STOCK PURCHASE AGREEMENT
DATED AS OF June 4, 1998
By and Between
MC EQUITIES, INC.
New York, New York;
and
STANDARD MANAGEMENT CORPORATION
Indianapolis, Indiana
For The Purchase Of
MIDWESTERN NATIONAL LIFE INSURANCE COMPANY OF OHIO
Xxxxxxxx Village, Ohio
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS..........................................1
1.1 TERMS DEFINED 1
1.2 OTHER DEFINITIONAL PROVISIONS 1
ARTICLE II SALE OF SHARES AND CLOSING.........................1
2.1 P URCHASE AND SALE 1
2.2 PURCHASE PRICE 2
2.3 ADJUSTMENT 2
2.4 SMC COMMON STOCK 3
2.5 CLOSING 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........3
3.1 ORGANIZATION 3
3.2 AUTHORITY 4
3.3 CAPITAL STOCK 4
3.4 NO SUBSIDIARIES 4
3.5 NO CONFLICTS OR VIOLATIONS 4
3.6 BOOKS AND RECORDS 5
3.7 SAP STATEMENTS 5
3.8 GAAP STATEMENTS 6
3.9 NO OTHER FINANCIAL STATEMENTS 6
3.10 AVAILABILITY OF ASSETS 6
3.11 RESERVES 6
3.12 ABSENCE OF CHANGES 7
3.13 NO UNDISCLOSED LIABILITIES 10
3.14 TAX MATTERS 11
3.15 LITIGATION 12
3.16 COMPLIANCE WITH LAWS 13
3.17 EMPLOYEE BENEFITS 14
3.18 EMPLOYEE RELATIONS 14
3.19 PROPERTIES 15
3.20 CONTRACTS 15
3.21 INSURANCE ISSUED BY THE COMPANY 17
3.22 THREATS OF CANCELLATION 19
3.23 LICENSES AND PERMITS 19
3.24 OPERATIONS INSURANCE 19
3.25 INTERCOMPANY ACCOUNTS 19
3.26 BANK ACCOUNTS 19
3.27 BROKERS 20
3.28 DISCLOSURE 20
3.29 SENSITIVE PAYMENTS 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER...........20
4.1 ORGANIZATION 20
4.2 AUTHORITY 21
4.3 NO CONFLICTS OR VIOLATIONS 21
4.4 LITIGATION 22
4.5 PURCHASE FOR INVESTMENT 22
4.6 CAPITALIZATION 22
4.7 BROKERS 22
4.8 DISCLOSURE 23
ARTICLE V COVENANTS OF SELLER................................23
5.1 REGULATORY AND OTHER APPROVALS 23
5.2 INVESTIGATION BY THE BUYER 23
5.3 NO NEGOTIATIONS, ETC 24
5.4 CONDUCT OF BUSINESS 24
5.5 FINANCIAL STATEMENTS AND REPORTS 26
5.6 INVESTMENTS 26
5.7 EMPLOYEE MATTERS 27
5.8 NO CHARTER AMENDMENTS 28
5.9 NO ISSUANCE OF SECURITIES 28
5.10 NO DIVIDENDS 28
5.11 NO DISPOSAL OF PROPERTY 28
5.12 NO BREACH OR DEFAULT 28
5.13 NO INDEBTEDNESS 28
5.14 NO ACQUISITIONS 29
5.15 INTERCOMPANY ACCOUNTS 29
5.16 RESIGNATIONS OF OFFICERS AND DIRECTORS 29
5.17 OTHER MATTERS 29
5.18 DISCLOSURE SCHEDULE 29
5.19 NOTICE AND CURE 29
ARTICLE VI COVENANTS OF BUYER................................30
6.1 REGULATORY APPROVALS 30
6.2 NOTICE AND CURE 30
6.3 DISCLOSURE SCHEDULE 30
ARTICLE VII CONDITIONS TO OBLIGATIONS OF BUYER...............31
7.1 REPRESENTATIONS AND WARRANTIES 31
7.2 PERFORMANCE 31
7.3 OFFICER'S CERTIFICATES 31
7.4 NO INJUNCTION 31
7.5 NO PROCEEDING OR LITIGATION 31
7.6 CONSENTS, AUTHORIZATIONS, ETC 32
7.7 NO ADVERSE CHANGE 32
7.8 OPINION OF COUNSEL 32
7.9 XXXX-XXXXX. 32
7.10 RESIGNATION OF OFFICERS AND DIRECTORS 32
7.11 APPROVAL BY FLEET AND CONSECO 33
7.12 ADJUSTED CAPITAL AND SURPLUS 33
7.13 SELLER STOCKHOLDER APPROVAL 33
7.14 CONSENT OF ERNST & YOUNG. 33
7.15 ASSIGNMENT OF MARKETING AGREEMENT BETWEEN SELLER AND LEAD
AMERICA, LLC........................................33
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLER.............33
8.1 REPRESENTATIONS AND WARRANTIES 33
8.2 PERFORMANCE 34
8.3 OFFICER'S CERTIFICATES 34
8.4 NO INJUNCTION 34
8.5 NO PROCEEDING OR LITIGATION 34
8.6 CONSENTS, AUTHORIZATIONS, ETC. 34
8.7 OPINION OF COUNSEL 35
8.8 SELLER STOCKHOLDER APPROVAL 35
8.9 ADJUSTED CAPITAL AND SURPLUS 35
8.10 MATERIAL ADVERSE CHANGE 35
8.11 XXXX-XXXXX. 35
8.12 FLEET 35
ARTICLE IX SURVIVAL OF PROVISIONS; REMEDIES..................35
9.1 SURVIVAL 35
9.2 AVAILABLE REMEDIES 36
ARTICLE X INDEMNIFICATION....................................36
10.1 INDEMNIFICATION BY SELLER 36
10.2 INDEMNIFICATION BY BUYER 37
10.3 DEFENSE BY THE INDEMNIFYING PARTY 37
10.4 DEFENSE BY INDEMNIFIED PARTY 38
10.5 MANNER OF INDEMNIFICATION 39
10.6 NON-EXCLUSIVE 39
10.7 ASSIGNMENT OF INDEMNIFICATION 39
ARTICLE XI TERMINATION.......................................39
11.1 TERMINATION 39
11.2 EFFECT OF TERMINATION 40
11.3 CERTAIN PAYMENTS 41
ARTICLE XII MISCELLANEOUS....................................41
12.1 NOTICES 41
12.2 ENTIRE AGREEMENT 42
12.3 EXPENSES 42
12.4 PUBLIC ANNOUNCEMENTS 42
12.5 CONFIDENTIALITY 43
12.6 FURTHER ASSURANCES 43
12.7 WAIVER 43
12.8 AMENDMENT 43
12.9 COUNTERPARTS 43
12.10 NO THIRD PARTY BENEFICIARY 43
12.11 JURISDICTION AND VENUE 44
12.12 GOVERNING LAW 44
12.13 BINDING EFFECT 44
12.14 ASSIGNMENT 44
12.15 HEADINGS, ETC. 44
12.16 INVALID PROVISIONS 44
12.17 REPURCHASE OF SMC COMMON STOCK 44
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
as of June 4, 1998 by and between Standard Management Corporation, an
Indiana corporation (the "Buyer") and MC Equities, Inc., a Delaware
corporation (the "Seller").
W I T N E S S E T H:
WHEREAS, Seller is the beneficial owner of 1,000 shares of the issued
and outstanding of the 11,765 authorized capital common stock ("Common
Stock"), $1.00 par value per share ("the Shares") of Midwestern National
Life Insurance Company of Ohio, an Ohio corporation (the "Company"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase from
Seller, all of the Shares of Midwestern National Life Insurance Company of
Ohio;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 TERMS DEFINED. The capitalized terms used in this Agreement and
not defined herein shall have the meanings specified in EXHIBIT A.
1.2 OTHER DEFINITIONAL PROVISIONS. Unless the context otherwise
requires, (a) references in this Agreement to the singular number shall
include the plural, and the plural number shall include the singular;
(b) words denoting gender shall include the masculine, feminine and neuter;
(c) the words "hereof," "herein" and "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular
provision of this Agreement, (d) unless otherwise specified, all Article
and Section references pertain to this Agreement; (e) the term "or" means
"and/or"; and (f) the phrase "ordinary course of business and consistent
with past practice" refers to the business and practice of the Seller or
the Company, as the case may be.
ARTICLE II
SALE OF SHARES AND CLOSING
2.1 PURCHASE AND SALE. The Seller agrees to sell to the Buyer and
the Buyer agrees to purchase from the Seller the Shares at the Closing upon
the terms and subject to the conditions set forth in this Agreement.
2.2 PURCHASE PRICE. (a) Subject to adjustment pursuant to Section
2.3 hereof, the purchase price (the "Purchase Price") for the Shares
payable at the Closing shall be equal to $17,261,000, of which $5,136,000
is payable by wire transfer in immediately available funds to such bank and
account as the Seller may specify by written notice received by the
Purchaser at least two (2) Business Days prior to the Closing Date. The
balance of the Purchase Price is payable at Closing as follows: (i)
Assumption of certain debt due Fleet National Bank in the sum of $6,000,000
from the Seller (the "Fleet Loan") upon restructured terms and conditions
satisfactory to Purchaser in its sole discretion; and (ii) The issuance of
$6,125,000 in value of shares of Standard Management Corporation's
restricted common stock ("SMC Common Stock"), the number of such shares to
be rounded to the nearest hundredth of a share determined by dividing
$6,125,000 by the average of the closing trading prices as reported by the
NASDAQ National Market (the "Average Trading Price") of SMC Common Stock
for the ten (10) consecutive trading days ending on the fifth Business Day
prior to the Closing Date; (b) Not later than two (2) Business Days prior
to the Closing Date, the Seller shall cause the Company to prepare and
deliver to the Buyer a statutory balance sheet of the Company as of the
last day of the most recent calendar month prior to the Closing for which
such a balance sheet is available (the "Closing Balance Sheet"), together
with a list of the investment securities to be held by the Company at the
Closing and the respective Fair Market Value and statutory carrying value
of each such investment security as of the date which is three (3) Business
Days prior to the Closing Date (the "Closing Asset Statement"). The
foregoing documents shall be accompanied by a certificate of the Company,
executed by its chief financial officer, to the effect that (i) the Closing
Balance Sheet has been prepared in accordance with the books and records of
the Company and SAP, and fairly presents the financial position of the
Company as of the date thereof, and (ii) the Closing Asset Statement has
been prepared in accordance with the books and records of the Company and
this Agreement.
2.3 ADJUSTMENT.
(a) Not later than two (2) Business Days prior to Closing, the
Seller will determine and will deliver to the Buyer a certificate of
the chief financial officer of the Company setting forth on a PRO
FORMA basis the Company's determination of the Adjusted Capital and
Surplus of Company as of the Closing Date, together with true and
complete copies of all Work Papers related thereto (collectively, the
"Closing Adjusted Capital and Surplus").
(b) The Adjusted Capital and Surplus of the Company shall be
determined in accordance with the Formula set forth on EXHIBIT B
hereto.
(c) If the Closing Adjusted Capital and Surplus is less than
$8,337,000, the Purchase Price and the amount of the Purchase Price to
be paid by delivery of SMC Common Stock shall be reduced by the amount
by which the Closing Adjusted Capital and Surplus shall be less than
$8,337,000.
(d) If the Closing Adjusted Capital and Surplus is greater than
$8,437,000, the Purchase Price and the amount of the Purchase Price to
be paid by delivery of SMC Common Stock shall be increased by the
amount by which the Closing Adjusted Capital and Surplus shall be
greater than $8,437,000.
2.4 SMC COMMON STOCK. The SMC Common Stock transferred to the
Seller pursuant to SECTION 2.2 hereof shall be non-transferrable by the
Seller for a period of one (1) year from the date of Closing; provided that
the Seller may distribute some or all of such SMC Common Stock to holders
of the capital stock of the Seller (a "Permitted Disbributee"), if each
Permitted Distributee agrees in writing to be bound by the terms of this
Section 2.4. Subject to applicable rules and regulations, Seller (and each
Permitted Distributee) shall have the right to sell or transfer any portion
of the SMC Common Stock at any time after the first anniversary of the
Closing Date.
2.5 CLOSING. The Closing of the transactions contemplated by this
Agreement will take place at the offices of Xxxxxxx & Xxxxxx, LLP, 750
Lexington Avenue, 12{th} Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
place as both parties shall agree, at 10:00 a.m., local time, on the
Closing Date. At the Closing, the Seller will deliver to the Buyer such
documents and instruments as the Buyer may reasonably request for the
purpose of effectuating the purchase and sale of the Shares and the
transactions contemplated hereby, including, without limitation, a
certificate or certificates representing the Shares issued in the name of
the Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to the Buyer as of the date
of this Agreement and as of the Closing Date as follows (it being
acknowledged by the Buyer that any matter, fact, circumstance or condition
disclosed with respect to any Section of the Disclosure Schedule shall be
deemed applicable to and to modify and supplement each of the
representations and warranties set forth below relating to such matter,
fact, circumstance or condition):
3.1 ORGANIZATION. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and
has full corporate power and authority to enter into this Agreement and to
perform its obligations under this Agreement. The Company is a life
insurance company duly organized, validly existing, and in good standing
under the Laws of the State of Ohio. To the Seller's Knowledge, the
Company is duly licensed, qualified, or admitted to do business and is in
good standing or holds certificates of compliance in all jurisdictions in
which the failure to be so licensed, qualified, or admitted and in good
standing or to hold certificates of compliance, individually or in the
aggregate with other such failures, has or may reasonably be expected to
have a material adverse effect on the validity or enforceability of this
Agreement, on the ability of the Company to perform its obligations under
this Agreement, or on the Business or Condition of the Company.
SECTION 3.1 of the Disclosure Schedule contains a true and complete list of
the states in which the Company is licensed to write life and health
insurance.
3.2 AUTHORITY. The Board of Directors of the Seller has duly and
validly approved this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by the Seller and the
performance by the Seller of its obligations under this Agreement have
been, or on or before the close of business of the twentieth (20th)
Business Day following the date of this Agreement, will be duly and validly
authorized by all necessary corporate action on the part of the Seller.
Subject to receipt of the Seller's Stockholder Approval, this Agreement
constitutes a legal, valid, and binding obligation of the Seller and the
Company and is enforceable against the Seller and the Company in accordance
with its terms, except to the extent that (a) enforcement may be limited by
or subject to any bankruptcy, insolvency, reorganization, moratorium, or
similar Laws now or hereafter in effect relating to or limiting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar Person before
which any proceeding therefor may be brought.
3.3 CAPITAL STOCK. The authorized capital stock of the Company
consists of 11,765 shares of common stock, $1.00 par value per share, of
which 1,000 shares are validly issued and outstanding, fully paid and
nonassessable, and owned beneficially and of record by the Seller, free and
clear of all Liens, except for Liens disclosed in SECTION 3.3 of the
Disclosure Schedule. Except as disclosed in SECTION 3.3 of the Disclosure
Schedule, there are no outstanding securities, obligations, rights,
subscriptions, warrants, options, charter or founders insurance policies,
phantom stock rights, or (except for this Agreement) other Contracts of any
kind that give any Person the right to (a) purchase or otherwise receive or
be issued any shares of capital stock of the Company (or any interest
therein) or any security or Liability of any kind convertible into or
exchangeable for any shares of capital stock of the Company (or any
interest therein) or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to a holder of the Common Stock, or any
rights to participate in the equity, income, or election of directors or
officers of the Company.
3.4 NO SUBSIDIARIES. Except as disclosed in SECTION 3.4 of the
Disclosure Schedule, to the Seller's Knowledge, the Company does not
control (whether directly or indirectly, whether through the ownership of
securities or by Contract or proxy, and whether alone or in combination
with others) any corporation, partnership, business organization, or other
similar Person.
3.5 NO CONFLICTS OR VIOLATIONS. To the Seller's Knowledge, the
execution and delivery of this Agreement by the Seller does not, and the
performance by the Seller of its obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by SECTIONS
5.1 and 6.1 hereof, violate any term or provisions of any Law or any
writ, judgment, decree, injunction, or similar order applicable to the
Seller or the Company;
(b) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any of the terms, conditions, or provisions of the articles or
certificate of incorporation or Bylaws of the Seller or the Company;
(c) result in the creation or imposition of any Lien upon the
Seller or the Company or any of their respective Assets and Properties
that individually or in the aggregate with any other Liens has or may
reasonably be expected to have a material adverse effect on the
validity or enforceability of this Agreement, or on the ability of the
Seller to perform its obligations under this Agreement;
(d) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, or give to any Person any right of termination, cancellation,
acceleration, or modification in or with respect to, any Contract to
which the Seller or the Company is a party or by which any of their
respective Assets or Properties may be bound and as to which any such
conflicts, violations, breaches, defaults, or rights individually or
in the aggregate have or may reasonably be expected to have a material
adverse effect on the validity or enforceability of this Agreement, on
the ability of the Seller to perform its obligations under this
Agreement, or on the Business or Condition of the Company; or
(e) require the Seller or the Company to obtain any consent,
approval, or action of, or make any filing with or give any notice to,
any Person except: (i) as contemplated in SECTION 5.1 hereof; (ii) as
disclosed in SECTION 3.5(E) of the Disclosure Schedule; (iii) the
Seller Stockholder Approval; or (iv) those which the failure to
obtain, make, or give individually or in the aggregate with any other
such failures has or may reasonably be expected to have no material
adverse effect on the validity or enforceability of this Agreement, on
the ability of the Seller to perform its obligations under this
Agreement.
3.6 BOOKS AND RECORDS. The minute books and other similar records
of the Company contain a true and complete record, in all material
respects, of all actions taken at all meetings and by all written consents
in lieu of meetings of the stockholder, Board of Directors, and each
committee thereof of the Company since the Acquisition Date. To the
Seller's Knowledge, the Books and Records of the Company accurately reflect
in all material respects the Business or Condition of the Company.
3.7 SAP STATEMENTS. The Seller has previously delivered to the
Company true and complete copies of the Annual Statements, and audited SAP
basis financial statements of the Company for each of the years ended
December 31, 1995, 1996, and 1997, and unaudited SAP basis financial
statements of the Company for the three months ended March 31, 1998 (and
the notes relating thereto, whether or not included therein). Except as
disclosed in SECTION 3.7 of the Disclosure Schedule, to the Seller's
Knowledge, each such SAP Statement complied in all material respects with
all applicable Laws when so filed, and to the Seller's Knowledge, all
material deficiencies with respect to any such SAP Statement have been
cured or corrected. To the Seller's Knowledge, each such SAP Statement
(and the notes relating thereto, whether or not included therein),
including, without limitation, each balance sheet and each of the
statements of operations, capital and surplus account, and cash flow
contained in the respective SAP Statement, was prepared in accordance with
SAP, subject in the case of any interim financial statements to year-end
and audit adjustments, is true and complete in all material respects, and
fairly presents the financial condition, the Assets and Properties, and the
Liabilities of the Company, in each case as of the respective dates thereof
and the results of operations and changes in capital and surplus and in
cash flow of the Company for and during the respective periods covered
thereby.
3.8 GAAP STATEMENTS. SECTION 3.8 of the Disclosure Schedule
contains (i) the audited balance sheets of the Company as of December 31,
1995, 1996, and 1997 and the related statements of income, stockholders'
equity and cash flows for the years then ended, together with the
appropriate notes to such financial statements, and (ii) the unaudited
balance sheet of the Company as of March 31, 1998 and the related
statements of income and cash flows for the three months then ended.
Except as set forth therein or in the notes thereto, to Seller's Knowledge
such balance sheets and statements of income and cash flows, have been
prepared in conformity with generally accepted accounting principles
consistently applied except as otherwise noted in SECTION 3.8 of the
Disclosure Schedule, and such balance sheets and related statements of
income and cash flows present fairly the financial position and results of
operations of the Company as of their respective dates and for the
respective periods covered thereby, subject in the case of any interim
financial statements to year-end and audit adjustments.
3.9 NO OTHER FINANCIAL STATEMENTS. Except for the financial
statements described in SECTION 3.7 and SECTION 3.8 (collectively, the
"Financial Statements"), since March 31, 1998 no other similar financial
statements have been prepared by or with respect to the Company (whether on
a GAAP, SAP, or other basis), other than monthly internal statements and/or
financial statements provided to the Ohio Department of Insurance.
3.10 AVAILABILITY OF ASSETS. Except as set forth in SECTION 3.10 of
the Disclosure Schedule, to the Seller's Knowledge, the Company owns all of
the assets used in its Business (including, but not limited to, all books,
records, computers and computer programs and data processing systems) and
all such assets are in good condition (subject to normal wear and tear) and
serviceable condition and are suitable for the uses for which intended.
3.11 RESERVES. To Seller's Knowledge, all reserves and other similar
amounts with respect to insurance and annuities as established or reflected
in the SAP Statements of the Company dated as of December 31, 1997 and
March 31, 1998 were determined in accordance with generally accepted
actuarial principles consistently applied that are in accordance in all
material respects with those called for by the provisions of the related
insurance and annuity Contracts and in the related reinsurance,
coinsurance, and other similar Contracts of Company, and meet the
requirements of the insurance Laws of the State of Ohio, the states in
which the Company is licensed, and states in which such insurance and
annuity Contracts were issued or delivered. To Seller's Knowledge, all
such reserves and other similar amounts will be adequate (under generally
accepted actuarial principles consistently applied) to cover the total
amount of all reasonably anticipated matured and unmatured benefits,
dividends, claims, and other Liabilities of the Company under all insurance
and annuity Contracts under which the Company has or will have any
Liability (including, without limitation, any Liability arising under or as
a result of any reinsurance, coinsurance, or other similar Contract) on the
respective dates of such SAP Statements. To Seller's Knowledge, the
Company owns assets that qualify as legal reserve assets under applicable
insurance Laws in an amount at least equal to all such required reserves
and other similar amounts.
3.12 ABSENCE OF CHANGES. Except as disclosed in SECTION 3.12 of the
Disclosure Schedule or as specifically reflected in the March 31, 1998 SAP
Statement, or except for changes or developments relating to the conduct of
the business of the Company after the date of this Agreement in conformity
with this Agreement or the requests of the Buyer, to the Seller's
Knowledge, since March 31, 1998, there has not been, occurred, or arisen
any change in, or any event (including without limitation any damage,
destruction, or loss whether or not covered by insurance), condition, or
state of facts of any character that individually or in the aggregate has
or may reasonably be expected to have a material adverse effect on the
Business or Condition of the Company. Except as disclosed in SECTION 3.12
of the Disclosure Schedule (with paragraph references corresponding to
those set forth below), or except as specifically reflected in the March
31, 1998 SAP Statement, or except for changes or developments relating to
the conduct of the business of the Company after the date of this Agreement
in conformity with this Agreement or the requests of the Buyer since
March 31, 1998, to the Seller's Knowledge, the Company has operated only in
the ordinary course of business and consistent with past practice, and
(without limiting the generality of the foregoing) there has not been,
occurred, or arisen:
(a) any declaration, setting aside, or payment of any dividend
or other distribution in respect of the capital stock of the Company
or any direct or indirect redemption, purchase, or other acquisition
by the Company of any such stock or of any interest in or right to
acquire any such stock;
(b) any employment, deferred compensation, or other salary,
wage, or compensation Contract entered into between the Company and
any of its officers, directors, employees, agents, consultants, or
similar representatives, except for normal and customary Contracts
with agents and consultants in the ordinary course of business and
consistent with past practice; or any increase in the salary, wages,
or other compensation of any kind, whether current or deferred, of any
officer, director, employee, agent, consultant, or other similar
representative of the Company other than routine increases that were
made in the ordinary course of business and consistent with past
practice and that did not result in an increase of more than five
percent (5%) of the respective salary, wages, or compensation of any
such Person; or any creation of any Benefit Plan or any contribution
to or amendment or modification of any Benefit Plan;
(c) any issuance, sale, or disposition by the Company of any
debenture, note, stock, or other security issued by the Company, or
any modification or amendment of any right of the holder of any
outstanding debenture, note, stock, or other security issued by the
Company;
(d) any Lien created on or in any of the Assets and Properties
of the Company, or assumed by the Company with respect to any of such
Assets and Properties, which Lien relates to Liabilities individually
or in the aggregate exceeding $50,000 for the Company or which Lien
individually or in the aggregate with any other Liens has or may
reasonably be expected to have a material adverse effect on the
Business or Condition of the Company;
(e) any prepayment of any Liabilities individually or in the
aggregate exceeding $50,000;
(f) any Liability involving the borrowing of money by the
Company in a single instance or when aggregated with all such
borrowings exceeding $50,000;
(g) any Liability incurred by the Company in any transaction
(other than pursuant to any insurance, annuity, reinsurance or other
Contract entered into in the ordinary course of business and
consistent with past practice) not involving the borrowing of money,
except such Liabilities incurred by the Company, the result of which
individually or in the aggregate cannot reasonably be expected to have
a material adverse effect on the Business or Condition of the Company;
(h) any damage, destruction, or loss (whether or not covered by
insurance) affecting any of the Assets and Properties of the Company,
which damage, destruction, or loss individually exceeds $50,000 or the
result of which individually or in the aggregate has or may reasonably
be expected to have a material adverse effect on the Business or
Condition of the Company;
(i) any work stoppage, strike, slowdown, or (to the best
knowledge of the Seller or the Company) union organizational campaign
(in process or threatened) at or affecting the Company;
(j) any material change in any underwriting, actuarial,
investment, financial reporting, or accounting practice or policy
followed by the Company, or in any assumption underlying such a
practice or policy, or in any method of calculating any bad debt,
contingency, or other reserve for financial reporting purposes or for
any other accounting purposes;
(k) any payment, discharge, or satisfaction by the Company of
any Lien or Liability other than as permitted by (e) above or Liens or
Liabilities that were paid, discharged, or satisfied since
December 31, 1997 in the ordinary course of business and consistent
with past practice, or were paid, discharged, or satisfied as
required under this Agreement;
(l) any cancellation of any Liability in excess of $50,000
individually or in the aggregate owed to the Company by any other
Person;
(m) any write-off or write-down of, or any determination to
write off or down any of, the Assets and Properties of the Company or
any portion thereof, except for write-offs or write-downs that do not
exceed $50,000 individually or in the aggregate for the Company;
(n) any sale, transfer, or conveyance of any investments, or any
other Assets and Properties, of the Company with an individual book
value or with an aggregate book value in excess of $50,000, except as
contemplated in SECTION 5.6 and except in the ordinary course of
business and consistent with past practice;
(o) any amendment, termination, waiver, disposal, or lapse of,
or other failure to preserve, any license, permit, or other form of
authorization of the Company, the result of which individually or in
the aggregate has or may reasonably be expected to have a material
adverse effect on the Business or Condition of the Company;
(p) any transaction or arrangement under which the Company paid,
lent, or advanced any amount to or in respect of, or sold,
transferred, or leased any of its Assets and Properties or any service
to, (i) any officer or director of the Seller or the Company (except
for payments of salaries and wages in the ordinary course of business
and consistent with past practice, and except for payments made
pursuant to any Contract disclosed in SECTION 3.12(B) of the
Disclosure Schedule), or of any Affiliate of the Seller or the
Company, or of any such officer of director; (ii) any business or
other Person in which the Seller or the Company, any such officer or
director, or any such Affiliate has any material interest, except for
advances made to, or reimbursements of, officers or directors of the
Seller or the Company for travel and other business expenses in
reasonable amounts in the ordinary course of business and consistent
with past practice and as disclosed in SECTION 3.12(P) or 3.20 of the
Disclosure Schedule; or (iii) any Affiliate of the Company pursuant to
any Contract of the type described in SECTION 3.12(G), except as
disclosed in SECTION 3.12(P) or 3.20 in the Disclosure Schedule;
(q) any material amendment of, or any failure to perform all of
its obligations under, or any default under, or any waiver of any
right under, or any termination (other than on the stated expiration
date) of, any Contract (except good faith disputes over claims) that
involves or reasonably would involve the annual expenditure or receipt
by the Company of more than $25,000 or that individually or in the
aggregate is material to the Business or Condition of the Company;
(r) any material decrease in the amount of, or any material
change in the nature of, the insurance or annuities in force of the
Company or any material change in the amount or nature of the
reserves, liabilities or other similar amounts of the Company with
respect to insurance and annuity Contracts (including, without
limitation, reserves and other similar amounts of a type required to
be reflected respectively on lines 1 through 10 on page 3 of an Annual
Statement of the Company);
(s) any amendment to the articles or certificate of
incorporation or Bylaws of the Company;
(t) any termination, amendment, or execution by the Company of
any reinsurance, coinsurance, or other similar Contract, as ceding or
assuming insurer;
(u) any expenditure or commitment for additions to property,
plant, equipment or other tangible or intangible capital assets of the
Company, except for any expenditure or commitment that does not exceed
$25,000 individually, or in the aggregate $50,000, or the result of
which individually or in the aggregate does not have and may not
reasonably be expected to have a material adverse effect on the
Business or Condition of the Company;
(v) any amendment or introduction by the Company of any
insurance or annuity Contract other than in the ordinary course of
business and consistent with past practice;
(w) any Contract to take any of the actions described in this
Section other than actions expressly permitted under this Section; or
(x) any condition or state of facts of any character (including
without limitation any event, condition or state of facts arising
since December 31, 1997), individually or in the aggregate having or
which may reasonably be expected to have a material adverse effect of
the Business or Condition of the Company.
3.13 NO UNDISCLOSED LIABILITIES. Except to the extent specifically
reflected in the balance sheet included in the December 31, 1997 SAP
Statement (or in the notes relating thereto), or except as disclosed in
SECTION 3.13 of the Disclosure Schedule, to the Seller's Knowledge, there
were no Liabilities (other than policyholder benefits payable in the
ordinary course of business and consistent with past practice) against,
relating to, or affecting the Company as of December 31, 1997 that
individually or in the aggregate have or may reasonably be expected to have
a material adverse effect on the Business or Condition of the Company.
Except to the extent specifically reflected in the balance sheet included
in the March 31, 1998 SAP Statement (or in the notes relating thereto), or
except as disclosed in SECTION 3.13 of the Disclosure Schedule, to the
Seller's Knowledge, since March 31, 1998, the Company has not incurred any
Liabilities (other than policyholder benefits payable in the ordinary
course of business and consistent with past practice) that individually or
in the aggregate have or may reasonably be expected to have a material
adverse effect on the Business or Condition of the Company.
3.14 TAX MATTERS.
(a) To the Seller's Knowledge, the Company and its subsidiaries
have filed all Tax Returns and other federal and state, local and
foreign information returns and payee statements (including, but not
limited to, Internal Revenue Service forms 1096, 1098, 1099-MISC,
1099-R, and 5498) that they are required to file. To the Seller's
Knowledge, all such Tax Returns, information returns, and payee
statements were correct and complete in all material respects. To the
Seller's Knowledge, all Taxes owed by the Company and any of its
subsidiaries (whether or not shown on any Tax Return) have been paid
when due or adequately reserved for. Except for the taxable year
1997, to the Seller's Knowledge, the Company and any of its
subsidiaries is/are not currently the beneficiary of any extension of
time within which to file any Tax Return, information returns, or
payee statements. To the Seller's Knowledge, no claim has ever been
made by an authority in a jurisdiction where the Company and any of
its subsidiaries files/file Tax Returns, information returns, or payee
statements that it/they is/are or may be subject to taxation by that
jurisdiction, which would have an adverse material affect on the
Business or Condition of the Company. To the Seller's Knowledge,
there are no security interests attached to any of the assets of the
Company or any of its subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax when due.
(b) To the Seller's Knowledge, the Company and any of its
subsidiaries have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, policyholder, or other
third party.
(c) To Seller's Knowledge, no authority has notified the Company
of an intention to assess any additional Taxes against the Company nor
any of its subsidiaries for any period for which Tax Returns have been
or should have been filed. To Seller's Knowledge, there is no dispute
or claim concerning any Tax Liability of the Company or any of its
subsidiaries either (A) claimed or raised by any authority in writing
or (B) as to which Seller and the Company and its subsidiaries have
knowledge based upon personal contact with any agent of such
authority. To Seller's Knowledge, SECTION 3.14(C) of the Disclosure
Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Company and its subsidiaries for the
taxable years ending 1995, 1996 and 1997. To Seller's Knowledge,
SECTION 3.14(C) of the Disclosure Schedule further lists all Tax
Returns for taxable years since 1990 that have been audited and lists
all Tax Returns for any taxable year that are currently the subject of
audit. To Seller's Knowledge, the Seller has delivered to the
Purchaser correct and complete copies of all federal income Tax
Returns listed on SECTION 3.14(C) of the Disclosure Schedule,
examination reports, and statements of deficiencies assessed against
or agreed to by any of the Company and its subsidiaries for any
taxable year covered by any such Tax Return.
(d) Except as disclosed on SECTION 3.14(D) of the Disclosure
Schedule, to Seller's Knowledge, the Company and its subsidiaries have
not waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.
(e) Except as disclosed in SECTION 3.14(E) of the Disclosure
Schedule, the Company and its subsidiaries are not a party to any Tax
allocation or sharing agreement. Since the Acquisition Date, the
Company and its subsidiaries have not been (or has any Liability for
unpaid Taxes because it once was) a member of an affiliated group
during any part of any consolidated return year.
(f) To Seller's Knowledge, SECTION 3.14(F) of the Disclosure
Schedule sets forth the tax basis of the Company in its assets.
(g) To Seller's Knowledge, the unpaid Taxes of the Company and
its subsidiaries do not exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Company's SAP or GAAP Financial Statements (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company and its
subsidiaries in filing its/their Tax Returns.
(h) To Seller's Knowledge, SECTION 3.14(H) of the Disclosure
Schedule sets forth all federal Tax Returns for any taxable year for
which the applicable statute of limitations has not expired.
3.15 LITIGATION. Except as disclosed in SECTION 3.15 of the
Disclosure Schedule (with paragraph references corresponding to those set
forth below), to Seller's Knowledge:
(a) There are no actions, suits, investigations, or proceedings
pending (assuming the legal department of the Company has received
actual notice thereof), or (to the best knowledge of the Seller)
threatened, against the Seller or the Company or any of their Assets
and Properties, at law or in equity, in, before, or by any Person that
individually or in the aggregate have or may reasonably be expected to
have a material adverse effect on the validity or enforceability of
this Agreement, on the ability of the Seller or the Company to perform
its respective obligations under this Agreement, or on the Business or
Condition of the Seller or the Company.
(b) There are no actions, suits, investigations, or proceedings
pending, or (to the best knowledge of the Seller) threatened, against
the Company or any of their respective Assets and Properties, at law
or in equity, in, before, or by any Person that individually involve a
claim or claims for any injunction or similar relief or for Damages
exceeding $50,000 or an unspecified amount of Damages.
(c) There are no writs, judgments, decrees, or similar orders of
any Person outstanding against the Seller or the Company that
individually exceed $25,000 or that individually or in the aggregate
have or may reasonably be expected to have a material adverse effect
on the Business or Condition of the Seller or the Company, and there
are no injunctions or similar orders of any Person outstanding against
the Seller or the Company.
3.16 COMPLIANCE WITH LAWS. Except as disclosed in SECTION 3.16 of
the Disclosure Schedule, to Seller's Knowledge, the Company is not in
violation (or with or without notice or lapse of time or both, would be in
violation) of any term or provision of any Law or any writ, judgment,
decree, injunction, or similar order applicable to the Company or any of
its Assets and Properties, the result of which violation individually or
violations in the aggregate has or may reasonably be expected to have a
material adverse effect on the Business or Condition of the Company.
Without limiting the generality of the foregoing, to Seller's Knowledge:
(a) Since January 1, 1998, the Company has duly and validly
filed or caused to be so filed all reports, statements, documents,
registrations, filings, or submissions that were required by Law to be
filed with any Person and as to which the failure to so file,
individually or in the aggregate with other such failures, has or may
reasonably be expected to have a material adverse effect on the
Business or Condition of the Company; all such filings complied with
applicable Laws in all material respects when filed and, no material
deficiencies have been asserted by any Person with respect to any such
filings.
(b) The Seller has previously delivered to the Buyer the reports
reflecting the results of the most recent triennial financial
examination of the Company dated March 1, 1997 for the period through
December 31, 1995, issued by the Insurance Department of the State of
Ohio. Except as disclosed in SECTION 3.16(B) of the Disclosure
Schedule, all material deficiencies or violations in such report have
been resolved to the satisfaction of the Insurance Department of the
State of Ohio.
(c) Except as disclosed in SECTION 3.16(C) of the Disclosure
Schedule, all outstanding insurance and annuity Contracts issued,
reinsured or underwritten by the Company are, to the extent required
under applicable Laws, on forms approved by the insurance regulatory
authority of the jurisdiction where issued or have been filed with and
not objected to by such authority within the period provided for
objection.
(d) SECTION 3.16(D) of the Disclosure Schedule contains a true
and complete list of each master or prototype (as well as any
individually designed) pension, profit sharing, defined benefit, Code
Section 401(k), and other retirement or employee benefit plan or
Contract (including, but not limited to, simplified employee pension
plans, Code Section 403(a), (b) and (c) annuities, Xxxxx plans, and
individual retirement accounts and annuities) offered or sold by the
Company to, or maintained or sponsored for the benefit of any
employees of, any other Person, and each determination letter
relating to the creation or amendment of any such plan or Contract.
Except as disclosed in SECTION 3.16(D) of the Disclosure Schedule,
each such plan or Contract in all material respects conforms with, and
has been offered, sold, maintained, and sponsored in accordance with,
all applicable Laws. Except as disclosed in SECTION 3.16(D) of the
Disclosure Schedule, the Company is not a fiduciary with respect to
any plan or Contract referenced in this SECTION 3.16(D).
(1) The Company does not provide administrative or other
contractual services for any plan or Contract referenced in this
SECTION 3.16(D), including, but not limited to, any third party
administrative services for an Employee Welfare Benefit Plan.
(2) To the extent that the Company maintains any collective or
commingled funds or accounts which restrict the Persons who may
invest therein to tax-exempt entities or qualified plans, each
such fund or account (of which a true and complete list and
description is disclosed in SECTION 3.16(D)(2) of the Disclosure
Schedule) has been established, maintained and operated in
accordance with all applicable Laws, has maintained its
tax-exempt status and has no non-qualified plans or trusts or
other taxable entities investing in it.
(3) In addition to the representations and warranties
contained in SECTION 3.15, there are no claims pending, or (to
the best knowledge of the Seller or the Company) threatened,
against the Company or any of its Assets and Properties, under
any fiduciary liability insurance policy issued by or to the
Company that individually or in the aggregate has or may
reasonably be expected to have a material adverse effect on the
Business or Condition of the Company.
3.17 EMPLOYEE BENEFITS. Except as set forth in SECTION 3.17 of the
Disclosure Schedule, to Seller's Knowledge, neither the Company nor any of
its subsidiaries have ever had any Employee Benefit Plans or any
Liabilities or obligation of any kind whatsoever with respect to any
current or former Employee Benefit Plans.
3.18 EMPLOYEE RELATIONS. Except as set forth in SECTION 3.18 of the
Disclosure Schedule, to Seller's Knowledge, the Company has complied in
respect of the Business with all applicable laws, rules and regulations
which relate to prices, wages, hours, discrimination in employment and
collective bargaining and to the operation of the Business of the Company
and is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing, the result of which
noncompliance or payment of any such amount, individually or in the
aggregate has or may reasonably be expected to have a material adverse
effect on the Business or Condition of the Company. To Seller's
Knowledge, the Company is not a party to, and is not affected by or
threatened with, any dispute or controversy with a union or with respect to
unionization or collective bargaining. To Seller's Knowledge, the Company
is not materially affected by any dispute or controversy with a union.
3.19 PROPERTIES. Except as disclosed in SECTION 3.19 of the
Disclosure Schedule (with paragraph references corresponding to those set
forth below), to Seller's Knowledge:
(a) The Company has good and valid title to all debentures,
notes, stocks, securities, and other assets that are of a type
required to be disclosed in Schedules B through DB of its Annual
Statement and that are owned by it, free and clear of all Liens.
(b) The Company has a valid leasehold interest in, all material
real property used in the conduct of its business, operations, or
affairs or of a type required to be disclosed in Schedule A of the
Company's Annual Statement, free and clear of all Liens.
(c) The Company owns good and indefeasible title to, or has a
valid leasehold interest in or has a valid right under Contract to
use, all material tangible personal property that is used in the
conduct of its business, operations, or affairs, free and clear of all
Liens. All such tangible personal property is in good operating
condition and repair and is suitable for its current uses.
(d) The Company has, and at all times after the Closing will
have, the right to use, free and clear of any royalty or other payment
obligations, claims of infringement or alleged infringement, or other
Liens, all material marks, names, trademarks, service marks, patents,
patent rights, assumed names, logos, trade secrets, copyrights, trade
names, and service marks that are used in the conduct of its business,
operations, or affairs (of which a true and complete list and
description is disclosed in SECTION 3.19(D) of the Disclosure
Schedule), and all material computer software, programs, and similar
systems owned by or licensed to the Seller or the Company or any
Affiliate of the Company or used in the conduct of its business,
operations, or affairs (of which a true and complete list and
description is disclosed in SECTION 3.19(D) of the Disclosure
Schedule). Neither the Seller nor the Company is in conflict with or
in violation or infringement of, nor has the Seller or the Company
received any notice of any conflict with or violation or infringement
of or any claimed conflict with, any asserted rights of any other
Person with respect to any intellectual property or any computer
software, programs, or similar systems material to the Company's
Business, including, without limitation, any of such items disclosed
in SECTION 3.19(D) of the Disclosure Schedule.
3.20 CONTRACTS. To Seller's Knowledge, SECTION 3.20 of the
Disclosure Schedule (with paragraph references corresponding to those set
forth below) contains a true and complete list of each of the following
Contracts or other documents or arrangements (true and complete copies, or,
if none, written descriptions, of which have been made available to the
Buyer, together with all amendments thereto), to which the Company is a
party or by which any of its Assets and Properties is or may be bound:
(a) all employment, agency, consultation, or representation
Contracts or other Contracts of any type (including, without
limitation, loans or advances) with any present officer, director,
employee, agent, consultant, or other similar representative of the
Company (or former officer, director, employee, agent, consultant or
similar representative of the Company, if there exists any present or
future liability with respect to such Contract, whether now existing
or contingent) (other than Contracts with consultants and similar
representatives who do not receive compensation of $100,000 or more
per year and other than employment or agency Contracts, not containing
terms which are unduly burdensome to the Company, with agents who do
not receive compensation of $100,000 or more per year), and the name,
position, and rate of compensation of each such Person and the
expiration date of each such Contract, as well as all sick leave,
vacation, holiday, and other similar practices, procedures, and
policies of the Company established or administered other than as
Benefit Plans;
(b) all Contracts with any Person containing any provision or
covenant limiting the ability of the Company to engage in any line of
business or to compete with or to obtain products of services from any
Person or limiting the ability of any Person to compete with or to
provide products or services to the Company;
(c) all partnership, joint venture, profit-sharing, or similar
Contracts with any Person (other than Benefit Plans);
(d) all Contracts relating to the borrowing of money by the
Company or to the direct or indirect guarantee by the Company of any
obligation for borrowed money or indebtedness of any other Person in
excess of $50,000, including without limitation any Contract relating
to the maintenance of compensating balances that are not terminable
by the Company without penalty upon not more than sixty (60) calendar
days' notice, any line of credit or similar facility, the payment
for property, products, or services of any other Person even if such
property, products, or services are not conveyed, delivered, or
rendered, or the obligation to take-or-pay, keep-well, make-whole, or
maintain surplus or earnings levels or perform other financial ratios
or requirements; SECTION 3.20(D) of the Disclosure Schedule contains a
true and complete list of any requirements for consents or approvals
of creditors needed to consummate the transactions contemplated
hereby;
(e) all leases or subleases of material real property used in
the Company's business, operations, or affairs, and all other material
leases, subleases, or rental or use Contracts for which the Company is
liable;
(f) all Contracts relating to the future disposition or
acquisition of any investment in or security of any Person or of any
interest in any business enterprise (other than the disposition or
acquisition of investments in the ordinary course of business and
consistent with past practice);
(g) all Contracts or arrangements (including, without
limitation, those relating to the sharing or allocation of expenses,
personnel, services, or facilities) between or among the Seller and
the Company and any of their respective Affiliates or any other Person
who is described in SECTION 3.12(P);
(h) all material reinsurance, coinsurance, or other similar
Contracts indicating, with respect to each such Contract, the
information required to be disclosed in Schedule S of the Company's
Annual Statement;
(i) all outstanding proxies, powers of attorney, or similar
delegations of authority of the Company, except for powers of attorney
for the service of process pursuant to applicable insurance Laws with
respect to the Company or delegations of authority to agents of the
Company in the ordinary course of business and consistent with past
practices;
(j) all Contracts for any product, service, equipment, facility,
or similar item (other than insurance and annuity Contracts issued,
reinsured, or underwritten by the Company and other than reinsurance,
coinsurance, and other similar Contracts) that by their respective
terms do not expire or terminate or are not terminable by the Company,
without penalty or other Liability, within twelve (12) months after
December 31, 1997; and
(k) all other Contracts (other than insurance and annuity
Contracts issued, reinsured, or underwritten by the Company) that
involve the payment or potential payment pursuant to the terms of such
Contracts, by or to the Company of more than $50,000 individually or
in the aggregate or that are otherwise material to the Business or
Condition of the Company.
To the Seller's Knowledge, each Contract disclosed or required to be
disclosed in the Disclosure Schedule pursuant to this Section is in full
force and effect and constitutes a legal, valid, and binding obligation of
the Company and of each other Person that is a party thereto in accordance
with its terms; and neither the Company nor any other party to such
Contract is in violation or breach of or default under any such Contract
(or with or without notice or lapse of time or both, would be in violation
or breach of or default under any such Contract). Except as disclosed in
SECTION 3.20 of the Disclosure Schedule, to Seller's Knowledge, the Company
is not a party to or bound by any Contract that was not entered into in the
ordinary course of business and consistent with past practice or that has
or may reasonably be expected to have, individually or in the aggregate
with any other Contracts, a material adverse effect on the Business or
Condition of the Company. To Seller's Knowledge, the Company is not a
party to or bound by any collective bargaining or similar labor Contract.
3.21 INSURANCE ISSUED BY THE COMPANY. Except as required by Law or
except as disclosed in SECTION 3.21 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below), to Seller's
Knowledge:
(a) All insurance or annuity Contract benefits payable to the
Company by any other Person that is a party to or bound by any
reinsurance, coinsurance, or other similar Contract with the Company
have in all material respects been paid in accordance with the terms
of the insurance, annuity, and other Contracts under which they arose,
except for such benefits for which the Company reasonably believes
there is a reasonable basis to contest payment.
(b) No outstanding insurance or annuity Contract issued,
reinsured, or underwritten by the Company entitles the holder thereof
or any other Person to receive dividends, distributions, or to share
in the income of the Company or receive any other benefits based on
the revenues or earnings of the Company or any other Person.
(c) The underwriting standards utilized and ratings applied by
the Company and by any other Person that is a party to or bound by any
reinsurance, coinsurance, or other similar Contract with the Company
conform in all material respects to industry accepted practices and to
the standards and ratings required pursuant to the terms of the
respective reinsurance, coinsurance, or other similar Contracts.
(d) All amounts to which the Company is entitled under
reinsurance, coinsurance, or other similar Contracts (including
without limitation amounts based on paid and unpaid losses) are fully
collectible.
(e) Except as set forth on SECTION 3.21 (E) of the Disclosure
Schedule, and except for such instances as in the aggregate would not
have a material adverse effect on the Company, to Seller's Knowledge,
there is no instance where (i) any insurance agent who, at the time
such agent wrote, sold or produced business for the Company or any of
its subsidiaries, was not duly licensed as an insurance agent for the
type of business written, sold or produced by such agent for the
Company or any of its subsidiaries in the particular jurisdiction in
which such agent wrote, sold or produced such business for the Company
or any of its subsidiaries, or (ii) any such insurance agent violated
any law or order applicable to the writing, sale or production of
business for the Company or any of its subsidiaries with respect to
any business written, sold or produced by such agent for the Company
or any of its subsidiaries.
(f) The tax treatment under the Code of all insurance, annuity
or investment policies, plans, or contracts; all financial products,
employee benefit plans, individual retirement accounts or annuities;
or any similar or related policy, contract, plan, or product, whether
individual, group, or otherwise, issued or sold by the Company is and
at all times has been the same to the Buyer, policyholder or intended
beneficiaries thereof as the tax treatment under the Code for which
such contracts qualified or purported to qualify at the time of its
issuance or purchase. For purposes of this SECTION 3.21(F), the
provisions of the Code relating to the tax treatment of such contracts
shall include, but not be limited to, Sections 72, 79, 89, 101, 104,
105, 106, 125, 130, 401, 402, 403, 404, 408, 412, 415, 419, 419A, 501,
505, 817, 818, 7702, and 7702A of the Code.
(g) No "vanishing premium" type policies have been offered or
sold by the Company. There have been no increases in the cost of
insurance scales since issue of any interest-sensitive life contracts.
3.22 THREATS OF CANCELLATION. Except as disclosed in SECTION 3.22 of
the Disclosure Schedule, since the Acquisition Date, to Seller's Knowledge,
no policyholder, group of policyholder Affiliates, or Persons writing,
selling, or producing insurance business that individually or in the
aggregate accounted for five percent 5% or more of the premium or annuity
income of the Company for the year ended December 31, 1997, has terminated
or threatened to terminate its relationship with the Company.
3.23 LICENSES AND PERMITS. Except as disclosed in SECTION 3.23 of
the Disclosure Schedule, to Seller's Knowledge, all certificates of
authority of the Company that are required for its business operations, and
affairs and that the failure to so own or hold has or may reasonably be
expected to have a material adverse effect on its Business or Condition,
are valid and in full force and effect, and free of any restrictions
imposed by any Person.
3.24 OPERATIONS INSURANCE. To Seller's Knowledge, SECTION 3.24 of
the Disclosure Schedule contains a true and complete list and description
of all liability, property, workers compensation, directors and officers
liability, and other similar insurance Contracts that insure the business,
operations, or affairs of the Company or affect or relate to the ownership,
use, or operations of any of the Assets and Properties of the Company and
that have been issued to the Company or any of its Affiliates (including,
without limitation, the names and addresses of the insurers, the expiration
dates thereof, and the annual premiums and payment terms thereof) or that
are held by the Company or by any Affiliate of the Seller for the benefit
of the Company following the Closing. To Seller's Knowledge, all such
insurance is in full force and effect and in light of the business,
operations, and affairs of the Company, is in amounts and provides coverage
that are reasonable and customary for Persons in similar businesses.
3.25 INTERCOMPANY ACCOUNTS. Other than reimbursed direct expenses as
reflected in the March 31, 1998 SAP Statement, or except as disclosed in
SECTION 3.25 of the Disclosure Schedule, to Seller's Knowledge, there are
no intercompany accounts (receivable or payable) arising after the
Acquisition Date, other than in the ordinary course of business and
consistent with past practice between the Company and any of its
Affiliates. Except as disclosed in SECTION 3.25 of the Disclosure
Schedule, since March 31, 1998 all settlements of such intercompany
accounts have been made, and all allocations of such intercompany expenses
have been applied, in the ordinary course of business and consistent with
past practice.
3.26 BANK ACCOUNTS. To Seller's Knowledge, SECTION 3.26 of the
Disclosure Schedule contains a true and complete list of the names and
locations of all banks, trust companies, securities brokers, and other
financial institutions at which the Company has an account or safe deposit
box or maintains a banking, custodial, trading, or other similar
relationship and a true and complete list and description of each such
account, box, and relationship, indicating in each case the account number.
3.27 BROKERS. Except as disclosed in SECTION 3.27, all negotiations
relative to this Agreement and the transactions contemplated hereby have
been carried out by the Seller directly with the Buyer, without the
intervention of any Person on behalf of the Seller in such manner as to
give rise to any valid claim by any Person against the Buyer or the Seller
for a finder's fee, brokerage commission, or similar payment.
3.28 DISCLOSURE. Neither this Agreement nor any certificate
furnished by the Seller to the Buyer in connection with this Agreement or
the transactions contemplated hereby contains any untrue statement of a
material fact by the Seller or omits to state a material fact by the Seller
necessary to make the statements herein or therein not misleading in light
of the circumstances in which they were made.
3.29 SENSITIVE PAYMENTS. Except as disclosed in SECTION 3.29 of the
Disclosure Schedule, to the Seller's Knowledge, (i) the Company is not
involved in any transaction or other situation with any employee, officer,
director or Affiliate of the Company which may be generally characterized
as a "conflict of interest", including, but not limited to, direct or
indirect interests in the business of competitors, suppliers or customers
of the Company, and (ii) there are no situations which involved or involves
(A) the use of any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (B)
the making of any direct or indirect unlawful payments to government
officials or others from corporate funds or the establishment or
maintenance of any unlawful or unrecorded funds, (C) the violation of any
of the provisions of The Foreign Corrupt Practices Act of 1977, or any
rules or regulations promulgated thereunder, (D) the receipt of any illegal
discounts or rebates or any other violation of the antitrust laws or (E)
any investigation by the Securities and Exchange Commission or any other
federal, foreign, state or local government agency or authority.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Seller as of the date
of this Agreement and as of the Closing as follows:
4.1 ORGANIZATION. The Buyer is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of
Indiana and has full corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement. The Buyer
is duly licensed, qualified, or admitted to do business and is in good
standing in all jurisdictions in which the failure to be so licensed,
qualified, or admitted and in good standing, individually or in the
aggregate with other such failure, has or may reasonably be expected to
have a material adverse effect on the validity or enforceability of this
Agreement, on the ability of the Buyer to perform its obligations under
this Agreement or on the Business or Condition of the Buyer.
4.2 AUTHORITY. The Board of Directors of the Buyer has duly and
validly approved this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by the Buyer and the
performance by the Buyer of its obligations under this Agreement have been
duly and validly authorized by all necessary corporate action on the part
of the Buyer. This Agreement constitutes a legal, valid, and binding
obligation of the Buyer and is enforceable against the Buyer in accordance
with its terms, except to the extent that enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium, or
similar Laws now or hereafter in effect relating to or limiting creditors'
rights generally and the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses
and to the discretion of the court or other similar Person before which any
proceeding therefor may be brought.
4.3 NO CONFLICTS OR VIOLATIONS. The execution and delivery of this
Agreement by the Buyer do not, and the performance by the Buyer of its
obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by
SECTION 6.1 hereof, violate any term or provision of any Law or any
writ, judgment, decree, injunction, or similar order applicable to the
Buyer;
(b) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any of the terms, conditions, or provisions of the articles of
incorporation or Bylaws of the Buyer;
(c) result in the creation or imposition of any Lien upon the
Buyer or any of its Assets and Properties that individually or in the
aggregate with any other Liens has or may reasonably be expected to
have a material adverse effect on the validity or enforceability of
this Agreement or on the ability of the Buyer to perform its
obligations under this Agreement;
(d) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, or give to any person any right of termination, cancellation,
acceleration, or modification in or with respect to, any Contract to
which the Buyer is a party or by which any of its Assets and
Properties may be bound and as to which any such conflicts,
violations, breaches, defaults, or rights individually or in the
aggregate have or may reasonably be expected to have a material
adverse effect on the validity or enforceability of this Agreement or
on the ability of the Buyer to perform its obligations under this
Agreement; or
(e) require the Buyer to obtain any consent, approval, or action
of, or make any filing with or give any notice to, any Person except
as contemplated in SECTION 6.1 or SECTION 7.11, as disclosed in
writing to the Seller, or those which the failure to obtain, make, or
give individually or in the aggregate with other such failures has or
may reasonably be expected to have no material adverse effect on the
validity or enforceability of this Agreement or on the ability of the
Buyer to perform its obligations under this Agreement.
4.4 LITIGATION. There are no actions, suits investigations, or
proceedings pending against the Buyer, or (to the best knowledge of the
Buyer) threatened against the Buyer, at law or in equity, in, before, or by
any Person, that individually or in the aggregate have or may reasonably be
expected to have a material adverse effect on the validity or
enforceability of this Agreement, on the ability of the Buyer to perform
its obligations under this Agreement or on the Business and Condition of
the Buyer.
4.5 PURCHASE FOR INVESTMENT. The Shares will be acquired by the
Buyer for its own account for the purpose of investment. The Buyer agrees
that: it will not offer, sell, pledge, hypothecate, or otherwise dispose
of the shares unless such offer, sale, pledge, hypothecation or other
disposition is (i) registered under the Securities Act of 1933 and any
other applicable securities laws, or (ii) in compliance with an opinion of
counsel to the Buyer, delivered to the Seller and reasonably acceptable to
it, to the effect that such offer, sale, pledge, hypothecation or other
disposition does not violate the Securities Act of 1933 or such other
securities laws; and the certificate(s) representing the Shares shall bear
a legend evidencing the restrictions or transfer set forth in the foregoing
clause.
4.6 CAPITALIZATION. The authorized capital stock of the Buyer
consists of 20,000,000 shares of common stock and 1,000,000 shares of
preferred stock. As of May 15, 1998, there were issued and outstanding:
7,986,152 shares of common stock, of which 872,432 shares are in the
treasury; stock options to acquire 1,956,558 shares of common stock of
which options to acquire 1,571,592 shares of common stock were exercisable;
warrants to acquire 806,430 shares of common stock, all of which were
exercisable; and 1,740,038 shares reserved for the conversion of
subordinated convertible debt. All outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid
and nonassessable and free of preemptive rights. Except as disclosed in
SECTION 4.6 of the Disclosure Schedule, there are outstanding (a) no other
shares of capital stock or other voting securities of the Company (b) no
securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company and (c) no other options
or other rights to acquire from the Company, and there is no obligation of
the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for, or options or warrants to purchase
capital stock or voting securities of the Company (the items in clauses
(a), (b) and (c) being referred to, together with the common stock,
collectively as the "Company Securities"). Except as disclosed in SECTION
4.6 of the Disclosure Schedule, there are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any Company Securities.
4.7 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Buyer
directly with the Seller, without the intervention of any Person on behalf
of the Buyer in such manner as to give rise to any valid claim by any
Person against the Seller or the Buyer for a finder's fee, brokerage
commission, or similar payment.
4.8 DISCLOSURE. Neither this Agreement nor any certificate
furnished by the Buyer to the Seller in connection with this Agreement or
the transactions contemplated hereby contains any untrue statement by the
Buyer of material fact or omits to state a material fact by the Buyer
necessary to make the statements herein or therein not misleading in light
of the circumstances in which they were made.
ARTICLE V
COVENANTS OF SELLER
The Seller covenants and agrees with the Buyer that, at all times
before the Closing, the Seller will, and will use commercially reasonable
efforts to cause the Company to, comply with all of the covenants and
provisions of this Article V, except to the extent the Buyer may otherwise
consent in writing or to the extent otherwise required or permitted by this
Agreement.
5.1 REGULATORY AND OTHER APPROVALS. The Seller and Company will
take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts to
obtain, as promptly as practicable, (a) all approvals, authorizations, and
clearances of governmental and regulatory authorities required of the
Seller or the Company to consummate the transactions contemplated hereby,
and provide such other information and communications to such governmental
and regulatory authorities as the Buyer or such authorities may reasonably
request; and cooperate with the Buyer in obtaining, as promptly as
practicable, all approvals, authorizations, and clearances of governmental,
lender or regulatory authorities and others required of the Buyer to
consummate the transactions contemplated hereby, including, without
limitation, all filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act (15 U.S.C. 18(a)) ("Xxxx-Xxxxx"), and any
required approvals of the insurance regulatory authorities in the States of
Ohio and Indiana, and (b) the Seller Stockholder Approval.
5.2 INVESTIGATION BY THE BUYER. The Seller and the Company will
provide (a) the Buyer, its lenders, and their respective counsel,
accountants, actuaries, and other representatives with full access, upon
prior reasonable notice to the Seller and during normal business hours, to
all facilities, officers, employees, agents, accountants, actuaries, Assets
and Properties, and Books and Records of the Seller and the Company and
will furnish the Buyer and such other Persons during such period with all
such information and data (including, without limitation, copies of
Contracts, Benefit Plans, and other Books and Records) concerning the
business, operations, and affairs of the Company as the Buyer or any of
such other Persons reasonably may request and (b) the Buyer with timely
notice of and full access to all meetings (and all actions by written
consent in lieu thereof) of the board of directors and stockholders of the
Company involving matters which are not in the ordinary course of business
and consistent with past practice, except such meetings as involve only
matters related to the consummation of the transactions contemplated
herein.
5.3 NO NEGOTIATIONS, ETC. The Seller and the Company will not take,
and will not permit any Affiliate of the Seller or the Company (or permit
any other Person acting for or on behalf of the Seller or the Company or
any Affiliate of the Seller or the Company) to take, directly or
indirectly, any action (a) to seek or encourage any offer or proposal from
any Person to acquire any shares of capital stock or any other securities
of the Company or any interest therein or Assets and Properties thereof or
any interest therein; (b) to merge, consolidate, or combine, or to permit
any other Person to merge, consolidate or combine, with the Company; (c) to
liquidate, dissolve, or reorganize the Company in any manner; (d) to
acquire or transfer any Assets and Properties of the Company or any
interests therein, except as contemplated by the terms of this Agreement,
except in the ordinary course and consistent with past practice; (e) to
reach any agreement or understanding (whether or not such agreement or
understanding is absolute, revocable, contingent, or conditional) for, or
otherwise to attempt to consummate, any such acquisition, transfer, merger,
consolidation, combination, or reorganization; or (f) to furnish or cause
to be furnished any information with respect to the Company to any Person
(other than the Buyer) that the Seller or the Company or any Affiliate of
the Seller or the Company (or any Person acting for or on behalf of the
Seller or the Company or any other Affiliate of the Seller or the Company)
knows or has reason to believe is in the process of attempting or
considering any such acquisition, transfer, merger, consolidation,
combination, liquidation, dissolution, or reorganization.
5.4 CONDUCT OF BUSINESS. Prior to Closing and except as
specifically permitted herein, the Company will conduct its business only
in the ordinary course and consistent with past practice. Without limiting
the generality of the foregoing:
(a) The Seller and the Company will use all commercially
reasonable efforts to (i) preserve intact the Company's present
business organization, reputation, and policyholder relations;
(ii) keep available the services of the Company's present officers,
directors, employees, agents, consultants, and other similar
representatives; (iii) maintain all licenses, qualifications, and
authorizations of the Company to do business in each jurisdiction in
which it is so licensed, qualified, or authorized; (iv) maintain in
full force and effect all Contracts, documents, and arrangements
referred to in SECTION 3.19 hereof, (v) maintain all Assets and
Properties of the Company in good working order and condition,
ordinary wear and tear excepted and (vi) continue all current
marketing and selling activities relating to the business, operations,
or affairs of the Company.
(b) The Seller and the Company will cause the Books and Records
of the Company to be maintained in the usual manner and consistent
with past practice and will not permit a material change in any
underwriting, investment, actuarial, financial reporting, or
accounting practice or policy of the Company or in any assumption
underlying such practice or policy, or in any method of calculating
any bad debt, contingency, or other reserve for financial reporting
purposes or for other accounting purposes (including, without
limitation, any practice, policy, assumption, or method relating to or
affecting the determination of the Company's investment income,
reserves or other similar amounts, or operating ratios with respect to
expenses, losses, or lapses).
(c) The Seller and the Company will: (i) subject to any
extensions obtained in accordance with applicable law, properly
prepare and duly and timely file all reports and all Tax Returns
required to be filed with any governmental or regulatory authorities
with respect to the business, operations, or affairs of the Company;
and (ii) duly and fully pay all Taxes indicated by such Tax Returns or
otherwise levied or assessed upon the Company or any of its Assets and
Properties, and withhold or collect and pay to the proper taxing
authorities or hold in separate bank accounts for such payment all
Taxes that the Company is required to so withhold or collect and pay
assuming actual knowledge of such Taxes, unless such Taxes are being
contested in good faith and, if appropriate, reasonable reserves
therefor have been established and reflected in the Books and Records
of the Company in accordance with GAAP and SAP.
(d) The Company will: (i) cause all reserves and other similar
amounts with respect to insurance and annuity Contracts established or
reflected in the Company's Books and Records to be (A) established and
reflected on a basis consistent with those reserves and other similar
amounts and reserving methods followed by the Company at December 31,
1997 and (B) good, sufficient and adequate (under generally accepted
actuarial principles consistently applied) to cover the total amount
of all reasonably anticipated matured and unmatured benefits,
dividends, losses, claims, expenses, and other Liabilities of the
Company under all insurance and annuity Contracts pursuant to which
the Company has or will have any Liability (including, without
limitation, any Liability arising under or as a result of any
reinsurance, coinsurance, or other similar Contract); and
(ii) continue to own assets that qualify as legal reserve assets under
all applicable insurance Laws in an amount at least equal to the
required reserves of the Company and other similar amounts.
Notwithstanding the provisions of this SECTION 5.4, SECTION 5.5 or
EXHIBIT B, the Company may: (x) carry Affiliate Investments in an
amount of up to $2,250,000 on the Company's Books and Records for
purposes of SAP as an "admitted asset", which would otherwise not be
deemed an "admitted asset", and (y) include in SAP Capital and Surplus
an amount not exceeding $450,000 for actual AVR adjustments made
between March 31, 1998 and the Closing Date with respect to an
Affiliate Investment.
(e) The Company will use all commercially reasonable efforts to
maintain in full force and effect until the Closing substantially the
same levels of coverage as the insurance afforded under the Contracts
listed in SECTION 3.24 of the Disclosure Schedule. Any and all
benefits under such Contracts paid or payable (whether before or after
the effective date of this Agreement) with respect to the business,
operations, affairs, or Assets and Properties of the Company will be
paid to the Company.
(f) The Company will continue to comply, in all material
respects, with all Laws applicable to its business, operations, or
affairs.
(g) The Company will determine its Adjusted Capital and Surplus
consistent with past practice for determining capital and surplus on
its Financial Statements for any interim period and will not take any
actions the effect of which may be to cause its Adjusted Capital and
Surplus to be less than $8,337,000 immediately after the Closing.
(h) The Company will not enter into any reinsurance contracts,
whether as the ceding company or the assuming company, nor will the
Company recapture any previously ceded reinsurance.
5.5 FINANCIAL STATEMENTS AND REPORTS.
(a) As promptly as practicable, the Seller will deliver to the
Buyer true and complete copies of such other material financial
statements, reports, or analyses as are prepared by the Company or any
Affiliate of the Company following the date hereof in accordance with
past practice and as relate to the Company's business, operations, or
affairs, including, without limitation, normal internal reports (such
as those reflecting monthly premiums, claims, and cash flow) and
special reports (such as those of consultants).
(b) The Company will promptly deliver to the Buyer unaudited
financial statements for the quarter ending March 31, 1998 and for
each quarter thereafter until the Closing Date, prepared in accordance
with SAP and GAAP, consistent with methods and procedures utilized at
December 31, 1997, which, subject to year-end and audit adjustments,
shall present fairly the financial condition, the Assets and
Properties, and the Liabilities of the Company as of the date thereof
and the results of operations, changes in shareholders' equity and
cash flows of the Company for and during each of the periods covered
thereby. Such unaudited statements shall be delivered within thirty-
five (35) days after the date of the end of any such quarter.
(c) As promptly as practicable and in no event more than thirty
(30) days after the close of each month, the Company will deliver to
the Buyer a true and complete copy of unaudited financial statements
for the month ended April 30, 1998, and for each month thereafter
until the Closing Date, prepared in accordance with SAP and GAAP,
consistent with methods and procedures utilized at December 31, 1997,
which shall present fairly the financial condition, the Assets and
Properties and the Liabilities of the Company as of the date thereof
and the results of operations, changes in the capital and surplus
account and cash flows of the Company for and during each of the
periods covered thereby.
5.6 INVESTMENTS. Except as set forth in SECTION 5.6 of the
Disclosure Schedule, the Company shall not sell or otherwise dispose of
investments owned as of May 11, 1998 unless consented to by the Buyer. The
Company will invest its future cash flow, any cash from matured and
maturing investments, any cash proceeds from the sale of its Assets and
Properties, and any cash funds currently held by the Company, exclusively
in cash equivalent assets, short-term investments or fixed maturity
securities which mature in five (5) years or less (all of which permissible
investments shall consist only of United States government issued or
guaranteed securities, commercial paper rated A-I or PI, or certificates of
deposit issued by one or more of the banks or financial institutions listed
in SECTION 5.6 of the Disclosure Schedule), except as otherwise required by
Law or except as required to provide cash (in the ordinary course of
business and consistent with past practice) to meet the Company's
reasonably anticipated current obligations or except as consented to or
required by the Buyer.
5.7 EMPLOYEE MATTERS.
Except as may be required by Law or as disclosed in SECTION 5.7
of the Disclosure Schedule, or except for such representations, promises,
changes, alterations, or amendments that do not and will not result in any
Liability to the Company, or the Buyer, the Seller and the Company will
refrain from directly or indirectly:
(a) making any representation or promise, oral or written, to
any officer, director, employee, agent, consultant, or other similar
representative of the Company concerning any Benefit Plan, except in
the ordinary course of business;
(b) making any change to, or amending in any way, the Contracts,
salaries, wages, or other compensation of any officer, director,
employee, agent, consultant, or other similar representative of the
Company whose annual compensation exceeds $75,000, other than routine
changes or amendments that (a) are made in the ordinary course of
business and consistent with past practice; (b) do not and will not
result in increases of more than five percent (5%) in the salary,
wages, or other compensation of any such Person, and (c) do not and
will not exceed, in the aggregate, five percent (5%) of the total
salaries, wages, and other compensation of all employees of the
Company;
(c) adopting, entering into, amending, altering, or terminating,
partially or completely, any Benefit Plan, except as required pursuant
to applicable law;
(d) adopting, entering into, amending, altering, or terminating,
partially or completely, any employment, agency, consultation, or
representation Contract that is, or had it been in existence on the
effective date of this Agreement would have been, required to be
disclosed in SECTION 3.20(A) of the Disclosure Schedule;
(e) approving any unscheduled general or company-wide pay
increases for officers, directors, employees, agents, consultants, or
other similar representatives of the Company; or
(f) entering into any Contract with any officer, director,
employee, agent, consultant, or other similar representative of the
Company that is not terminable by the Company, without penalty or
other Liability, upon not more than sixty (60) calendar days' notice.
5.8 NO CHARTER AMENDMENTS. The Company will not amend the articles
or certificate of incorporation or Bylaws of the Company and will refrain
from taking any action with respect to any such amendment.
5.9 NO ISSUANCE OF SECURITIES. The Company will refrain from
authorizing or issuing, any shares of capital stock or other equity
securities of the Company, or from entering into any Contract or granting
any option, warrant, or right calling for the authorization or issuance of
any such shares or other equity securities, or creating or issuing any
securities directly or indirectly convertible into or exchangeable for any
such shares or other equity securities, or issuing any options, warrants,
or rights to purchase any such convertible securities.
5.10 NO DIVIDENDS. The Company will refrain from declaring, setting
aside, or paying any dividend or other distribution in respect of its
capital stock and from directly or indirectly redeeming, purchasing, or
otherwise acquiring any of its capital stock or any interest in or right to
acquire any such stock.
5.11 NO DISPOSAL OF PROPERTY. Except as set forth in SECTION 5.11 of
the Disclosure Schedule or as expressly provided in this Agreement, the
Company will not (a) dispose of any of its Assets and Properties or permit
any of its Assets and Properties to be subjected to any Liens, except to
the extent any such disposition or any such Lien is made or incurred in the
ordinary course of the business and consistent with past practice, (b) sell
any material part of its insurance products, operations, or business to any
third party (other than sales of insurance products in the ordinary course
of business consistent with past practice), (c) enter into any contracts
obligating the Company to administer the insurance operations of any Person
other than any Affiliate or (d) enter into any Contracts permitting any
Person other than any Affiliate of the Company to administer the Company's
insurance operations.
5.12 NO BREACH OR DEFAULT. Except as set forth in SECTION 5.12 of
the Disclosure Schedule, the Company will not violate or breach, and will
not take or fail to take any action that (with or without notice or lapse
of time or both) would constitute a material violation, breach, or default
in any way under any term or provision of any Contract to which the Company
is a party or by which any of its Assets and Properties is or may be bound.
5.13 NO INDEBTEDNESS. Except as contemplated hereby with respect to
the Fleet Loan, the Company will not create, incur, assume, guarantee, or
otherwise become liable for, and will not cancel, pay, agree to cancel or
pay, or otherwise provide for a complete or partial discharge in advance of
a scheduled payment date with respect to, any Liability, and will not waive
any right to receive any direct or indirect payment or other benefit under
any Liability owing to the Company.
5.14 NO ACQUISITIONS. The Company will not (a) merge, consolidate,
or otherwise combine or agree to merge, consolidate, or otherwise combine
with any other Person, (b) acquire or agree to acquire blocks of business
of, or all or substantially all the Assets and Properties or capital stock
or other equity securities of any other Person, or (c) otherwise acquire or
agree to acquire control or ownership of any other Person.
5.15 INTERCOMPANY ACCOUNTS. At least five Business Days before the
Closing, the Seller will cause the Company to deliver to the Buyer a true
and complete list and description of all intercompany accounts (receivable
or payable) between the Company and any Affiliate of the Company to be
outstanding on the Closing Date. The Company will not enter into any
Contract with any Affiliate of the Company or, except as required by any
Contract disclosed in SECTION 3.20(G) of the Disclosure Schedule, engage in
any transaction with any of its Affiliates.
5.16 RESIGNATIONS OF OFFICERS AND DIRECTORS. Seller and the Company
will cause such members of the Board of Directors and officers of the
Company to tender, as requested by Buyer, effective at the Closing, their
resignations from the Board of Directors and offices then held by such
officers in the Company.
5.17 OTHER MATTERS. The Seller will refrain and will cause the
Company to refrain from amending or cancelling any reinsurance,
coinsurance, or other Contract without the written consent of the Buyer.
5.18 DISCLOSURE SCHEDULE. The Seller shall deliver the Disclosure
Schedule to the Buyer no later than ten (10) Business Days after the date
hereof.
5.19 NOTICE AND CURE. The Seller will notify the Buyer promptly in
writing of, and contemporaneously will provide the Buyer with true and
complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction, or circumstance occurring after the effective date
of this Agreement that causes or will cause any covenant or agreement of
the Seller under this Agreement to be breached in any material respect, or
that renders or will render untrue in any material respect any
representation or warranty of the Seller contained in this Agreement as if
the same were made on or as of the date of such event, transaction, or
circumstance. The Seller also will use all commercially reasonable efforts
to cure, before the Closing, any material violation or breach of any
representation, warranty, covenant, or agreement made by it in this
Agreement, whether occurring or arising before or after the effective date
of this Agreement.
ARTICLE VI
COVENANTS OF BUYER
The Buyer covenants and agrees with the Seller that, at all times
before the Closing, the Buyer will comply with all covenants and provisions
of this Article VI, except to the extent the Seller may otherwise consent
in writing or to the extent otherwise required or permitted by this
Agreement.
6.1 REGULATORY APPROVALS. The Buyer will (a) take all commercially
reasonable steps necessary or desirable, and proceed diligently and in good
faith and use all commercially reasonable efforts to obtain, as promptly as
practicable, all approvals, authorizations, and clearances of governmental
and regulatory authorities required of the Buyer to consummate the
transactions contemplated hereby, including without limitation all filings
required under Xxxx-Xxxxx and any required approvals of the insurance
regulatory authorities in the States of Ohio and Indiana, including the
filing by the Buyer of a Form A with such regulatory authorities within
twenty (20) Business Days after the effective date of this Agreement;
(b) provide such other information and communications to such governmental
and regulatory authorities as the Seller or such authorities may reasonably
request; and (c) cooperate with the Seller in obtaining, as promptly as
practicable, all approvals, authorizations, and clearances of governmental
or regulatory authorities required of the Seller to consummate the
transactions contemplated hereby.
6.2 NOTICE AND CURE. The Buyer will notify the Seller promptly in
writing of, and contemporaneously will provide the Seller with true and
complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction, or circumstance occurring after the effective date
of this Agreement that causes or will cause any covenant or agreement of
the Buyer under this Agreement to be breached in any material respect, or
that renders or will render untrue in any material respect any
representation or warranty of the Buyer contained in this Agreement as if
the same were made on or as of the date of such event, transaction, or
circumstance. The Buyer also will use all commercially reasonable efforts
to cure, before the Closing, any material violation or breach of any
representation, warranty, covenant, or agreement made by it in this
Agreement, whether occurring or arising before or after the effective date
of this Agreement.
6.3 DISCLOSURE SCHEDULE. The Buyer shall deliver the Disclosure
Schedule to the Seller no later than ten (10) Business Days after the date
hereof.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of the Buyer hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any
of which may be waived in whole or in part by the Buyer).
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Seller in this Agreement and the statements of the
Seller contained in the Disclosure Schedule shall be true in all material
respects as of the effective date of this Agreement, the certifications
given pursuant to SECTION 5.5(D) shall be true in all material respects as
of the date given, and all of such representations, warranties,
certifications and statements shall be true in all material respects on and
as of the Closing Date as though such representations, warranties,
certifications and statements were made on and as of the Closing Date,
subject to changes contemplated or permitted hereby or made with the
consent of the Buyer.
7.2 PERFORMANCE. The Seller and the Company shall have performed
and complied in all material respects with all agreements, covenants,
obligations, and conditions required by this Agreement to be so performed
or complied with by the Seller and/or the Company at or before the Closing,
including those conditions specifically referred to elsewhere in this
Article VII.
7.3 OFFICER'S CERTIFICATES. The Seller shall have delivered to the
Buyer a certificate, dated the Closing Date in the form of EXHIBIT C hereto
and executed by an officer of the Seller, certifying (with respect to the
Seller) as to the fulfillment of the conditions set forth in this Article
VII. In addition, the Seller shall have delivered to the Buyer a
certificate, dated the Closing Date and executed by the secretary or any
assistant secretary of the Seller, certifying that the Seller has duly and
validly taken all corporate action necessary to authorize its execution and
delivery of this Agreement and its performance of its obligations under
this Agreement, and that the resolutions (true and complete copies of which
shall be attached to the certificate) of the Board of Directors with
respect to this Agreement and the transactions contemplated hereby have
been duly and validly adopted and are in full force and effect.
7.4 NO INJUNCTION. There shall not be in effect on the Closing Date
any writ, judgment, injunction, decree, or similar order of any court or
similar Person restraining, enjoining, or otherwise preventing consummation
of any of the material transactions contemplated by this Agreement.
7.5 NO PROCEEDING OR LITIGATION. There shall not be instituted,
pending, or (to the best knowledge of the Buyer or the Seller) threatened
any action, suit, investigation, or other proceeding in, before, or by any
court, governmental or regulatory authority, or other Person to restrain,
enjoin, or otherwise prevent consummation of any of the material
transactions contemplated by this Agreement or to recover any Damages or
obtain other relief as a result of this Agreement or any of the
transactions contemplated hereby or as a result of any Contract entered
into in connection with or as a condition precedent to the consummation
hereof, which action, suit, investigation, or other proceeding may, in the
reasonable opinion of the Buyer, result in a decision, ruling, or finding
that individually or in the aggregate has or may reasonably be expected to
have a material adverse effect on the validity or enforceability of this
Agreement, on the ability of the Seller or the Buyer to perform its
respective obligations under this Agreement, or on the Business or
Condition of the Buyer, or the Company. There shall not be in effect on
the Closing Date any voluntary or involuntary bankruptcy, receivership,
conservatorship, or similar proceeding with respect to the Company or the
Seller.
7.6 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals, and waivers of every Person disclosed pursuant
to SECTION 4.3 and necessary to permit the Buyer to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby
and to permit the Buyer to acquire the Shares pursuant to this Agreement
(including, without limitation, any requisite action of the insurance
regulatory authorities in the State of Ohio, in each case without the
abrogation or diminishment of the Company's authority or license or the
imposition of significant restrictions upon the transactions contemplated
hereby) shall have been obtained and shall be in full force and effect, and
the Seller and the Company shall have obtained all consents, approvals,
authorizations and clearances referred to in SECTION 5.1 and the Buyer
shall have received evidence satisfactory to it of the receipt of such
consents, approvals, authorizations and clearances.
7.7 NO ADVERSE CHANGE. Except as disclosed in SECTION 3.12 of the
Disclosure Schedule or as specifically reflected in the December 31, 1997
Annual Statement of the Company (it being understood that no material
adverse trend has been so disclosed or reflected), or except for changes or
developments relating to the conduct of the Company's business after the
effective date of this Agreement contemplated hereby or in conformity with
the requests of the Buyer, since December 31, 1997 there shall not have
been, occurred, or arisen any change in, or any event (including, without
limitation, any damage, destruction, or loss whether or not covered by
insurance), condition, or state of facts of any character that individually
or in the aggregate has or may reasonably be expected to have a material
adverse effect on the Business or Condition of the Company.
7.8 OPINION OF COUNSEL. The Seller shall have delivered to the
Buyer the opinion, dated the Closing Date, of Xxxxxxx & Xxxxxx, counsel to
the Seller, substantially in the same form as set forth in EXHIBIT D
hereto.
7.9 XXXX-XXXXX. Buyer and Seller shall have made all filings
required under Xxxx-Xxxxx, and all waiting periods shall have been passed
without any action having been taken by the Department of Justice or any
other governmental department.
7.10 RESIGNATION OF OFFICERS AND DIRECTORS. The resignations of such
members of the Board of Directors and officers of the Company, as requested
by Buyer, pursuant to SECTION 5.16, effective as of the Closing Date, shall
have been delivered to the Buyer on or before the Closing Date.
7.11 APPROVAL BY FLEET AND CONSECO. Fleet National Bank ("Fleet")
and Conseco, Inc. shall have consented to the consummation of the
transactions under this Agreement and have agreed to restructure the
existing Fleet debt in the sum of $6,000,000 upon terms and conditions
satisfactory to the Buyer in its sole discretion; provided that, unless on
or before the close of business of the twentieth (20th) Business Day
following the date of this Agreement the Buyer shall have provided written
notice to the Seller of the nonsatisfaction of the condition described in
this SECTION 7.11, the condition described in this SECTION 7.11 shall be
deemed waived by the Buyer.
7.12 ADJUSTED CAPITAL AND SURPLUS. The Adjusted Capital and Surplus
of the Company, calculated as provided in Exhibit B hereto, shall not be
less than $7,000,000 upon the Closing Date.
7.13 SELLER STOCKHOLDER APPROVAL. The Seller shall have obtained
the Seller Stockholder Approval.
7.14 CONSENT OF ERNST & YOUNG.. The Seller shall have delivered to
the Buyer written acknowledgment of Ernst & Young LLP as to the payment in
full of all amounts relating to the preparation, review and audit of the
Company's financial statements.
7.15 ASSIGNMENT OF MARKETING AGREEMENT BETWEEN SELLER AND LEAD
AMERICA, LLC. Seller shall assign all right, title and interest in certain
marketing Agreement by and between Seller and Lead America, LLC dated March
11, 1998 (the "Lead America Marketing Agreement") to Buyer or a subsidiary
of Buyer.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of the Seller hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by the Seller).
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement shall be true in all
material respects as of the effective date of this Agreement and shall be
true in all material respects on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date.
8.2 PERFORMANCE. The Buyer shall have performed and complied in all
material respects with all agreements, covenants, obligations, and
conditions required by this Agreement to be so performed or complied with
by the Buyer at or before the Closing.
8.3 OFFICER'S CERTIFICATES. The Buyer shall have delivered to the
Seller a certificate, dated the Closing Date in the form of EXHIBIT F
hereto and executed by the chief executive officer or the chief financial
officer of the Buyer, certifying with respect to the Buyer as to the
fulfillment of the conditions set forth in this Article VIII. In addition,
the Buyer shall have delivered to the Seller a certificate, dated the
Closing Date and executed by the secretary or any assistant secretary of
the Buyer certifying that the Buyer has duly and validly taken all
corporate action necessary to authorize its execution and delivery of this
Agreement and its performance of its obligations under this Agreement,
including, without limitation, that Buyer has taken all action necessary to
authorize the acquisition of the Shares, and that the resolutions (true and
complete copies of which shall be attached to the certificate) of the Board
of Directors of the Buyer with respect to this Agreement and the
transactions contemplated hereby have been duly and validly adopted and are
in full force and effect.
8.4 NO INJUNCTION. There shall not be in effect on the Closing Date
any writ, judgment, injunction, decree, or similar order of any court or
similar Person restraining, enjoining, or otherwise preventing consummation
of any of the material transactions contemplated by this Agreement.
8.5 NO PROCEEDING OR LITIGATION. There shall not be instituted,
pending, or (to the best knowledge of the Buyer or of the Seller)
threatened any action, suit, investigation, or other proceeding in, before,
or by any court, governmental or regulatory authority, or other Person to
restrain, enjoin, or otherwise prevent consummation of any of the material
transactions contemplated by this Agreement or to recover any Damages or
obtain other relief as a result of this Agreement or any of the
transactions contemplated hereby or as a result of any Contract entered
into in connection with or as a condition precedent to the consummation
hereof, which action, suit investigation, or other proceeding may, in the
reasonable opinion of the Seller, result in a decision, ruling, or finding
that individually or in the aggregate has or may reasonably be expected to
have a material adverse effect on the validity or enforceability of this
Agreement, on the ability of the Buyer or the Seller to perform its
obligations under this Agreement, or on the Business or Condition of the
Buyer or Seller.
8.6 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals, and waivers of every Person disclosed pursuant
to SECTION 3.5 and necessary to permit the Seller to perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect, and the Buyer shall have obtained all consents, approvals,
authorizations and clearances referred to in SECTION 6.1 and the Seller
shall have received evidence satisfactory to it of the receipt of such
consents, approvals, authorizations and clearances.
8.7 OPINION OF COUNSEL. The Buyer shall have delivered to the
Seller the opinion, dated the Closing Date, of Xxxxxxx X. Xxxxx, counsel to
the Buyer, substantially in the same form as set forth in EXHIBIT G hereto.
8.8 SELLER STOCKHOLDER APPROVAL. The Seller shall have obtained the
Seller Stockholder Approval; provided that, unless on or before the close
of business of the twentieth (20th) Business Day following the date of this
Agreement, the Seller shall have provided written notice to the Buyer of
the nonsatisfaction of the condition described in this SECTION 8.8, the
condition described in this SECTION 8.8 shall be deemed waived by the
Seller.
8.9 ADJUSTED CAPITAL AND SURPLUS. The Adjusted Capital and Surplus
of the Company, calculated as provided in Exhibit B hereto, shall not be
less than $7,000,000 upon the Closing Date.
8.10 MATERIAL ADVERSE CHANGE. Since December 31, 1997, there shall
not have been, occurred, or arisen any change in, or any event (including,
without limitation, any damage, destruction, or loss whether or not covered
by insurance), condition, or state of facts of any character that
individually or in the aggregate has or may reasonably be expected to have
a material adverse effect on the Business or Condition of the Buyer.
8.11 XXXX-XXXXX. Buyer and Seller shall have made all filings
required under Xxxx-Xxxxx, and all waiting periods shall have been passed
without any action having been taken by the Department of Justice or any
other governmental department.
8.12 FLEET. The Seller and its Affiliates (other than the Company)
shall have been released from any liability for the Fleet Loan upon such
terms and conditions as shall be reasonably satisfactory to the Seller.
ARTICLE IX
SURVIVAL OF PROVISIONS; REMEDIES
9.1 SURVIVAL. The representations, warranties, covenants, and
agreements respectively made by the Seller and the Buyer in this Agreement,
in the Disclosure Schedule, or in any certificate respectively delivered by
the Seller or the Buyer pursuant to SECTION 7.3 or SECTION 8.3 will survive
the Closing:
(a) until the expiration of all applicable statutes of
limitations (including all periods of extension, whether automatic or
permissive) in the case of the representations and warranties of the
Seller respectively set forth in SECTIONS 3.1, 3.2, and 3.3 hereof;
and
(b) until the first anniversary of the Closing in the case of
all other representations, warranties, covenants, and agreements,
except that covenants and agreements to be performed after the Closing
in accordance with their terms will survive until the last period to
which any such Tax benefit could be carried pursuant to the Code.
9.2 AVAILABLE REMEDIES. Each party expressly agrees that,
consistent with its intention and agreement to be bound by the terms of
this Agreement and to consummate the transactions contemplated hereby,
subject only to the performance or satisfaction of precedent conditions or
of precedent requirements imposed upon another party hereto, the remedy of
specific performance shall be available to a non-breaching and
non-defaulting party to enforce performance of this Agreement by a
breaching or defaulting party, including, without limitation, to require
the consummation of the Closing on the Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold
Buyer and its Affiliates and the officers, directors, shareholders,
employees, and agents of Buyer and its Affiliates harmless, from and
against and in respect of each and all of the following:
(a) any and all Liabilities of the Company or any of its
subsidiaries of any nature, whether accrued, absolute, contingent or
otherwise, existing on the dates of the SAP or GAAP Financial
Statements dated on or after December 31, 1997, to the extent not
reflected, disclosed or reserved against in full in the SAP or GAAP
Financial Statements or as specifically referred to in any Schedule
hereto which, based on the Seller's Knowledge as of the date of the
preparation of such financial statements, should have been so
reflected, disclosed or reserved against;
(b) any and all Liability, damage, deficiency or expense to any
Indemnified Party resulting from any misrepresentation, breach of any
warranty, or nonfulfillment of any agreement on the part of Seller
contained in this Agreement or from any misrepresentation or omission
contained in any statement or certificate furnished by Seller pursuant
hereto or in connection with the transactions contemplated hereby; and
(c) any and all Liability, damage, deficiency or expense to any
Indemnified Party resulting from Seller's failure to deliver to the
Indemnified Party good and marketable title to all of the issued and
outstanding shares of capital stock of the Company, free and clear of
any restrictions on transfer (other than any restrictions under state
insurance laws, the Securities Act and state securities laws), claims,
Taxes, security interests, options, warrants, rights, contracts,
calls, commitments, equities, and demands; and
(d) any and all accounts, claims, suits, proceedings, audits,
investigations, demands, assessments or judgment, reasonable costs and
expenses including reasonable attorneys' fees and court costs,
incident to any of the foregoing, regardless of the outcome thereof,
including without limitation, the litigation referred to in 3.15 of
the Disclosure Schedule attached hereto; and
(e) the indemnification provided for in this SECTION 10.1 shall
be further restricted by the requirement that Buyer may not seek
indemnity until claims, damages, etc. have been sought or assessed
against Buyer as evidenced by some correspondence or proceeding
believed to be legitimate by the Indemnified Party in the aggregate
amount of at least $100,000.
10.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold Seller
and its Affiliates and the officers, directors, shareholders, employees,
and agents of Seller and its Affiliates harmless from and against and in
respect of each and all of the following:
(a) any and all Liability, damage deficiency or expense to the
Indemnified Party resulting from any misrepresentation, breach of any
warranty, or nonfulfillment of any agreement on the part of Buyer
contained in this Agreement or from any misrepresentation or omission
contained in any statement or certificate furnished by Buyer pursuant
hereto or in connection with the transactions contemplated hereby; and
(b) any and all accounts, claims, suits, proceedings, audits,
investigations, demands, assessments or judgments, reasonable costs
and expenses including reasonable attorneys' fees and costs, incident
to any of the foregoing, regardless of the outcome thereof; and
(c) the indemnification provided for in this SECTION 10.2 shall
be further restricted by the requirement that the Seller may not seek
indemnity from the Buyer until claims, damages, etc. have been sought
or assessed against Seller as evidenced by some correspondence or
proceeding believed to be legitimate by Seller in the aggregate amount
of at least $100,000.
10.3 DEFENSE BY THE INDEMNIFYING PARTY.
(a) The Indemnified Party shall promptly give notice to the
Indemnifying Party after the Indemnified Party has knowledge of any
claim or the commencement of legal proceedings, whichever shall first
occur, against an Indemnified Party in respect of which recovery may
be sought by an Indemnified Party against the Indemnifying Party under
the indemnity set forth in this Article and shall permit the
Indemnifying Party at its sole cost and expense, to assume the defense
of any such claim or any litigation resulting from such claim.
Failure of the Indemnifying Party to notify the indemnified party of
its election to defend any such action within twenty (20) Business
Days after notice thereof shall have been given to them shall be
deemed a waiver by the Indemnifying Party of its right to so defend
such action. If the Indemnifying Party assumes the defense of any
such claim or litigation resulting therefrom, the obligations
hereunder of the Indemnifying Party as to such claim shall be limited
to taking all reasonable steps necessary in the defense or settlement
of such claim or litigation resulting therefrom and using reasonable
care in defending or settling such claims and to holding the
Indemnified Parties harmless from and against any losses, damages or
liabilities caused by or arising out of any settlement approved by the
Indemnified Party or any judgment in connection with such claim or
litigation resulting therefrom. Except with the consent of the
Indemnified Party, Indemnifying Party shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry of
any judgment or enter into any settlement which, in each case, does
not include as an unconditional term thereof the giving by the
claimant or plaintiff to the Indemnified Party of a release from all
liability in respect of such claim or litigation. The Indemnified
Party shall be entitled to join in the defense of any such action,
with its own counsel, at its sole cost and expense.
(b) The obligations of the Indemnifying Parties enumerated in
SECTIONS 10.1 AND 10.2 are subject to the following: (i) the
Indemnified Party shall notify Indemnifying Party in writing, after
the Indemnified Party obtains actual knowledge of any claim or matter
asserted by the Indemnified Party to fall within SECTIONS 10.1 AND/OR
10.2, of any such claim or matter, in a manner which will not
materially adversely affect the ability of the Indemnifying Party to
protect its interests and to perform its obligations under SECTIONS
10.1 AND/OR 10.2; and (ii) the Indemnified Party shall take no action
or fail to take any action to admit liability, waive any applicable
statute of limitation, affect coverage rights under any applicable
policy of insurance, and/or otherwise to materially adversely affect
the ability of the Indemnifying Party to protect its interests and to
perform its obligations under SECTIONS 10.1 AND/OR 10.2; and (iii) If
the Indemnifying Party assumes the defense of any claim or litigation
resulting from any such claim or matter, the Indemnified Party shall
cooperate in good faith with the Indemnifying Party in the defense
thereof.
10.4 DEFENSE BY INDEMNIFIED PARTY. If the Indemnifying Party does
not assume the defense of any such claim or litigation resulting therefrom,
the Indemnified Party may defend against such claim or litigation in such
matter as it may deem appropriate including but not limited to settling
such claim or litigation, on such terms as the Indemnified Party may deem
appropriate and Seller will promptly reimburse Indemnified Party for the
amount of such settlement, together with the amount of all reasonable
expenses and costs, legal or otherwise, incurred by Indemnified Party in
connection with the defense or settlement of such claim or litigation. If
no settlement of such claim or litigation is made, in the sole discretion
of Indemnified Party, the Indemnifying Party shall promptly reimburse
Indemnified Party for the amount of any judgment rendered with respect to
such claim or in such litigation and for all reasonable expenses and costs,
legal or otherwise, incurred by the Indemnified Party in defending against
such claim or litigation. The reimbursement required herein by the
Indemnifying Party shall be made within twenty (20) Business Days after the
Indemnified Party has demanded such reimbursement in writing from the
Indemnifying Party together with appropriate documentation thereof.
10.5 MANNER OF INDEMNIFICATION. The Indemnified Party shall be
entitled to set off any indemnification arising hereunder against any
indebtedness owed the Indemnifying Party, if any, after giving prior
written notice to the Indemnifying Party against the earliest installment
payment due the Indemnifying Party, or, at the sole option of the
Indemnified Party, such indemnification shall be effected by payment of
cash or delivery of a certified or bank cashiers check for the amount of
such indemnification without set-off.
10.6 NON-EXCLUSIVE. The provisions of this ARTICLE X shall be in
addition to any other rights which Buyer may otherwise have in connection
with this Transaction.
10.7 ASSIGNMENT OF INDEMNIFICATION. Buyer may assign its rights to
indemnification under this Article X to any direct or indirect transferee
or transferees of all the Shares, and each such transferee shall have the
same rights to indemnification under this ARTICLE X as Buyer. Seller may
assign its rights to indemnification under this ARTICLE X to any Permitted
Distributee or Permitted Distributees of SMC Common Stock, and each such
Permitted Distributee shall have the same rights to indemnification under
this ARTICLE X as Seller.
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, upon notice by the
terminating party to the other party:
(a) at any time before the Closing, by mutual written agreement
of the Seller and the Buyer; or
(b) by the Buyer effective on the giving of written notice from
the Buyer to the Seller stating the Buyer's disapproval of any
material aspect of the Business or Condition of the Company
(including, without limitation, any material aspect disclosed pursuant
to the information included in the Disclosure Schedule); PROVIDED,
that such written notice must be received by the Seller within ten
(10) Business Days after delivery of the Disclosure Schedule pursuant
to SECTION 5.21. Delivery of the notice provided in this SECTION
11.1(B) shall not be deemed to create any express or implied
obligation on the part of the Buyer to negotiate concerning or to
justify its termination pursuant to this Section, such termination
being in the Buyer's sole and absolute discretion; or
(c) at any time by the Seller if any of the covenants set forth
in Article VI shall have been breached or any of the conditions set
forth in Article VIII hereof shall not have been satisfied, performed,
or complied with, in any material respect, at or before the Closing
Date and such breach, non-satisfaction, non-performance, or
non-compliance has not been cured or eliminated within thirty (30)
calendar days after notice thereof has been given to the Buyer, OR IF
the Disclosure Schedule is not delivered to the Seller within ten (10)
Business Days after the date hereof, or if the Disclosure Schedule or
other information provided to the Seller discloses any change in, or
event, trend, condition or state of facts of any character that
individually or in the aggregate has or may reasonably be expected to
have a material adverse effect on the Business or Condition of the
Buyer and such change, event, trend, condition or state of facts has
not been cured or eliminated within ten (10) days after notice thereof
has been given to Buyer, PROVIDED that at the time of such termination
the Seller has neither breached any of the covenants set forth in
Article V nor failed to satisfy, perform, or comply with any of the
conditions set forth in Article VII hereof, in any material respect;
or
(d) at any time by the Buyer if any of the covenants set forth
in Article V shall have been breached or any of the conditions set
forth in Article VII hereof shall not have been satisfied, performed,
or complied with, in any material respect, before the Closing Date and
such breach, non-satisfaction, non-performance or non-compliance has
not been cured or eliminated within thirty (30) calendar days after
notice thereof has been given to the Seller, or if the Disclosure
Schedule is not delivered to the Buyer within ten (10) Business Days
after the date hereof, or if the Disclosure Schedule or other
information provided to the Buyer discloses any change in, or event,
trend, condition or state of facts of any character that individually
or in the aggregate has or may reasonably be expected to have a
material adverse effect on the Business or Condition of the Company
and such change, event, trend, condition or state of facts has not
been cured or eliminated within ten (10) days after notice thereof has
been given to the Seller, PROVIDED that at the time of such
termination the Buyer has neither breached any of the covenants set
forth in Article VI nor failed to satisfy, perform, or comply with any
of the conditions set forth in Article VIII hereof, in any material
respect; or
(e) at any time after October 31, 1998, by the Seller or the
Buyer, if the transactions contemplated by this Agreement have not
been consummated on or before such date and such failure to consummate
is not caused by a breach of this Agreement (or any representation,
warranty, covenant, or agreement included herein) by the party
electing to terminate pursuant to this clause (e).
11.2 EFFECT OF TERMINATION. If this Agreement is validly terminated
pursuant to SECTION 11.1, this Agreement will forthwith become null and
void, and there will be no Liability on the part of the Seller or the Buyer
(or any of their respective officers, directors, employees, agents,
consultants, or other representatives), except that the provisions relating
to confidentiality in SECTION 12.4 will continue to apply following any
such termination; PROVIDED, HOWEVER, that notwithstanding anything in this
Section to the contrary, no party electing to terminate this Agreement
pursuant to SECTION 11.1 will be relieved of any Liability for Damages that
the electing party may have to the other party by reason of the electing
party's breach of this Agreement (or any representation, warranty,
covenant, or agreement included herein).
11.3 CERTAIN PAYMENTS. Notwithstanding any provision in this
Agreement to the contrary, if the Board of Directors of the Seller fails to
make a favorable recommendation or withdraws, amends or modifies its
favorable recommendation to its stockholders of this Agreement, the Seller
shall promptly, but in no event later than the second Business Day
following such action, pay to the Buyer (without prejudice to any other
rights of the Buyer against the Seller) a break-up fee of $500,000 in cash.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given if
delivered, telecopied or mailed, by certified mail, return receipt
requested, first class postage prepaid, to the parties at the following
addresses:
If to the Seller, to:
MC Equities, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
With a copy to:
Xxxx X. Xxxxx, Esq.
Xxxxxxx & Xxxxxx
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
If to the Buyer, to:
Standard Management Corporation
0000 Xxxxxxxx Xxxxxxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Chairman & Chief Executive
Officer
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxx, Esq., General Counsel
0000 Xxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopy: (000)000-0000
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Article XII will, if
delivered personally, be deemed given upon delivery, will, if delivered by
telecopy, be deemed delivered when confirmed and will, if delivered by mail
in the manner described above, be deemed given on the third Business Day
after the day it is deposited in a regular depository of the United States
mail. Any party from time to time may change its address for the purpose of
notices to that party by giving a similar notice specifying a new address,
but no such notice will be deemed to have been given until it is actually
received by the party sought to be charged with the contents thereof.
12.2 ENTIRE AGREEMENT. Except for documents executed by the Seller
and the Buyer pursuant hereto, this Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter of this Agreement, and this Agreement (including the exhibits
thereto, the Disclosure Schedule, and other Contracts and documents
delivered in connection herewith) contains the sole and entire agreement
between the parties hereto with respect to the subject matter hereof.
12.3 EXPENSES. Except as otherwise expressly provided in this
Agreement (including, without limitation, as provided in Article X), each
of the Seller and the Buyer will pay its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby.
Buyer will bear the cost of all filing fees required pursuant to Xxxx-
Xxxxx.
12.4 PUBLIC ANNOUNCEMENTS. At all times at or before the Closing,
the Seller and the Buyer will each consult with the other before issuing or
making any reports, statements, or releases to the public with respect to
this Agreement or the transactions contemplated hereby and will use good
faith efforts to agree on the text of a joint public report, statement, or
release or will use good faith efforts to obtain the other party's approval
of the text of any public report, statement, or release to be made solely
on behalf of a party. If the Seller and the Buyer are unable to agree on
or approve any such public report, statement, or release and such report,
statement, or release is, in the opinion of legal counsel to a party,
required by Law or may be appropriate in order to discharge such party's
disclosure obligations, then such party may make or issue the legally
required report, statement, or release. Any such report, statement, or
release approved or permitted to be made pursuant to this Section may be
disclosed or otherwise provided by the Seller or the Buyer to any Person,
including without limitation to any employee or customer of either party
hereto and to any governmental or regulatory authority.
12.5 CONFIDENTIALITY. Each of the Seller and the Buyer will hold,
and will cause its respective officers, directors, employees, agents,
consultants, and other representatives to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process
(including, without limitation, in connection with obtaining the necessary
approval of insurance regulatory authorities) or by other requirements of
Law, all confidential documents and confidential information concerning the
other party furnished to it by the other party or such other party's
officers, directors, employees, agents, consultants, or representatives in
connection with this Agreement or the transactions contemplated hereby,
except to the extent that such documents or information can be shown to
have been (a) previously lawfully known by the party receiving such
documents or information, (b) in the public domain through no fault of such
receiving party, or (c) later acquired by the receiving party from other
sources not themselves bound by, and in breach of, a confidentiality
agreement. Neither the Seller nor the Buyer will disclose or otherwise
provide any such confidential documents or confidential information to any
other Person, except to the Buyer's lenders and investors and to either
party's respective auditors, actuaries, attorneys, financial advisors, and
other consultants and advisors who need such documents or information in
connection with this Agreement and except as required by the provisions of
SECTIONS 5.1 and 6.1.
12.6 FURTHER ASSURANCES. The Seller and the Buyer agree that, from
time to time after the Closing, upon the reasonable request of the other,
they will cooperate and will cause their respective Affiliates to cooperate
with each other to effect the orderly transition of the business,
operations, and affairs of the Company. Without limiting the generality of
the foregoing, the Seller will give and will cause its Affiliates to give
representatives of the Buyer reasonable access to all Books and Records of
the Seller and its Affiliates reasonably requested by the Buyer in the
preparation of any post-Closing financial statements, reports, or Tax
Returns.
12.7 WAIVER. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof. Such
waiver must be in writing and must be executed by the chief executive
officer or the chief operating officer of such party. A waiver on one
occasion will not be deemed to be a waiver of the same or any other breach
on a future occasion. All remedies, either under this Agreement, or by Law
or otherwise afforded, will be cumulative and not alternative.
12.8 AMENDMENT. This Agreement may be modified or amended only by a
writing duly executed by or on behalf of the Seller and the Buyer.
12.9 COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which will be deemed an original, but
all of which will constitute one and the same instrument.
12.10 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of the Seller and the Buyer,
and their respective successors or assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person.
12.11 JURISDICTION AND VENUE. The parties acknowledge that a
substantial portion of negotiations, anticipated performance and execution
of this Agreement occurred or shall occur in Xxxxxx County, Indiana and
that, therefore, without limiting the jurisdiction or venue of any other
federal or state courts, each of the parties irrevocably and
unconditionally (a) agrees that any suit, action or legal proceeding
arising out of or relating to this Agreement may be brought in the federal
district courts serving Xxxxxx County, Indiana; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c)
waives any objection which it may have to the laying of venue of any such
suit, action or proceeding in such court; and (d) agrees that service of
any court paper may be effected on such party by mail, at the address
provided in this Agreement, or in such other manner as may be provided
under applicable laws or court rules in said state.
12.12 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA (EXCLUSIVE OF
CONFLICTS OF LAW PRINCIPLES).
12.13 BINDING EFFECT. This Agreement is binding upon and will inure
to the benefit of the parties and their respective successors and assigns.
12.14 ASSIGNMENT. Except as otherwise provided herein (including,
without limitation, as provided in SECTION 10.6), this Agreement or any
right hereunder or part hereof may not be assigned by any party hereto
without the prior written consent of the other party hereto.
12.15 HEADINGS, ETC. The headings used in this Agreement have been
inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement.
12.16 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under any present or future Law,
and if the rights or obligations of the Seller or the Buyer under this
Agreement will not be materially and adversely affected thereby; (a) such
provision will be fully severable; (b) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a party hereof; (c) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance herefrom;
and (d) in lieu of such illegal, invalid, or unenforceable provision, there
will be added automatically as a part of this Agreement a legal, valid, and
enforceable provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible.
12.17 REPURCHASE OF SMC COMMON STOCK. At any time prior to the first
anniversary of the Closing Date, the Buyer shall have the right to
repurchase from the Seller such number of the shares of the SMC Common
Stock delivered at the Closing as part of the Purchase Price as shall have
a value of $1,125,000 as of the Closing Date determined in the manner
specified in Section 2.2(a)(ii), by delivery to the Seller of written
notice of the exercise of such right. Within ten (10) Business Days of the
delivery of such notice, such repurchase shall be consummated at the
offices of the Seller or its counsel at which time the Seller shall deliver
a certificate for at least the number of shares of SMC Common Stock to be
repurchased by the Buyer upon receipt of a wire transfer in the amount
$1,125,000.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto, effective as of the date first written
above.
MC EQUITIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary and General Counsel
STANDARD MANAGEMENT CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chairman, President and CEO
EXHIBIT A
DEFINITIONS OF TERMS
"Acquisition Agreement" means the Acquisition Agreement dated as of
September 16, 1996 by and among the Seller, Midwestern Acquisition Corp.,
an Ohio corporation, and the Company, as amended.
"Acquisition Date" means the date of the consummation of the
transaction contemplated by the Acquisition Agreement on or about February
20, 1997.
"Adjusted Capital and Surplus" as of any date shall mean the Company's
statutory capital and surplus as of such date, adjusted pursuant to the
Formula set forth on EXHIBIT B hereto and determined based on SAP
consistently applied throughout the specified period and in the immediately
prior comparable period.
"Affiliate" shall mean any Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified.
"Affiliate Investment" means an investment by the Company in (a)
Affiliates of the Seller or the Company or (b) any Person in which the
Company has a one half of one percent ( 1/2 %) or greater equity interest.
"Agreement" shall mean this Stock Purchase Agreement, together with
the exhibits and the Disclosure Schedule attached hereto, and the Contracts
and other documents to be executed and delivered respectively by Seller and
Company pursuant hereto.
"Annual Statement" shall mean any annual statement of the Company
filed with or submitted to the insurance regulatory authority in the State
of Ohio on forms prescribed or permitted by such authority.
"Assets and Properties" shall mean all assets or properties of every
kind, nature, character, and description (whether real, personal, or mixed
whether tangible or intangible, whether absolute, accrued, contingent,
fixed, or otherwise, and wherever situated) as now operated, owned, or
leased by a specified Person, including without limitation cash, cash
equivalents, securities, accounts and notes receivable, real estate,
equipment, furniture, fixtures, insurance or annuities in force, goodwill,
and going-concern value.
"Average Trading Price" shall have the meaning set forth in Section
2.2(a)
"AVR" shall mean the asset valuation reserve required to be
established and maintained by the Company at any particular date,
calculated in accordance with SAP.
"Books and Records" shall mean all accounting, financial reporting,
Tax, business, marketing, corporate, and other files, documents,
instruments, papers, books, and records of a specified Person, including
without limitation financial statements, budgets, projections, ledgers,
journals, deeds, titles, policies, manuals, minute books, stock
certificates and books, stock transfer ledgers, Contracts, franchises,
permits, agency lists, policyholder lists, supplier lists, reports,
computer files, retrieval programs, operating data or plans, and
environmental studies or plans.
"Business Day" shall mean a day other than Saturday, Sunday, or any
day on which the principal commercial banks located in the City of New York
are authorized or obligated to close under the Laws of the State of New
York.
"Business or Condition" shall mean the organization, existence,
authority, capitalization, business, licenses, financial condition, cash
flow, management, sales force, solvency, prospects, SAP and GAAP results of
operations, insurance or annuities in force, SAP capital and surplus,
Mandatory Securities Valuation Reserve, AVR, Liabilities, or Assets and
Properties of a specified Person.
"Buyer" shall have the meaning ascribed to it in the preamble of this
Agreement.
"Claim Notice" shall mean written notification of a Third Party Claim
by an Indemnified Party to an Indemnifying Party pursuant to
SECTION 10.4(A), enclosing a copy of all papers served, if any.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as provided in SECTION 2.3.
"Closing Adjusted Capital and Surplus" shall have the meaning ascribed
to in SECTION 2.3 hereof.
"Closing Asset Statement" and "Closing Balance Sheet" have the
respective meaning set forth in Section 2.2(b).
"Closing Date" shall mean the earlier of (a) the fifth Business Day
next following the date upon which the last of the orders or approvals
described in SECTIONS 5.1, 5.2, 6.1, and 6.2 has been obtained, including
without limitation the approvals under all applicable insurance holding
company Laws, (b) October 31, 1998, or (c) such other date as the Buyer and
Seller may mutually agree upon in writing.
"Code" shall mean the Internal Revenue Code of 1986, as amended
(including without limitation any successor code), and the rules and
regulations promulgated thereunder.
"Company" shall have the meaning set forth in the Recitals hereof.
"Contract" shall mean any agreement, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, insurance policy,
annuity, reinsurance agreement, reinsurance treaty, or other contract or
commitment (whether written or oral).
"Damages" shall mean any and all monetary damages, Liabilities, fines,
fees, penalties, interest obligations, deficiencies, losses, and expenses
(including without limitation punitive, treble, or other exemplary or extra
contractual damages, amounts paid in settlement, interest, court costs,
costs of investigation, fees and expenses of attorneys, accountants,
actuaries, and other experts, and other expenses of litigation or of any
claim, default, or assessment).
"Disclosure Schedule" shall mean the bound record dated the effective
date of this Agreement, furnished by Seller to the Buyer, and containing
all lists, descriptions, exceptions, and other information and materials as
are required to be included therein pursuant to this Agreement.
"Employee Benefit Plan" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an employee pension
benefit plan, as defined in ERISA section 3 (2), (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension
Benefit Plan, (c) qualified defined benefit retirement plan or arrangement
which is an Employee Pension Benefit Plan (including any multi-employer
plan, as defined in ERISA section 3 (37)), or (d) employee welfare benefit
plan as defined in ERISA section 3 (1), or material fringe benefit plan, or
program.
"Employee Pension Benefit Plan" shall mean each employee pension
benefit plan (whether or not insured), as defined in Section 3(2) of ERISA,
which is or was in existence on or before the Closing Date and to which the
Company is or may hereafter become obligated in any manner as an employer.
"Employee Welfare Benefit Plan" shall mean each employee welfare
benefit plan (whether or not insured), as defined in Section 3(1) of ERISA,
which is or was in existence on or before the Closing Date and to which the
Company is or may hereafter become obligated in any manner as an employer.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended (including without limitation any successor act), and the
rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean any Person under common control (as
defined in Section 414 of the Code) with the Company.
"Fair Market Value" means, with respect to any investment security as
of any given date, the closing price of such investment security on such
date on the national securities exchange or over-the-counter market on
which it is listed for trading or, if no closing price is available, the
average of the closing bid and asked prices thereof on such date, in each
case as published in the Northeastern Edition of the WALL STREET JOURNAL.
"Fleet Loan" has the meaning set forth in SECTION 2.2.
"GAAP" shall mean generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"Indemnified Party" shall mean a Person claiming indemnification under
ARTICLE X.
"Indemnifying Party" shall mean a Person against whom claims of
indemnification are being asserted under ARTICLE X.
"Indemnity Notice" shall have the meaning ascribed to it in
SECTION 10.5(E).
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"Laws" shall mean all laws, statutes, ordinances, regulations, and
other pronouncements having the effect of law in the United States of
America, or any domestic or foreign state, province, commonwealth, city,
country, municipality, territory, protectorate, possession, court,
tribunal, agency, government, department, commission, arbitrator, board,
bureau, or instrumentality thereof.
"Lead America" means Lead American, LLC, a Delaware limited liability
company.
"Liabilities" shall mean all debts, obligations, and other liabilities
of a Person (whether absolute, accrued, contingent, fixed, or otherwise, or
whether due or to become due).
"Lien" shall mean any mortgage, pledge, assessment, security interest,
lease, sublease, lien, adverse claim, levy, charge, or other encumbrance of
any kind, or any conditional sale Contract, title retention Contract, or
other Contract to give or to refrain from giving any of the foregoing.
"Non-Admitted Assets" shall mean any assets of the Company required to
be reported as "assets not admitted" on EXHIBIT 13 of any Annual Statement
or Quarterly Statement filed by the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA.
"Person" shall mean any natural person, corporation, general
partnership, limited partnership, proprietorship, trust, union,
association, court, tribunal, agency, government, department, commission,
self-regulatory organization, arbitrator, board, bureau, instrumentality,
or other entity, enterprise, authority, or business organization.
"Purchase Price" shall have the meaning ascribed to it in SECTION 2.2.
"Quarterly Statement" shall mean any quarterly statement of the
Company filed with or submitted to the insurance regulatory authority in
the State of Ohio on forms prescribed or permitted by such authority.
"SAP" shall mean the accounting practices required or permitted by the
National Association of Insurance Commissioners and the insurance
regulatory authority in the State of Ohio consistently applied throughout
the specified period and in the immediately prior comparable period.
"SAP Statements" shall mean the Annual Statements, Quarterly
Statements, and other financial statements and presentations of the Company
prepared in accordance with SAP and delivered to the Buyer pursuant to
either or both of SECTIONS 3.7 and 5.5.
"Seller" shall have the meaning ascribed to it in the preamble of this
Agreement and shall include the Company, unless the context otherwise
requires.
"Seller's Knowledge" means the actual and not imputed or inferred
knowledge of the Seller based solely upon (a) the representations and
warranties of the Company pursuant to Article 3 of the Acquisition
Agreement, (b) facts, matters, circumstances and conditions arising after
the Acquisition Date of which the Seller shall have received written notice
or which are actually known or have been specifically brought to the
attention of the Chairman, Vice Chairman or Secretary and General Counsel
of the Seller (the "Subject Officers"), and (c) financial statements of the
Company with respect to periods commencing after the Acquisition Date
delivered to the Seller; provided that, notwithstanding anything to the
contrary contained herein or in any agreement, certificate, instrument or
other document executed or delivered in connection with this Agreement,
except as set forth in this definition, (x) no knowledge of the Company or
its officers, agents, employees, directors or representatives or any person
other than the Subject Officers shall be imputed to or deemed to by known
by the Seller, and (y) the Seller shall not be deemed to have knowledge of
any fact, matter, circumstance or condition existing or arising prior to
the Acquisition Date, whether or not continuing after the Acquisition Date.
"Seller Stockholder Approval" means the approval of the transactions
contemplated by this Agreement by holders of sixty-six and two-thirds
percent (66-2/3%) of the issued and outstanding shares of the capital stock
of the Seller.
"Shares" shall have the meaning ascribed to it in the preamble of this
Agreement.
"SMC Common Stock" shall have the meaning set forth in SECTION 2.2.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, state insurance guaranty association assessments
or other taxes or assessments of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Work Papers" shall mean all summaries, calculations, compilations and
similar written documentation derived from the accounts of the Company and
used or prepared by accountants in the process of computing Adjusted
Capital and Surplus.
EXHIBIT B
FORMULA FOR DETERMINING
ADJUSTED CAPITAL AND SURPLUS OF COMPANY
AS OF THE CLOSING DATE
PURSUANT TO SECTION 2.3(B)
In accordance with SECTION 5.4, the Adjusted Capital and Surplus of
the Company on the Closing Date shall be determined as follows (the
"Formula"):
1. SAP Capital and Surplus as of the month end prior to the Closing
Date.
EXHIBIT C
FORM OF CERTIFICATE OF OFFICER OF SELLER
At the Closing, the Seller shall deliver to the Buyer a certificate,
dated the Closing Date, executed by an officer of the Seller, to the
following effect:
Pursuant to the provisions of Section 7.3 of that certain Stock
Purchase Agreement dated June 4, 1998 (the "Agreement") by and between MC
Equities, Inc. (the "Seller") and Standard Management Corporation (the
"Buyer"), and relating to the purchase and sale of 1,000 shares of the
common capital stock $1.00 par value (the "Stock") of Midwestern National
Life Insurance Company of Ohio (the "Company") by the Seller to the Buyer,
I, the undersigned [Chairman, Vice Chairman or Secretary and General
Counsel] of the Seller do hereby certify to the Buyer as follows:
1. That I am the duly elected [ ] of the Seller, and in that
capacity have the requisite power and authority to execute and deliver this
certificate on behalf of the Seller;
2. That the representations and warranties of the Seller made in
connection with the Agreement and contained in Article III thereof and in
the Disclosure Schedule attached to the Agreement and the certifications
given pursuant to Section 5.5(d) of the Agreement are true and correct as
of the date of this certificate as though made by the Seller and the
Company on and as of the date, whether or not they were untrue or incorrect
prior to such date;
3. That the Seller has performed and complied or caused the
Company to perform or comply, with all agreements, covenants, obligations
and conditions required by the Agreement to be so performed or complied
with by the Seller and/or the Company at or before the Closing, including
those specifically referred to in Articles V and VII of the Agreement; and
4. That all of the conditions to the obligations of the Buyer to
purchase the Stock from the Seller set forth in Article VII of the
Agreement have been fulfilled.
EXHIBIT D
FORM OF SELLER'S COUNSEL'S OPINION
At the Closing, Seller shall deliver to Purchaser the opinion of its
counsel, Xxxxxxx & Xxxxxx, LLP, substantially to the following effect:
1. The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full
corporate power and authority to enter into the Agreement and perform its
obligations thereunder.
2. The Company is an insurance company duly licensed as an insurance
company under the laws of the State of Ohio, and is duly licensed,
qualified or admitted to do business in all jurisdictions listed on Section
3.1 of the Disclosure Schedule, as a foreign insurance company.
3. The execution and delivery of the Agreement by the Seller and the
performance of its obligations thereunder have been duly and validly
authorized by all necessary corporate action on the part of the Seller, and
the Agreement constitutes the legal, valid and binding obligation of the
Seller and is enforceable against the Seller in accordance with its terms,
except to the extent that (a) enforcement may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to or limiting creditors' rights
generally and (b) the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses
and to the discretion of the court or other Person before which any such
proceeding therefor may be brought.
4. The authorized capital stock of the Company is as set forth in
Section 3.3 of the Agreement; all of such shares are validly issued and
outstanding, fully paid and nonassessable, and 1,000 of such shares are
owned beneficially and of record by the Seller, free and clear of all
Liens, except as may be disclosed in Section 3.3 of the Disclosure
Schedule; and there are no securities, obligations, rights, subscriptions,
warrants, options, charter or founders insurance policies, phantom stock
rights, or Contracts of any kind of the Company which are subject of any
rights or options of the nature described in Section 3.3 of the Agreement.
5. The execution and delivery of the Agreement by the Seller does
not, and the performance by the Seller of its obligations under the
agreement will not, subject to obtaining the approvals contemplated by
Sections 5.1 and 6.1 of the Agreement, (a) violate any term or provisions
of any Law of the State of New York or Delaware Corporate Law, or, to such
Counsel's Knowledge, any writ, judgment, decree, injunction or similar
order applicable to the Seller; (b) conflict with or result in a violation
or breach of, or constitute (with or without notice or lapse of time or
both) a default under, any of the terms, conditions, or provisions of the
articles or certificate of incorporation or Bylaws of the Seller; or (c) to
such Counsel's Knowledge, conflict with or result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default under, or give to any Person any right of termination,
cancellation, acceleration, or modification in or with respect to, any
Contract to which the Seller is a party or by which any of its Assets or
Properties may be bound and as to which any such conflicts, violations,
breaches, defaults or rights individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the validity or
enforceability of the Agreement, on the ability of the Seller to perform
its obligations under the Agreement, or on the Business or Condition of the
Seller.
6. Any consent, approval, order or authorization of, or any waiting
period imposed by any regulatory authority under federal law or state
insurance law, including the insurance laws of the State of Ohio, which
require the Seller or the Company to obtain any consent, approval, or
action of, or make any filing with or give any notice to, any person except
those which the failure to obtain, make, or give individually or in the
aggregate with any other such failures has or may reasonably be expected to
have no material adverse effect on the validity or enforceability of the
Agreement, or in the Business or Condition of the Seller or the Company, in
connection with the execution and delivery of the Agreement and the
performance by the Seller and the Company of their respective obligations
under the Agreement has been obtained or, in the case of any such waiting
period, has expired.
7. To such counsel's actual knowledge, except as disclosed in Section
3.13 of the Disclosure Schedule: (a) there are no actions, suits
investigations or proceedings pending or threatened against the Seller or
any of its Assets and properties, at law or in equity, in, before, or by
any Person that individually or in the aggregate have or may reasonably be
expected to have a material adverse effect on the validity or
enforceability of the Agreement, on the ability of the Seller to perform
its obligations under the Agreement; and (b) there are no writs, judgments,
decrees or similar orders of any Person restraining, enjoining or otherwise
preventing consummation of the transactions contemplated by the Agreement.
EXHIBIT F
FORM OF CERTIFICATE OF OFFICER OF BUYER
At the Closing, the Buyer shall deliver to the Seller a certificate,
dated the Closing Date, executed by the Chief Executive Officer or Chief
Financial Officer of the Buyer, to the following effect:
Pursuant to the provisions of Section 8.3 of that certain Stock
Purchase Agreement dated June 4, 1998 (the "Agreement") by and MC Equities,
Inc. (the "Seller") and Standard Management Corporation (the "Buyer"), and
relating to the purchase and sale of 1,000 shares of the common capital
stock $1.00 par value (the "Stock") of Midwestern National Life Insurance
Company of Ohio (the "Company") by the Seller to the Buyer, I, the
undersigned [Chief Executive Officer/Chief Financial Officer] of the Buyer
do hereby certify to the Seller as follows:
1. That I am the duly elected [Chief Executive Officer/Chief
Financial Officer] of the Buyer, and in that capacity have the requisite
power and authority to execute and deliver this certificate on behalf of
the Buyer;
2. That the representations and warranties of the Buyer in
connection with the Agreement and contained in Article IV thereof and in
the Disclosure Schedule attached to the Agreement and the certification
given pursuant to Section 6.4(d) of the Agreement are true and correct as
of the date of this certificate as though made by the Buyer on and as of
the date, whether or not they were untrue or incorrect prior to such date;
3. That the Buyer has performed and complied with all agreements,
covenants, obligations and conditions required by the Agreement to be so
performed or complied with by the Buyer at or before the Closing, including
those specifically referred to in Articles VI and VIII of the Agreement;
and
4. That all of the conditions to the obligations of Seller to sell
the Stock to the Buyer set forth in Article VIII of the Agreement have been
fulfilled.
EXHIBIT G
FORM OF BUYER'S COUNSEL'S OPINION
At the Closing, Buyer shall deliver to Seller the opinion of its
counsel, Xxxxxxx X. Xxxxx, substantially to the following effect:
1. The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Indiana and has full corporate
power and authority to enter into the Agreement and perform its obligations
thereunder.
2. The execution and delivery of the Agreement by the Buyer and the
performance of its obligations thereunder have been duly and validly
authorized by all necessary corporate action on the part of the Buyer, and
the Agreement constitutes the legal, valid, and binding obligation of the
Buyer and is enforceable against the Buyer in accordance with the terms,
except to the extent that (a) enforcement may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium, or similar Laws now
or hereafter in effect relating to or limiting creditors' rights generally
and (b) the remedy of specific performance and injunctive and other forms
of equitable relief are subject to certain equitable defenses and to the
discretion of the court or other similar Person before which any such
proceeding therefor may be brought.
3. The execution and delivery of the Agreement by the Buyer does not,
and the performance by the Buyer of its obligations under the Agreement
will not, subject to obtaining the approvals contemplated by Sections 5.1
and 6.1 of the Agreement, (a) violate any term or provisions of any Law or
any writ, judgment, decree, injunction or similar order applicable to the
Buyer; (b) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any of the terms, conditions, or provisions of the articles or
certificate of incorporation or Bylaws of the Buyer; (c) result in the
creation or imposition of any Lien upon the Buyer or any of its Assets and
Properties that individually or in the aggregate with any other Liens has
or may reasonably be expected to have a material adverse effect on the
validity or enforceability of the Agreement or on the ability of the Buyer
to perform its obligations thereunder; or (d) conflict with or result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default under, or give any Person any right of termination,
cancellation, acceleration, or modification in or with respect to, any
Contract to which the Buyer is a party or by which any of its Assets or
Properties may be bound and as to which any such conflicts, violations,
breaches, defaults or rights individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the validity or
enforceability of the Agreement or on the ability of the Buyer to perform
its obligations under the Agreement.
4. Any consent, approval, order or authorization of, or any waiting
period imposed by any regulatory authority under federal or state law,
including the laws of the State of Ohio and the State of Indiana, which
require the Buyer to obtain any consent, approval or action of, or make any
filing with or give any notice to, any Person except those which the
failure to obtain, make, or give individually or in the aggregate with any
other such failures has or may be expected to have no material adverse
effect on the validity or enforceability of the Agreement or on the ability
of the Buyer to perform its obligations thereunder in connection with the
execution and delivery of the Agreement and the performance by the Buyer of
its obligations thereunder has been obtained or, in the case of any such
waiting period, has expired.
5. To such counsel's actual knowledge, except as disclosed in SECTION
4.4 of the Disclosure Schedule: (a) there are no actions, suits
investigations or proceedings pending or threatened against the Buyer or
any of its Assets and properties, at law or in equity, in, before, or by
any Person that individually or in the aggregate have or may reasonably be
expected to have a material adverse effect on the validity or
enforceability of the Agreement, on the ability of the Buyer to perform its
obligations under the Agreement; and (b) there are no writs, judgments,
decrees or similar orders of any Person restraining, enjoining or otherwise
preventing consummation of the transactions contemplated by the Agreement.
