantee elects to purchase the
RFR Shares, the closing of the purchase and sale of the RFR Shares shall occur
no later than 90 days after delivery by Guarantee of the RFR Acceptance. At the
closing, Guarantee shall deliver to the Shareholder the consideration payable
for such RFR Shares against delivery by the Shareholder of certificates
evidencing such shares. Guarantee shall pay such purchase price in immediately
available funds. The obligation of the Shareholder to sell RFR Shares to
Guarantee under this Section 3.01(c) shall terminate if the contemplated closing
does not occur within 90 days after delivery of the RFR Acceptance due to delays
caused by Guarantee.
(d) If Guarantee does not deliver the RFR Acceptance for all RFR Shares
within the respective 30-day periods set forth in paragraph (b) (or if Guarantee
sooner rejects the Shareholder's offer), or if Guarantee does not close the
purchase of the RFR shares in accordance with paragraph (c), the Shareholder
shall be free for a period of 180 days thereafter to Transfer the RFR Shares for
which no RFR Acceptance has been delivered to any Person at the market price
prevailing at the time of such Transfer. If the Shareholder does not Transfer
such RFR Shares within such period, then such RFR Shares shall again become
subject to the provisions of this Section 3.01. In the event Guarantee elects
not to purchase the RFR Shares, Guarantee shall cooperate reasonably with the
Shareholder in connection with its Transfer of the RFR Shares to any Person.
Section 3.02. RIGHT OF FIRST REFUSAL FOR RULE 144 SALES. (a)
Notwithstanding the
5
<PAGE>
provisions of Section 3.01, two years after the date of this Agreement, the
Shareholder may Transfer the Securities in compliance with the provisions of
Rule 144 under the Securities Act, other than Rule 144(k), and the provisions of
this Section 3.02.
(b) The Shareholder shall give written notice to Guarantee of a proposed
Transfer of the Securities which shall include: (i) a statement of the
Shareholder's intention to Transfer the Securities; (ii) the number of shares of
the Securities that the Shareholder proposes to Transfer; (iii) the proposed
sale price per Security; and (iv) the other terms and conditions of the proposed
Transfer. Such notice shall constitute an irrevocable offer on the part of the
Shareholder to sell to Guarantee all of such Securities on the same per-Security
terms and conditions stated in the notice. Guarantee may elect to accept such
offer only by giving written notice to the Shareholder of its irrevocable
election to accept such offer (the "Acceptance") within 48 hours after delivery
to Guarantee of the notice. If Guarantee elects to purchase the Securities, the
closing of the purchase and sale of the Securities shall occur no later than
five Business Days after delivery by Guarantee of the Acceptance. At the
closing, Guarantee shall deliver to the Shareholder the consideration payable
for such Securities against delivery by the Shareholder of certificates
evidencing such Securities. Guarantee shall pay such purchase price in
immediately available funds. The obligation of the Shareholder to sell the
Securities to Guarantee under this Section 3.02 shall terminate if the
contemplated closing does not occur within five Business Days after delivery of
the Acceptance due to delays caused by Guarantee.
(c) If Guarantee does not deliver the Acceptance for all the Securities
within the period set forth in paragraph (b) (or if Guarantee sooner rejects the
Shareholder's offer), or if Guarantee does not close the purchase of the
Securities in accordance with paragraph (b), the Shareholder shall be free for a
period of 180 days thereafter to Transfer the Securities for which no Acceptance
has been delivered to any Person at the market price prevailing at the time of
such Transfer. If the Shareholder does not Transfer such Securities within such
period, then such Securities shall again become subject to the provisions of
this Section 3.02. In the event Guarantee elects not to purchase the
Securities, Guarantee shall cooperate reasonably with the Shareholder in
connection with its Transfer of the Securities to any Person.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only in writing by the
Shareholder and Guarantee.
Section 4.02. WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise
provided in this Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
or parties entitled to the benefits thereof only by a written instrument signed
by the party or parties granting such waiver, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
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Whenever this Agreement requires or permits consent by or on behalf of any party
hereto, such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 4.02.
Section 4.03. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given on the date of receipt if
delivered personally or by confirmed facsimile transmission and five days from
the date of mailing if mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof):
(a) If to the Shareholder to:
Ohio Farmers Insurance Company
Post Office Box 5001
One Park Circle
Westfield Center, OH 44251
Attention: Robert J. Joyce
Fax Number: (330) 887-6295
With a copy to:
Bricker & Eckler LLP
100 South Third Street
Columbus, OH 43215
Attention: John W. Cook, III, Esq.
Fax Number: (614) 227-2390
(b) If to Guarantee, to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Attention: Robert D. Bates
Fax Number: (402) 361-7571
With copies to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Attention: Richard A. Spellman, Esq.
Fax Number: (402) 361-7571
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<PAGE>
and
Kutak Rock
1650 Farnam Street
Omaha, NE 68102
Attention: Joe E. Armstrong, Esq.
Fax Number: (402) 346-1148
Section 4.04. 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, heirs, personal representatives and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party or parties.
Section 4.05. NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement is
intended or shall be construed to give any Person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect to
this Agreement or any provision contained herein.
Section 4.06. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware (regardless of the laws that might otherwise govern
under applicable principles of conflicts of law) as to all matters, including,
but not limited to, matters of validity, construction, effect, performance and
remedies.
Section 4.07. INVALIDITY OF PROVISIONS. If any provision of this
Agreement is determined to be invalid, illegal or unenforceable, in whole or in
part, then the parties shall be relieved of all obligations arising under such
provision to the extent it is invalid, illegal or unenforceable, and such
provision shall be reformed to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
Section 4.08. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 4.09. HEADINGS. The article and section headings contained in
this Agreement are solely for convenience of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 4.10. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the transactions
contemplated by this Agreement. There are no restrictions, promises,
representations, warranties, covenants or undertakings other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
transactions.
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<PAGE>
Section 4.11. FURTHER ACTS. The parties shall execute all documents,
provide all information and take all such actions as may be reasonably necessary
or appropriate to achieve the purposes of this Agreement and to accomplish the
transactions contemplated hereby.
Section 4.12. TERM OF AGREEMENT. This Agreement shall become effective as
of the date first written above and shall remain in full force and effect until
the later to occur of (a) five years from the date of this Agreement or (b) the
termination of the Marketing Agreement or Administrative Services Agreement,
both of which are between Guarantee and the Shareholder and dated
, 1998. Upon termination of this Agreement, the Secretary of Guarantee, upon
tender of the certificates for Common Stock, shall delete the legend endorsed
thereon pursuant to Article II of this Agreement.
Section 4.13. EXPENSES. Each of the parties hereto shall, whether or not
the transactions contemplated hereby are consummated, bear its own fees, costs
and expenses incurred in connection with the negotiation, execution and
performance of this Agreement or any of the transactions contemplated hereunder.
Section 4.14. ENFORCEMENT OF COVENANTS. In the event of a violation by
any of the parties hereto of any of its agreements and covenants set forth
herein, the other parties shall be entitled to injunctive relief in addition to
any other legal or equitable remedies that may be available to them. The
parties acknowledge that their agreements and covenants herein were a material
inducement and condition to the other parties' execution of this Agreement and
performance of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of date first above written.
OHIO FARMERS INSURANCE COMPANY
By __________________________
Name ________________________
Title _______________________
THE GUARANTEE LIFE COMPANIES
INC.
By __________________________
Name ________________________
Title _______________________
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<PAGE>
EXHIBIT C
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
This Administrative Services Agreement (this "Agreement") is entered into
and made to be effective this ___ day of _______, 1998, by and among The
Guarantee Life Companies Inc., a Delaware corporation ("GLC"), Westfield Life
Insurance Company, an Ohio domiciled life insurance company (the "Company"); and
Ohio Farmers Insurance Company, an Ohio corporation (the "Provider"). GLC and
the Company are sometimes collectively referred to herein as "Guarantee".
RECITALS
--------
A. The Provider has sold to GLC, and GLC has acquired from the Provider,
all of the issued and outstanding capital stock of the Company on even
date herewith.
B. The Provider provides administrative services as described in this
Agreement and has or will obtain qualified personnel, equipment and
facilities to perform such administrative services for Guarantee.
C. Guarantee desires to engage the Provider to assist Guarantee in
certain of its administrative functions as described herein, and the
Provider is willing to accept such engagement pursuant to the terms
and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledges, the parties hereto
covenant and agree as follows:
SECTION 1. SERVICES.
--------
(A) Guarantee hereby engages and appoints the Provider, and the Provider
hereby agrees to provide to and perform for Guarantee all of the administrative
services reasonably necessary to process, administer and account for all of the
insurance business of the Company (the "Services") (including without
limitation, individual life, annuity, supplementary contract and structured
settlements) which (1) is in force on the date hereof; (2) was applied for or
issued by the Company on or prior to the date hereof to become effective on or
after the date hereof; or (3) was issued by the Company prior to the date hereof
and has lapsed but is hereinafter reinstated by the Company (the "Serviced
Business"), provided, however, that the Provider shall not be obligated to
-------- -------
provide actuarial or underwriting services as part of the definition of
"Services" hereunder. The Services shall include those described on Schedule A
----------
attached hereto and incorporated herein by this reference. All such Services
shall be performed by the Provider
<PAGE>
in substantial conformity with the relevant service standards identified on
Schedule A and incorporated herein by reference.
- ----------
(B) Guarantee hereby authorizes the Provider to open and administer a
banking account (the "Service Account") on Guarantee's behalf for purposes of
performing the Services under this Agreement. The Provider shall deposit into
the Service Account all premiums and other amounts received by the Provider with
respect to the Serviced Business ,and shall make all necessary disbursements
from such account in connection with the Services. Guarantee shall from time to
time upon notice from the Provider advance such funds as are or may be needed to
cover or prevent any negative balance in the Service Account. The Provider
acknowledges and agrees that the Service Account is the exclusive property of
Guarantee and that the Provider shall act as a fiduciary with respect to such
Account.
(C) Guarantee acknowledges and understands that funds received by the
Provider with respect to the Serviced Business may be commingled when received
with funds received by the Provider with respect to business which is not
included in the Serviced Business. The Provider shall be permitted to initially
deposit all such commingled funds in accounts of Provider other than the Service
Account, provided that the Provider shall within 72 hours thereafter transfer
the portion of such commingled funds attributable to the Serviced Business into
the Service Account in an automated clearinghouse transaction. Uncollected or
improperly credited funds will be charged back upon proper notification.
(D) Guarantee hereby grants to Provider the non-exclusive right to use the
corporate name, trade names, service marks and trademarks, together with any
stylized logos incorporating those names or marks (collectively, the "Marks")
now or hereafter owned or used by or useful in the business of the Company, but
solely for the purpose of performing and providing the Services hereunder.
Provider agrees that it shall not hereby or otherwise acquire any right, title
or interest in the Marks, except for the limited license granted by this Section
1(D).
(E) The Provider is currently utilizing both internal and external
resources to identify, replace, correct or reprogram, and test the Provider's
information systems and related software and hardware required to perform the
services required under this Agreement, including those systems which are
proprietary and those from third-party vendors (collectively, the "Provider
Systems") as being Year 2000 compliant. The Provider represents and warrants to
Guarantee that all such replacement, correction and reprogramming efforts of the
Provider Systems will be completed in time to permit adequate testing prior to
December 31, 1998, and that the Provider's Systems will be Year 2000 compliant
on a timely basis in order to properly function when relating to any date, data
or time following December 31, 1999. For purposes of this Agreement, the term
"Year 2000 compliant" shall mean, at a minimum, that the Provider Systems (a)
will manage and manipulate data involving dates, including single century
formulas and multi-century formulas, and will not cause an abnormally ending
scenario with the application or generate incorrect values or invalid results
involving such dates, (b) provide that all date-related user interface
functionalities and data fields include the indication of the century, if
necessary, and (c) provide that all date-related data interface functionalities
include the indication of the century or logic to accommodate century
processing. Furthermore, the Provider represents that it has (i) adopted a
comprehensive Year 2000 problem resolution process which includes an
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inventory, assessment, remediation, validation/testing and implementation
process, and (ii) committed sufficient resources to the Year 2000 effort. With
respect to those portions of the Provider Systems which include use of third
party software, the Provider either (A) has diligenced vendors to ensure their
Year 2000 compliant efforts and expects to receive reasonable assurances that
such vendors shall be prepared for testing prior to December 31, 1998, (B) has
full authority to disclose to external resources and to modify such third-party
software, or (C) will timely replace such third-party software which is not Year
2000 compliant and which the Provider cannot modify. Notwithstanding the
foregoing, it is understood and agreed that the Provider assumes no
responsibility for Year 2000 compliance with respect to Guarantee's information
systems.
SECTION 2. SERVICE FEE. As consideration for providing the various
-----------
Services, Guarantee shall pay to the Provider (collectively, the "Service Fee")
(i) the service fees calculated as provided and payable at the times set forth
in the fee schedule agreed upon by the parties, which is incorporated herein by
reference, and (ii) such additional fees as are necessary to reflect the
Provider's added cost of performing Services which are required by (A) changes
in applicable insurance laws or regulations, (B) changes in reports or
information required to be provided to policyholders, agents or insurance
governmental authorities or (C) claims investigation. The parties acknowledge
and agree that the intention of this Section 2 is to pass-through to Guarantee
the reasonable costs of revising and redesigning the Services as required in
subsection (B) above, as well as to pass through expenses for any addition
services not included on Schedule A which may be requested by Guarantee from
----------
time to time. The Service Fee shall be billed directly to Guarantee on a
monthly basis.
SECTION 3. TERM AND TERMINATION.
--------------------
(A) The term of this Agreement shall commence on the date hereof and
continue until December 31, 2001 and shall thereafter automatically renew for up
to ten successive additional one year terms, unless earlier terminated as
follows:
(1) By the written agreement of the parties hereto;
(2) By either Guarantee or the Provider, as of December 31st of any
calendar year after 2000, upon prior written notice of termination
given at least one (1) calendar year to the other; or
(3) By either Guarantee or the Provider, in the event of a material
breach of this Agreement by the other, if such breach is not cured
or eliminated within ninety (90) days after receipt by the
breaching party of written notice thereof.
(B) The provisions of Section 11 shall survive the termination of this
Agreement.
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<PAGE>
SECTION 4. LIMITS OF LIABILITY AND INDEMNIFICATION.
---------------------------------------
(A) The Provider will use reasonable care in performing the Services and
represents that all such Services shall be provided in accordance with the
standards established and adhered to historically by the Provider in performing
such Services on its own behalf or for its affiliates. In the event that the
Provider discovers or is notified of an error or omission in the performance of
the Services, the Provider shall use its best efforts to correct the error or
omission within a time reasonable under the circumstances, or within such a time
to furnish a correct report or the correct data and to correct Guarantee's
files. EXCEPT AS SET FORTH IN THIS SECTION 4, THE PROVIDER DISCLAIMS ALL
-----------------------------------------------------------------
WARRANTIES, WHETHER EXPRESS OR IMPLIED, REGARDING ANY SERVICES, HARDWARE,
- -------------------------------------------------------------------------
SOFTWARE, EQUIPMENT OR MATERIALS PROVIDED BY THE PROVIDER UNDER THIS AGREEMENT,
- -------------------------------------------------------------------------------
INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
- ---------------------------------------------------------------------------
FITNESS FOR A PARTICULAR PURPOSE.
- ---------------------------------
(B) Guarantee's sole and exclusive monetary remedy for any and all losses,
claims, damages, obligations, liabilities (including expenses and costs),
whether based on an action or claim in contract, equity, negligence, intentional
conduct, tort or otherwise and whether or not involving any third party claim
(collectively, "Claims"), arising out of or related to the performance or
nonperformance of any of the Services provided or to be provided by the Provider
hereunder, or with respect to any error or omission of the Provider with respect
to such Services, shall be for the Provider to pay to Guarantee the lesser of:
(1) the amount of actual damages incurred by Guarantee with respect to such
Claims, or (2) an amount not to exceed, in the aggregate over the term of the
Agreement, the Service Fee paid or payable by Guarantee hereunder with respect
to the twelve (12) month period immediately preceding the date of such error or
omission (or if more than one error or omission, the date of the first such
error or omission), and if the error or omission occurs prior to one year from
the date of this Agreement the amount will be the Service Fee paid or payable by
Guarantee on an annualized basis. Notwithstanding the foregoing limitations,
the Provider shall pay to Guarantee the amount of the actual damages sustained
by Guarantee for all Claims directly related to or caused by a breach of the
Provider's representations in Section 1(E). Except as expressly provided by the
immediately preceding sentences, the Provider shall not have any monetary
liability under this Agreement for any damages resulting from any Claims.
(C) In no event shall the Provider be responsible for special, indirect,
incidental or consequential damages or punitive damages which Guarantee may
incur or experience on account of entering into or relying on this Agreement,
even if the Provider has been advised of the possibility of such damages. The
foregoing provisions of this Section 4 set forth the full extent of the
Provider's liability under this Agreement (monetary or otherwise) for any and
all Claims and set forth Guarantee's sole remedies.
(D) Guarantee shall at all times indemnify, protect, defend and hold
harmless the Provider from and against any and all Claims relating to or arising
from the Serviced Business; provided, however, that the provisions of this
-------- -------
Section 4(D) shall not apply in the case of any such Claim which arises out of
or relates to the negligent, intentional or reckless misconduct of the Provider
in performing the Services.
4
<PAGE>
SECTION 5. SUPERVISION BY GUARANTEE; AUDIT RIGHTS. The performance of the
--------------------------------------
Services by the Provider shall be subject to Guarantee's reasonable review and
supervision. The Provider shall promptly prepare and submit to Guarantee such
invoices as to Services provided and costs incurred as Guarantee may reasonably
request. The Provider shall permit representatives of Guarantee, during normal
business hours and upon five (5) business days advance written notice, to
inspect and copy the Provider's financial and other records pertaining to the
performance by the Provider of the Services.
SECTION 6. RELATIONSHIP OF THE PARTIES. In furnishing the Services to
---------------------------
Guarantee, the Provider is acting as an independent contractor. The Provider
does not undertake by this Agreement or otherwise to perform any obligation of
Guarantee, whether regulatory or contractual or otherwise except as provided
herein. The Provider shall not be deemed to be a joint venturer with, or a
partner or agent of, Guarantee, nor shall the Provider's employees be deemed to
be employees of Guarantee.
SECTION 7. FORCE MAJEURE. The Provider shall be excused from performance
-------------
hereunder (other than for payment of monies that are due and payable) for any
period when it is prevented from performing any services to be provided
hereunder, in whole or in part, as a result of an act of God, fire, war, civil
disturbance, court order, insurance department regulatory order (provided such
order did not arise from the violation of any law or regulation by the
Provider), labor dispute or other cause beyond its reasonable control, and such
nonperformance shall not be a ground for termination hereof or assertion of
default hereunder. In the event that the Provider shall be excused from
performance under this provision, it shall use its best efforts to provide,
directly or indirectly, alternative and, to the extent practicable, equivalent
fulfillment of its obligations hereunder.
SECTION 8. SEVERABILITY. If any provision of this Agreement is declared
------------
or found to be illegal, unenforceable or void by any administrative agency,
regulatory body or court of competent jurisdiction, such finding shall not
affect the remaining provisions of this Agreement, and all other provisions
hereof shall remain in full force and effect.
SECTION 9. GOVERNING LAW; FORUM. This Agreement and all rights and
--------------------
obligations of the parties hereunder shall be construed and interpreted under
and pursuant to the laws of the State of Ohio, without regard to conflicts of
law principles. Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of Ohio, County of Medina, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Northern District of Ohio, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on any
party in any jurisdiction.
SECTION 10. WAIVER. No delay or omission by any party hereto to
------
exercise any right or power arising upon any noncompliance or default by any
other party with respect to any of the terms of this Agreement shall cause any
such right or power to be construed as a waiver thereof.
5
<PAGE>
A waiver by any of the parties hereto of the fulfillment of any of the
covenants, conditions, or agreements to be performed by any other shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant, condition or agreement contained herein. No waiver or compromise of
any provision or condition hereof shall be effective unless evidenced by a
written instrument duly executed by the party hereto to be charged with such
waiver or compromise.
SECTION 11. CONFIDENTIALITY.
---------------
(A) The parties hereto acknowledge that, in connection with their rights
and responsibilities hereunder, each may obtain access to information that the
other party considers proprietary and confidential, including, without
limitation, information concerning their respective financial conditions,
operations, policyholders, employees, markets, agents, marketing strategy and
techniques, computer software and systems and similar information that may
otherwise become available during the term of this Agreement that is not
generally ascertainable from public or published sources (the "Confidential
Information"). Each of the parties shall retain in strict confidence, and shall
require their respective affiliates, shareholders, officers, directors,
employees, and other representatives to retain in strict confidence, all
Confidential Information and not to use or disclose to others, or permit the use
or disclosure of, any Confidential Information, except as necessary to perform
their obligations with respect to this Agreement.
(B) Notwithstanding anything in Section 11(A) to the contrary, the term
"Confidential Information" shall not include (1) information which comes into
the public domain other than by reason of a breach of this Agreement; (2)
information that has come to a party from a lawful source not bound to maintain
the confidentiality of the information, other than from another party to this
Agreement and (3) disclosures that, in the reasonable opinion of counsel for a
party, are required by law.
(C) Nothing in this Section 11 or otherwise in this Agreement shall prevent
any party to this Agreement from competing with any other party to this
Agreement. The only obligations and limitations of the parties hereto relating
to competition are set forth in a separate Marketing Agreement entered into by
the parties of even date herewith. No breach by any party under the Marketing
Agreement shall be deemed to cause a breach of this Agreement.
SECTION 12. NOTICES. All notices and other communications hereunder
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shall be in writing and shall be deemed given on the date of receipt if
delivered personally or by facsimile transmission and ten (10) days from the
date of mailing if mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof):
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If to Guarantee, to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Facsimile: 402/361-7571
Attention: Robert D. Bates
with copies to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Facsimile: 401/361-7571
Attention: Richard A. Spellman, Esq.
If to the Provider, to:
Ohio Farmers Insurance Company
P. O. Box. 5001
One Park Circle
Westfield Center, Ohio 44251-5001
Facsimile: 330-887-6295
Attention: Robert J. Joyce
SECTION 13. ASSIGNMENT. This Agreement shall be binding upon and
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shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither the Provider nor Guarantee may assign any of
their respective rights and obligations under this Agreement without the prior
written consent of the other; provided, however, that the Provider may assign
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its rights and obligations under this Agreement to WesWorks, Inc. or another
affiliate of the Provider upon written notice of such assignment to Guarantee
and with Guarantee's written consent, it being understood that Guarantee shall
not unreasonably withhold its written consent thereto unless it reasonably
determines that such affiliate's proposed capitalization or staffing are or
would be inadequate, or that the proposed assignee is not an affiliate of the
Provider. Upon such assignment, Ohio Farmers Insurance Company shall have no
further rights or obligations under this Agreement as the Provider.
SECTION 14. COUNTERPARTS. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
SECTION 15. HEADINGS. The headings to the Sections of this Agreement
--------
are for convenience only and in no way define, limit or describe the scope or
intent of this Agreement or any party hereto, nor in any other way affect this
Agreement or any part hereof.
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SECTION 16. AMENDMENT. This Agreement shall not be altered or amended
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except pursuant to an instrument in writing signed by the parties hereto. Each
party agrees to consent to any amendments to this Agreement required by the Ohio
Department of Insurance or the Nebraska Department of Insurance, except to the
extent that any such amendment contains terms or conditions which are not
commercially reasonable in such party's reasonable judgment.
SECTION 17. OTHER ARRANGEMENTS. Guarantee acknowledges that the Provider
------------------
is presently and may in the future provide and perform services which are the
same or similar to the Services to parties other than Guarantee, and that the
Provider may utilize the same office space, equipment and personnel to perform
such services and functions for such other parties as it utilizes to perform the
Services for Guarantee.
SECTION 18. CONSTRUCTION. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring any party by virtue of authorship of any of the specific
provisions of the Agreement. When used in this Agreement, the word "including"
shall mean including without limitation. Any reference to federal, state, local
or foreign statutes or laws shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. All
references to "affiliates" in this Agreement shall mean "affiliates" as such
term is defined within the meaning of federal securities laws.
SECTION 19. ENTIRE AGREEMENT. This Agreement, including all schedules
----------------
attached to this Agreement, constitutes the entire agreement between the parties
pertaining to the subject matter of this Agreement and supersedes all prior or
contemporaneous oral or written agreements, proposals and understandings.
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<PAGE>
SIGNATURES
----------
IN WITNESS WHEREOF, GLC, the Provider and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
GLC: PROVIDER:
THE GUARANTEE LIFE COMPANIES INC. OHIO FARMERS INSURANCE COMPANY
By:____________________________
Name:__________________________ By:____________________________
Title:___________________________ Name:__________________________
Title:_________________________
THE COMPANY:
WESTFIELD LIFE INSURANCE
COMPANY
By:____________________________
Name:__________________________
Title:___________________________
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EXHIBIT A
DESCRIPTION OF SERVICES
-----------------------
1. Generate periodic billings to policyholders, including nonforfeiture
options.
2. Process premiums received.
3. Process and update policy records for change of ownership, beneficiary,
address, conversions, contractual changes, etc.
4. Process applications for policy loans.
5. Process partial withdrawals and hardship withdrawals.
6. Issue checks for loans and withdrawals.
7. Process loan repayments.
8. Process policy surrenders.
9. Provide quotes on payouts and annuitizations.
10. Process annuitizations.
11. Handle inquiries from policyholders.
12. Handle inquiries from agents on all policyholder service matters.
13. Process and pay commissions and renewal commissions.
14. Maintain commission files.
15. Handle all inquiries from agents regarding commissions.
16. Process commission corrections.
17. Process and pay all claims. Consult with Guarantee on contestable or
questionable claims before making payment. Investigation expenses will be
billed to Guarantee.
18. Pay reinsurance premiums on processed business.
19. Recover from reinsurers where appropriate on processed business.
20. Provide re-projection statements for processed business. Actuarial
assistance when required to be provided by Guarantee.
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21. Update credited interest rates or cost of insurance for processed business
as instructed by Guarantee.
22. Provide all existing printed reports prepared for the Company prior to the
date hereof to support all reporting including accounting, actuarial,
regulatory and tax.
23. Changes to existing reports or to provide electronic interfaces for reports
will be billed according to Exhibit B.
24. Provide all electronic data processing services necessary to perform the
foregoing Services.
25. Annuity Statements of Account, Universal and Traditional Life Annual
Statements (NAIC-compliant).
26. State and federal withholding tax and reporting.
27. Policyholder tax reporting, including but not limited to 1099's, 1099((I)'s
and taxable gains on surrenders.
28. Grace notices and lapse notices.
29. Reinstatements.
30. Revocable, irrevocable and collateral assignments.
31. Partial surrenders and interest withdrawals.
32. Internal transfers, external transfers and 1035 exchanges.
33. Maturities.
34. Loan, premium and dividend histories.
35. Administration of disability and long term care contract provisions.
36. Duplicate policies and certificates.
37. Policy changes, rider additions and deletions.
38. Mode changes.
39. Complaint logging, tracking and resolution (in consultation with
Guarantee).
40. Replacement tracking and reporting.
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41. Compliance with NAIC Illustration Regulation on in-force ledgers and re-
proposals.
42. Suspense clearing, control and reconciliation.
43. 5500's, 5498's, and Schedule A's.
All services will be provided on the same timing and basis as provided by the
Company or the Provider prior to the date hereof unless changed by mutual
agreement of all the parties, or an additional charge is negotiated for the
service. All services will be provided based on normal work schedule of the
Provider in Westfield Center, Ohio.
Postage, local and long distance telephone charges and other normal
administrative charges are included in the Service Fee.
[The parties will cooperate to develop additional objective servicing standards
and incorporate such standards into this Schedule A prior to the Closing.]
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