AMENDED AND RESTATED STOCK AND ASSET PURCHASE AGREEMENT, dated as of
February 16, 1995, between SBM COMPANY, a Minnesota corporation (the "Seller"),
and ARM FINANCIAL GROUP, INC., a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller owns all the issued and outstanding shares of common
stock, par value $1.00 per share (the "SBM Life Shares"), of State Bond and
Mortgage Life Insurance Company, a Minnesota stock life insurance company ("SBM
Life"), and all of the issued and outstanding shares of common stock, par value
$.01 per share (the "SBM Financial Shares" and, together with the SBM Life
Shares, the "Shares"), of SBM Financial Services, Inc., a Minnesota corporation
("SBM Financial");
WHEREAS, the Seller and the Purchaser are parties to a Stock and Asset
Purchase Agreement, dated as of February 16, 1995 (the "Original Purchase
Agreement"), pursuant to which the Seller has agreed to sell to the Purchaser,
and the Purchaser has agreed to purchase from the Seller, the Shares, together
with all right, title and interest of the Seller in and to certain other
property and assets of the Seller, and in connection therewith the Purchaser has
agreed to assume certain liabilities of the Seller relating thereto, all upon
the terms and subject to the conditions set forth therein; and
WHEREAS, the Seller and the Purchaser desire to amend and restate in its
entirety the Original Purchase Agreement, in the manner set forth herein, as of
the date of the Original Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser and the Seller hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Affiliated Mutual Funds" means State Bond Money Funds, Inc., State Bond
Securities Funds, Inc., State Bond Investment Funds, Inc., State Bond Municipal
Funds, Inc., State Bond Tax-Free Income Funds, Inc. and State Bond Equity Funds,
Inc.
"Agreement" or "this Agreement" means this Amended and Restated Stock and
Asset Purchase Agreement, dated as of February 16, 1995, between the Seller and
the Purchaser (including the Exhibits hereto and the Disclosure Schedule) and
all amendments hereto made in accordance with the provisions of Section 10.09.
"Analysis" means the Actuarial Appraisal of State Bond and Mortgage Life
Insurance Company dated November 14, 1994 (as revised by the December 15, 1994
Addendum thereto).
"Ancillary Agreements" means the Bill of Sale, the Assumption Agreement and
the Preferred Stock Purchase Agreements.
"Assets" has the meaning specified in Section 2.01.
"Assumed Liabilities" has the meaning specified in Section 2.02(a).
"Assumption Agreement" means the Assumption Agreement to be executed by the
Purchaser and the Seller on the Closing Date substantially in the form of
Exhibit 1.01(a).
"Audited Balance Sheets" means (i) the audited statement of assets and the
statement of liabilities, surplus and other funds included in the annual
statement of SBM Life filed with or submitted to the Minnesota Department for
the year ended December 31, 1993 (including the related notes, exhibits and
schedules thereto), (ii) the audited balance sheet (including the related notes
and schedules thereto) of SBM Certificate Company, dated as of December 31,
1993, and (iii) the audited balance sheet (including the related notes and
schedules thereto) of SBM Financial, dated as of December 31, 1993.
"Audited Balance Sheet Date" means December 31, 1993.
"Bill of Sale" means the Bill of Sale and Assignment to be executed by the
Seller on the Closing Date substantially in the form of Exhibit 1.01(b).
"Book Value" means the sum of (i) SBM Life Book Value, (ii) SBM Certificate
Company Book Value and (iii) SBM Financial Book Value.
"Break-Up Fee" has the meaning specified in Section 5.08(a).
"Business" means the business of (i) issuing and selling life insurance and
annuity products, (ii) acting as investment advisor and distributor and
providing related services to the Affiliated Mutual Funds, (iii) issuing face
amount certificates and (iv) providing distribution services to certain
unaffiliated investment companies.
"Business Combination" has the meaning specified in Section 5.07.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by Law to be closed in the City of New
York, New York, or Minneapolis, Minnesota.
"California Department" means the Department of Insurance of the State of
California.
"Closing" has the meaning specified in Section 2.04.
"Closing Date" has the meaning specified in Section 2.04.
"Code" means the Internal Revenue Code of 1986, as amended through the date
hereof.
"Confidentiality Agreement" means the letter agreement dated November 15,
1994 between Conning & Company, as agent for the Seller, and the Purchaser.
"Control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Control Transaction" means (i) a merger or other business combination of
the Seller or SBM Life with any third party, (ii) the sale of all or any portion
of the capital stock of the Seller or SBM Life such that the purchaser thereof
may exercise control of the Seller or SBM Life or (iii) the sale of all or
substantially all the assets of the Seller or SBM Life.
"Disclosure Schedule" means the Disclosure Schedule delivered to the
Purchaser by the Seller concurrently with the execution of the Original Purchase
Agreement.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement, or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental Claim" means any written communication alleging potential
liability arising out of or resulting from (i) any violation, or alleged
violation, of any Environmental Law or Environmental Permit; or (ii) the
presence or release into the environment of any Hazardous Material.
"Environmental Law" means any Law, now in effect or in effect at the time
of the Closing, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials.
"Environmental Permits" means all permits, approvals, identification
numbers, licenses and other authorizations required under any applicable
Environmental Law.
"ERISA" has the meaning specified in Section 3.20(a).
"Excess Liabilities" means (i) the Liabilities of the Seller described on
Exhibit 1.01(c); (ii) any Liabilities incurred by SBM Life or SBM Certificate
Company from January 1, 1995 through the date of determination in the ordinary
course of the Business consistent with past practice in excess of the sum of (a)
$1,700,000 in the aggregate (net of any tax benefit inuring to the Purchaser or
any Subsidiary as a result thereof) and (b) an aggregate amount equal to the
product of (x) $665,000 and (y) the number of calendar months from March 31,
1995 through the date of determination (net of any tax benefit inuring to the
Purchaser or any Subsidiary as a result thereof); and (iii) any impairment in
realizable value from the date of acquisition to the date of determination of
securities acquired by the Subsidiaries after December 31, l994 without the
consent of the Purchaser; provided that, for purposes of clause (ii),
"Liabilities" shall not include liabilities for taxes, state guaranty fund
assessments or sales commissions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Liabilities" has the meaning specified in Section 2.02(b).
"Expenses" has the meaning specified in Section 5.08(a).
"Financial Statements" means the Seller GAAP Statements, the Seller Interim
GAAP Statements, the SBM Certificate Company GAAP Statements, the SBM
Certificate Company Interim GAAP Statements, the SBM Financial GAAP Statements,
the SBM Financial Interim GAAP Statements, the SBM Life Annual Statements and
the SBM Life Quarterly Statements.
"Governmental Authority" means any United States federal, state or local or
any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) petroleum and petroleum products and
by-products, radioactive materials, asbestos and asbestos-containing materials
and polychlorinated biphenyls and (b) any other chemicals, materials or
substances which are regulated pursuant to any Environmental Law or regulated by
any Governmental Authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with U.S. GAAP, recorded as
capital leases, (f) all obligations, contingent or otherwise, of such Person
under acceptance, letter of credit or similar facilities, (g) all obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock of such Person or any warrants, rights or options to acquire
such capital stock, valued, in the case of redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (h) all Indebtedness of others referred to in clauses (a)
through (f) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Indebtedness or
to assure the holder of such Indebtedness against loss, (iii) to supply funds to
or in any other manner invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against loss, and
(i) all Indebtedness referred to in clauses (a) through (f) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"Intellectual Property" means (a) trademarks, service marks, trade dress,
logos, trade names and corporate names, whether or not registered, including all
common law rights, and registrations and applications for registration thereof,
(b) copyrights, whether or not registered, and registrations and applications
for registration thereof, (c) computer software, including, without limitation,
source code, operating systems and specifications, data, data bases, files,
documentation and other materials related thereto, data and documentation, (d)
trade secrets and confidential, technical or business information and (e)
whether or not confidential, technology (including know-how and show-how),
research and development information, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing
information, business and marketing plans and distributor, policyholder,
contractholder and supplier lists and information.
"Interim Balance Sheet Date" means September 30, 1994.
"Interim Balance Sheets" means (i) the unaudited statement of assets and
the statement of liabilities, surplus and other funds included in the quarterly
statement of SBM Life filed with or submitted to the Minnesota Department for
the quarter ended September 30, 1994 (including the related notes, exhibits and
schedules thereto, if any), (ii) the unaudited balance sheet (including the
related notes and schedules thereto, if any) of SBM Certificate Company, dated
as of September 30, 1994, and (iii) the unaudited balance sheet (including the
related notes and schedules thereto, if any) of SBM Financial, dated as of
September 30, 1994.
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
amended.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"IRS" means the Internal Revenue Service of the United States.
"Knowledge" of any party hereto means, when used to qualify expressly any
representation or warranty contained in this Agreement, that, as to the matters
that are the subject of such representations and warranties, such party has made
all appropriate inquiries of officers and appropriate additional executives of
such party (and inquiries of such other individuals as, based on the results of
the inquiries and knowledge of such party's officers and other appropriate
executives, a reasonable person would deem prudent) and, when the results of
such inquiries indicated it to be prudent, has reviewed all appropriate books
and records of such party, but the term "Knowledge" shall not mean, require or
imply that the representing party has made any further investigation or inquiry.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order or rule of common law.
"Leased Real Property" means the office space leased by the Seller, as
tenant, on the eleventh floor of 8400 Normandale Lake Boulevard, Minneapolis,
Minnesota, the office space leased by SBM Financial Services, as tenant, on the
first floor of 1550 East Shaw Avenue, Fresno, California, and the space leased
by the Seller, as tenant, at 100-106 North Minnesota Street, New Ulm, Minnesota,
together with all facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of the
Seller or any Subsidiary attached or appurtenant thereto, and all easements,
licenses, rights and appurtenances relating to the foregoing owned or leased by
the Seller or any Subsidiary.
"Liabilities" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable, including, without limitation, those arising under any Law
(including, without limitation, any Environmental Law), Action or Governmental
Order and those arising under any contract, agreement, arrangement, commitment
or undertaking.
"Licensed Intellectual Property" means all Intellectual Property licensed
or sublicensed by the Seller or any Subsidiary from a third party.
"Material Adverse Change" means (a) the sale, removal (other than by
policyholder lapse, withdrawal or maturity), reinsurance (other than customary
excess risk reinsurance) or other disposal of (i) any policyholder reserves or
customer deposits or (ii) Tangible Personal Property, whether or not reflected
in the Financial Statements, other than in the ordinary course of the Business
consistent with past practice, or (b) a decline (i) in the actuarial appraisal
value of SBM Life reflected in the Analysis from August 31, 1994 to the date of
determination exceeding $11.0 million (calculated based on the assets and
liabilities of SBM Life as of the date of determination using the same
methodologies and assumptions (including, without limitation, the yield curve)
used in the Analysis; provided that no effect shall be given to changes in
reserves for compliance with Actuarial Guideline GGG of the NAIC), or (ii) a
decline in Book Value from August 31, 1994 to the date of determination
exceeding $7.0 million (in the case of each of clauses (b)(i) and(ii), exclusive
of the $4.1 million in additional reserves for compliance with Actuarial
Guideline GGG of the NAIC.
"Material Adverse Effect" means any circumstance, change in, or effect on,
any Subsidiary or any Asset that, individually or in the aggregate with any
other circumstances, changes in, or effects on, any Subsidiary or any Asset: (a)
is, or could reasonably be expected to be, materially adverse to the business,
operations, prospects, results of operations or the condition (financial or
otherwise) of the Business or (b) could materially adversely affect the ability
of the Purchaser to operate or conduct the Business in the manner in which it is
currently operated or conducted by the Seller and the Subsidiaries; provided,
however, that any of the following circumstances, changes in or effects on the
Business, the Assets or any Subsidiary (collectively, "Effects") shall not be
deemed to have a Material Adverse Effect: (i) Effects assumed or used in the
Analysis, to the extent of such assumption or use, (ii) Effects set forth in the
Disclosure Schedule and (iii) so long as the Seller is not in breach in any
material respect of any covenant or agreement contained in this Agreement which
breach results in such Effects, (a) Effects arising from the product
distribution system associated with the Business or (b) Effects relating to
current or prospective Business revenue, premium, policyholder or
certificateholder lapse, withdrawal, maturity, surrender or renewal.
"Material Contracts" has the meaning specified in Section 3.13(a).
"Minnesota Department" means the Department of Commerce of the State of
Minnesota.
"NAIC" means the National Association of Insurance Commissioners.
"Original Purchase Agreement" has the meaning specified in the recitals to
this Agreement.
"Owned Intellectual Property" means all Intellectual Property in and to
which the Seller or any Subsidiary holds, or has a right to hold, right, title
and interest.
"Owned Real Property" means the real property owned by any Subsidiary,
together with all buildings and other structures, facilities or improvements
currently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property of such Subsidiary attached or appurtenant thereto
and all easements, licenses, rights and appurtenances relating to the foregoing.
"Permits" has the meaning specified in Section 3.12(a).
"Permitted Encumbrances" means: (a) liens for taxes, assessments and
governmental charges or levies (i) not yet due and payable or (ii) which are
being contested in good faith by appropriate proceedings and for which an
appropriate reserve has been established under U.S. GAAP or SAP, as appropriate;
(b) Encumbrances imposed by Law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (A) (i) are not overdue for a
period of more than 30 days and (ii) are not in excess of $5,000 in the case of
a single property or $50,000 in the aggregate at any time and (B) are being
contested in good faith by appropriate proceedings and for which an appropriate
reserve has been established under U.S. GAAP or SAP, as appropriate; (c) pledges
or deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; (d) survey exceptions,
reciprocal easement agreements or other customary encumbrances on title to real
property that (i) were not incurred in connection with any Indebtedness, (ii) do
not render title to the property encumbered thereby unmarketable or uninsurable
and (iii) do not, individually or in the aggregate, materially adversely affect
the value of or the use of such property for its present purposes; (e)
Encumbrances related to deposits to secure policyholder obligations to the
extent required by insurance departments of various states; (f) Encumbrances
reflected in the Financial Statements; and (g) Encumbrances resulting from
restrictions on transferability imposed by federal and state securities laws.
"Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity, as well as any syndicate or
group that would be deemed to be a person under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.
"Plan of Liquidation" has the meaning specified in Section 5.13(a).
"Plans" has the meaning specified in Section 3.20(a).
"Preferred Stock Purchase Agreements" means the Agreement dated as of March
31, 1995, by and between the Purchaser and SBM Partners L.P. and the Agreement
dated as of March 31, 1995, by and between the Purchaser and Georgia
International Life Insurance Company.
"Purchase Price" has the meaning specified in Section 2.03.
"Purchase Price Bank Account" means a bank account in the United States of
America to be designated by the Seller in a written notice to the Purchaser at
least five Business Days before the Closing.
"Purchaser" has the meaning specified in the preamble to this Agreement.
"Real Property" means the Leased Real Property and the Owned Real Property.
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Reserve Liabilities" has the meaning specified in Section 3.06(e).
"Returns" has the meaning specified in Section 7.01.
"SAP" means, with respect to an insurance company, the accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the insurance regulatory authority in the state or states in which such
insurance company is domiciled.
"SBM Certificate Company" means SBM Certificate Company, a Minnesota
corporation and a wholly owned subsidiary of SBM Life.
"SBM Certificate Company Book Value" means the stockholder's equity of SBM
Certificate Company shown on a balance sheet of SBM Certificate Company as of
the date of determination, excluding the effects of Statement of Financial
Accounting Standards 115.
"SBM Financial" has the meaning specified in the recitals to this
Agreement.
"SBM Financial Book Value" means the stockholder's equity of SBM Financial
shown on a balance sheet of SBM Financial as of the date of determination.
"SBM Financial Shares" has the meaning specified in the recitals to this
Agreement.
"SBM Life" has the meaning specified in the recitals to this Agreement.
"SBM Life Book Value" means the sum of capital, surplus and asset valuation
reserves, less the carrying value of Affiliates of SBM Life and less the effects
of surplus relief reinsurance, if any, shown on a balance sheet of SBM Life as
of the date of determination.
"SBM Life Shares" has the meaning specified in the recitals to this
Agreement.
"SBM Preferred Stock" means the Series A Mandatory Redeemable Voting
Convertible Preferred Stock, no par value, of the Seller.
"SEC Filings" has the meaning specified in Section 3.11(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning specified in the preamble to this Agreement.
"Seller's Accountants" means Deloitte & Touche, independent accountants of
the Seller.
"Shares" has the meaning specified in the recitals to this Agreement.
"Subsidiaries" means SBM Life, SBM Financial Services and SBM Certificate
Company.
"Tangible Personal Property" has the meaning specified in Section 3.16(a).
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs' duties, tariffs, and similar charges.
"Transferred Employee" has the meaning specified in Section 6.01.
"U.S. GAAP" means United States generally accepted accounting principles
and practices in effect from time to time applied consistently throughout the
periods involved.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Assets to Be Sold. On the terms and subject to the conditions
of this Agreement, the Seller shall, on the Closing Date, sell, assign,
transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase
from the Seller, on the Closing Date, the following assets and properties owned
by the Seller (the assets to be purchased by the Purchaser being referred to as
the "Assets"):
(a) the Shares;
(b) all rights of the Seller in respect of the Leased Real Property;
(c) all furniture, fixtures, equipment, machinery and other tangible
personal property owned by the Seller at the Closing Date and
held for use in the conduct of the Business and not otherwise
included in clause (b);
(d) all books of account, general, financial, tax and personnel
records, invoices, distributor and supplier lists, correspondence
and other documents, records and files and all computer software
and programs and any rights thereto owned, associated with or
employed by the Seller and used in, or relating to, the Business
at the Closing Date, other than organization documents, minute
and stock record books and the corporate seal of the Seller;
(e) all the Seller's right, title and interest in, to and under the
Owned Intellectual Property and the Licensed Intellectual
Property;
(f) other than as set forth in Exhibit 2.01, insofar as they relate
to the Assets or the Business, all claims, causes of action,
choses in action, rights of recovery and rights of set-off of any
kind (including rights to insurance proceeds and rights under and
pursuant to all warranties, representations and guarantees made
by suppliers of products, materials or equipment, or components
thereof), pertaining to, arising out of, and inuring to the
benefit of the Seller;
(g) all sales and promotional literature, customer lists and other
sales-related materials owned, used, associated with or employed
by the Seller at the Closing Date;
(h) other than as set forth in Exhibit 2.01, insofar as they relate
to the Assets or the Business and to the extent such rights are
transferable, all rights of the Seller under all contracts,
licenses, sublicenses, agreements, leases, commitments, and sales
and purchase orders, and under all commitments, bids and offers,
including, without limitation, the Management Agreement between
the Seller and SBM Life, the Management Agreement between the
Seller and SBM Certificate Company and the Investment Advisory
and Management Agreements, Transfer Agency Agreements,
Administration Agreements, Agency Agreements and Accounting
Services Agreements between the Seller and the Affiliated Mutual
Funds;
(i) all municipal, state and federal franchises, permits, licenses,
agreements, waivers and authorizations held or used by the Seller
in connection with, or required for, the Business, to the extent
transferable; and
(j) the Seller's custodial account at Old Kent Bank in Chicago,
Illinois, account number 300014, relating to the Seller's
obligations in respect of face amount certificates issued by the
Seller and assumed by SBM Certificate Company.
SECTION 2.02. Assumption and Exclusion of Liabilities. (a) On the terms and
subject to the conditions of this Agreement, the Purchaser shall, on the Closing
Date, assume and shall pay, perform and discharge when due all of the following
Liabilities of the Seller (the "Assumed Liabilities"):
(i) all Liabilities of the Seller arising from or relating to
the operation of the Business following the Closing;
(ii) all Liabilities of the Seller arising after the Closing out
of or resulting from ownership of the Assets by the
Purchaser following the Closing, including, without
limitation, all Liabilities under all contracts, licenses,
sublicenses, agreements, leases, commitments, sales and
purchase orders, commitments, bids and offers included in
the Assets;
(iii) all Liabilities of the Seller to Transferred Employees
arising after the Closing;
(iv) all Liabilities of the Seller to Transferred Employees
arising prior to the Closing to the extent reflected and
reserved against in the books and records of the
Subsidiaries as of the Closing Date (other than the
Liabilities referred to in Section 2.02(b)(ii));
(v) all Liabilities of the Seller described on Exhibit 1.01(c)
or under the executive employment agreements of the Seller
set forth in Exhibit 2.02;
(vi) all Liabilities of the Seller relating to the open items set
forth in Section 2.07(b) of the Disclosure Schedule; and
(vii) all Excess Liabilities of the Seller not otherwise included
in clauses (i) through (vi).
(b) The Seller shall retain, and shall be responsible for paying,
performing and discharging when due, and the Purchaser shall not
assume or have any responsibility for, all Liabilities of the
Seller as of the Closing Date other than the Assumed Liabilities
(the "Excluded Liabilities"), including, without limitation:
(i) all Taxes (other than Assumed Liabilities) (A) now or
hereafter owed by the Seller or any Affiliate of the Seller
(other than any Subsidiary), or (B) attributable to the
Assets or the Business (other than any Subsidiary), relating
to any period, or any portion of any period, ending on or
prior to the Closing Date; and
(ii) all Liabilities (other than Assumed Liabilities arising
under the employment agreements listed in Exhibit 2.02 or
Assumed Liabilities described on Exhibit 1.01(c)) arising
under the Plans (including, without limitation, Liabilities
thereunder relating to Transferred Employees) and all other
Liabilities to current and former employees of the Seller
other than the Transferred Employees, whether arising before
or after the Closing.
SECTION 2.03. Purchase Price; Allocation of Purchase Price. (a) The
purchase price for the Assets shall be $38.6 million less an amount equal to the
Excess Liabilities as of the date of delivery of the statement referred to in
Section 2.03(c) (the "Purchase Price").
(b) The sum of the Purchase Price and the relevant liabilities shall
be allocated among the Assets as of the Closing Date in
accordance with Exhibit 2.03(b). For all Tax purposes, the
Purchaser and the Seller agree to report the transactions
contemplated in this Agreement in a manner consistent with the
terms of this Agreement, including the allocation under Exhibit
2.03(b), and that none of them will take any position
inconsistent therewith in any Tax return, in any refund claim, in
any litigation, or otherwise.
(c) Not later than the fifth Business Day prior to the Closing Date,
the Seller shall deliver to the Purchaser a schedule setting
forth the Excess Liabilities and the amounts thereof. In the
event there exist any disputes between the Seller and the
Purchaser as to any Excess Liability or the amount thereof, the
Seller and the Purchaser shall use their best efforts to resolve
such disputes prior to the Closing.
SECTION 2.04. Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Assets and the assumption of the Assumed
Liabilities contemplated by this Agreement shall take place at a closing (the
"Closing") to be held at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York at 10:00 A.M. New York time on the later to occur of
(i) March 31, 1995 or (ii) the fifth Business Day following the later to occur
of the (A) expiration or termination of all applicable waiting periods under the
HSR Act and (B) satisfaction or waiver of all other conditions to the
obligations of the parties set forth in Article VIII, or at such other place or
at such other time or on such other date as the Seller and the Purchaser may
mutually agree upon in writing (the day on which the Closing takes place being
the "Closing Date").
SECTION 2.05. Closing Deliveries by the Seller. At the Closing, the Seller
shall deliver or cause to be delivered to the Purchaser:
(a) certificates evidencing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, in form
satisfactory to the Purchaser and with all required stock
transfer tax stamps affixed;
(b) the Bill of Sale and such other instruments, in form and
substance satisfactory to the Purchaser, as may be requested by
the Purchaser to transfer the Assets to the Purchaser or evidence
such transfer on the public records;
(c) an executed counterpart of the Assumption Agreement;
(d) a receipt for the Purchase Price; and
(e) the opinions, certificates and other documents required to be
delivered pursuant to Section 8.02.
SECTION 2.06. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller:
(a) the Purchase Price by wire transfer in immediately available
funds to the Purchase Price Bank Account;
(b) an executed counterpart of the Assumption Agreement; and
(c) the opinions, certificates and other documents required to be
delivered pursuant to Section 8.01.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the Seller
hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization and Authority of the Seller. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota and has all necessary corporate power and authority to
enter into this Agreement and the Ancillary Agreements to which it is a party,
to carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Except as set forth in Section
3.01 of the Disclosure Schedule, the Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified would not (i) adversely affect the ability of the Seller to carry
out its obligations under, and to consummate the transactions contemplated by,
this Agreement and the Ancillary Agreements to which it is a party or (ii)
materially adversely affect the ability of the Seller and the Subsidiaries to
conduct the Business. The execution and delivery by the Seller of this Agreement
and the Ancillary Agreements to which it is a party, the performance by the
Seller of its obligations hereunder and thereunder and the consummation by the
Seller of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Seller and its
shareholders, except to the extent the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements to which it is a
party requires the approval of the Seller's shareholders. This Agreement has
been, and upon their execution the Ancillary Agreements to which the Seller is a
party will be, duly executed and delivered by the Seller, and (assuming due
authorization, execution and delivery by the Purchaser) this Agreement
constitutes, and upon their execution such Ancillary Agreements will constitute,
legal, valid and binding obligations of the Seller enforceable against the
Seller in accordance with their respective terms, except to the extent that (a)
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar law now or hereafter
in effect relating to or limiting creditors' rights generally, (b) the remedy of
specific performance and injunctive relief and other forms of equitable relief
are subject to general principles of equity and certain equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought, and (c) enforcement may be subject to general principles of equity and
law, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether enforceability is considered
in a proceeding in equity or at law).
SECTION 3.02. Subsidiaries. (a) Other than the Subsidiaries and the
investment assets listed in Section 3.02(a) of the Disclosure Schedule, there
are no corporations, partnerships, joint ventures, associations or other
entities in which the Seller owns, of record or beneficially, any direct or
indirect equity or other interest or any right (contingent or otherwise) to
acquire the same. The Seller is not a member of (nor is any part of the Business
conducted through) any partnership, nor is the Seller a participant in any joint
venture or similar arrangement.
(b) SBM Life is a life insurance corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota and has all necessary corporate power and authority to
own, operate or lease the properties and assets now owned,
operated or leased by it (including, without limitation, the
capital stock of SBM Certificate Company) and to carry on its
business as it has been and is currently conducted. SBM Life is
duly licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased by
it or the operation of its business makes such licensing or
qualification necessary, other than those jurisdictions where the
failure to be so qualified or licensed would not have a Material
Adverse Effect, and all such jurisdictions are listed in Section
3.02(b)(i) of the Disclosure Schedule. SBM Life is licensed to
write life insurance and issue annuities in each of the
jurisdictions listed in Section 3.02(b)(ii) of the Disclosure
Schedule (which also specifies each jurisdiction as to which the
license held by SBM Life specifically authorizes reinsurance
activities). Except as set forth in Section 3.02(b)(iii) of the
Disclosure Schedule, all of the foregoing qualifications and
licenses are in full force and effect and SBM Life has not
received any notice of any event, inquiry, investigation or
proceeding that could reasonably be expected to result in the
suspension, revocation or limitation of any such qualification or
license.
(c) SBM Certificate Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota and has all necessary corporate power and authority to
own, operate or lease the properties and assets now owned,
operated or leased by it and to carry on its business as it has
been and is currently conducted. SBM Certificate Company is duly
licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licensing or
qualification necessary, other than those jurisdictions where the
failure to be so qualified or licensed would not have a Material
Adverse Effect, and all such jurisdictions are set forth in
Section 3.02(c)(i) of the Disclosure Schedule. SBM Certificate
Company is duly registered as an investment company under the
Investment Company Act. Except as set forth in Section
3.02(c)(ii) of the Disclosure Schedule, all of the foregoing
qualifications, licenses and registrations are in full force and
effect and SBM Certificate Company has not received any notice of
any event, inquiry, investigation or proceeding that could
reasonably be expected to result in the suspension, revocation or
limitation of any such qualification, license or registration.
(d) SBM Financial is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota and
has all necessary power and authority to own, operate or lease
the properties and assets now owned, operated or leased by it and
to carry on its business as it has been and is currently
conducted. SBM Financial is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its
business makes such licensing or qualification necessary, other
than those jurisdictions where the failure to be so qualified or
licensed would not have a Material Adverse Effect, and all such
jurisdictions are listed in Section 3.02(d)(i) of the Disclosure
Schedule. SBM Financial is a registered broker-dealer under the
Exchange Act and in each jurisdiction in which the conduct of its
business requires such registration, and all of such
jurisdictions are listed in Section 3.02(d)(ii) of the Disclosure
Schedule. SBM Financial is a member in good standing of the
National Association of Securities Dealers, Inc. Except as
disclosed in Section 3.02(d)(iii) of the Disclosure Schedule, all
of the foregoing qualifications, licenses, registrations and
memberships are in full force and effect and SBM Financial has
not received any notice of any event, inquiry, investigation or
proceeding that could reasonably be expected to result in the
suspension, revocation or limitation of any such qualification,
license, registration or membership.
(e) The authorized capital stock of SBM Life consists of 10,000,000
shares of common stock, par value $1.00 per share, of which
2,500,000 shares are issued and outstanding. The authorized
capital stock of SBM Financial consists of 1,000,000 shares of
common stock, par value $.01 per share, of which 25,000 shares
are issued and outstanding. The Shares constitute all the issued
and outstanding capital stock of SBM Life and SBM Financial and
are owned of record and beneficially solely by the Seller. Upon
consummation of the transactions contemplated by this Agreement
and registration of the Shares in the name of the Purchaser in
the stock records of SBM Life and SBM Financial, the Purchaser,
assuming it shall have purchased the Shares for value in good
faith and without notice of any adverse claim, will own all the
issued and outstanding capital stock of SBM Life and SBM
Financial free and clear of all Encumbrances, other than
Encumbrances which arise solely as a result of actions by the
Purchaser and restrictions on transferability generally imposed
under federal and state securities laws and state insurance laws.
(f) The authorized capital stock of SBM Certificate Company consists
of 1,000,000 shares of common stock, par value $1.00 per share,
of which 250,000 shares are issued and outstanding, all of which
are owned of record and beneficially solely by SBM Life free and
clear of all Encumbrances, other than restrictions on
transferability generally imposed under federal and state
securities laws or as set forth in Section 3.02(f) of the
Disclosure Schedule.
(g) All the outstanding shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable.
(h) There are no options, warrants, convertible securities, or other
rights, agreements, arrangements or commitments of any character
relating to the capital stock of any Subsidiary or obligating the
Seller or any Subsidiary to issue or sell any shares of capital
stock of, or any other interest in, any Subsidiary.
(i) True and complete copies of the charter and by-laws (or similar
organizational documents), in each case as in effect on the date
hereof, of each Subsidiary have been delivered by the Seller to
the Purchaser.
(j) Except as set forth in Section 3.02(j) of the Disclosure
Schedule, no Subsidiary is a member of (nor is any part of its
business conducted through) any partnership nor is any Subsidiary
a participant in any joint venture or similar arrangement.
(k) The stock register of each Subsidiary accurately records: (i) the
name and address of each Person owning shares of capital stock of
such Subsidiary and (ii) the certificate number of each
certificate evidencing shares of capital stock issued by such
Subsidiary, the number of shares evidenced each such certificate,
the date of issuance thereof and, in the case of cancellation,
the date of cancellation.
SECTION 3.03. Books and Records. The minute books of the Seller and the
Subsidiaries contain accurate records of all meetings of, and accurately reflect
all other actions taken by, the shareholders, Boards of Directors and all
committees of the Boards of Directors of the Seller and the Subsidiaries.
Complete and accurate copies of all such minute books and of the stock register
of the Seller and each Subsidiary have been provided by the Seller to the
Purchaser.
SECTION 3.04. No Conflict. Except as set forth in Section 3.04 of the
Disclosure Schedule, and assuming that all consents, approvals, authorizations
and other actions described in Section 3.05 have been obtained, all filings and
notifications listed in Section 3.05 of the Disclosure Schedule have been made
and all applicable approvals of the Seller's shareholders have been obtained,
the execution, delivery and performance by the Seller of this Agreement and the
Ancillary Agreements to which it is a party do not and will not (a) violate,
conflict with or result in the breach of any provision of the charter or by-laws
(or similar organizational documents) of the Seller or any Subsidiary, (b)
violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to the Seller or any
Subsidiary or any of their respective assets, properties or businesses or (c)
result in any breach of, constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance (other than a Permitted Encumbrance) on any of the
assets or properties of the Seller or any Subsidiary pursuant to, any note,
bond, mortgage, indenture or Material Contract, to which the Seller or any
Subsidiary is a party or by which any of such assets or properties is bound or
affected.
SECTION 3.05. Governmental Consents and Approvals. The execution, delivery
and performance by the Seller of this Agreement and each Ancillary Agreement to
which the Seller is a party do not and will not require of the Seller any
consent, approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority, except (a) as described in Section
3.05 of the Disclosure Schedule, (b) the requirements of the HSR Act and (c) the
approvals of the Minnesota Department and the California Department.
SECTION 3.06. Financial Information; Books and Records. (a) The Seller has
delivered to the Purchaser true and complete copies of (i) the audited
consolidated balance sheet of the Seller for each of the three fiscal years
ended as of December 31, 1993, December 31, 1992 and December 31, 1991, and the
related audited consolidated statements of income, stockholders' equity and cash
flows of the Seller, together with all related notes and schedules thereto,
accompanied by the reports thereon of the Seller's Accountants (collectively
referred to herein as the "Seller GAAP Statements"), (ii) the unaudited
consolidated balance sheet of the Seller as of September 30, 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
of the Seller, together with all related notes and schedules thereto
(collectively referred to herein as the "Seller Interim GAAP Statements"), (iii)
the audited balance sheet of SBM Certificate Company for each of the three
fiscal years ended as of December 31, 1993, December 31, 1992 and December 31,
1991, and the related audited statements of income, stockholder's equity and
cash flows of SBM Certificate Company, together with all related notes and
schedules thereto, accompanied by the reports thereon of the Seller's
Accountants (collectively referred to herein as the "SBM Certificate Company
GAAP Statements"), (iv) the unaudited balance sheet of SBM Certificate Company
as of September 30, 1994, and the related statements of income, stockholder's
equity and cash flows of SBM Certificate Company, together with all related
notes and schedules thereto (collectively referred to herein as the "SBM
Certificate Company Interim GAAP Statements"), (v) the audited balance sheet of
SBM Financial for each of the three fiscal years ended as of December 31, 1993,
December 31, 1992 and December 31, 1991, and the related audited statements of
income, stockholder's equity and cash flows of SBM Financial, together with all
related notes and schedules thereto, accompanied by the reports thereon of the
Seller's Accountants (collectively referred to herein as the "SBM Financial GAAP
Statements"), and (vi) the unaudited balance sheet of SBM Financial as of
September 30, 1994, and the related statements of income and stockholder's
equity of SBM Financial (collectively referred to herein as the "SBM Financial
Interim GAAP Statements"). The Seller GAAP Statements and the Seller Interim
GAAP Statements (i) were prepared in accordance with the books of account and
other financial records of the Seller, (ii) present fairly the consolidated
financial condition and results of operations of the Seller as of the dates
thereof or for the periods covered thereby, (iii) have been prepared in
accordance with U.S. GAAP applied on a basis consistent with the past practices
of the Seller and throughout the periods involved (except as disclosed in the
notes thereto) and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the
consolidated financial condition and results of operations of the Seller as of
the dates thereof or for the periods covered thereby. The SBM Certificate
Company GAAP Statements and the SBM Certificate Company Interim GAAP Statements
(i) were prepared in accordance with the books of account and other financial
records of SBM Certificate Company, (ii) present fairly the financial condition
and results of operations of SBM Certificate Company as of the dates thereof or
for the periods covered thereby, (iii) have been prepared in accordance with
U.S. GAAP applied on a basis consistent with the past practices of SBM
Certificate Company and throughout the periods involved (except as disclosed in
the notes thereto) and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the financial
condition and results of operations of SBM Certificate Company as of the dates
thereof or for the periods covered thereby. The SBM Financial GAAP Statements
and the SBM Financial Interim GAAP Statements (i) were prepared in accordance
with the books of account and other financial records of SBM Financial, (ii)
present fairly the financial condition and results of operations of SBM
Financial as of the dates thereof or for the periods covered thereby, (iii) have
been prepared in accordance with U.S. GAAP applied on a basis consistent with
the past practices of SBM Financial and throughout the periods involved and (iv)
include all adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation of the financial condition and results of
operations of SBM Financial as of the dates thereof or for the periods covered
thereby.
(b) The Seller has delivered to the Purchaser true and complete
copies of (i) the annual statements of SBM Life filed with or
submitted to the Minnesota Department and the California
Department for each of the three years ended as of December 31,
1993, December 31, 1992 and December 31, 1991, together with all
related notes, exhibits and schedules thereto (collectively
referred to as the "SBM Life Annual Statements"), and (ii) the
quarterly statements of SBM Life filed with or submitted to the
Minnesota Department and the California Department for each of
the first three quarters of 1994, together with all related
notes, exhibits and schedules thereto (collectively referred to
as the "SBM Life Quarterly Statements"). Except as set forth in
Section 3.06(b) of the Disclosure Schedule, the SBM Life Annual
Statements and the SBM Life Quarterly Statements (i) were
prepared from the books of accounts and other financial records
of SBM Life, (ii) were filed with or submitted to the Minnesota
Department and the California Department on forms prescribed or
permitted by the Minnesota Department and the California
Department, respectively, (iii) were prepared in accordance with
SAP applied on a basis consistent with the past practices of SBM
Life and complied on their respective dates of filing or
submission in all respects with the Laws of the States of
Minnesota and California, as applicable, and all other applicable
Laws, (iv) are true and complete in all material respects and (v)
present fairly the statutory assets, liabilities and surplus,
results of operations and cash flows of SBM Life as of the dates
thereof or for the periods covered thereby.
(c) All historical information, including, without limitation,
historical financial information, provided to Ernst & Young LLP
by or on behalf of the Seller and the Subsidiaries and used by
Ernst & Young LLP in the preparation of the Analysis was true and
accurate in all material respects.
(d) The books of account and other financial records of the Seller
and the Subsidiaries: (i) are in all material respects complete
and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (ii) have been maintained in
accordance with good business, accounting and actuarial practices
and in accordance with U.S. GAAP or SAP, as the case may be.
(e) All reserve liabilities reflected in the SBM Life Annual
Statements and the SBM Life Quarterly Statements ("Reserve
Liabilities") (i) were determined in accordance with commonly
accepted actuarial standards consistently applied, (ii) were
fairly stated in accordance with actuarial principles, (iii) were
based on actuarial assumptions which were in accordance with or
more conservative than those appropriate for the related
insurance policies and annuity contracts, (iv) except as
disclosed in Section 3.06(e)(iv) of the Disclosure Schedule, met
the requirements of the insurance Laws of the states of Minnesota
and California and met in all material respects the requirements
of the insurance Laws of each other jurisdiction in which SBM
Life is licensed to write life insurance or issue annuities and
(v) reflected (on a net basis) the related reinsurance,
coinsurance and other similar agreements of SBM Life. Except as
disclosed in the SBM Life Annual Statements, adequate provision
for all such Reserve Liabilities has been made (under commonly
accepted actuarial principles consistently applied) for the total
amount of all reasonably anticipated matured and unmatured
benefits, claims and other liabilities of SBM Life under all
insurance policies and annuity contracts under which SBM Life has
any liability (including, without limitation, any liability
arising under or as a result of any reinsurance, coinsurance or
other similar agreement) at the respective dates of the SBM Life
Annual Statements based on commonly accepted actuarial
assumptions as to future contingencies which are reasonable and
appropriate under the circumstances.
(f) All reserve liabilities reflected in the SBM Certificate Company
GAAP Statements and the SBM Certificate Company Interim GAAP
Statements (i) were determined in accordance with U.S. GAAP
consistently applied and (ii) met the requirements of all
applicable Laws. Adequate provision for all such reserve
liabilities has been made (under U.S. GAAP consistently applied)
for the total amount of all liabilities of SBM Certificate
Company under all face amount certificates issued or assumed by
SBM Certificate Company and outstanding at the respective dates
of the SBM Certificate Company GAAP Statements.
(g) Section 3.06(g) of the Disclosure Schedule sets forth a true and
complete list (by identification of the insolvent party) of all
pending and, to the Knowledge of the Seller, threatened state
guaranty fund assessments to which SBM Life is or may become
subject.
SECTION 3.07. No Undisclosed Liabilities. There are no material Liabilities
of any Subsidiary other than Liabilities (i) reflected or reserved against on
the Interim Balance Sheets, (ii) disclosed in the Disclosure Schedule, (iii)
incurred since the Interim Balance Sheet Date in the ordinary course of
business, and consistent with past practice, of such Subsidiary or (iv)
obligations to perform or pay pursuant to executory agreements, leases,
subleases, licenses, sublicenses or other contracts or binding commitments or
arrangements identified in the Disclosure Schedule or, if not required to be
identified therein, entered into in the ordinary course of the Business
consistent with past practice.
SECTION 3.08. Acquired Assets. Except as disclosed in Section 3.08 of the
Disclosure Schedule, all the Assets and all assets of the Subsidiaries,
including, without limitation, the benefit of any licenses, leases or other
agreements or arrangements, acquired since the Interim Balance Sheet Date have
been acquired for consideration not less than the fair market value of such
asset at the date of such acquisition.
SECTION 3.09. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Since the Interim Balance Sheet Date, except as disclosed
in Section 3.09 of the Disclosure Schedule, the Business has been conducted in
the ordinary course and consistent with past practice. As amplification and not
limitation of the foregoing, except as disclosed in Section 3.09 of the
Disclosure Schedule, since the Interim Balance Sheet Date, neither the Seller
nor any Subsidiary has:
(i) permitted or allowed any of the Assets or any of the assets
or properties (whether tangible or intangible) of any
Subsidiary to be subjected to any Encumbrance, other than
Permitted Encumbrances and Encumbrances that will be
released at or prior to the Closing;
(ii) revalued (other than in accordance with SAP or U.S. GAAP, as
applicable, in the ordinary course of the Business
consistent with past practice) or restructured any Assets or
any assets of any Subsidiary;
(iii) except as required by this Agreement, made any change in
any method of accounting or accounting practice or policy
other than such changes required by SAP or U.S. GAAP and
disclosed in Section 3.09 of the Disclosure Schedule;
(iv) amended, terminated, cancelled or compromised any material
claims of any Subsidiary or waived any other rights of
substantial value to any Subsidiary;
(v) sold, transferred, leased, subleased, licensed or otherwise
disposed of any Assets or any properties or assets, real,
personal or mixed (including, without limitation, investment
assets, leasehold interests and intangible property), of any
Subsidiary, other than the sale of investment assets in the
ordinary course of the Business consistent with past
practice;
(vi) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire
the same, of, or any other interest in, any Subsidiary,
other than the sale of face amount certificates in the
ordinary course of the Business consistent with past
practice;
(vii) redeemed any of the capital stock or declared, made or paid
any dividends or distributions (whether in cash, securities
or other property) to the holders of capital stock of any
Subsidiary;
(viii) made any material changes in the customary methods of
operations of any Subsidiary or the Business, including,
without limitation, purchasing, marketing, selling, pricing,
underwriting, investing or actuarial practices and policies;
(ix) made any express or deemed election or settled or
compromised any liability, with respect to Taxes of any
Subsidiary;
(x) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension
or other benefits payable by the Seller or any Subsidiary to
any of its employees, including, without limitation, any
increase or change pursuant to any Plan, or (B) established
or increased or promised to increase any benefits under any
Plan, in either case except as required by Law or any
collective bargaining agreement and involving ordinary
increases consistent with the past practice of the Seller or
such Subsidiary;
(xi) entered into any agreement, arrangement or transaction with
any of its directors, officers, employees, shareholders or
distributors (or with any relative, beneficiary, spouse or
Affiliate of such Persons), other than an insurance policy
or annuity contract containing standard terms issued in the
ordinary course of the Business consistent with past
practice;
(xii) terminated, discontinued, closed or disposed of any office,
facility or other business operation, or laid off any
employees (other than layoffs of less than 50 employees in
any six-month period in the ordinary course of the Business
consistent with past practice) or implemented any early
retirement, separation or program providing early retirement
window benefits within the meaning of Section 1.401(a)-4 of
the Regulations or announced or planned any such action or
program for the future;
(xiii) disclosed any secret or confidential Intellectual Property
or permitted to lapse or go abandoned any Intellectual
Property (or any registration or grant thereof or any
application relating thereto) to which, or under which, the
Seller or any Subsidiary has any right, title, interest or
license;
(xiv) allowed any Permit or Environmental Permit that was issued
or relates to any Subsidiary or otherwise relates to the
Business to lapse or terminate or failed to renew any
insurance policy under which the Seller or any Subsidiary is
an insured, Permit or Environmental Permit that is scheduled
to terminate or expire within 45 calendar days of the
Closing Date;
(xv) failed to maintain the Assets or any Subsidiary's property
and equipment in good repair and operating condition,
ordinary wear and tear excepted;
(xvi) amended, modified or consented to the termination of any
Material Contract or the Seller's or any Subsidiary's rights
thereunder;
(xvii) except as required by this Agreement, amended or restated
its charter or by-laws (or other organizational documents);
(xviii) made any material amendment to the insurance policies or
annuity contracts in force of SBM Life, or made any change
in the methodology used in the determination of the Reserve
Liabilities with respect to insurance policies and annuity
contracts;
(xix) amended or introduced any annuity contract other than in
the ordinary course of the Business consistent with past
practice; or
(xx) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.09 or granted any
options to purchase, rights of first refusal, rights of
first offer or any other similar rights with respect to any
of the actions specified in this Section 3.09, except as
expressly contemplated by this Agreement and the Ancillary
Agreements.
As further amplification and not limitation of the first sentence of this
Section 3.09, except as disclosed in Section 3.09 of the Disclosure Schedule,
since the Interim Balance Sheet Date, none of the Subsidiaries has:
(i) merged with, entered into a consolidation with or acquired
an interest of 5% or more in any Person or acquired a
substantial portion of the assets or business of any Person
or any division or line of business thereof, or otherwise
acquired any material assets other than in the ordinary
course of the Business consistent with past practice;
(ii) made any capital expenditure or commitment for any capital
expenditure in excess of $100,000 in the aggregate;
(iii) made any commitments which will be outstanding as of the
Closing to make any purchases involving exchanges in value
in excess of $300,000 in the aggregate;
(iv) incurred any Indebtedness for borrowed money, other than
face amount certificates issued by SBM Certificate Company
in the ordinary course of its business consistent with past
practice;
(v) made any loan to, guaranteed any Indebtedness of or
otherwise incurred any Indebtedness on behalf of any Person,
other than policy or certificate loans and renewals made by
SBM Life and SBM Certificate Company in the ordinary course
of their businesses consistent with past practice and other
than renewals of mortgage loans made by SBM Life and SBM
Certificate Company;
(vi) failed to pay any creditor any amount owed to such creditor
in the ordinary course of the Business consistent with past
practice;
(vii) made any commitments which will be outstanding as of the
Closing to make any charitable contribution; or
(viii) except as required by this Agreement, terminated, amended
or entered into as a ceding or assuming reinsurer any
reinsurance, coinsurance or other similar agreement or any
trust agreement or security agreement related thereto, other
than renewals on substantially the same terms in the
ordinary course of the Business.
SECTION 3.10. Litigation. Except as set forth in Section 3.10 of the
Disclosure Schedule (which, with respect to each Action disclosed therein, sets
forth the parties, nature of the proceeding, date and method commenced, amount
of damages or other relief sought and, if applicable, paid or granted), there
are no Actions by or against the Seller or any Subsidiary, or affecting any of
the Assets or the Business, pending before any Governmental Authority (or, to
the Knowledge of the Seller, threatened to be brought by or before any
Governmental Authority). None of the matters disclosed in Section 3.10 of the
Disclosure Schedule has, has had or could have a Material Adverse Effect or
could affect the legality, validity or enforceability of this Agreement, any
Ancillary Agreement to which the Seller is a party or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in Section 3.10
of the Disclosure Schedule, neither the Seller nor any Subsidiary nor any of
their respective assets or properties, including, without limitation, the
Assets, is subject to any Governmental Order (nor, to the Knowledge of the
Seller, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has, has had or could have a Material Adverse
Effect.
SECTION 3.11. Compliance with Laws. (a) Except as set forth in Section
3.11(a)(i) of the Disclosure Schedule, the Seller and the Subsidiaries have
conducted since January 1, 1990 and continue to conduct the Business in
accordance with all material Laws and Governmental Orders applicable to the
Seller or any Subsidiary or any of the Assets or any of the properties or assets
of any Subsidiary, and neither the Seller nor any Subsidiary is in violation of
any such material Law or Governmental Order. Except as set forth in Section
3.11(a)(ii) of the Disclosure Schedule, since January 1, 1990, the Seller and
the Subsidiaries have duly and validly filed or caused to be filed all reports,
statements, documents, registrations, filings or submissions that were required
by applicable material Laws to be filed; all such filings complied with all
applicable material Laws when filed, and no material deficiencies have been
asserted with respect to any such filings which have not been satisfied. All
outstanding insurance policies, annuity contracts and assumption certificates
issued by SBM Life and now in force 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. The Subsidiaries have filed
all forms, reports, statements and other documents required by Law to be filed
with the Securities and Exchange Commission ("SEC Filings"), including, without
limitation, (a) all Annual Reports on Form 10-K, (b) all Quarterly Reports on
Form 10-Q, (c) all Current Reports on Form 8-K, (d) all other reports and
registration statements, including, without limitation, in connection with sales
of face amount certificates, and (e) all amendments and supplements to all such
reports and registration statements, and all such forms, reports, statements and
other documents, including those filed after the date hereof, did not at the
time they were filed (at the time they became effective and so long as they
remain effective in the case of registration statements and amendments thereto),
or will not at the time they are filed (at the time they become effective and so
long as they remain effective in the case of registration statements and
amendments thereto), contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) Section 3.11(b) of the Disclosure Schedule sets forth a brief
description of each Governmental Order applicable to the Seller
or any of the Assets or any Subsidiary or any of its properties
or assets, and no such Governmental Order has or has had a
Material Adverse Effect.
SECTION 3.12. Environmental and Other Permits and Licenses; Related
Matters. (a) The Seller and the Subsidiaries currently hold all the health and
safety and other permits, licenses, authorizations, certificates, exemptions and
approvals of Governmental Authorities (collectively, "Permits"), including,
without limitation, Environmental Permits, necessary or proper for the current
use, occupancy and operation of each of the Assets and each of the assets and
properties of each Subsidiary, except as disclosed in Section 3.12(a)(i) of the
Disclosure Schedule and except for Permits and Environmental Permits the absence
of which would not have a Material Adverse Effect. Except as disclosed in
Section 3.12(a)(ii) of the Disclosure Schedule, to the Knowledge of the Seller,
there is no existing practice, action or activity of the Seller or any
Subsidiary and no existing condition of any of the Assets or any of the
properties or assets of any Subsidiary which could reasonably be expected to
give rise to any civil or criminal Liability under, or violate or prevent
compliance, in any material respect, with, any health or occupational safety or
other Environmental Law. Neither the Seller nor any Subsidiary has received any
written notice from any Governmental Authority revoking, cancelling, rescinding,
materially modifying or refusing to renew any existing material Permit or
Environmental Permit. Except as disclosed in Section 3.12(a)(iii) of the
Disclosure Schedule, the Seller and the Subsidiaries are in all material
respects in compliance with all material Permits, all applicable material
Environmental Laws and the requirements of all material Environmental Permits.
(b) Except as disclosed in Section 3.12(b) of the Disclosure
Schedule, to the Knowledge of the Seller, there are not present
in, on or under any Real Property, any Hazardous Materials, nor
have any Hazardous Materials been transported to or from any Real
Property, in such form or quantities as to create any Liability
or obligation under any Environmental Law, and there are no past,
pending or, to the Knowledge of the Seller, threatened
Environmental Claims against the Seller or any Subsidiary, or, to
the Knowledge of the Seller, any Real Property.
SECTION 3.13. Material Contracts. (a) Section 3.13(a) of the Disclosure
Schedule lists each of the following contracts and agreements (including,
without limitation, oral agreements) of the Seller which are included in the
Assets and of the Subsidiaries (such contracts and agreements, together with all
contracts, agreements, leases and subleases concerning the management or
operation of any Real Property (including, without limitation, brokerage
contracts) listed or otherwise disclosed in Section 3.15(a) or 3.15(b) of the
Disclosure Schedule to which the Seller or any Subsidiary is a party and all
agreements relating to Intellectual Property set forth in Section 3.14(a) of the
Disclosure Schedule, being "Material Contracts"):
(i) each contract, agreement and purchase order for the purchase
of materials or personal property with any supplier or for
the furnishing of services to the Seller, any Subsidiary or
otherwise related to the Business under the terms of which
the Seller or any Subsidiary: (A) is likely to pay or
otherwise give consideration of more than $50,000 in the
aggregate during the calendar year ended December 31, 1995,
or (B) is likely to pay or otherwise give consideration of
more than $50,000 in the aggregate over the remaining term
of such contract and (C) cannot be cancelled by the Seller
or such Subsidiary without penalty or further payment and
without more than 30 days' notice;
(ii) each contract or agreement for the sale of personal property
or for the furnishing of services by the Seller or any
Subsidiary which: (A) is likely to involve consideration of
more than $50,000 in the aggregate during the calendar year
ended December 31, 1995, or (B) is likely to involve
consideration of more than $50,000 in the aggregate over the
remaining term of the contract and (C) cannot be cancelled
by the Seller or such Subsidiary without penalty or further
payment and without more than 30 days' notice;
(iii) all broker, distributor, agency, sales promotion, market
research, marketing consulting and advertising contracts and
agreements to which the Seller or any Subsidiary is a party,
other than standard broker and agency agreements entered
into in the ordinary course of the Business consistent with
past practice;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to
which the Seller or any Subsidiary is a party and which are
not cancelable without penalty or further payment and
without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness of any
Subsidiary, other than face amount certificates issued by
SBM Certificate Company and policy loans;
(vi) all contracts and agreements with any Governmental Authority
to which the Seller or any Subsidiary is a party, other than
standard hold harmless agreements entered into with school
districts by SBM Life in the ordinary course of its business
consistent with past practice;
(vii) all contracts and agreements that limit or purport to limit
the ability of the Seller or any Subsidiary to compete in
any line of business or with any Person or in any geographic
area or during any period of time;
(viii) all contracts and agreements between or among the Seller
or any Subsidiary, on the one hand, and any one or more
Affiliates of the Seller (including any Subsidiary), on the
other hand;
(ix) all reinsurance, coinsurance or other similar agreements,
and all custodial or trust agreements or other security
agreements related thereto, to which the Seller or any
Subsidiary is a party; and
(x) all other contracts and agreements, whether or not made in
the ordinary course of the Business, which are material to
the Seller, any Subsidiary or the conduct of the Business,
or the absence of which would have a Material Adverse
Effect.
For purposes of this Section 3.13 and Sections 3.15, 3.16 and 3.17, the term
"lease" shall include any and all leases, subleases, sale/leaseback agreements
or similar arrangements.
(b) Except as disclosed in Section 3.13(b) of the Disclosure
Schedule, each Material Contract: (i) is valid and binding on the
Seller or the Subsidiary party thereto, as the case may be, and
is in full force and effect, except to the extent that (a)
enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
similar law now or hereafter in effect relating to or limiting
creditors' rights generally, (b) the remedy of specific
performance and injunctive relief and other forms of equitable
relief are subject to general principles of equity and certain
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, and (c) enforcement
may be subject to general principles of equity and law,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of
whether enforceability is considered in a proceeding in equity or
at law), and (ii) upon consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements to
which the Seller is a party, except to the extent that any
consents set forth in Section 3.04 of the Disclosure Schedule are
not obtained, shall continue in full force and effect without
penalty or other adverse consequence. Neither the Seller nor any
Subsidiary is, in any material respect, in breach of, or default
under, any Material Contract.
(c) Except as disclosed in Section 3.13(c) of the Disclosure
Schedule, to the Knowledge of the Seller, no other party to any
Material Contract is, in any material respect, in breach thereof
or default thereunder.
(d) Except as disclosed in Section 3.13(d) of the Disclosure
Schedule, there is no contract, agreement or other arrangement
granting any Person any preferential right to purchase any of the
Assets or any of the properties or assets of any Subsidiary.
SECTION 3.14. Intellectual Property. (a) Section 3.14(a)(i) of the
Disclosure Schedule sets forth a true and complete list and a brief description
of all Owned Intellectual Property and Section 3.14(a)(ii) of the Disclosure
Schedule sets forth a true and complete list and a brief description, including
a description of any license or sublicense thereof, of all Licensed Intellectual
Property. Except as disclosed in Section 3.14(a)(iii) of the Disclosure
Schedule, to the Knowledge of the Seller, the rights of the Seller or any
Subsidiary, as the case may be, in or to such Owned Intellectual Property or
Licensed Intellectual Property do not conflict with or infringe on the rights of
any other Person and neither the Seller nor any Subsidiary has received any
claim or written notice from any Person to such effect.
(b) Except as disclosed in Section 3.14(b) of the Disclosure
Schedule: (i) all the Owned Intellectual Property is owned by the
Seller or a Subsidiary, free and clear of any Encumbrance (other
than Permitted Encumbrances), (ii) the Seller or a Subsidiary has
the right, pursuant to valid and enforceable licenses, to use the
Licensed Intellectual Property in the manner in which it is
currently being used and (iii) no Actions have been made or
asserted or are pending (nor, to the Knowledge of the Seller has
any such Action been threatened) against the Seller or any
Subsidiary either (A) based upon or challenging or seeking to
deny or restrict the use by the Seller or any Subsidiary of any
of the Intellectual Property or (B) alleging that any services
provided or products sold by the Seller or any Subsidiary are
being provided or sold in violation of any trademarks, or any
other rights of any Person. Except as disclosed in Section
3.14(b) of the Disclosure Schedule, neither the Seller nor any
Subsidiary has granted any license or other right to any other
Person with respect to the Owned Intellectual Property.
(c) Except as disclosed in Section 3.14(c) of the Disclosure
Schedule, all rights of the Seller and the Subsidiaries in each
item of Owned Intellectual Property or Licensed Intellectual
Property are transferable to the Purchaser as herein
contemplated. As a result of the transactions contemplated
hereby, upon the Closing, the Purchaser or a Subsidiary shall own
or possess, or own or possess adequate and enforceable licenses,
sublicenses or other rights to use, without payment of any fee
other than fees disclosed in Section 3.14(c) of the Disclosure
Schedule, all the Owned Intellectual Property or Licensed
Intellectual Property.
SECTION 3.15. Real Property. (a) Section 3.15(a) of the Disclosure Schedule
lists: (i) the street address of each parcel of Owned Real Property, (ii) the
current owner of each such parcel of Owned Real Property and (iii) the current
use of each such parcel of Owned Real Property.
(b) Section 3.15(b) of the Disclosure Schedule lists: (i) the
identity of the lessor, lessee and current occupant (if different
from the lessee) of each parcel of Leased Real Property and (ii)
the current use of each such parcel of Leased Real Property.
(c) The Seller has, or has caused to be, delivered to the Purchaser
correct and complete copies of all leases and subleases listed in
Section 3.15(b) of the Disclosure Schedule and any and all
ancillary documents pertaining thereto (including, but not
limited to, all amendments, consents for alterations and
documents recording variations and evidence of commencement dates
and expiration dates). Each of such leases and subleases,
together with all ancillary documents delivered pursuant to the
first sentence of this Section 3.15(c), is legal, valid, binding,
enforceable as to the Seller or the Subsidiary party thereto, as
the case may be, and in full force and effect, except to the
extent that (a) enforcement may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar law now or hereafter in effect relating to or
limiting creditors' rights generally, (b) the remedy of specific
performance and injunctive relief and other forms of equitable
relief are subject to general principles of equity and certain
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, and (c) enforcement
may be subject to general principles of equity and law,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of
whether enforceability is considered in a proceeding in equity or
at law), and represents the entire agreement between the
respective landlord and tenant with respect to such property, and
except as otherwise set forth in Section 3.15(c) of the
Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not constitute a breach or
default under such lease or sublease or otherwise give the
landlord a right to terminate such lease or sublease.
(d) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the Knowledge of the
Seller, threatened against any of the Real Property.
(e) To the Knowledge of the Seller, (i) all the Real Property is
occupied under a valid and current certificate of occupancy or
similar permit (if required), (ii) the transactions contemplated
by this Agreement will not require the issuance of any new or
amended certificate of occupancy, and (iii) there are no facts
that would prevent the Real Property from being occupied after
the Closing in the same manner as immediately prior to the
Closing.
(f) To the Knowledge of the Seller, and except for violations which
would not, either individually or in the aggregate, have a
Material Adverse Effect, no improvements on the Real Property and
none of the current uses and conditions thereof violate any
applicable deed restrictions or other applicable covenants,
restrictions, agreements, existing site plan approvals, zoning or
subdivision regulations or urban redevelopment plans as modified
by any duly issued variances, and no permits, licenses or
certificates pertaining to the ownership or operation of all
improvements on the Real Property, other than those which are
transferable with the Real Property, are required by any
Governmental Authority having jurisdiction over the Real
Property.
(g) To the Knowledge of the Seller, all improvements on any Owned
Real Property are wholly within the lot limits of such Owned Real
Property and do not encroach on any adjoining premises, and there
are no encroachments on any Owned Real Property by any
improvements located on any adjoining premises.
(h) Except as set forth in Section 3.15(h) of the Disclosure
Schedule, the rental set forth in each lease or sublease of the
Leased Real Property is the actual rental being paid, and there
are no separate agreements or understandings with respect to the
same.
SECTION 3.16. Tangible Personal Property. (a) The Seller has previously
delivered to the Purchaser a list of each item or distinct group of machinery,
equipment, supplies, furniture, fixtures, personalty, vehicles and other
tangible personal property (the "Tangible Personal Property") used in the
Business and owned or leased by the Seller and the Subsidiaries as of the date
set forth in such listing.
(b) The Seller has, or has caused to be, delivered to the Purchaser
correct and complete copies of all leases and subleases for
Tangible Personal Property meeting the dollar and cancellation
thresholds set forth in Section 3.13(a)(i) and (ii) (a "Material
Personal Property Lease") and any and all material ancillary
documents pertaining thereto (including, but not limited to, all
amendments, consents and evidence of commencement dates and
expiration dates). Each of such leases and subleases, together
with all ancillary documents delivered pursuant to the first
sentence of this Section 3.16(b), is legal, valid, binding,
enforceable against the Seller or the Subsidiary party thereto,
as the case may be, except to the extent that (a) enforcement may
be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar law
now or hereafter in effect relating to or limiting creditors'
rights generally, (b) the remedy of specific performance and
injunctive relief and other forms of equitable relief are subject
to general principles of equity and certain equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought, and (c) enforcement may be subject to
general principles of equity and law, including, without
limitation, concepts of materiality, reasonableness, good faith
and fair dealing (regardless of whether enforceability is
considered in a proceeding in equity or at law), and in full
force and effect and represents the entire agreement between the
respective lessor and lessee with respect to such property and,
except as set forth in Section 3.16(b) of the Disclosure
Schedule, the consummation of the transactions contemplated by
this Agreement will not constitute a breach or default under such
lease or sublease or otherwise give the lessor a right to
terminate such lease or sublease.
(c) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, the Seller or a Subsidiary has, and upon the Closing
the Purchaser or a Subsidiary will have, the full right to
exercise any renewal options contained in the Material Personal
Property Leases on the terms and conditions therein and upon due
exercise would be entitled to enjoy the use of each such item of
leased Tangible Personal Property for the full term of such
renewal options.
SECTION 3.17. Assets. (a) Except as disclosed in Section 3.17(a) of the
Disclosure Schedule, either the Seller or a Subsidiary owns, leases or has the
legal right to use all the properties and assets, including, without limitation,
the Owned Intellectual Property, the Licensed Intellectual Property, the Real
Property and the Tangible Personal Property, used in the conduct of the Business
or otherwise owned, leased or used by the Seller and the Subsidiaries and, with
respect to contract rights, is a party to and enjoys the right to the benefits
of all contracts, agreements and other arrangements used by the Seller or any
Subsidiary in or relating to the conduct of the Business. The Seller has good
and marketable title to, or, in the case of leased or subleased Assets, valid
and subsisting leasehold interests in, all the Assets, free and clear of all
Encumbrances, except (i) as disclosed in Section 3.14, 3.15(a), 3.15(b), 3.16 or
3.17(a) of the Disclosure Schedule and (ii) Permitted Encumbrances.
(b) At all times since the Interim Balance Sheet Date, the Seller has
caused the Assets to be maintained in accordance with good
business practice, and all the Assets are in good operating
condition and repair and are suitable for the purposes for which
they are used and intended, normal wear and tear excepted.
(c) Except as set forth in Sections 3.04, 3.05, 3.13(b), 3.14,
3.15(a), 3.15(b), 3.16, 3.17(a) or 3.17(c) of the Disclosure
Schedule, following the consummation of the transactions
contemplated by this Agreement and the execution of the
instruments of transfer contemplated by this Agreement, the
Purchaser will own, with good, valid and marketable title, or
lease, under valid and subsisting leases, or otherwise acquire
the interests of the Seller in the Assets, free and clear of any
Encumbrances, other than Permitted Encumbrances, and without
incurring any penalty or other adverse consequence, including,
without limitation, any increase in rentals, royalties, or
license or other fees imposed as a result of, or arising from,
the consummation of the transactions contemplated by this
Agreement.
(d) At the time of the Closing, (i) the investment assets held in the
general account of SBM Life will substantially conform as to
type, option-adjusted duration (based on the yield curve used in
the Analysis), credit quality and book yield to the description
thereof set forth in the Analysis and (ii) the investment assets
held by SBM Certificate Company will substantially conform as to
type, option-adjusted duration, credit quality and book yield to
the description thereof set forth in Section 3.17(d)(ii) of the
Disclosure Schedule.
SECTION 3.18. Products Issued. (a) Except as disclosed in Section 3.18(a)
of the Disclosure Schedule:
(i) All insurance policy and annuity contract benefits payable
by SBM Life and, to the Knowledge of the Seller, by any
other Person that is a party to or bound by any reinsurance,
coinsurance or other similar agreement with SBM Life, have
in all material respects been paid in accordance with the
terms of the insurance policies, annuity contracts and other
contracts under which they arose, except for such benefits
for which there is a reasonable basis to contest payment;
(ii) All benefits payable under face amount certificates issued
by SBM Certificate Company or under which it is otherwise an
obligor have in all material respects been paid in
accordance with the terms of such face amount certificates;
(iii) No outstanding insurance policy, annuity contract or face
amount certificate issued or assumed by SBM Life or SBM
Certificate Company entitles the holder thereof or any other
Person to receive dividends, distributions or other benefits
based on the revenues or earnings of SBM Life, SBM
Certificate Company or any other Person;
(iv) Neither the Seller nor any Subsidiary has received any
information which would reasonably cause it to believe that
the financial condition of any other party to any
reinsurance, coinsurance or other similar agreement with SBM
Life is so impaired as to result in a default thereunder;
(v) To the Knowledge of the Seller, each insurance agent, at the
time such agent wrote, sold or produced business for SBM
Life at any time since January 1, 1990, was duly licensed as
an insurance agent (for the type of business written, sold
or produced by such insurance agent) in the particular
jurisdiction in which such agent wrote, sold or produced
such business;
(vi) No advertising material or prospectus relating to any
outstanding insurance policy, annuity contract or face
amount certificate issued or distributed by any Subsidiary
contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading, and no such advertising material failed to
comply with applicable Law where such noncompliance would
have a Material Adverse Effect; and
(vii) The tax treatment under the Code of all insurance annuity
or investment policies, plans or contracts, all financial
products, employee benefit plans (other than the 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 any
Subsidiary on or before the Closing Date, to the Knowledge
of the Seller, is and at all times has been in all material
respects the same or more favorable to the purchaser,
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 their issuance or
purchase, except for changes resulting from changes to the
Code effective after the date of such issuance or purchase.
For purposes of this Section 3.18(a)(vii), the provisions of
the Code relating to the tax treatment of such contracts
shall include, but not be limited to, Sections 72, 79, 101,
104, 105, 106, 125, 130, 401, 402, 403, 404, 408, 412, 415,
419, 419A, 457, 501, 505, 817, 818, 7702 and 7702A.
(b) Except as disclosed in Section 3.18(b) of the Disclosure
Schedule, since January 1, 1992, no Persons writing, selling or
producing insurance business that individually or in the
aggregate for each such Person, accounted for $3.5 million of
premium or annuity income of SBM Life for any of the last three
calendar years has terminated or, to the Knowledge of the Seller,
threatened to terminate its agency agreement with SBM Life.
(c) Except as disclosed in Section 3.18(c) of the Disclosure
Schedule, since January 1, 1994, no Persons selling face amount
certificates that individually or in the aggregate for each such
Person, accounted for the sale of $1 million or more of the face
amount certificates issued by SBM Certificate Company for the
year ended December 31, 1994, has terminated or, to the Knowledge
of the Seller, threatened to terminate its agency agreement with
SBM Certificate Company.
SECTION 3.19. Distributors. Listed in Section 3.19 of the Disclosure
Schedule are the names and addresses of the ten most significant distributors
(by premium and annuity income written, sold or produced) of the products of SBM
Life for the twelve-month period ended December 31, 1994 and the amount of
premium and annuity income which each such distributor wrote, sold or produced
during such period.
SECTION 3.20. Employee Benefit Matters. (a) Plans and Material Documents.
Section 3.20(a) of the Disclosure Schedule lists (i) all employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, termination, severance or other contracts
or agreements, whether legally enforceable or not, to which the Seller or any
Subsidiary is a party, with respect to which the Seller or any Subsidiary has
any obligation or which are maintained, contributed to or sponsored by the
Seller or any Subsidiary for the benefit of any current or former employee,
officer or director of the Seller or any Subsidiary, (ii) each employee benefit
plan for which the Seller or any Subsidiary could incur liability under Section
4069 of ERISA in the event such plan has been or were to be terminated, (iii)
any plan in respect of which the Seller or any Subsidiary could incur liability
under Section 4212(c) of ERISA and (iv) any contracts, arrangements or
understandings between the Seller or any of its Affiliates and any employee of
the Seller or any Subsidiary including, without limitation, any contracts,
arrangements or understandings relating to a sale of the Seller or any
Subsidiary (collectively, the "Plans"). Each Plan is in writing and the Seller
has furnished the Purchaser with a complete and accurate copy of each Plan and a
complete and accurate copy of each material document prepared in connection with
each such Plan including, without limitation, (i) a copy of each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed IRS Form 5500, (iv) the most
recently received IRS determination letter for each such Plan, and (v) the most
recently prepared actuarial report and financial statement in connection with
each such Plan. Except as disclosed in Section 3.20(a) of the Disclosure
Schedule, there are no other employee benefit plans, programs, arrangements or
agreements, whether formal or informal, whether in writing or not, to which the
Seller or any Subsidiary is a party, with respect to which the Seller or any
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Seller or any Subsidiary for the benefit of any current or
former employee, officer or director of the Seller or any Subsidiary.
(b) Absence of Certain Types of Plans. None of the Plans is subject
to Title IV of ERISA. Except as set forth in Section 3.20(b)(i)
of the Disclosure Schedule, none of the Plans provides for the
payment of separation, severance, termination or similar-type
benefits to any Person or obligates the Seller or any Subsidiary
to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by
this Agreement or as a result of a "change in control", within
the meaning of such term under Section 280G of the Code. Except
as set forth in Section 3.20(b)(ii) of the Disclosure Schedule,
none of the Plans provides for or promises retiree medical,
disability or life insurance benefits to any current or former
employee, officer or director of the Seller or any Subsidiary.
Each of the Plans is subject only to the laws of the United
States or a political subdivision thereof.
(c) Compliance with Applicable Law. Except as disclosed in writing to
the Purchaser, each Plan is now and, since 1988, has been
operated by the Seller and the Subsidiaries in all respects in
accordance with the requirements of all applicable Law,
including, without limitation, ERISA and the Code, except where
such noncompliance would not have a Material Adverse Effect.
Except as set forth in Section 3.20(c) of the Disclosure
Schedule, no legal action, suit or claim is pending or, to the
Seller's Knowledge, threatened with respect to any Plan (other
than claims for benefits in the ordinary course).
(d) Qualification of Certain Plans. For each Plan which is intended
to be qualified under Section 401(a) of the Code or Section
401(k) of the Code, the Seller has applied on December 23, 1994
for a favorable determination letter from the IRS that it is so
qualified and that each trust established in connection with any
Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code is so exempt, and the Seller
intends to make such additional amendments, if any, as may
reasonably be required by the IRS as a condition to the issuance
of such favorable determination letter.
(e) Absence of Certain Liabilities and Events. Neither the Seller nor
any Subsidiary has incurred any liability under, arising out of
or by operation of Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in
the ordinary course), and no fact or event exists that could give
rise to any such liability.
(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been
made on or before their due dates. All such contributions have
been fully deducted for income tax purposes and no such deduction
has been challenged or disallowed by any government entity and no
fact or event exists which could give rise to any such challenge
or disallowance.
(g) Americans With Disabilities Act; WARN. The Seller and each
Subsidiary is in compliance in all material respects with the
requirements of the Americans With Disabilities Act (the "ADA")
and the Workers Adjustment and Retraining Notification Act
("WARN") and neither the Seller nor any Subsidiary has any
liabilities pursuant to the ADA or WARN.
SECTION 3.21. Labor Matters. (a) Neither the Seller nor any Subsidiary is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Seller or any Subsidiary and currently
there are no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit which could
affect the Seller or any Subsidiary; (b) there are no controversies, strikes,
slowdowns or work stoppages pending or, to the Knowledge of the Seller,
threatened between the Seller or any Subsidiary and any of their employees, and
neither the Seller nor any Subsidiary has experienced any such controversy,
strike, slowdown or work stoppage within the past three years; (c) there are no
unfair labor practice complaints pending against the Seller or any Subsidiary
before the National Labor Relations Board or any other Governmental Authority or
any current union representation questions involving employees of the Seller or
any Subsidiary that could have a Material Adverse Effect; (d) the Seller and the
Subsidiaries are currently in material compliance with all applicable material
Laws relating to the employment of labor, including those related to wages,
hours, collective bargaining and the payment and withholding of taxes and other
sums as required by the appropriate Governmental Authority and have withheld and
paid to the appropriate Governmental Authority or are holding for payment not
yet due to such Governmental Authority all amounts required to be withheld from
employees of the Seller and the Subsidiaries and are not liable for any arrears
of wages, taxes, penalties or other sums for failure to comply with any of the
foregoing; (e) the Seller and the Subsidiaries have paid in full to all their
respective employees or adequately accrued for in accordance with U.S. GAAP
consistently applied all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such employees; (f) there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or threatened before any Governmental Authority with respect
to any Persons currently or formerly employed by the Seller or any Subsidiary;
(g) neither the Seller nor any Subsidiary is a party to, or otherwise bound by,
any consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices; (h) there is no charge or proceeding with
respect to a violation of any occupational safety or health standards that has
been asserted or is now pending or, to the Knowledge of the Seller, threatened
with respect to the Seller or any Subsidiary; and (i) there is no charge of
discrimination in employment or employment practices, for any reason, including,
without limitation, age, gender, race, religion or other legally protected
category, which has been asserted or is now pending or, to the Knowledge of the
Seller, threatened before the United States Equal Employment Opportunity
Commission, or any other Governmental Authority in any jurisdiction in which the
Seller or any Subsidiary has employed or currently employs any Person.
SECTION 3.22. Key Employees. Section 3.22 of the Disclosure Schedule lists
the name, place of employment, the current annual salary rates, bonuses,
deferred or contingent compensation, pension, accrued vacation, "golden
parachute" and other like benefits paid or payable (in cash or otherwise) in
1994, 1993, 1992 and 1991, the date of employment and a description of position
and job function of each current salaried employee, officer, director,
consultant or agent of the Seller or any Subsidiary whose annual compensation
exceeded (or, in 1995, is expected to exceed) $75,000.
SECTION 3.23. Certain Interests. (a) Except as disclosed in Section 3.23(a)
of the Disclosure Schedule, no shareholder, officer or director of the Seller or
any Subsidiary and no relative or spouse (or relative of such spouse) who
resides with, or is a dependent of, any such shareholder, officer or director
has outstanding any Indebtedness to the Seller or any Subsidiary other than
policy loans.
(b) Except as disclosed in Section 3.23(b) of the Disclosure
Schedule, neither the Seller nor any Subsidiary has any Liability
or any other obligation of any nature whatsoever to any officer,
director or shareholder of the Seller or any Subsidiary or to any
relative or spouse (or relative of such spouse) who resides with,
or is a dependent of, any such officer, director or shareholder.
SECTION 3.24. Taxes. (a) Except as disclosed in Section 3.24(a) of the
Disclosure Schedule, (i) all returns and reports in respect of Taxes required to
be filed with respect to the Seller and each Subsidiary have been timely filed;
(ii) all Taxes required to be shown on such returns and reports or otherwise due
have been timely paid; (iii) all such returns and reports are true, correct and
complete in all material respects; (iv) no adjustment relating to such returns
has been proposed formally or informally by any Tax authority and, to the
Knowledge of the Seller, no basis exists for any such adjustment; (v) there are
no pending or, to the Knowledge of the Seller, threatened actions or proceedings
for the assessment or collection of Taxes against the Seller or any Subsidiary;
(vi) no consent under Section 341(f) of the Code has been filed with respect to
the Seller or any Subsidiary; (vii) there are no Tax liens on any of the Assets
or any assets of any Subsidiary except Permitted Encumbrances; (viii) none of
the Subsidiaries is a personal holding company; (ix) no acceleration of the
vesting schedule for any property that is substantially unvested within the
meaning of the regulations under Section 83 of the Code will occur in connection
with the transactions contemplated by this Agreement; (x) each Subsidiary is a
member of the affiliated group (within the meaning of Section 1504(a)(1) of the
Code) for which the Seller files a consolidated return as the common parent, and
have not been includible in any other consolidated return for any taxable period
for which the statute of limitations has not expired.
(b) Except as disclosed with reasonable specificity in Section
3.24(b) of the Disclosure Schedule: (i) there are no outstanding
waivers or agreements extending the statute of limitations for
any period with respect to any Tax to which the Seller or any
Subsidiary may be subject; (ii) there are no requests for
information currently outstanding that could affect the Taxes of
the Seller or any Subsidiary; (iii) none of the Subsidiaries has
any (A) income reportable for a period ending after the Closing
Date but attributable to a transaction (e.g., an installment
sale) occurring in or a change in accounting method made for a
period ending on or prior to the Closing Date which resulted in a
deferred reporting of income from such transaction or from such
change in accounting method (other than a deferred intercompany
transaction), or (B) deferred gain or loss arising out of any
deferred intercompany transaction; and (iv) no power of attorney
that is currently in force has been granted with respect to any
matter relating to Taxes that could affect any Subsidiary.
(c) (i) Section 3.24(c) of the Disclosure Schedule lists all income,
franchise and similar tax Returns (federal, state, local and
foreign) filed with respect to each of the Seller and the
Subsidiaries for taxable periods ended on or after December 31,
1992, indicates for which jurisdictions Returns have been filed
on the basis of a unitary group, indicates the most recent
income, franchise or similar tax Return for each relevant
jurisdiction for which an audit has been completed in the last
five years and indicates all tax Returns filed on behalf of the
Seller and the Subsidiaries on or before the date hereof that
currently are the subject of audit; (ii) the Seller has delivered
to the Purchaser correct and complete copies of all (A) federal,
state and foreign income, franchise and similar tax Returns in
respect of periods ended on or after December 31, 1992, and (B)
examination reports and statements of deficiencies assessed
against or agreed to by the Seller or a Subsidiary since December
31, 1990; and (iii) the Seller has delivered to the Purchaser a
true and complete copy of any tax-sharing or allocation agreement
or arrangement involving any Subsidiary and a true and complete
description of any such unwritten or informal agreement or
arrangement.
SECTION 3.25. Risk Management. (a) The Seller has previously furnished to
the Purchaser the following information with respect to each insurance policy
(including policies providing property, casualty, liability, workers'
compensation, and bond and surety arrangements) under which the Seller or any
Subsidiary has been an insured, a named insured or otherwise the principal
beneficiary of coverage at any time within the past three years (which, in the
case of the Seller, relate to any of the Assets): (i) the name, address and
telephone number of the agent or broker; (ii) the name of the insurer and the
names of the principal insured and each named insured; (iii) the policy number
and the period of coverage; (iv) the type, scope (including an indication of
whether the coverage was on a claims made, occurrence or other basis) and amount
(including a description of how deductibles, retentions and aggregates are
calculated and operate) of coverage; and (v) the premium charged for the policy,
including, without limitation, a description of any retroactive premium
adjustments or other loss-sharing arrangements.
(b) With respect to each such insurance policy: (i) neither the
Seller nor any Subsidiary is in breach or default (including any
breach or default with respect to the payment of premiums or the
giving of notice), and no event has occurred which, with the
giving of notice or the lapse of time, or both, would constitute
such a breach or default or permit termination or modification,
under the policy; (ii) no party to the policy has repudiated, or
given notice of an intent to repudiate, any provision thereof;
and (iii) to the Knowledge of the Seller, no insurer on the
policy has been declared insolvent or placed into receivership,
conservatorship or liquidation or currently has a rating of "B+"
or below from A.M. Best & Co. or a claims paying ability rating
of "BBB" or below from Standard & Poors, Inc.
(c) Section 3.25(c) of the Disclosure Schedule sets forth all risks
against which the Seller or any Subsidiary is self-insured or
which are covered under any risk retention program in which the
Seller or any Subsidiary participates and details for the last
five years of the Seller's and each Subsidiary's loss experience
with respect to such risks.
(d) At no time subsequent to December 31, 1993 has the Seller or any
Subsidiary (i) been denied any insurance or indemnity bond
coverage which it has requested, (ii) made any material reduction
in the scope or amount of its insurance coverage, or, except as
set forth in Section 3.25(d) of the Disclosure Schedule, received
notice from any of its insurance carriers that any insurance
premiums will be subject to increase in an amount materially
disproportionate to the amount of the increases with respect
thereto (or with respect to similar insurance) in prior years or
that any insurance coverage referred to in Section 3.25(a) will
not be available in the future substantially on the same terms as
are now in effect or (iii) suffered any extraordinary increase in
premium for renewed coverage. Since December 31, 1993, no
insurance carrier has cancelled, failed to renew or materially
reduced any insurance coverage for the Seller or any Subsidiary
or given any notice or other indication of its intention to
cancel, not renew or reduce any such coverage.
(e) Except as set forth in Section 3.25(e) of the Disclosure
Schedule, at the time of the Closing, all insurance policies
currently in effect will be outstanding and duly in force.
SECTION 3.26. Accounts; Lockboxes; Safe Deposit Boxes; Powers of Attorney.
Section 3.26 of the Disclosure Schedule is a true and complete list of (i) the
names of each bank, savings and loan association, securities or commodities
broker or other financial institution in which any Subsidiary has an account,
including cash contribution accounts, and the names of all persons authorized to
draw thereon or have access thereto, (ii) the location of all lockboxes and safe
deposit boxes of each Subsidiary and the names of all Persons authorized to draw
thereon or have access thereto and (iii) the names of all Persons, if any,
holding powers of attorney from any Subsidiary. At the time of the Closing, no
Subsidiary shall have any such account, lockbox or safe deposit box other than
those listed in Section 3.26 of the Disclosure Schedule, nor shall any
additional Person have been authorized, from the date of this Agreement, to draw
thereon or have access thereto or to hold any such power of attorney, without
the prior written consent of the Purchaser. Except as disclosed in Section 3.26
of the Disclosure Schedule, neither the Seller nor any Subsidiary has commingled
monies or accounts of any Subsidiary with other monies or accounts of
shareholders or any Affiliates of the Seller. At the time of the Closing, all
monies and accounts of each Subsidiary shall be held by, and be accessible only
to, such Subsidiary.
SECTION 3.27. Brokers. Except for Conning & Company and Sterling Capital
Advisors, Inc., no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements to which
the Seller is a party based upon arrangements made by or on behalf of the
Seller. The Seller is solely responsible for the fees and expenses of Conning &
Company and Sterling Capital Advisors, Inc.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the Purchaser
hereby represents and warrants to the Seller as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Purchaser of this Agreement and the Ancillary Agreements to
which it is a party, the performance by the Purchaser of its obligations
hereunder and thereunder and the consummation by the Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of the Purchaser. This Agreement has been, and upon
their execution the Ancillary Agreements to which the Purchaser is a party will
be, duly executed and delivered by the Purchaser, and (assuming due
authorization, execution and delivery by the Seller) this Agreement constitutes,
and upon their execution such Ancillary Agreements will constitute, legal, valid
and binding obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, except to the extent that (a)
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar law now or hereafter
in effect relating to or limiting creditors' rights generally, (b) the remedy of
specific performance and injunctive relief and other forms of equitable relief
are subject to general principles of equity and certain equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought, and (c) enforcement may be subject to general principles of equity and
law, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether enforceability is considered
in a proceeding in equity or at law).
SECTION 4.02. No Conflict. Assuming compliance with the requirements of the
HSR Act and the making and obtaining of all filings, notifications, consents,
approvals, authorizations and other actions referred to in Section 4.03, except
as may result from any facts or circumstances relating solely to the Seller, the
execution, delivery and performance by the Purchaser of this Agreement and the
Ancillary Agreements to which it is a party do not and will not (a) violate,
conflict with or result in the breach of any provision of the Certificate of
Incorporation or By-laws of the Purchaser, (b) violate any Law or Governmental
Order applicable to the Purchaser or (c) result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of the Purchaser pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Purchaser is a party or by which
any of such assets or properties is bound or affected, which would have a
material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated by this Agreement or by the Ancillary Agreements.
SECTION 4.03. Governmental Consents and Approvals. The execution, delivery
and performance by the Purchaser of this Agreement and the Ancillary Agreements
to which the Purchaser is a party do not and will not require any consent,
approval, authorization or other order of, action by, filing with, or
notification to, any Governmental Authority, except (a) as described in Section
3.05 of the Disclosure Schedule, (b) the requirements of the HSR Act and (c)
notifications to and approvals of insurance regulatory authorities, including,
without limitation, the Minnesota Department and the California Department.
SECTION 4.04. Litigation. No claim, action, proceeding or investigation is
pending or, to the Knowledge of the Purchaser, threatened, which seeks to delay
or prevent the consummation of, or which would be reasonably likely to
materially adversely affect the Purchaser's ability to consummate, the
transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 4.05. Financing. The Purchaser has delivered to the Seller on the
date hereof commitments for financing sufficient to fund the payment of the
Purchase Price and to make the capital contribution referred to in Section
5.04(a).
SECTION 4.06. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
SECTION 4.07. Investment Intent. The Purchaser has knowledge and experience
in financial and business matters, is capable of evaluating the merits and risks
of an investment in the Shares, has had access to and has acquired sufficient
information about the Subsidiaries to reach an informed and knowledgeable
decision to acquire the Shares, is able to bear the risks of such an investment,
is an "accredited investor" within the meaning of Regulation D of the Securities
Act, and is acquiring the Shares for its own account for investment and not with
a view to any resale or distribution thereof such as would require registration
under Section 5 of the Securities Act.
SECTION 4.08. Preferred Stock Purchase Agreements. The Purchaser has
delivered to the Seller true and correct copies of the Preferred Stock Purchase
Agreements.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) The Seller
covenants and agrees that, except as described in Section 5.01(a) of the
Disclosure Schedule, between the date hereof and the Closing, the Seller and the
Subsidiaries shall not conduct the Business other than in the ordinary course
and consistent with the Seller's and the Subsidiaries' prior practice. Without
limiting the generality of the foregoing, except as described in Section 5.01(a)
of the Disclosure Schedule or as contemplated by the Plan of Liquidation, the
Seller and each Subsidiary shall (i) continue its advertising and promotional
activities, pricing and purchasing policies, underwriting, claims and accounting
practices, operations, business strategies and communications to its employees,
distributors, policyholders, contractholders, regulators, rating agencies and
other stakeholders, in accordance with past practice; (ii) not shorten or
lengthen the customary payment cycles for any of its payables or receivables;
(iii) use all reasonable efforts to (A) preserve intact its business
organization and the business organization of the Business, (B) keep available
to the Purchaser the services of its employees, (C) continue in full force and
effect without material modification all existing policies or binders of
insurance currently maintained in respect of the Assets and the Subsidiaries,
(D) preserve its current relationships with its distributors, policyholders,
contractholders, regulators, rating agencies and other persons with which it has
significant business relationships and (E) maintain in full force and effect all
licenses, qualifications, registrations and memberships necessary or desirable
for the conduct of the Business; (iv) exercise, but only after notice to the
Purchaser and receipt of the Purchaser's prior written approval, any rights of
renewal pursuant to the terms of any of the leases or subleases set forth in
Section 3.15(b) of the Disclosure Schedule which by their terms would otherwise
expire; (v) use all reasonable efforts not to engage knowingly in any practice,
or knowingly take any action, fail to take any action or enter into any
transaction, which could cause any representation or warranty of the Seller to
be untrue or result in a breach of any covenant made by the Seller in this
Agreement; (vi) use all reasonable efforts not to engage inadvertently in any
practice, or inadvertently take any action, fail to take any action or enter
into any transaction, which could cause any representation or warranty of the
Seller to be untrue in any material respect or result in a breach in any
material respect of any covenant made by the Seller in this Agreement; (vii)
continue the practices for the allocation of expenses among the Seller and the
Subsidiaries that was in effect at December 31, l994; and (viii) accrue
Liabilities on the books and records of the Seller and the Subsidiaries in
accordance with U.S. GAAP on a basis consistent with the past practices of the
Seller and the Subsidiaries, except to the extent contemplated by this
Agreement. With respect to the matters set forth in clause (iii) of the
preceding sentence, the Purchaser agrees to cooperate and use all reasonable
efforts to assist the Seller in its efforts; provided, however, that the
Purchaser shall have no obligation to give any guarantee or other consideration
of any nature in connection with such matters, or to consent to any change in
the terms of any contract, agreement, license or other arrangement which the
Purchaser in its sole and absolute discretion may deem adverse to the interests
of the Purchaser, any Subsidiary or the Business.
(b) Except as described in Section 5.01(b) of the Disclosure Schedule
or as contemplated by the Plan of Liquidation, the Seller
covenants and agrees that, prior to the Closing, without the
prior written consent of the Purchaser, neither the Seller nor
any Subsidiary will do any of the things enumerated in the second
and third sentences of Section 3.09.
(c) Prior to the Closing, the Seller shall cause to be terminated all
surplus relief arrangements to which SBM Life is a party.
SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, the Seller shall and shall cause each of the
Seller's and each of the Subsidiaries' officers, directors, employees, agents,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, controlling stockholders, accountants, counsel, prospective financing
sources and representatives of the Purchaser reasonable access, during normal
business hours, to the offices, properties, other facilities, books and records
of the Seller relating to the Assets or the Business and of the Subsidiaries and
to those officers, directors, employees, agents, accountants and counsel of the
Seller and the Subsidiaries who have any knowledge relating to the Assets, any
of the Subsidiaries or the Business and (ii) furnish to the officers, employees
and authorized agents, accountants, counsel, financing sources and
representatives of the Purchaser such additional financial and operating data
and other information regarding the Business and the assets, properties and
goodwill of the Seller and the Subsidiaries as the Purchaser may from time to
time reasonably request.
(b) In order to facilitate the resolution of any claims made against
or incurred (whether or not reported) by the Seller prior to the
Closing, for a period of five years after the Closing, the
Purchaser shall (i) retain the books and records of the Seller
which are transferred to the Purchaser pursuant to this Agreement
relating to periods prior to the Closing in a manner reasonably
consistent with the prior practices of the Seller, (ii) upon
reasonable notice, afford the officers, employees and authorized
agents and representatives of the Seller reasonable access
(including the right to make, at the Seller's expense,
photocopies), during normal business hours, to such books and
records and to employees of the Purchaser or the Subsidiaries who
were, prior to the Closing, employees of the Seller or the
Subsidiaries, in a manner so as not to be unreasonably disruptive
to the business or operations of the Purchaser or the
Subsidiaries, and (iii) provide reasonable assistance to the
Seller, at the Seller's expense, in managing, resolving or
eliminating such claims.
(c) In order to facilitate the resolution of any claims made by or
against or incurred by the Purchaser or any Subsidiary after the
Closing or for any other reasonable purpose, for a period of five
years following the Closing, the Seller shall, or shall make
arrangements satisfactory to the Purchaser for another custodian
to, (i) retain all books and records of the Seller which are not
transferred to the Purchaser pursuant to this Agreement and which
relate to the Seller, any Subsidiary, any of their operations or
the Business for periods prior to the Closing and which shall not
otherwise have been delivered to the Purchaser and (ii) upon
reasonable notice, afford the officers, employees and authorized
agents and representatives of the Purchaser, reasonable access
(including the right to make photocopies at the expense of the
Purchaser), during normal business hours, to such books and
records.
(d) The Seller covenants and agrees to provide to the Purchaser (i)
all SEC Filings to be filed with the Securities and Exchange
Commission by or on behalf of the Seller, any Subsidiary or any
Affiliated Mutual Fund between the date hereof and the Closing
Date and (ii) the quarterly and annual statements of SBM Life to
be filed with or submitted to the Minnesota Department and the
California Department for each calendar quarter and year ending
between the date hereof and the Closing Date, together with all
related notes, exhibits and schedules thereto, in each case no
later than three Business Days prior to the filing or submission
thereof, and to consult with the Purchaser in respect thereof
prior to such filing or submission.
SECTION 5.03. Confidentiality. (a) The Seller agrees to, and will cause its
agents, representatives, Affiliates, employees, officers and directors to: (i)
treat and hold as confidential (and not disclose or provide access to any Person
to) all information relating to trade secrets, trademark applications, product
development, price, policyholder, contractholder, distributor and supplier
lists, pricing and marketing plans, policies and strategies, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and any other confidential information with respect to the
Business, the Assets or any Subsidiary, (ii) in the event that the Seller or any
such agent, representative, Affiliate, employee, officer or director becomes
legally compelled to disclose any such information, provide the Purchaser with
prompt written notice of such requirement so that the Purchaser may seek a
protective order or other remedy or waive compliance with this Section 5.03,
(iii) in the event that such protective order or other remedy is not obtained,
or the Purchaser waives compliance with this Section 5.03, furnish only that
portion of such confidential information which is legally required to be
provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information, and (iv) promptly furnish (prior
to, at, or as soon as practicable following, the Closing) to the Purchaser any
and all copies (in whatever form or medium) of all such confidential information
then in the possession of the Seller or any of its agents, representatives,
Affiliates, employees, officers and directors and destroy any and all additional
copies then in the possession of the Seller or any of its agents,
representatives, Affiliates, employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Seller, its agents, representatives, Affiliates, employees,
officers or directors. The Seller agrees and acknowledges that remedies at Law
for any breach of its obligations under this Section 5.03 are inadequate and
that in addition thereto the Purchaser shall be entitled to seek equitable
relief, including injunction and specific performance, in the event of any such
breach, without the necessity of demonstrating the inadequacy of money damages.
(b) In the event this Agreement is terminated, the Confidentiality
Agreement shall remain in full force and effect.
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.
(a) The Seller and the Purchaser shall each use all reasonable efforts to obtain
(or cause the Subsidiaries to obtain) all authorizations, consents, orders and
approvals of all Governmental Authorities and officials that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and the Ancillary Agreements, including,
without limitation, any required approvals of the Minnesota Department and the
California Department, and will cooperate fully with the other in promptly
seeking to obtain all such authorizations, consents, orders and approvals. In
connection with obtaining such approvals from the Minnesota Department, the
Purchaser agrees to commit to contribute to the capital of SBM Life and SBM
Certificate Company an aggregate of $15 to $20 million in cash, marketable
investment-grade securities or a combination thereof. Each party hereto agrees
to make an appropriate filing, if necessary, pursuant to the HSR Act with
respect to the transactions contemplated by this Agreement as promptly as
practicable after the date hereof and to supply as promptly as practicable to
the appropriate Governmental Authorities any additional information and
documentary material that may be requested pursuant to the HSR Act.
(b) The Seller shall give promptly such notices to third parties and
use all reasonable efforts to obtain such third party consents
and estoppel certificates as the Purchaser may reasonably request
in connection with the transactions contemplated by this
Agreement, including, without limitation, all third party
consents that are necessary in connection with the transfer of
the Material Contracts.
(c) The Purchaser shall cooperate and use all reasonable efforts to
assist the Seller in giving such notices and obtaining such
consents and estoppel certificates; provided, however, that the
Purchaser shall have no obligation to give any guarantee or other
consideration of any nature in connection with any such notice,
consent or estoppel certificate or to consent to any change in
the terms of any Material Contract which the Purchaser in its
sole and absolute discretion may deem adverse to the interests of
the Purchaser, any Subsidiary or the Business.
(d) The Seller shall use all reasonable efforts to:
(i) duly call, give notice of, convene and hold a special
meeting of the board of directors of each Affiliated Mutual
Fund to be held as soon as practicable after the date
hereof, for the purpose of considering the assignment to the
Purchaser of the Investment Advisory and Management
Agreement between the Seller and such Affiliated Mutual
Fund; unless the board of directors of the Seller determines
that such action would constitute a breach of its fiduciary
duties to the shareholders of the Seller under applicable
law after consultation with outside counsel, use all
reasonable efforts to cause such board of directors to
approve such assignment; and, unless the board of directors
of the Seller determines that such action would constitute a
breach of its fiduciary duties to the shareholders of the
Seller under applicable law after consultation with outside
counsel, cause such directors as may be designated by the
Purchaser to resign from such board of directors, effective
as of the Closing;
(ii) duly call, give notice of, convene and hold a special
meeting of the holders of interests in each Affiliated
Mutual Fund (each, a "Fund Meeting"), to be held as soon as
practicable after the date hereof, for the purpose of
considering the assignment to the Purchaser of the
Investment Advisory and Management Agreements between the
Seller and such Affiliated Mutual Fund and the election of
the designees of the Purchaser to the board of directors of
such Affiliated Mutual Fund;
(iii) prepare and provide to the Purchaser for review as soon as
practicable after the date hereof a proxy statement relating
to each Fund Meeting (each, together with all amendments and
supplements thereto, a "Fund Proxy Statement") and file each
Fund Proxy Statement with the Securities and Exchange
Commission as soon as practicable following approval by the
Purchaser; and
(iv) use all reasonable efforts (A) after consultation with the
Purchaser, to respond to any comments made by the Securities
and Exchange Commission with respect to each Fund Proxy
Statement or any preliminary version thereof and to cause
each Fund Proxy Statement to be mailed to each holder of
interests in the applicable Affiliated Mutual Fund at the
earliest practicable date following the date hereof and (B)
unless the board of directors of the Seller determines that
such action would constitute a breach of its fiduciary
duties to the shareholders of the Seller under applicable
law after consultation with outside counsel, to obtain the
approval by such holders of the assignment to the Purchaser
of the agreements between the Seller and such Affiliated
Mutual Fund.
The Seller covenants and agrees that each Fund Proxy Statement shall comply in
all material respects with applicable federal securities laws and shall not, at
the date such Fund Proxy Statement (or any amendment or supplement thereto) is
first mailed to holders of interests in the related Affiliated Mutual Fund or at
the time of the related Fund Meeting, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light if the
circumstances under which they were made, not misleading or necessary to correct
any statement made in any previous communication to shareholders with respect to
the solicitation of proxies for such Fund Meeting which shall have become false
or misleading, except that the Seller makes no representation with respect to
information supplied by the Purchaser for inclusion in any such Fund Proxy
Statement. None of the information regarding the Purchaser supplied or to be
supplied in writing by the Purchaser for inclusion in any Fund Proxy Statement
shall, at the date such Fund Proxy Statement (or any amendment or supplement
thereto) is first mailed to holders of interests in the related Affiliated
Mutual Fund or at the time of the related Fund Meeting, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading or necessary to
correct any statement made in any previous communication to holders of interests
in the related Affiliated Mutual Fund with respect to the solicitation of
proxies for the related Fund Meeting which shall have become false or
misleading.
(e) The Seller and the Purchaser agree that, in the event any
consent, approval or authorization necessary to preserve for the
Business, any Subsidiary or the Purchaser any right or benefit
under any lease, license, contract, commitment or other agreement
or arrangement to which the Seller or any Subsidiary is a party
is not obtained prior to the Closing, the Seller will, subsequent
to the Closing, cooperate with the Purchaser in attempting to
obtain such consent, approval or authorization as promptly
thereafter as practicable. If such consent, approval or
authorization cannot be obtained, the Seller will use all
reasonable efforts to provide the Purchaser with the rights and
benefits of the affected lease, license, contract, commitment or
other agreement or arrangement for the term of such lease,
license, contract or other agreement or arrangement, and, if the
Seller provides such rights and benefits, the Purchaser shall
assume the obligations and burdens thereunder.
SECTION 5.05. Notice of Developments. Prior to the Closing, the Seller
shall promptly notify the Purchaser in writing of all events, circumstances,
facts and occurrences within the Knowledge of the Seller arising subsequent to
the date of this Agreement which could reasonably be expected to result in any
breach of a representation or warranty or covenant of the Seller in this
Agreement.
SECTION 5.06. Consulting Services. From the date hereof until the Closing,
the Purchaser shall provide to the Seller, at no cost or expense to the Seller,
consulting services relating to investment strategy, marketing, asset/liability
management, systems and operations and finance, as requested by the Seller and
agreed upon by the Purchaser. Neither the Purchaser nor any of its Affiliates,
officers, directors, stockholders, employees, agents or representatives shall be
liable for any action taken or omitted to be taken in connection with its
performance of such services, except that the Purchaser shall be liable for
losses incurred by the Seller arising out of the gross negligence or willful
misconduct of the Purchaser in the performance of such services.
SECTION 5.07. No Solicitation or Negotiation. The Seller agrees that
between the date of this Agreement and the earlier of (i) the Closing and (ii)
the termination of this Agreement, neither the Seller nor any of its Affiliates,
officers, directors, representatives or agents will, on behalf of the Seller,
(a) solicit, initiate, consider or intentionally encourage any other proposals
or offers from any Person (i) relating to any acquisition or purchase of all or
any portion of the capital stock of the Seller or any Subsidiary or the assets
of the Seller or any Subsidiary (other than investment assets to be sold in the
ordinary course of the Business consistent with past practice), (ii) to enter
into any business combination with the Seller or (iii) to enter into any other
extraordinary business transaction involving or otherwise relating to the Seller
or any Subsidiary (any of the transactions referred to in subclause (i), (ii) or
(iii) being referred to as a "Business Combination"), or (b) participate in any
discussions, conversations, negotiations or other communications regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate in any way, assist or participate in, facilitate or encourage any
effort or attempt by any other Person to seek to do any of the foregoing;
provided, however, that the Seller may participate in such discussions,
conversations, negotiations and other communications, or furnish such
information, in response to an unsolicited bona fide written indication of
interest relating to any such transaction to the extent the board of directors
of the Seller determines that such action is required by its fiduciary duties to
the stockholders of the Seller under applicable law after consultation with
outside counsel. In addition, following receipt of a proposal relating to a
Business Combination subject to Rule 14e-2 under the Exchange Act, the Seller
may take and disclose to its shareholders a position as contemplated by such
rule. The Seller immediately shall cease and cause to be terminated all
discussions, conversations, negotiations and other communications with any
Persons existing on the date of this Agreement and conducted heretofore with
respect to any of the foregoing. Unless the board of directors of the Seller
determines that so doing would constitute a breach of its fiduciary duties to
the shareholders of the Seller under applicable law after consultation with
outside counsel, the Seller shall notify the Purchaser promptly if any such
indication of interest, or any inquiry or other contact with any Person with
respect thereto, is made and shall, in any such notice to the Purchaser,
indicate in reasonable detail the identity of the Person making such indication
of interest, inquiry or contact and the terms and conditions of such indication
of interest, inquiry or other contact. The Seller agrees not to, without the
prior written consent of the Purchaser, release any Person from, or waive any
provision of, any confidentiality or standstill agreement to which the Seller is
a party.
SECTION 5.08. Break-Up Fee. (a) In the event that the Seller (i) enters
into any agreement with a Person, other than the Purchaser, with whom the Seller
or any Affiliate, officer, director, representative or agent of the Seller, on
behalf of the Seller, has had any discussions, conversations, negotiations or
other communications regarding any Business Combination prior to the termination
of this Agreement (an "Interested Person") relating to any Business Combination
with the Seller or any Subsidiary or (ii) terminates this Agreement pursuant to
Section 9.01(d), provided there has been no material breach by the Purchaser of
the representations, warranties and covenants of the Purchaser under this
Agreement, then the Seller shall promptly pay to the Purchaser in immediately
available funds an amount equal to all reasonable out-of-pocket costs and
expenses (including, without limitation, all reasonable fees and expenses of
counsel) incurred by the Purchaser and its Affiliates or on their behalf in
connection with the preparation, negotiation and enforcement of this Agreement
and the transactions contemplated hereby ("Expenses") plus $1.0 million, not to
exceed $2.5 million in the aggregate (together with Expenses, the "Break-Up
Fee").
(b) In the event that the Seller terminates this Agreement pursuant
to Section 9.01(f), and at the time of the meeting of the
Seller's shareholders referred to in Section 9.01(f) there exists
a bona fide written proposal from a Person other than the
Purchaser for a Business Combination with the Seller or any
Subsidiary which has been disclosed to shareholders of the Seller
(an "Acquisition Proposal"), then the Seller shall, upon such
termination, promptly pay to the Purchaser in immediately
available funds an amount equal to the Expenses (not to exceed
$1.5 million), and, in the event a Business Combination is
consummated between such Person and the Seller or any Subsidiary
within twelve months following the termination of this Agreement,
the Seller shall promptly pay to the Purchaser in immediately
available funds a further $1.0 million.
(c) In the event that the Seller terminates this Agreement pursuant
to Section 9.01(f) at a time when no Acquisition Proposal exists
but, within twelve months following the termination of this
Agreement, the Seller consummates a Control Transaction with any
Person other than the Purchaser, the Seller shall promptly pay to
the Purchaser in immediately available funds an amount equal to
the Expenses (not to exceed $1.0 million).
(d) The payment of all or any portion of the Break-Up Fee shall be
payable to the extent permitted by Law, shall not in any way
infer a breach by the Seller of any of its representations,
warranties or covenants contained in this Agreement, and shall
not in any way limit any remedies of the Purchaser against the
Seller under this Agreement for any breach by the Seller of any
of its representations, warranties or covenants contained in this
Agreement, and the Purchaser reserves its rights to pursue its
remedies, at Law or in equity, against the Seller or any third
party.
SECTION 5.09. Use of Intellectual Property. (a) Except as set forth in
Section 5.09 of the Disclosure Schedule, from and after the Closing, the Seller
shall not use any of the Owned Intellectual Property or the Licensed
Intellectual Property of any Subsidiary or included in the Assets.
(b) Immediately after the Closing, the Seller shall change its
corporate name, and amend its Articles of Incorporation
accordingly, to one not using any trademark, service mark, trade
dress, logo, trade name or corporate name contained in the Owned
Intellectual Property or the Licensed Intellectual Property of
any Subsidiary or included in the Assets or any trademark,
service mark, trade dress, logo, trade name or corporate name
similar or related thereto.
SECTION 5.10. Non-Competition. (a) The Seller agrees with the Purchaser
that, for a period of five (5) years following the Closing, the Seller will not
in any way, directly or indirectly, for the purpose of conducting or engaging in
any business that supplies products or services of the kind supplied by the
Business, any Subsidiary or the Seller, call upon, solicit, advise or otherwise
do, or attempt to do, business with any customers or distributors of the
Business, any Subsidiary or the Seller with whom the Business, any Subsidiary or
the Seller had any dealings prior to the Closing Date, or take away or interfere
or attempt to interfere with any custom, trade, business or patronage of the
Purchaser, any Subsidiary or the Business, or interfere with or attempt to
interfere with any officers, employees, representatives or agents of the
Purchaser, any Subsidiary or the Business, or induce or attempt to induce any of
them to leave the employ of the Purchaser or any Subsidiary or violate the terms
of their contracts, or any employment arrangements, with the Purchaser or any
Subsidiary.
(b) The Seller acknowledges that the covenants of the Seller set
forth in this Section 5.10 are an essential element of this
Agreement and that, but for the agreement of the Seller to comply
with these covenants, the Purchaser would not have entered into
this Agreement. The Seller acknowledges that this Section 5.10
constitutes an independent covenant and shall not be affected by
performance or nonperformance of any other provision of this
Agreement by the Purchaser. The Seller has independently
consulted with its counsel and after such consultation agrees
that the covenants set forth in this Section 5.10 are reasonable
and proper.
SECTION 5.11. Excluded Liabilities. The Seller shall pay and discharge the
Excluded Liabilities as and when the same become due and payable.
SECTION 5.12. Bulk Transfer Laws. The Purchaser hereby waives compliance by
the Seller with the requirements of any applicable bulk sale or bulk transfer
laws of any jurisdiction in connection with the sale of the Assets to the
Purchaser (other than any obligations with respect to the application of the
proceeds herefrom).
SECTION 5.13. Shareholder Approval. (a) The Seller shall:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Shareholders Meeting"), to
be held as soon as practicable after the date hereof, for
the purpose of considering and taking action upon this
Agreement and the transactions contemplated hereby and upon
a plan for the liquidation of the Seller following the
consummation of the transactions contemplated hereby (the
"Plan of Liquidation");
(ii) prepare as soon as practicable after the date hereof a proxy
statement relating to the Shareholders Meeting (together
with all amendments and supplements thereto, the "Proxy
Statement");
(iii) unless the board of directors of the Seller determines that
such action would constitute a breach of its fiduciary
duties to the shareholders of the Seller under applicable
law after consultation with outside counsel, include in the
Proxy Statement the unanimous recommendation of the board of
directors of the Seller that shareholders of the Seller vote
in favor of the approval of this Agreement and the
transactions contemplated hereby and in favor of the Plan of
Liquidation and the transactions contemplated thereby; and
(iv) use all reasonable efforts to (A) cause the Proxy Statement
to be mailed to its shareholders at the earliest practicable
date following the date hereof and (B) unless the board of
directors of the Seller determines that such action would
constitute a breach of its fiduciary duties to the
shareholders of the Seller under applicable law after
consultation with outside counsel, obtain the approval by
its shareholders of this Agreement and the transactions
contemplated hereby and of the Plan of Liquidation and the
transactions contemplated thereby.
(b) The Seller covenants and agrees that the Proxy Statement shall
comply in all material respects with applicable federal and state
securities laws and shall not, at the date the Proxy Statement
(or any amendment or supplement thereto) is first mailed to
shareholders of the Seller or at the time of the Shareholders
Meeting, contain any untrue statement of a material fact, or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light
if the circumstances under which they were made, not misleading
or necessary to correct any statement made in any previous
communication to shareholders with respect to the solicitation of
proxies for the Shareholders Meeting which shall have become
false or misleading, except that the Seller makes no
representation with respect to information supplied by the
Purchaser for inclusion in the Proxy Statement. None of the
information regarding the Purchaser supplied or to be supplied in
writing by the Purchaser for inclusion in the Proxy Statement
shall, at the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to shareholders of the Seller
or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading or necessary to correct any
statement made in any previous communication to shareholders with
respect to the solicitation of proxies for the Shareholders
Meeting which shall have become false or misleading.
SECTION 5.14. Further Action. (a) Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Laws, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement. Each of the parties
hereto shall use all reasonable efforts to cause the Closing to occur prior to
May 31, 1995.
(b) The Seller covenants and agrees to use all reasonable efforts to
minimize the termination, withdrawal or nonrenewal of in force
insurance policies and annuity contracts issued by SBM Life,
whether as a result of "twisting" or otherwise.
(c) Notwithstanding anything to the contrary provided in Sections
5.13(a)(iii) and (iv)(B) or this Section 5.14(a), none of the
Seller or its board of directors shall be required to take any of
the actions contemplated therein if the board of directors of the
Seller determines (after consultation with outside counsel), that
such action would conflict with its fiduciary duties to the
shareholders of the Seller under applicable law.
(d) In the event the acquisition of control of SBM Life by the
Purchaser is approved by the Minnesota Department and the
California Department at a time when the holders of interests in
each of the Affiliated Mutual Funds shall not have approved the
assignment to the Purchaser of the agreements between the Seller
and the Affiliated Mutual Funds, the Purchaser and the Seller
shall attempt in good faith to negotiate a means by which the
sale of the SBM Life Shares to the Purchaser could be consummated
prior to the receipt of the remaining Affiliated Mutual Fund
approvals but otherwise in accordance with the terms of this
Agreement.
SECTION 5.15. Cooperation. In order to assist the Seller in the fulfillment
of its rights and obligations under this Agreement and the orderly winding up,
liquidation and dissolution of the Seller after the Closing Date, and only to
the extent necessary, the Purchaser covenants and agrees to take the following
actions, at no expense to the Seller, until such time as the Seller has
dissolved pursuant to the provisions of the Minnesota Business Corporation Act:
(a) The Purchaser shall maintain and retain all books and records in
its possession after the Closing Date concerning or relating to
the Assets or the Business, wherever located, up to a maximum of
five years. In addition, upon the dissolution of the Seller, the
Purchaser shall maintain and retain all books and records
delivered to it by the Seller pertaining to the business of the
Seller, which records are required by law to be maintained for a
specified period, for the period specified by law, to the extent
the Seller shall have given the Purchaser notice thereof. Such
books and records shall be made available to the Seller upon
reasonable notice and the Purchaser shall not destroy any such
books and records within five years after the Closing without
first specifying to the Seller the nature and coverage of the
records proposed to be destroyed and offering to turn them over
to the Seller.
(b) The Purchaser agrees that it will provide to the Seller such
information within the possession of the Purchaser or any
Subsidiary regarding the Business relating to the period prior to
the Closing or relating to the Seller as the Seller may
reasonably request, but only to the extent such activities do not
unreasonably interfere with the business or operations of the
Purchaser or any Subsidiary.
(c) The Purchaser agrees that the officers and employees of the
Seller and the Subsidiaries immediately prior to the Closing
Date, so long as they remain officers or employees of the
Subsidiaries or the Purchaser after the Closing Date, will be
made available to the Seller at the Seller's reasonable request
to assist the Seller in any and all actions necessary in
connection with preparing any Returns and any other
administrative filings and the winding up, liquidation and
dissolution of the Seller, but only to the extent such activities
do not unreasonably interfere with the business or operations of
the Purchaser or any Subsidiary.
(d) Permit officers, employees and representatives of the Seller to
occupy the office space currently used by Charles A. Geer in the
Seller's current offices located at 8400 Normandale Lake
Boulevard, Minneapolis, Minnesota until the earlier of (i)
December 31, 1995 and (ii) the date on which the lease for such
office space is terminated and employees of the Purchaser or the
Subsidiaries no longer occupy such offices.
SECTION 5.16. Indemnification. (a) Following the Closing, the Purchaser
shall either cause each of the Subsidiaries to continue to indemnify or directly
indemnify the persons who are currently officers and directors of each of the
Subsidiaries substantially in accordance with the articles of incorporation and
bylaws of each of the Subsidiaries as they are currently in effect (or, at the
option of the Purchaser, on terms more favorable than those currently in effect)
for any action or inaction by such person prior to the Closing. Following the
Closing, the Purchaser shall also cause the Subsidiaries to maintain the
provisions of their articles of incorporation and bylaws which limit the
liability of the persons who are currently officers and directors of each of the
Subsidiaries for actions or inactions by such persons prior to the Closing as
they are currently in effect (or, at the option of the Purchaser, on terms more
favorable than those currently in effect).
(b) The Purchaser, its successors and assigns shall be indemnified
and held harmless by the Seller for any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation,
attorneys' and consultants' fees and expenses) actually suffered
or incurred by them ("Losses") arising out of or resulting from
the Purchaser's status as an owner of SBM Preferred Stock
acquired pursuant to the Preferred Stock Purchase Agreements
during the period from the Closing Date through the date of final
liquidation of the Seller pursuant to the Plan of Liquidation. If
the Seller acknowledges in writing its obligation to indemnify
the Purchaser under this Section 5.16(b) for any Losses arising
out of a claim by a third party (a "Third Party Claim"), then the
Seller shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the
Purchaser within five days of the receipt of notice of such Third
Party Claim from the Purchaser; provided, however, that if there
exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the good faith judgment of
the Purchaser for the same counsel to represent both the Seller
and the Purchaser, then the Purchaser shall be entitled to retain
its own counsel, in each jurisdiction for which the Purchaser
reasonably determines counsel is required, at the expense of the
Seller. In the event the Seller exercises the right to undertake
any such defense against any such Third Party Claim as provided
above, the Purchaser shall cooperate with the Seller in such
defense and make available to the Seller, at the Seller's
expense, all witnesses, pertinent records, materials and
information in the Purchaser's possession or under the
Purchaser's control relating thereto as is reasonably required by
the Seller. Similarly, in the event the Purchaser is, directly or
indirectly, conducting the defense against any such Third Party
Claim, the Seller shall cooperate with the Purchaser in such
defense and make available to the Purchaser, at the Seller's
expense, all such witnesses, records, materials and information
in the Seller's possession or under the Seller's control relating
thereto as is reasonably required by the Purchaser. No such Third
Party Claim may be settled by the Seller without the prior
written consent of the Purchaser. To the extent that the Seller's
undertakings set forth in this Section 5.16(b) may be
unenforceable, the Seller shall contribute the maximum amount
that it is permitted to contribute under applicable law to the
payment and satisfaction of all Losses.
SECTION 5.17. Plan of Liquidation. Pursuant to the Plan of Liquidation, on
the Closing Date, the Seller shall pay to the Purchaser $19,000,000 in cash in
immediately available funds in respect of the shares of SBM Preferred Stock then
held by the Purchaser plus accrued and unpaid dividends thereon as provided in
the Certificate of Designation for the SBM Preferred Stock. The Purchaser hereby
waives any right of the Purchaser to exchange shares of SBM Common Stock
acquired pursuant to the Preferred Stock Purchase Agreements for shares of
Series B Voting Convertible Preferred Stock of the Seller.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Offer of Employment. (a) As of the Closing Date, the
Purchaser shall offer transitional or regular employment, at salary levels not
less than those in effect as of February 1, 1995, to each of the then current
employees in good standing of the Seller, other than Charles A. Geer. As used
herein, "Transferred Employee" shall mean each such employee who accepts such
offer.
(b) Not later than December 31, 1995, the Purchaser shall either
offer regular employment to each Transferred Employee who is a
party to an employment agreement listed in Exhibit 2.02 (each, an
"Executive") or inform such Executive that no such offer will be
made. Without limiting the assumption of Liabilities under
Section 2.02(a)(v), in the event the Purchaser does not make an
offer of regular employment on or before such date or offers
regular employment on or before such date at a location outside
of the Minneapolis-St. Paul metropolitan area which is not
accepted by the Executive, the Executive shall be entitled to the
change of control severance benefits payable in accordance with
such Executive's employment agreement.
SECTION 6.02. Past-Service Credit. Effective as of the Closing Date, each
Transferred Employee shall cease to participate in the Plans, and shall become
eligible to participate in the employee benefit plans, programs and arrangements
maintained by the Purchaser and its subsidiaries for their similarly-situated
employees (the "Purchaser Plans"); provided, however, that the Purchaser may, at
its option, maintain the health and life insurance Plans currently maintained by
the Seller and provide for the participation in such Plans of Transferred
Employees through December 31, 1995. The Purchaser and its subsidiaries shall
grant the Transferred Employees credit for eligibility, vesting and benefit
service purposes under the Purchaser Plans for all service credited to such
Transferred Employees under the Plans and the Purchaser shall waive, with
respect to the Transferred Employees, any pre-existing condition restrictions in
any Purchaser Plans.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Returns. From the date of this Agreement through and after
the Closing Date, the Seller shall prepare and file or otherwise furnish in
proper form to the appropriate Governmental Authority (or cause to be prepared
and filed or so furnished) in a timely manner all Tax returns, reports and forms
("Returns") relating to the Seller and the Business that are due on or before or
relate to any taxable period ending on or before the Closing Date (and the
Purchaser shall do the same for Returns relating to the Business with respect to
any taxable period ending after the Closing Date). Returns of the Business not
yet filed for any taxable period that begins before the Closing Date shall be
prepared in a manner reasonably satisfactory to the Purchaser (except to the
extent counsel for the Seller renders a legal opinion there is no reasonable
basis in Law therefor or that a Return cannot be so prepared and filed without
being subject to penalties).
SECTION 7.02. Refunds. Any Tax refund (including any interest with respect
thereto) relating to the Subsidiaries for any taxable period prior to the
Closing Date shall be the property of the Purchaser, and if received by the
Seller shall be payable promptly to the Purchaser.
SECTION 7.03. Cooperation and Exchange of Information. Upon the terms set
forth in Section 5.02, the Seller and the Purchaser will provide each other with
such cooperation and information as either of them reasonably may request of the
other in filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to a refund of Taxes, participating in or
conducting any audit or other proceeding in respect of Taxes. Such cooperation
and information shall include providing copies of relevant Returns or portions
thereof, together with accompanying schedules, related work papers and documents
relating to rulings or other determinations by Tax authorities. The Seller shall
make its employees available on a basis mutually convenient to both parties to
provide explanations of any documents or information provided hereunder. Each of
the Seller (or a custodian satisfactory to the Purchaser) and the Purchaser
shall retain all Returns, schedules and work papers, records and other documents
in its possession relating to Tax matters of the Seller and the Business for
each taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such Returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective Tax periods, or (ii) six
years following the due date (without extension) for such Returns. Any
information obtained under this Section 7.03 shall be kept confidential in
accordance with Section 5.03 except as may be otherwise necessary in connection
with the filing of Returns or claims for refund or in conducting an audit or
other proceeding.
SECTION 7.04. Conveyance Taxes. The Seller shall be liable for and shall
hold the Purchaser harmless against any real property transfer or gains, sales,
use, transfer, value added, stock transfer, and stamp taxes, any transfer,
recording, registration, and other fees, and any similar Taxes which become
payable in connection with the transactions contemplated by this Agreement,
except for any New York stock transfer tax payable with respect to the sale of
the Shares by the Seller to the Purchaser, which shall be paid by the Purchaser.
The Seller, after the review and consent by the Purchaser, shall file such
applications and documents as shall permit any such Tax to be assessed and paid
on or prior to the Closing Date in accordance with any available pre-sale filing
procedure. The Purchaser shall execute and deliver all instruments and
certificates necessary to enable the Seller to comply with the foregoing. The
Purchaser shall complete and execute a resale or other exemption certificate
with respect to the inventory items sold hereunder, and shall provide the Seller
with an executed copy thereof.
SECTION 7.05. Miscellaneous. (a) From and after the date of this Agreement,
the Seller shall not without the prior written consent of the Purchaser (which
may, in its sole and absolute discretion, withhold such consent) make, or cause
or permit to be made, any Tax election that would affect the Business.
(b) All payments payable under any tax sharing agreement or
arrangement between the Seller and any Subsidiary for any taxable
period ending on or prior to the Closing Date shall be calculated
on a basis consistent with that used to date and be payable in
full on the Closing Date (or a reasonable estimate thereof),
notwithstanding any later time for payment set forth in any such
agreement. The Seller shall indemnify the Purchaser for any
payments due from the Seller to any Subsidiary under any such tax
sharing agreement or arrangement in excess of the estimate
thereof paid on the Closing Date pursuant to the previous
sentence, and the Purchaser shall indemnify the Seller for any
payments due from the Subsidiaries to the Seller under any such
tax sharing agreement or arrangement as a result of an
overpayment by the Seller on the Closing Date pursuant to the
previous sentence. Except as otherwise provided above, any tax
sharing agreement or arrangement between the Seller and any
Subsidiary shall be terminated immediately prior to the Closing.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Seller. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall
have been true and correct when made and, other than such
representations and warranties as are made as of another date,
shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the
Closing Date, the covenants and agreements contained in this
Agreement to be complied with by the Purchaser on or before the
Closing shall have been complied with in all material respects,
and the Seller shall have received a certificate from the
Purchaser to such effect signed by a duly authorized officer
thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Assets contemplated
hereby shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been commenced
by or before any Governmental Authority against either the Seller
or the Purchaser, seeking to restrain or materially and adversely
alter the transactions contemplated by this Agreement which is
reasonably likely to render it impossible or unlawful to
consummate such transactions; provided, however, that the
provisions of this Section 8.01(c) shall not apply if the Seller
has directly or indirectly solicited or encouraged any such
Action;
(d) Resolutions. The Seller shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of the
Purchaser, of the resolutions duly and validly adopted by the
Board of Directors of the Purchaser evidencing its authorization
of the execution and delivery of this Agreement and the Ancillary
Agreements to which the Purchaser is a party and the consummation
of the transactions contemplated hereby and thereby;
(e) Incumbency Certificate. The Seller shall have received a
certificate of the Secretary or an Assistant Secretary of the
Purchaser certifying the names and signatures of the officers of
the Purchaser authorized to sign this Agreement and the Ancillary
Agreements to which the Purchaser is a party and the other
documents to be delivered hereunder and thereunder;
(f) Legal Opinions. The Seller shall have received from Shearman &
Sterling, counsel to the Purchaser, a legal opinion, addressed to
the Seller and dated the Closing Date, substantially in the form
of Exhibit 8.01(f);
(g) Shareholder Approval. The requisite shareholders of the Seller
shall have approved this Agreement and the transactions
contemplated hereby and the Plan of Liquidation and the
transactions contemplated thereby;
(h) Regulatory Approvals. All authorizations, consents, orders and
approvals of all Governmental Authorities listed in Section 3.05
of the Disclosure Schedule and in the writing referred to in
Section 4.03 and the approvals of the Minnesota Department and
the California Department shall have been received;
(i) Ancillary Agreements. The Purchaser shall have executed and
delivered to the Seller the Assumption Agreement and shall have
delivered to the Seller true and correct copies of the Preferred
Stock Purchase Agreements.
(j) Releases. To the extent not prohibited by the Minnesota
Department and the California Department, each Subsidiary shall
have executed and delivered to the Seller, on behalf of the
Seller and those persons who were officers and directors of the
Seller and each Subsidiary prior to the Closing, a release in the
form of Exhibit 8.01(j).
SECTION 8.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Seller contained in this Agreement shall
have been true and correct when made and, other than such
representations and warranties as are made as of another date,
shall be true and correct as of the Closing with the same force
and effect as if made as of the Closing Date (provided any
inaccuracy therein has or could reasonably be expected to have a
Material Adverse Effect), the covenants and agreements contained
in this Agreement to be complied with by the Seller on or before
the Closing shall have been complied with in all material
respects, and the Purchaser shall have received a certificate of
the Seller to such effect signed by a duly authorized officer
thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Assets contemplated
hereby shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against
either the Seller or the Purchaser, seeking to restrain or
materially and adversely alter the transactions contemplated by
this Agreement which is reasonably likely to render it impossible
or unlawful to consummate such transactions or which could
reasonably be expected to result in a Material Adverse Change;
provided, however, that the provisions of this Section 8.02(c)
shall not apply if the Purchaser has solicited or encouraged any
such Action;
(d) Resolutions. The Purchaser shall have received a true and
complete copy, certified by the Secretary or an Assistant
Secretary of the Seller, of the resolutions duly and validly
adopted by the Board of Directors of the Seller and the
shareholders of the Seller evidencing their authorization of the
execution and delivery of this Agreement and the Ancillary
Agreements to which the Seller is a party and the consummation of
the transactions contemplated hereby and thereby;
(e) Incumbency Certificate. The Purchaser shall have received a
certificate of the Secretary or an Assistant Secretary of the
Seller certifying the names and signatures of the officers of the
Seller authorized to sign this Agreement and the Ancillary
Agreements to which the Seller is a party and the other documents
to be delivered hereunder and thereunder;
(f) Legal Opinions. The Purchaser shall have received from (i)
Stewart D. Gregg, Esq., General Counsel of the Seller, a legal
opinion, addressed to the Purchaser and dated the Closing Date,
substantially in the form of Exhibit 8.02(f)(i) and (ii) Faegre &
Benson, counsel to the Seller, a legal opinion, addressed to the
Purchaser and dated the Closing Date, substantially in the form
of Exhibit 8.02(f)(ii);
(g) Shareholder Approval. The requisite shareholders of the Seller
shall have approved this Agreement and the transactions
contemplated hereby and the Plan of Liquidation and the
transactions contemplated thereby;
(h) Consents and Approvals. The Purchaser and the Seller shall have
received, each in form and substance reasonably satisfactory to
the Purchaser, all authorizations, consents, orders and approvals
of all Governmental Authorities and officials and all third party
consents and estoppel certificates set forth in Exhibit 8.02(h),
except to the extent that the failure to obtain any such consent
or estoppel certificate of third parties, individually or in the
aggregate, would not be reasonably likely to have a Material
Adverse Effect;
(i) Ancillary Agreements. The Seller shall have executed and
delivered to the Purchaser each of the Ancillary Agreements to
which the Seller is a party;
(j) No Material Adverse Change. No Material Adverse Change shall have
occurred;
(k) Certificate of Non-Foreign Status. The Purchaser shall have
received a certificate from the Seller (which complies with
Section 1445 of the Code) of non-foreign status executed in
accordance with the provisions of the Foreign Investment in Real
Property Tax Act;
(l) No Regulatory Restrictions. None of the Subsidiaries shall be
subject to any material restriction (whether on its business,
operations, ability to pay dividends or incur indebtedness, or
otherwise) imposed by any Governmental Authority since the date
of this Agreement, except restrictions generally applicable to
companies engaged in businesses substantially similar to the
Business (including, without limitation, Actuarial Guideline GGG
of the NAIC) and restrictions resulting solely from any action or
inaction or the Purchaser or from the fact that the Purchaser is
participating in the transactions contemplated by this Agreement,
and the Purchaser shall not be subject to any material
restriction or requirement (whether on its business, operations,
ability to pay dividends or incur indebtedness, or otherwise)
imposed by any Governmental Authority as a result of the
transactions contemplated by this Agreement, except those which
are generally applicable to acquirors and those which are not
materially more stringent with regard to capital infusions by the
Purchaser into SBM Life and SBM Certificate Company than
contemplated by Section 5.04(a);
(m) Reinsurance Agreements. The Modified Coinsurance Agreement
between Heritage Reinsurance, Ltd. shall have been terminated,
and the Reinsurance Agreement between SBM Life and NRG American
Life Reassurance Corporation and the related trust agreement
shall have been amended, on terms reasonably satisfactory to the
Purchaser and approved by the Minnesota Department, in a manner
so as to comply with Minnesota Statutes Section 60A.803, as if
such law were in full effect on the Closing Date;
(n) Executive Employment Agreements. SBM Life shall have been
released as a party from and from all Liabilities under the
Employment Agreement among the Seller, SBM Life and Charles A.
Geer and all Liabilities for bonus payments under the Employment
Agreements with each of Edward L. Zeman, Stewart D. Gregg, Dale
C. Bauman, Richard M. Carlblom and Keith O. Martens (except to
the extent such Liabilities are included in the Excess
Liabilities);
(o) Winslow Employment Agreement. The Employment Agreement between
the Seller and Ford H. Winslow shall have been terminated (unless
the Liabilities of the Seller thereunder are included in the
Excess Liabilities);
(p) Tax Sharing Agreement. The Tax Sharing Agreement among the Seller
and the Subsidiaries shall have been terminated;
(q) Cease and Desist Order. The Cease and Desist Order issued by the
Minnesota Department on November 16, 1994 in respect of SBM Life
shall have been rescinded in all respects, effective as of or
prior to the Closing;
(r) Financial Plan. The Minnesota Department shall have approved the
termination of, and the board of directors of SBM Life shall have
adopted resolutions terminating, the financial plan adopted by
the board of directors of SBM Life on August 12, 1994;
(s) Articles of Incorporation. The Minnesota Department shall have
approved an amendment to the Restated and Amended Articles of
Incorporation of SBM Life providing for the exculpation from
liability and indemnification of directors and officers of SBM
Life to the fullest extent permitted by Minnesota Law;
(t) Audited Financial Statements. The Purchaser shall have received a
true and complete copy of the audited financial statements of the
Seller and each of the Subsidiaries as of and for the fiscal year
ended December 31, 1994, together with all related notes and
schedules thereto, accompanied by the reports thereon of the
Seller's Accountants;
(u) Release. The Seller shall have executed and delivered to each
Subsidiary a release in the form of Exhibit 8.02(w);
(v) Examination Report. The Purchaser shall have received a copy (or
draft thereof) of the Examination Report to be issued by the
Minnesota Department with respect to the examination of SBM Life
currently being conducted, which Examination Report shall not
require, except as disclosed in Section 8.02(x) of the Disclosure
Schedule, any retrospective or prospective effects on the
statutory financial statements of SBM Life which results in a
Material Adverse Change;
(w) Preferred Stock Purchase Agreements. The conditions to the
consummation of the transactions contemplated by the Preferred
Stock Purchase Agreements shall have been satisfied; and
(x) SBM Financial Book Value. The SBM Financial Book Value as of the
Closing Date shall be not less than $650,000.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the Purchaser if, between the date hereof and the time
scheduled for the Closing: (i) an event or condition occurs that
has resulted in or that may be reasonably expected to result in a
Material Adverse Change and which cannot reasonably be expected
to be cured; or (ii) except for (A) actions in connection with
the contemplated dissolution of the Seller under the Minnesota
Business Corporation Act or (b) actions instituted by or against
the Seller, with the cooperation of the Seller and with the
purpose and intent of conveying the Assets to the Purchaser as
contemplated by this Agreement, the Seller or any Subsidiary
makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against the Seller seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization; or
(b) by either the Seller or the Purchaser if the Closing shall not
have occurred by July 31, 1995; provided, however, that the right
to terminate this Agreement under this Section 9.01(b) shall not
be available to any party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior to
such date; or
(c) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall
have become final and nonappealable; or
(d) by the Seller in order to enter into an agreement with a Person
other than the Purchaser relating to a Business Combination with
the Seller or any Subsidiary in response to an unsolicited bona
fide written indication of interest and only to the extent the
board of directors of the Seller determines that such action is
required by its fiduciary duties to the stockholders of the
Seller under applicable law after consultation with outside
counsel; provided, however, that the Seller shall simultaneously
pay to the Purchaser in immediately available funds the Break-Up
Fee pursuant to Section 5.08(a); or
(e) by the mutual written consent of the Seller and the Purchaser; or
(f) by the Purchaser or the Seller in the event the shareholders of
the Seller shall have failed to approve this Agreement at a
meeting duly convened therefor; provided, however, that the right
to terminate this Agreement under this Section 9.01(f) shall not
be available to the Seller in the event the Seller shall have
failed to comply with its obligations under Section 5.13; and
provided, further, that, if applicable, the Seller shall pay to
the Purchaser when due the amount or amounts specified in Section
5.08(b) or 5.08(c), as applicable.
SECTION 9.02. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except (a) as set forth in Sections 5.03, 5.08 and 10.01 and (b) that nothing
herein shall relieve either party from liability for any breach of this
Agreement.
SECTION 9.03. Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
SECTION 10.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.02):
(a) if to the Seller:
SBM Company
8400 Normandale Lake Boulevard
Suite 1150
Minneapolis, Minnesota 55437
Telecopy: (612) 835-0735
Attention: Charles A. Geer
with a copy to:
Faegre & Benson
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telecopy: (612) 336-3026
Attention: David B. Miller, Esq.
(b) if to the Purchaser:
ARM Financial Group, Inc.
239 S. Fifth Street, 12th Floor
Louisville, Kentucky 40202
Telecopy: (502) 582-7903
Attention: Co-Chief Executive Officers
with copies to:
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas, 33rd Floor
New York, New York 10020
Telecopy: (212) 703-7951
Attention: Frank V. Sica
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 848-7179
Attention: W. Jeffrey Lawrence, Esq.
SECTION 10.03. Public Announcements. The parties shall cooperate as to the
timing and contents of any press release or public announcement in respect of
this Agreement or the transactions contemplated hereby .
SECTION 10.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 10.06. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, undertakings, representations and warranties,
both written and oral, between the Seller and the Purchaser with respect to the
subject matter hereof.
SECTION 10.07. Assignment. This Agreement may not be assigned by operation
of Law or otherwise without the express written consent of the Seller and the
Purchaser (which consent may be granted or withheld in the sole discretion of
the Seller and the Purchaser); provided, however, that the Purchaser may assign
this Agreement to an Affiliate of the Purchaser without the consent of the
Seller; provided, further, that no such assignment shall relieve the Purchaser
of its obligations hereunder.
SECTION 10.08. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and, except as set forth in Section 5.16, nothing herein,
express or implied, is intended to or shall confer upon any other Person,
including, without limitation, any union or any employee or former employee of
the Seller, any legal or equitable right, benefit or remedy of any nature
whatsoever, including, without limitation, any rights of employment for any
specified period, under or by reason of this Agreement.
SECTION 10.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the Seller
and the Purchaser or (b) by a waiver in accordance with Section 9.03.
SECTION 10.10. Governing Law. This Agreement and the legal relations
between the parties hereto shall be governed by, and construed in accordance
with, the laws of the State of New York, applicable to contracts executed in and
to be performed entirely within that state, as to all matters, including,
without limitation, matters of validity, interpretation, construction, effect,
performance and remedies.
SECTION 10.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity, without the necessity of demonstrating the
inadequacy of money damages.
SECTION 10.13. Survival. The covenants and agreements of the Company and
the Purchaser relating to the period following the Closing shall survive the
Closing. All representations and warranties and all other covenants and
agreements in this Agreement shall not survive the Closing.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
SBM COMPANY
By
Name: Charles A. Geer
Title: President and Chief Executive Officer
ARM FINANCIAL GROUP, INC.
By
Name: John Franco
Title: Co-Chief Executive Officer
By
Name: Martin H. Ruby
Title: Co-Chief Executive Officer
EXHIBIT 1.01(a)
FORM OF ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of _______, 1995, between ARM FINANCIAL
GROUP, INC., a Delaware corporation ("Assignee"), and SBM COMPANY, a Minnesota
corporation ("Assignor").
WHEREAS, Assignor and Assignee are parties to an Amended and Restated Stock
and Asset Purchase Agreement, dated as of February 16, 1995 (the "Purchase
Agreement"), pursuant to which Assignor has agreed to sell to Assignee all
right, title and interest in and to certain properties and assets of Assignor,
and in connection therewith Assignee has agreed to assume certain liabilities of
Assignor;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants set forth herein and in the Purchase Agreement, Assignee and
Assignor hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein have the meanings assigned to them in the Purchase Agreement.
2. Assumption and Exclusion of Liabilities. (a) Assignee hereby assumes
and agrees to pay, perform and discharge when due all of the following
Liabilities of Assignor (the "Assumed Liabilities"):
(i) all Liabilities of Assignor arising from or relating to the
operation of the Business following the Closing;
(ii) all Liabilities of Assignor arising after the Closing out of
or resulting from ownership of the Assets by Assignee
following the Closing, including, without limitation, all
Liabilities under all contracts, licenses, sublicenses,
agreements, leases, commitments, sales and purchase orders,
commitments, bids and offers included in the Assets;
(iii) all Liabilities of Assignor to Transferred Employees
arising after the Closing;
(iv) all Liabilities of Assignor to Transferred Employees arising
prior to the Closing to the extent reflected and reserved
against in the books and records of the Subsidiaries as of
the date hereof (other than the Liabilities referred to in
Paragraph 2(b)(ii) below);
(v) all Liabilities of Assignor described on Exhibit 1.01(c) to
the Purchase Agreement or under the executive employment
agreements of Assignor set forth in Exhibit 2.02 to the
Purchase Agreement;
(vi) all Liabilities of Assignor relating to the open items set
forth in Section 2.07(b) of the Disclosure Schedule; and
(vii) all Excess Liabilities of Assignor not otherwise included
in clauses (i) through (vi).
(b) Assignor hereby retains, and agrees to pay, perform and discharge
when due, and Assignee shall not assume or have any
responsibility for, all Liabilities of Assignor other than the
Assumed Liabilities (the "Excluded Liabilities"), including,
without limitation:
(i) all Taxes (other than Assumed Liabilities) (A) now or
hereafter owed by Assignor or any Affiliate of Assignor
(other than any Subsidiary), or (B) attributable to the
Assets or the Business (other than any Subsidiary), relating
to any period, or any portion of any period, ending on or
prior to the date hereof; and
(ii) all Liabilities (other than Assumed Liabilities arising
under the employment agreements listed in Exhibit 2.02 to
the Purchase Agreement or Assumed Liabilities described on
Exhibit 1.01(c) to the Purchase Agreement) arising under the
Plans (including, without limitation, Liabilities thereunder
relating to Transferred Employees) and all other Liabilities
to current and former employees of Assignor other than the
Transferred Employees, whether arising before or after the
Closing.
3. Purchase Agreement. This Assumption Agreement is intended to implement
the provisions of the Purchase Agreement and shall not be construed to
enhance, extend or limit the rights or obligations of Assignor or
Assignee thereunder.
4. Assignment. This Assumption Agreement may not be assigned by operation
of Law or otherwise without the express written consent of Assignor
and Assignee (which consent may be granted or withheld in the sole
discretion of Assignor and Assignee); provided, however, that Assignee
may assign this Assumption Agreement to an Affiliate of Assignee
without the consent of Assignor; provided, further, that no such
assignment shall relieve Assignee of its obligations hereunder.
5. No Rights in Third Parties. Nothing expressed or implied in this
Assumption Agreement is intended to confer upon any person, other than
Assignor and Assignee and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of
this Assumption Agreement.
6. Counterparts. This Assumption Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the
same agreement.
7. Governing Law. This Assumption Agreement and the legal relations
between the parties hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, applicable to
contracts executed in and to be performed entirely within that state,
as to all matters, including, without limitation, matters of validity,
interpretation, construction, effect, performance and remedies.
IN WITNESS WHEREOF, Assignee and Assignor have caused this Assumption
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ARM FINANCIAL GROUP, INC.
By
Name:
Title:
By
Name:
Title:
SBM COMPANY
By
Name:
Title:
EXHIBIT 1.01(b)
FORM OF BILL OF SALE AND ASSIGNMENT
BILL OF SALE AND ASSIGNMENT, dated as of _______, 1995, from SBM COMPANY, a
Minnesota corporation ("Assignor"), to ARM FINANCIAL GROUP, INC., a Delaware
corporation ("Assignee").
WHEREAS, Assignor and Assignee are parties to an Amended and Restated Stock
and Asset Purchase Agreement, dated as of February 16, 1995 (the "Purchase
Agreement"), pursuant to which Assignor has agreed to sell to Assignee all
right, title and interest in and to certain properties and assets of Assignor,
and in connection therewith Assignee has agreed to assume certain liabilities of
Assignor;
NOW, THEREFORE, in consideration of the Purchase Price (as defined in the
Purchase Agreement) and the assumption of such liabilities, Assignor agrees as
follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein have the meanings assigned to them in the Purchase Agreement.
2. Sale and Assignment of Assets. Assignor does hereby sell, assign,
transfer, convey, grant, bargain, set over, release, deliver and
confirm unto Assignee, its successors and assigns, forever all of
Assignor's right, title and interest in and to the following assets
and properties (the "Assets"):
(a) all rights of Assignor in respect of the Leased Real Property;
(b) all furniture, fixtures, equipment, machinery and other tangible
personal property owned by Assignor at the date hereof and held
for use in the conduct of the Business and not otherwise included
in clause (a) above;
(c) all books of account, general, financial, tax and personnel
records, invoices, distributor and supplier lists, correspondence
and other documents, records and files and all computer software
and programs and any rights thereto owned, associated with or
employed by Assignor and used in, or relating to, the Business at
the date hereof, other than organization documents, minute and
stock record books and the corporate seal of Assignor;
(d) all Assignor's right, title and interest in, to and under the
Owned Intellectual Property and the Licensed Intellectual
Property;
(e) other than as set forth in Exhibit A hereto, insofar as they
relate to the Assets or the Business, all claims, causes of
action, choses in action, rights of recovery and rights of
set-off of any kind (including rights to insurance proceeds and
rights under and pursuant to all warranties, representations and
guarantees made by suppliers of products, materials or equipment,
or components thereof), pertaining to, arising out of, and
inuring to the benefit of Assignor;
(f) all sales and promotional literature, customer lists and other
sales-related materials owned, used, associated with or employed
by Assignor at the date hereof;
(g) other than as set forth in Exhibit A hereto, insofar as they
relate to the Assets or the Business and to the extent such
rights are transferable, all rights of Assignor under all
contracts, licenses, sublicenses, agreements, leases,
commitments, and sales and purchase orders, and under all
commitments, bids and offers, including, without limitation, the
Management Agreement between Assignor and SBM Life, the
Management Agreement between Assignor and SBM Certificate Company
and the Investment Advisory and Management Agreements, Transfer
Agency Agreements, Administration Agreements, Agency Agreements
and Accounting Services Agreements between Assignor and the
Affiliated Mutual Funds;
(h) all municipal, state and federal franchises, permits, licenses,
agreements, waivers and authorizations held or used by Assignor
in connection with, or required for, the Business, to the extent
transferable; and
(i) Assignor's custodial account at Old Kent Bank in Chicago,
Illinois, account number 300014, relating to Assignor's
obligations in respect of face amount certificates issued by
Assignor and assumed by SBM Certificate Company.
3. Representations and Warranties. The sale, assignment, transfer and
conveyance hereunder is made without any representations or warranties
except as specified in the Purchase Agreement.
4. Power of Attorney. Assignor, to the extent it may lawfully do so,
hereby constitutes and appoints Assignee, its successors and assigns,
the true and lawful attorney of Assignor, with full power of
substitution, in the name of Assignee or in the name and stead of
Assignor, but on behalf of and for the benefit of Assignee, its
successors and assigns (and at the expense of Assignor):
(a) to collect, demand and receive any and all of the Assets and to
give receipts and releases for and in respect of the same;
(b) to institute and prosecute in Assignee's name, or otherwise, at
the expense of and for the benefit of Assignor any and all
actions, suits or proceedings, at law, in equity or otherwise
which Assignee may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the
Assets, to defend or compromise any and all actions, suits or
proceedings in respect of any of the Assets, and to do all such
acts and things in relation thereto as Assignee shall deem
advisable for the collection or reduction to possession of any
Assets;
(c) to take any and all other reasonable action designed to vest more
fully in Assignee the Assets and in order to provide for Assignee
the benefit, use, enjoyment and possession of such Assets; and
(d) to do all reasonable acts and things in relation to the Assets
and the Business.
Assignor acknowledges that the foregoing powers are coupled with an interest and
shall be irrevocable by it or upon its subsequent dissolution or in any manner
or for any reason. Assignee shall be entitled to retain for its own account any
amounts collected pursuant to the foregoing powers, including any amounts
payable as interest with respect thereto. Assignor shall from time to time pay
to Assignee, when received, any amounts which shall be received directly or
indirectly by Assignor (including amounts received as interest) in respect of
any of the Assets.
5. Obligations and Liabilities Not Assumed. Nothing expressed or implied
in this Bill of Sale and Assignment shall be deemed to be an
assumption by Assignee of any Liabilities of Assignor. Assignee does
not by this Bill of Sale and Assignment assume or agree to pay,
perform or discharge any Liabilities of Assignor of any nature, kind
or description whatsoever. The terms and provisions of the assumption
of Liabilities by Assignee are set forth in the Assumption Agreement
dated as of the date hereof between Assignee and Assignor.
6. No Rights in Third Parties. Nothing expressed or implied in this Bill
of Sale and Assignment is intended to confer upon any person, other
than Assignor and Assignee and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by
reason of this Bill of Sale and Assignment.
7. Successors and Assigns. This Bill of Sale and Assignment shall be
binding on and inure to the benefit of Assignor and Assignee and their
respective successors and permitted assigns.
8. Governing Law. This Bill of Sale and Assignment shall be governed by,
and construed in accordance with, the laws of the State of New York,
applicable to contracts executed in and to be performed entirely
within that state, as to all matters, including, without limitation,
matters of validity, interpretation, construction, effect, performance
and remedies.
IN WITNESS WHEREOF, Assignor has caused this Bill of Sale and Assignment to
be executed as of the date first written above by its officer thereunto duly
authorized.
SBM COMPANY
By
Name:
Title:
[Corporate Seal]
Attest:
By____________________________
Name:
Title:
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of ________, 1995, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he is ___________ of SBM Company, a Minnesota corporation and the
corporation described in and on whose behalf he executed the foregoing
instrument, and that he signed his name thereto by authority of the Board of
Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
___________________________
Notary Public
[Notarial Seal]
My commission expires:
__________________
Exhibit A
to Bill of Sale
and Assignment
CERTAIN EXCLUDED ASSETS
EXHIBIT A
List of Seller's claims not transferred to Purchaser.
1. Judgment in the amount of $103,000 granted to Seller against Southwest
Leasing. This claim was transferred to Seller by State Bank & Trust (the
"Bank") in connection with the sale of the Bank by Seller to Taylor
Bancshares, Inc.
2. Any claims of Seller or an officer, director or employee of Seller under
any bond or insurance policy.
3. Payments in the amount of $80,000 on non-compete agreement between Seller
and the Bank. This Agreement was entered into in connection with the sale
of the Bank by Seller to Taylor Bancshares, Inc.
4. Payment on certain loans, defined in the Bank sales agreement, in
connection with the sale of the Bank by Seller to Taylor Banchshares, Inc.
List of Seller's contract rights and licenses not transferred to Purchaser.
1. All insurance and bonding coverages applicable to the Seller and its
affiliates.
2. SBM Life Management Agreement will be terminated at Closing.
3. Seller makes no representations regarding the status of SBM Financial
Services, Inc. as an NASD member on and after Closing.
4. Seller's and Subsidiaries' Investment Company Act Rule 17g-1(f) Agreement
will be terminated at Closing.
5. Seller's rights in the Roman Schmid split dollar policy.
6. A number of new agreements must be entered into prior to transfer of
Seller's rights to Purchaser as follows:
Mutual Fund Advisory Agreements
Mutual Fund Distribution Agreements
Mutual Fund Transfer Agent and Dividend Distribution Agreements
Mutual Fund Accounting Services Agreements
Mutual Fund 12b-1 Plans
SBM Certificate Company Management Agreement
SBM Certificate Company Distribution Agreement
EXHIBIT 1.01(c)
PREPAID EXPENSES
(Final amounts determined as of the Closing Date)
Balance at December 31. 1994
Rent and deposits $ 30,498
EDP Expenses $ 55,519
Telephone $ 4,065
Bloomberg system $ 2,163
Parex System $ 25,000
NASD Annual Fee for 1995 $ 14,040
Advances to Representatives $103,635
EXHIBIT 1.01(c)
LIABILITIES TO BE ASSUMED
1. Liabilities under Roman Schmid's amended and restated employment
agreement dated April 8, 1994, deferred compensation agreement and split
dollar life insurance contract.
2. Liabilities under Ford Winslow's employment agreement dated January 23,
1975.
3. Liabilities under Charles Geer's employment agreement dated November 22,
1994.
4. Liabilities relating to bonus payments under the employment agreements
listed in Exhibit 2.02 for Edward Zeman, Stewart Gregg, Rich Carlblom,
Keith Martens and Dale Bauman.
5. Conning & Company fees.
EXHIBIT 2.01
CERTAIN EXCLUDED ASSETS
2.01(f) List of Seller's Claims not transferred to Purchaser
1. Judgment in the amount of $103,000 granted to Seller against Southwest
Leasing. This claim was transferred to Seller by State Bank & Trust
(the "Bank") in connection with the sale of the Bank by Seller to
Taylor Bancshares, Inc.
2. Any claims of Seller or an officer, director or employee of Seller
under any bond or insurance policy.
3. Payments in the amount of $80,000 on non-compete agreement between
Seller and the Bank. This Agreement was entered into in connection
with the sale of the Bank by Seller to Taylor Bancshares, Inc.
4. Payment on certain loans, defined in the Bank sales agreement, in
connection with the sale of the Bank by Seller to Taylor Bancshares,
Inc.
20.1(h) List of Seller's Contract rights and licenses not transferred to
Purchaser.
1. All insurance and bonding coverages applicable to the Seller and its
affiliates.
2. SBM Life Management Agreement will be terminated at Closing.
3. Seller makes no representations regarding the status of SBM Financial
Services, Inc. as an NASD memeber on and after Closing.
4. Seller's and Subsidiaries' Investment Company Act Rule 17g-1(f)
Agreement will be terminated at Closing.
5. Seller's rights in the Roman Schmid split dollar policy.
6. A number of new agreements must be entered into prior to transfer of
Seller's rights to Purchaser as follows:
Mutual Fund Advisory Agreements
Mutual Fund Distribution Agreements
Mutual Fund Transfer Agent and Dividend Distribution Agreements
Mutual Fund Accounting Services Agreements
Mutual Fund 12b-1 Plans
SBM Certificate Company Management Agreement
SBM Certificate Company Distribution Agreement
EXHIBIT 2.02
EMPLOYMENT AGREEMENTS
1. Employment Agreement, dated November 22, 1994, among the Seller, SBM Life
and Edward L. Zeman, as amended
2. Employment Agreement, dated November 22, 1994, among the Seller, SBM Life
and Stewart D. Gregg, as amended
3. Employment Agreement, dated November 30, 1994, among the Seller, SBM Life
and Richard M. Carlblom
4. Employment Agreement, dated November 30, 1994, among the Seller, SBM Life
and Dale C. Bauman
5. Employment Agreement, dated November 30, 1994, among the Seller, SBM Life
and Keith O. Martens
EXHIBIT 2.03(b)
ALLOCATION OF PURCHASE PRICE
Allocated Purchase Price
SBM Life Shares $36,250,000
SBM Financial Shares 650,000
Affiliated Mutual Funds 1,200,000
Fixed Assets 500,000
Total $38,600,000
EXHIBIT 2.09
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of _______, 1995 (this "Agreement"), among SBM
COMPANY, a Minnesota corporation (the "Seller"), ARM FINANCIAL GROUP, INC., a
Delaware corporation (the "Purchaser"), and Chemical Bank, a New York banking
corporation, as escrow agent (the "Escrow Agent").
WHEREAS, the Seller and the Purchaser are parties to a Stock and Asset
Purchase Agreement, dated as of February 16, 1995 (the "Purchase Agreement"),
pursuant to which the Seller has agreed to sell to the Purchaser all right,
title and interest in and to certain properties and assets of the Seller, and in
connection therewith the Purchaser has agreed to assume certain liabilities of
the Seller;
WHEREAS, it is contemplated under Section 2.09 of the Purchase Agreement
that at the Closing (as defined in the Purchase Agreement), the Purchaser will
deposit the Escrow Amount (as defined below) in an account to be managed and
paid out by the Escrow Agent in accordance with the terms of this Agreement; and
WHEREAS, a copy of the Purchase Agreement has been delivered to the Escrow
Agent, and the Escrow Agent is willing to act as escrow agent hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants set forth herein and in the Purchase Agreement, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Unless otherwise defined herein,
capitalized terms used herein have the meanings assigned to them in the Purchase
Agreement.
ARTICLE II
APPOINTMENT AND DUTIES
OF ESCROW AGENT
SECTION 2.01. Appointment and Agreement of Escrow Agent. The Purchaser and
the Seller hereby appoint the Escrow Agent to serve as their escrow agent, and
the Escrow Agent hereby agrees to act as escrow agent for such parties, upon the
terms and conditions of this Agreement.
SECTION 2.02. Establishment of the Escrow Fund. (a) Pursuant to Sections
2.06(b) and 2.09 of the Purchase Agreement, the Purchaser shall deliver to the
Escrow Agent on the date hereof the amount of $__________ (the "Escrow Amount"),
by wire transfer in immediately available funds. The Escrow Agent shall
acknowledge receipt of and shall hold the Escrow Amount and all interest and
investment earnings thereon (the "Escrow Fund") in escrow, in Account No. ______
at ______, ABA No. ______, pursuant to this Agreement.
(b) Each of the Purchaser and the Seller confirms to the Escrow Agent
and to each other that the Escrow Fund is free and clear of all
Encumbrances except as may be created by this Agreement and the
Purchase Agreement.
SECTION 2.03. Exercise of Duties. (a) The Escrow Agent shall not be under
any duty to treat the Escrow Fund with any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed hereunder. Uninvested funds held hereunder shall
not earn or accrue interest.
(b) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Agreement
against the Escrow Agent. The Escrow Agent shall not be bound by
the provisions of any agreement between the other parties hereto
except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own gross
negligence, bad faith or willful misconduct and, except with
respect to claims based upon such gross negligence, bad faith or
willful misconduct that are successfully asserted against the
Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any
successor Escrow Agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements arising out of or in
connection with this Agreement. Without limiting the foregoing,
the Escrow Agent shall in no event be liable in connection with
its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof. The
provisions of this Section 2.03(c) shall survive the termination
of this Agreement and resignation of the Escrow Agent hereunder.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other
writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person
purporting to give receipt or advice or make any statement or
execute any document in connection with the provisions hereof has
been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be
liable for any action taken or omitted to be taken in accordance
with such advice.
(f) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectibility of any security or other
document or instrument held by or delivered to it.
(g) The Escrow Agent shall not be called upon to advise any party as
to the wisdom in selling or retaining or taking or refraining
from any action with respect to any securities or other property
deposited hereunder.
(h) The Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Escrow Fund to any successor
Escrow Agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction, whereupon the
Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. The
resignation of the Escrow Agent will take effect on the earlier
of (a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day which is 30 days after the
date of delivery of its written notice of resignation to the
other parties hereto. If at that time the Escrow Agent has not
received a designation of a successor Escrow Agent, the Escrow
Agent's sole responsibility after that time shall be to safekeep
the Escrow Fund until receipt of a designation of a successor
Escrow Agent or a joint written disposition by the other parties
hereto or a final order of a court of competent jurisdiction.
(i) During such time as the Escrow Agent is acting as escrow agent
hereunder, in the event of any disagreement among the other
parties hereto resulting in adverse claims or demands being made
in connection with the Escrow Fund or in the event that the
Escrow Agent in good faith is in doubt as to what action it
should take hereunder, the Escrow Agent shall be entitled to
retain the Escrow Fund until it shall have received (i) a final
non-appealable order of a court of competent jurisdiction
directing delivery of the Escrow Fund or (ii) a written agreement
executed by the other parties hereto directing delivery of the
Escrow Fund, in which event the Escrow Agent shall disburse the
Escrow Fund in accordance with such order or agreement. Any court
order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect
that said order is final and non-appealable. The Escrow Agent
shall act on such order and legal opinions without further
question.
(j) As compensation for its services to be rendered under this
Agreement, the Escrow Agent shall receive fees in the amounts
specified in Schedule A to this Agreement and shall be reimbursed
upon request for all expenses, disbursements and advances,
including reasonable fees and expenses of outside counsel, if
any, incurred or made by it in connection with the carrying out
of its duties under this Agreement. All such fees and expenses
shall be the joint and several responsibility of the Purchaser
and the Seller, and shall be payable from the Escrow Fund to the
extent the Escrow Fund is sufficient to pay such fees and
expenses. As between the Purchaser and the Seller, the fees and
expenses of the Escrow Agent shall be borne one-half by the
Purchaser and one-half by the Seller.
SECTION 2.04. Termination of Duties. This Agreement will terminate upon the
delivery by the Escrow Agent of the entire amount of the Escrow Fund under any
provision or provisions of this Agreement.
ARTICLE III
MAINTENANCE AND DISPOSITION
OF ESCROW FUND
SECTION 3.01. Payments from the Escrow Fund. (a) In the event the Purchase
Price is adjusted downward pursuant to Section 2.08(c)(i) of the Purchase
Agreement, the Purchaser and the Seller shall deliver written notice to the
Escrow Agent specifying the amount of such downward adjustment of the Purchase
Price and the amount of interest thereon, from the Closing Date through the date
of payment at the rate of interest per annum publicly announced by Chemical Bank
or any successor thereto in New York, New York from time to time as its prime
rate from the Closing Date to the date of such payment plus 1/8%, and the Escrow
Agent shall, within three Business Days of its receipt of such notice, liquidate
all investments in the Escrow Fund and, after payment of the fees and expenses
of the Escrow Agent payable pursuant to Section 2.03(j), pay such amounts (net
of the Purchaser's share of the fees and expenses of the Escrow Agent) to the
Purchaser out of the Escrow Fund by wire transfer in immediately available
funds. In the event that the amount of funds in the Escrow Fund following such
liquidation exceeds the amount of the downward adjustment of the Purchase Price
and interest thereon provided for in the preceding sentence and the fees and
expenses of the Escrow Agent payable pursuant to Section 2.03(j), then the
Escrow Agent shall, after paying the amount of such excess to the Purchaser
(together with interest thereon) and the payment of the Seller's share of the
Escrow Agent's fees and expenses as provided in such sentence, pay the remaining
amount of funds in the Escrow Fund to the Seller.
(b) In the event the Purchase Price is adjusted upward pursuant to
Section 2.08(c)(ii) of the Purchase Agreement, the Purchaser and
the Seller shall deliver written notice to the Escrow Agent to
such effect, and the Escrow Agent shall, within three Business
Days of its receipt of such notice, liquidate all investments in
the Escrow Fund and, after payment of the fees and expenses of
the Escrow Agent payable pursuant to Section 2.03(j), pay all
funds then remaining in the Escrow Fund to the Seller.
SECTION 3.02. Liquidation of Escrow Fund. Whenever the Escrow Agent shall
be required to make any payment from the Escrow Fund, the Escrow Agent shall pay
such amount by liquidating the investments in the Escrow Fund to the extent
necessary to pay such amount in full in cash.
SECTION 3.03. Investment of Escrow Fund. The Escrow Agent shall invest and
reinvest moneys on deposit in the Escrow Fund, unless joint written notice to
the contrary is received from the Seller and the Purchaser, in the following
investments:
(a) direct obligations of, or obligations the principal and interest
on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations
are backed by the full faith and credit of the United States of
America), in each case maturing within 180 days from the date of
acquisition thereof;
(b) direct obligations of any State of the United States maturing
within 180 days from the date of acquisition thereof and having,
at such date of acquisition, the highest credit rating obtainable
from Standard & Poor's Corporation ("S&P") and Moody's Investors
Service, Inc. ("Moody's");
(c) investments in commercial paper maturing within 180 days from the
date of acquisition thereof and having, at such date of
acquisition, a credit rating of at least "A-1" (or the then
equivalent rating) from S&P or a credit rating of at least
"Prime-1" (or the then equivalent rating) from Moody's;
(d) investments in certificates of deposit, bankers' acceptances and
time deposits (including Eurodollar time deposits) maturing
within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market accounts issued or
offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State
thereof that has Tier 1 Capital (as defined in the regulations of
the United States Department of the Treasury's Office of the
Comptroller of the Currency or the Board of Governors of the
United States Federal Reserve System, as applicable) of not less
than $250 million; or
(e) investments pursuant to repurchase agreements with the Escrow
Agent.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01. Further Action. Each of the Seller and the Purchaser shall
use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Laws, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
SECTION 4.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.02):
(a) if to the Seller:
SBM Company
8400 Normandale Lake Boulevard
Suite 1150
Minneapolis, Minnesota 55437
Telecopy: (612) 835-0735
Attention: Charles A. Geer
with a copy to:
Faegre & Benson
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telecopy: (612) 336-3026
Attention: David B. Miller, Esq.
(b) if to the Purchaser:
ARM Financial Group, Inc.
39 S. Fifth Street, 12th Floor
Louisville, Kentucky 40202
Telecopy: (502) 582-7903
Attention: Co-Chief Executive Officers
with copies to:
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 703-6422
Attention: Frank V. Sica
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 848-7179
Attention: W. Jeffrey Lawrence, Esq.
(c) if to the Escrow Agent:
Chemical Bank
________________
New York, New York _____
Telecopy: ___________
Attention: ___________
SECTION 4.03. Waiver. Any party to this Agreement may (a) extend the time
for the performance of any of the obligations or other acts of another party,
(b) waive any inaccuracies in the representations and warranties of another
party contained herein or in any document delivered by another party pursuant
hereto or (c) waive compliance with any of the agreements or conditions of
another party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.
SECTION 4.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 4.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 4.06. Entire Agreement. This Agreement and the Purchase Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, between or among the Seller, the Purchaser and the Escrow
Agent with respect to the subject matter hereof.
SECTION 4.07. Assignment. This Agreement may not be assigned by operation
of Law or otherwise without the express written consent of the other parties
hereto (which consent may be granted or withheld in the sole discretion of such
other parties); provided, however, that the Purchaser may assign this Agreement
to an Affiliate of the Purchaser without the consent of the Seller and the
Escrow Agent; provided, further, that no such assignment shall relieve the
Purchaser of its obligations hereunder.
SECTION 4.08. No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 4.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the Seller,
the Purchaser and the Escrow Agent or (b) by a waiver in accordance with Section
4.03.
SECTION 4.10. Governing Law. This Agreement and the legal relations among
the parties hereto shall be governed by, and construed in accordance with, the
laws of the State of New York, applicable to contracts executed in and to be
performed entirely within that state, as to all matters, including, without
limitation, matters of validity, interpretation, construction, effect,
performance and remedies. All actions and proceedings arising out of or relating
to this Agreement shall be heard and determined in any New York state or federal
court sitting in the City of New York and the parties hereto hereby irrevocably
submit to the exclusive jurisdiction of such courts in any such action or
proceeding and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such action or proceeding.
SECTION 4.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
ARM FINANCIAL GROUP, INC.
By
Name:
Title:
By
Name:
Title:
SBM COMPANY
By
Name:
Title:
CHEMICAL BANK
By
Name:
Title:
Schedule A
to Escrow Agreement
EXHIBIT 8.01(f)
FORM OF OPINION OF THE PURCHASER'S COUNSEL
___________, 1995
SBM Company
8400 Normandale Lake Boulevard
Suite 1150
Minneapolis, Minnesota 55437
Ladies and Gentlemen:
We are acting as special counsel to ARM Financial Group, Inc., a Delaware
corporation (the "Purchaser"), in connection with the acquisition by the
Purchaser of certain assets and the assumption of certain liabilities of SBM
Company, a Minnesota corporation (the "Seller"), pursuant to an Amended and
Restated Stock and Asset Purchase Agreement, dated as of February 16, 1995 (the
"Purchase Agreement"), between the Seller and the Purchaser. This opinion is
being delivered pursuant to Section 8.01(f) of the Purchase Agreement.
Capitalized terms used but not otherwise defined herein have the meanings
assigned to such terms in the Purchase Agreement.
In connection with the foregoing, we have participated in the preparation
of and have examined executed copies of (i) the Purchase Agreement and (ii) the
Assumption Agreement, dated as of the date hereof, between the Seller and the
Purchaser (the "Transaction Agreements"). We have also examined originals or
copies certified or otherwise identified to our satisfaction of such corporate
records of the Purchaser, certificates of public officials and such other
documents as we have deemed necessary as a basis for the opinions hereinafter
expressed. As to questions of fact material to such opinions, we have, when
relevant facts were not independently established by us, examined and relied
upon certificates of public officials and representations of the Purchaser
contained in the Purchase Agreement. In our examination of the documents
referred to above, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies. We have also attended
the Closing held today in the City of New York.
Based upon the foregoing, and having regard for such other considerations
as we deem relevant, we are of the opinion that:
1. The Purchaser is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all
necessary corporate power and authority to enter into the Transaction
Agreements, to carry out its obligations thereunder and to consummate
the transactions contemplated thereby.
2. The execution and delivery of the Transaction Agreements by the
Purchaser, the performance by the Purchaser of its obligations
thereunder and the consummation by the Purchaser of the transactions
contemplated thereby have been duly authorized by all requisite
corporate action on the part of the Purchaser.
3. The Transaction Agreements have been duly executed and delivered by
the Purchaser, and (assuming due authorization, execution and delivery
by the Seller) constitute legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of
general principles of equity (regardless of whether considered in a
proceeding at law or in equity).
4. The execution, delivery and performance by the Purchaser of the
Transaction Agreements do not and will not (a) violate or result in
the breach of any provision of the Certificate of Incorporation or
By-laws of the Purchaser or (b) violate any law, statute, rule or
regulation or Governmental Order known to us to be applicable to the
Purchaser, which would have a material adverse effect on the ability
of the Purchaser to consummate the transactions contemplated by the
Transaction Agreements.
5. The execution, delivery and performance of the Transaction Agreements
by the Purchaser do not and will not require any consent, approval,
authorization or other order of, action by, filing with, or
notification to, any Governmental Authority, except (a) as described
in a writing given to the Seller by the Purchaser on the date of the
Purchase Agreement, (b) the requirements of the HSR Act and (c)
notifications to and approvals of insurance regulatory authorities,
including, without limitation, the Minnesota Department and the
California Department.
Our opinions expressed above are limited to the law of the State of New
York, the General Corporation Law of the State of Delaware and the federal law
of the United States.
The opinions set forth herein are rendered only to you and are solely for
your benefit in connection with the transactions contemplated by the Purchase
Agreement. The opinions set forth herein may not be relied upon by you for any
other purpose, or relied upon by any other person for any purpose, without our
prior written consent.
Very truly yours,
EXHIBIT 8.01(j)
FORM OF SUBSIDIARY RELEASE
GENERAL RELEASE
This GENERAL RELEASE is made this ____ day of _____, 1995, by each of State
Bond and Mortgage Life Insurance Company, a Minnesota stock life insurance
company ("SBM Life"), SBM Financial Services, Inc., a Minnesota corporation
("SBM Financial"), and SBM Certificate Company, a Minnesota corporation ("SBM
Certificate" and, together with SBM Life and SBM Financial, sometimes
collectively referred to herein as the "Subsidiaries" and individually as a
"Subsidiary").
RECITALS
WHEREAS, SBM Life and SBM Financial are wholly owned subsidiaries of SBM
Company, a Minnesota corporation (the "Company"), and SBM Certificate is a
wholly owned subsidiary of SBM Life;
WHEREAS, the Company has agreed to sell substantially all of the assets of
the Company, including all the outstanding shares of capital stock of SBM Life
and SBM Financial, to ARM Financial Group, Inc., a Delaware corporation ("ARM"),
pursuant to that certain Amended and Restated Stock and Asset Purchase
Agreement, dated as of February 16, 1995, between the Company and ARM (the
"Purchase Agreement");
WHEREAS, each of the Subsidiaries will benefit from the transactions
contemplated by the Purchase Agreement; and
WHEREAS, one of the conditions to the obligations of the Company to
consummate the transactions contemplated by the Purchase Agreement is the
execution and delivery by the Subsidiaries of a release for the benefit of the
Company and those persons who were officers and directors of the Company and the
Subsidiaries prior to the closing of the transactions contemplated by the
Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Subsidiaries hereby agrees as follows:
ARTICLE I
RELEASE
Section 1.1. Release. Each of the Subsidiaries hereby releases and
discharges, absolutely and forever, any and all Claims (as defined below), other
than, in the case of Released Persons (as defined below), Claims based on fraud,
which such Subsidiary has ever had, now has, or may hereafter have against,
directly or indirectly, the Company or any person who, prior to the closing of
the transactions contemplated by the Purchase Agreement, was an officer or
director of the Company or any of the Subsidiaries (a "Released Person"),
arising out of, based on or in connection with, any act, omission, event,
transaction or occurrence that happened or failed to happen, or any fact or
circumstance in existence, prior to or contemporaneously with the execution of
this General Release. Without limiting the generality of the foregoing, each of
the Subsidiaries hereby releases and discharges any such Claims of any nature
whatever arising in connection with the Company, the Subsidiaries or a Released
Person, regardless of whether such Claims or the consequences thereof are known
or unknown, anticipated or unanticipated, absolute or contingent, suspected or
unsuspected, and whether or not such Claims could have been asserted at the time
of the execution of this General Release.
Section 1.2. Claims. As used herein, "Claims" means any and all claims,
causes of action, contributions, indemnities, apportionments, duties, debts,
sums, sums of money, suits, doings, omissions, bonds, covenants, contracts,
controversies, restitutions, understandings, agreements, promises, commitments,
damages, responsibilities, demands, liabilities and accounts of each and every
kind, both at law and in equity, and whether in contract or in tort or
otherwise, other than salary advances outstanding on the date hereof.
Section 1.3. Knowing Release. This General Release is freely and
voluntarily executed by each of the Subsidiaries and each of the Subsidiaries,
in executing this General Release, does not rely on any inducements, promises or
representations of the Company, any Released Person or their representatives or
any state of past or present facts or future expectations which are not
described herein. Each of the Subsidiaries has been advised by its legal counsel
as to the meaning and consequence of this General Release, and it acknowledges
its understanding of the terms contained herein and the consequences thereof.
ARTICLE II
GENERAL
Section 2.1. Successors and Assigns. This General Release shall be binding
upon each of the Subsidiaries and its successors and assigns. This General
Release shall inure to the benefit of the Company, each Released Person and
their successors, assigns, heirs and representatives.
Section 2.2. Headings. The descriptive headings of the several Articles and
Sections of this General Release are inserted for convenience only and do not
constitute a part of this General Release.
Section 2.3. Governing Law. This General Release shall be governed by, and
construed in accordance with, the laws of the State of Minnesota, applicable to
contracts executed in and to be performed entirely within that state, as to all
matters, including, without limitation, matters of validity, interpretation,
construction, effect, performance and remedies.
Section 2.4. Counterparts. This General Release may be executed in
counterparts and by different parties on different counterparts with the same
effect as if the signatures thereto were on the same instrument. This General
Release shall be effective and binding upon all parties hereto at such time as
all parties have executed a counterpart of this General Release.
IN WITNESS WHEREOF, each of the parties hereto has caused this General
Release to be executed as of the day and year first above written.
STATE BOND AND MORTGAGE
LIFE INSURANCE COMPANY
By
Name:
Title:
SBM FINANCIAL SERVICES, INC.
By
Name:
Title:
SBM CERTIFICATE COMPANY
By
Name:
Title:
EXHIBIT 8.02(f)(i)
FORM OF OPINION OF THE SELLER'S GENERAL COUNSEL
___________, 1995
ARM Financial Group, Inc.
239 S. Fifth Street, 12th Floor
Louisville, Kentucky 40202
Ladies and Gentlemen:
I am General Counsel of SBM Company, a Minnesota corporation (the
"Seller"), and I am delivering this opinion pursuant to Section 8.02(f)(i) of
the Amended and Restated Stock and Asset Purchase Agreement, dated as of
February 16, 1995 (the "Purchase Agreement"), between the Seller and ARM
Financial Group, Inc., a Delaware corporation (the "Purchaser"). Capitalized
terms used but not otherwise defined herein have the meanings assigned to such
terms in the Purchase Agreement.
In connection with the foregoing, I have participated in the preparation of
and have examined executed copies of (i) the Purchase Agreement, (ii) the Bill
of Sale and Assignment, dated as of the date hereof, from the Seller to the
Purchaser, and (iii) the Assumption Agreement, dated as of the date hereof,
between the Seller and the Purchaser (the "Transaction Agreements"). I have made
such examination of law and facts as I have deemed relevant and necessary as a
basis for my opinions hereafter set forth. In doing so, I wish to advise you
that:
(a) As to certain relevant facts, I have relied upon certificates of
public officials and certificates of officers of the Seller,
reasonably believed by me to be appropriate sources of
information, as to the accuracy of factual matters, in each case
without independent verification thereof or other investigation;
provided that I have no knowledge concerning the factual matters
upon which reliance is placed which would render such reliance
unreasonable.
(b) I express no opinion with respect to the laws of any jurisdiction
other than the laws of the State of Minnesota and the federal
laws of the United States.
(c) The opinions herein expressed are limited to the specific issues
addressed and to laws existing on the date hereof. By rendering
my opinion, I do not undertake to advise you with respect to any
other matter or of any change in such laws or in the
interpretation thereof which may occur after the date hereof.
(d) I have assumed the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents
submitted to me as originals and the conformity with, and
authenticity of, the originals of all documents submitted to me
as copies.
(e) I have assumed that the Purchaser has satisfied those legal
requirements that are applicable to it to the extent necessary to
make the Transaction Agreements enforceable against it and that
the Purchaser has complied with all legal requirements pertaining
to its status as such status relates to its rights to enforce the
Transaction Agreements against the Seller.
(f) The use of the word or phrase "knowledge," "to my knowledge" and
"known to me" means my conscious awareness of facts or
information.
Based upon and subject to the foregoing, and having regard for such other
considerations as I deem relevant, I am of the opinion that:
1. The Seller is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased
by it or the operation of its business makes such licensing or
qualification necessary, except to the extent that the failure to be
so licensed or qualified would not (i) adversely affect the ability of
the Seller to carry out its obligations under, and to consummate the
transactions contemplated by, the Transaction Agreements or (ii)
materially adversely affect the ability of the Seller and the
Subsidiaries to conduct the Business.
2. The Seller is not a member of (nor is any part of the Business
conducted through) any partnership, nor is the Seller a participant in
any joint venture or similar arrangement.
3. SBM Life is a life insurance company duly organized, validly existing
and in good standing under the laws of the State of Minnesota and has
all necessary corporate power and authority to own, operate or lease
the properties and assets now owned, operated or leased by it
(including, without limitation, the capital stock of SBM Certificate
Company) and to carry on its business as it has been and is currently
conducted, except where the absence of such power and authority would
not have a Material Adverse Effect. SBM Life is duly licensed and is
in good standing in each jurisdiction in which the properties owned or
leased by it or the operation of its business makes such licensing or
qualification necessary, other than those jurisdictions where the
failure to be so qualified or licensed would not have a Material
Adverse Effect, and all such jurisdictions are listed in Section
3.02(b)(i) of the Disclosure Schedule. SBM Life is licensed to write
life insurance and issue annuities in each of the jurisdictions listed
in Section 3.02(b)(ii) of the Disclosure Schedule (which also
specifies each jurisdiction as to which the license held by SBM Life
specifically authorizes reinsurance activities). Except as set forth
in Section 3.02(b)(iii) of the Disclosure Schedule, all of the
foregoing qualifications and licenses are in full force and effect
and, to the best of my knowledge, SBM Life has not received any notice
of any event, inquiry, investigation or proceeding that could
reasonably be expected to result in the suspension, revocation or
limitation of any such qualification or license.
4. SBM Certificate Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota
and has all necessary corporate power and authority to own, operate or
lease the properties and assets now owned, operated or leased by it
and to carry on its business as it has been and is currently
conducted, except where the absence of such power and authority would
not have a Material Adverse Effect. SBM Certificate Company is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification
necessary, other than those jurisdictions where the failure to be so
qualified or licensed would not have a Material Adverse Effect, and
all such jurisdictions are set forth in Section 3.02(c)(i) of the
Disclosure Schedule. SBM Certificate Company is duly registered as an
investment company under the Investment Company Act. Except as set
forth in Section 3.02(c)(ii) of the Disclosure Schedule, all of the
foregoing qualifications, licenses and registrations are in full force
and effect and, to the best of my knowledge, SBM Certificate Company
has not received any notice of any event, inquiry, investigation or
proceeding that could reasonably be expected to result in the
suspension, revocation or limitation of any such qualification,
license or registration.
5. SBM Financial is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota and has all
necessary corporate power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to carry
on its business as it has been and is currently conducted, except
where the absence of such power and authority would not have a
Material Adverse Effect. SBM Financial is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary, other than those
jurisdictions where the failure to be so qualified or licensed would
not have a Material Adverse Effect, and all such jurisdictions are
listed in Section 3.02(d)(i) of the Disclosure Schedule. SBM Financial
is a registered broker-dealer under the Exchange Act and in each
jurisdiction in which the conduct of its business requires such
registration, and all of such jurisdictions are listed in Section
3.02(d)(ii) of the Disclosure Schedule. SBM Financial is a member in
good standing of the National Association of Securities Dealers, Inc.
Except as set forth in Section 3.02(d)(iii) of the Disclosure
Schedule, all of the foregoing qualifications, licenses, registrations
and memberships are in full force and effect and, to the best of my
knowledge, SBM Financial has not received any notice of any event,
inquiry, investigation or proceeding that could reasonably be expected
to result in the suspension, revocation or limitation of any such
qualification, license, registration or membership.
6. The authorized capital stock of SBM Life consists of 10,000,000 shares
of common stock, par value $1.00 per share, of which 2,500,000 shares
are issued and outstanding. The authorized capital stock of SBM
Financial consists of 1,000,000 shares of common stock, par value $.01
per share, of which 25,000 shares are issued and outstanding. The
Shares constitute all the issued and outstanding capital stock of SBM
Life and SBM Financial and are owned of record and beneficially solely
by the Seller.
7. The authorized capital stock of SBM Certificate Company consists of
1,000,000 shares of common stock, par value $1.00 per share, of which
250,000 shares are issued and outstanding, all of which are owned of
record and beneficially solely by SBM Life free and clear of all
Encumbrances, other than restrictions on transferability generally
imposed under federal and state securities laws or as set forth in
Section 3.02(f) of the Disclosure Schedule.
8. All the outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable.
9. Other than the Purchase Agreement, there are no options, warrants,
convertible securities, or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of any
Subsidiary or obligating the Seller or any Subsidiary to issue or sell
any shares of capital stock of, or any other interest in, any
Subsidiary.
10. Except as set forth in Section 3.04 of the Disclosure Schedule and
assuming that all consents, approvals, authorizations and other
actions described in Section 3.05 of the Purchase Agreement have been
obtained and all filings and notifications listed in Section 3.05 of
the Disclosure Schedule have been made, the execution, delivery and
performance of the Transaction Agreements by the Seller do not and
will not (a) violate any law, statute, rule or regulation or
Governmental Order known to me to be applicable to the Seller or any
Subsidiary or any of their respective assets, properties or
businesses, where such violation would have a Material Adverse Effect
or (b) result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation
or cancellation of, or result in the creation of any Encumbrance
(other than a Permitted Encumbrance) on the Shares or any of the other
material assets or properties of the Seller or any Subsidiary pursuant
to, any note, bond, mortgage, indenture or Material Contract known to
me to which the Seller or any Subsidiary is a party or by which any of
such assets or properties is bound or affected.
11. Except as set forth in Section 3.10 of the Disclosure Schedule, there
are no Actions by or against the Seller or any Subsidiary or affecting
any of the Assets or the Business, pending before any Governmental
Authority (or, to the best of my knowledge, threatened to be brought
by or before any Governmental Authority).
The opinions set forth herein are rendered only to you and are solely for
your benefit in connection with the transactions contemplated by the Purchase
Agreement. The opinions set forth herein may not be relied upon by you for any
other purpose, or relied upon by any other person for any purpose, without my
prior written consent.
Very truly yours,
Stewart D. Gregg
General Counsel
EXHIBIT 8.02(f)(ii)
FORM OF OPINION OF THE SELLER'S COUNSEL
___________, 1995
ARM Financial Group, Inc.
239 S. Fifth Street, 12th Floor
Louisville, Kentucky 40202
Ladies and Gentlemen:
We are acting as special counsel to SBM Company, a Minnesota corporation
(the "Seller"), in connection with the acquisition by ARM Financial Group, Inc.,
a Delaware corporation (the "Purchaser"), of certain assets and the assumption
of certain liabilities of the Seller, pursuant to an Amended and Restated Stock
and Asset Purchase Agreement, dated as of February 16, 1995 (the "Purchase
Agreement"), between the Seller and the Purchaser. This opinion is being
delivered pursuant to Section 8.02(f)(ii) of the Purchase Agreement. Capitalized
terms used but not otherwise defined herein have the meanings assigned to such
terms in the Purchase Agreement.
In connection with the foregoing, we have participated in the preparation
of and have examined executed copies of (i) the Purchase Agreement, (ii) the
Bill of Sale and Assignment, dated as of the date hereof, from the Seller to the
Purchaser, and (iii) the Assumption Agreement, dated as of the date hereof,
between the Seller and the Purchaser (the "Transaction Agreements"). We have
made such examination of law and facts as we have deemed relevant and necessary
as a basis for our opinions hereafter set forth. In doing so, we wish to advise
you that:
(a) As to certain relevant facts, we have relied upon certificates of
public officials and certificates of officers of the Seller,
reasonably believed by us to be appropriate sources of
information, as to the accuracy of factual matters, in each case
without independent verification thereof or other investigation;
provided that the lawyers who have given substantive legal
attention to representation of the Seller in connection with the
preparation or negotiation of the Transaction Agreements have no
knowledge concerning the factual matters upon which reliance is
placed which would render such reliance unreasonable.
(b) We express no opinion with respect to the laws of any
jurisdiction other than the laws of the State of Minnesota and
the federal laws of the United States.
(c) We express no opinion as to whether, or the extent to which, the
laws of any particular jurisdiction apply to the subject matter
hereof, including without limitation, the enforceability of the
governing law provisions contained in the Transaction Agreements.
Because the governing law provision of each of the Transaction
Agreements relates to the laws of a jurisdiction as to which we
express no opinion, the opinion set forth in paragraph 3 below is
given as if the law of Minnesota governs the Transaction
Agreements. Further, we express no opinion concerning the
enforceability of Section 5.10 of the Purchase Agreement. Our
opinion is also subject to the effect of applicable rules of law
that limit the enforceability of provisions requiring
indemnification.
(d) Our opinion does not address any of the following legal issues:
federal and state insurance laws and regulations, federal and
state face amount certificate company laws and regulations,
federal and state broker-dealer laws and regulations, federal and
state mutual fund laws and regulations, federal and state
investment advisor laws and regulations and other federal or
state laws the violation of which would be predicated solely on
violations of any of the foregoing laws or regulations.
(e) The opinions herein expressed are limited to the specific issues
addressed and to laws existing on the date hereof. By rendering
our opinion, we do not undertake to advise you with respect to
any other matter or of any change in such laws or in the
interpretation thereof which may occur after the date hereof.
(f) We have assumed the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity with, and
authenticity of, the originals of all documents submitted to us
as copies.
(g) We have assumed that the Purchaser has satisfied those legal
requirements that are applicable to it to the extent necessary to
make the Transaction Agreements enforceable against it and that
the Purchaser has complied with all legal requirements pertaining
to its status as such status relates to its rights to enforce the
Transaction Agreements against the Seller.
(h) The use of the word or phrase "knowledge," "to our knowledge" and
"known to us" means the conscious awareness of our lawyers who
have given substantive legal attention to representation of the
Seller in connection with the preparation or negotiation of the
Transaction Agreements of facts or information.
Based upon and subject to the foregoing, and having regard for such other
considerations as we deem relevant, we are of the opinion that:
1. The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Minnesota and has all
necessary corporate power and authority to enter into the Transaction
Agreements, to carry out its obligations thereunder and to consummate
the transactions contemplated thereby.
2. The execution and delivery of the Transaction Agreements by the
Seller, the performance by the Seller of its obligations thereunder
and the consummation by the Seller of the transactions contemplated
thereby have been duly authorized by all requisite action on the part
of the Seller and its shareholders, except to the extent the
consummation of the transactions contemplated by the Transaction
Agreements require the approval of the Seller's shareholders.
3. The Transaction Agreements have been duly executed and delivered by
the Seller, and (assuming due authorization, execution and delivery by
the Purchaser) constitute, legal, valid and binding obligations of the
Seller enforceable against the Seller in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of
general principles of equity (regardless of whether considered in a
proceeding at law or in equity).
4. Upon consummation of the transactions contemplated by the Purchase
Agreement and registration of the Shares in the name of the Purchaser
in the stock records of SBM Life and SBM Financial, the Purchaser,
assuming it shall have purchased the Shares for value in good faith
and without notice of any adverse claim, will own the Shares free and
clear of all Encumbrances, other than Encumbrances which arise solely
as a result of actions by the Purchaser and restrictions on
transferability generally imposed under federal and state securities
laws and state insurance laws.
5. Except as set forth in Section 3.04 of the Disclosure Schedule and
assuming that all consents, approvals, authorizations and other
actions described in Section 3.05 of the Purchase Agreement have been
obtained and all filings and notifications listed in Section 3.05 of
the Disclosure Schedule have been made, the execution, delivery and
performance of the Transaction Agreements by the Seller do not and
will not (a) violate or result in the breach of any provision of the
charter or by-laws (or similar organizational documents) of the Seller
or any Subsidiary or (b) violate any law, statute, rule or regulation
or any Governmental Order known to us to be applicable to the Seller
or any Subsidiary or any of their respective assets, properties or
businesses, where such violation would have a Material Adverse Effect.
6. The execution, delivery and performance of the Transaction Agreements
by the Seller do not and will not require of the Seller any consent,
approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority, except (a) as described
in Section 3.05 of the Disclosure Schedule, (b) the requirements of
the HSR Act and (c) notifications to and approvals of insurance
regulatory authorities, including, without limitation, the Minnesota
Department and the California Department.
The opinions set forth herein are rendered only to you and are solely for
your benefit in connection with the transactions contemplated by the Purchase
Agreement. The opinions set forth herein may not be relied upon by you for any
other purpose, or relied upon by any other person for any purpose, without our
prior written consent.
Very truly yours,
Faegre & Benson Professional
Limited Liability Partnership
EXHIBIT 8.02(h)
CONSENTS AND APPROVALS
Governmental Authorities
All consents, approvals, authorizations and orders referred to in Section
4.03(b) and (c) of the Agreement or in Item 8 of Section 3.05 of the Disclosure
Schedule.
All consents, approvals, authorizations and orders from insurance
regulatory authorities required for the financing referred to in Section 4.05 of
the Agreement.
Third Parties
Consents under the following agreements:
1. Office Lease, dated August 1, 1992, between Minnesota ND Properties,
Inc. and the Seller relating to the office space at 8400 Tower
Normandale Lake Office Park, Minneapolis, MN.
2. Equipment Leases between the Seller and Siemens Credit Corporation
relating to the lease of the Siemens Saturn I PBX Telephone Systems,
dated December 5, 1990, December 21, 1990, and June 8, 1992.
3. Maintenance and Service Agreement, dated January 1, 1994, between the
Seller and MIS, Inc, relating to the maintenance of the PAR EX
Software.
4. Software Maintenance Agreement, dated May 29, 1990, between the Seller
and TSI International.
5. License Agreement, dated January 11, 1990, between the Seller and
Computer Associates relating to the use of computer program products.
6. Computer Software Maintenance Agreement, dated March 31, 1993, between
the Seller and Computer Associates.
7. All reinsurance agreements referred to in Section 3.13(a)(ix) of the
Disclosure Schedule.
Consents of the holders of interests in the Affiliated Mutual Funds.
EXHIBIT 8.02(w)
FORM OF SELLER RELEASE
GENERAL RELEASE
This GENERAL RELEASE is made this ____ day of _____, 1995, by SBM Company,
a Minnesota corporation (the "Company").
RECITALS
WHEREAS, State Bond and Mortgage Life Insurance Company, a Minnesota stock
life insurance company ("SBM Life"), and SBM Financial Services, Inc., a
Minnesota corporation ("SBM Financial"), are wholly owned subsidiaries of the
Company, and SBM Certificate Company, a Minnesota corporation ("SBM Certificate"
and, together with SBM Life and SBM Financial, sometimes collectively referred
to herein as the "Subsidiaries" and individually as a "Subsidiary") is a wholly
owned subsidiary of SBM Life;
WHEREAS, the Company has agreed to sell substantially all of the assets of
the Company, including all the outstanding shares of capital stock of SBM Life
and SBM Financial, to ARM Financial Group, Inc., a Delaware corporation ("ARM"),
pursuant to that certain Amended and Restated Stock and Asset Purchase
Agreement, dated as of February 16, 1995, between the Company and ARM (the
"Purchase Agreement"); and
WHEREAS, one of the conditions to the obligations of ARM to consummate the
transactions contemplated by the Purchase Agreement is the execution and
delivery by the Company of a release for the benefit of the Subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby agrees as follows:
ARTICLE I
RELEASE
Section 1.1. Release. The Company hereby releases and discharges,
absolutely and forever, any and all Claims (as defined below) the Company has
ever had, now has, or may hereafter have against, directly or indirectly, any of
the Subsidiaries arising out of, based on or in connection with, any act,
omission, event, transaction or occurrence that happened or failed to happen, or
any fact or circumstance in existence, prior to or contemporaneously with the
execution of this General Release, other than (i) intercompany indebtedness
existing as of the date hereof and (ii) the assumption by SBM Certificate of
liabilities of the Company under face amount certificates issued by the Company.
Without limiting the generality of the foregoing, the Company hereby releases
and discharges any such Claims of any nature whatever arising in connection with
the Company or the Subsidiaries, regardless of whether such Claims or the
consequences thereof are known or unknown, anticipated or unanticipated,
absolute or contingent, suspected or unsuspected, and whether or not such Claims
could have been asserted at the time of the execution of this General Release.
Section 1.2. Claims. As used herein, "Claims" means any and all claims,
causes of action, contributions, indemnities, apportionments, duties, debts,
sums, sums of money, suits, doings, omissions, bonds, covenants, contracts,
controversies, restitutions, understandings, agreements, promises, commitments,
damages, responsibilities, demands, liabilities and accounts of each and every
kind, both at law and in equity, and whether in contract or in tort or
otherwise.
Section 1.3. Knowing Release. This General Release is freely and
voluntarily executed by the Company and the Company, in executing this General
Release, does not rely on any inducements, promises or representations of ARM,
any Subsidiary or their representatives or any state of past or present facts or
future expectations which are not described herein. The Company has been advised
by its legal counsel as to the meaning and consequence of this General Release,
and it acknowledges its understanding of the terms contained herein and the
consequences thereof.
ARTICLE II
GENERAL
Section 2.1. Successors and Assigns. This General Release shall be binding
upon the Company and its successors and assigns. This General Release shall
inure to the benefit of the Subsidiaries and their successors and assigns.
Section 2.2. Headings. The descriptive headings of the several Articles and
Sections of this General Release are inserted for convenience only and do not
constitute a part of this General Release.
Section 2.3. Governing Law. This General Release shall be governed by, and
construed in accordance with, the laws of the State of Minnesota, applicable to
contracts executed in and to be performed entirely within that state, as to all
matters, including, without limitation, matters of validity, interpretation,
construction, effect, performance and remedies.
IN WITNESS WHEREOF, the Company has caused this General Release to be
executed as of the day and year first above written.
SBM COMPANY
By
Name:
Title:
[Execution Copy]
AMENDED AND RESTATED
STOCK AND ASSET PURCHASE AGREEMENT
Between
SBM COMPANY
and
ARM FINANCIAL GROUP, INC.
Dated as of February 16, 1995
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS ........................................ 1
SECTION 1.01. Certain Defined Terms ...................................... 1
ARTICLE II
PURCHASE AND SALE .................................. 11
SECTION 2.01. Assets to Be Sold .......................................... 11
SECTION 2.02. Assumption and Exclusion of Liabilities .................... 13
SECTION 2.03. Purchase Price; Allocation of Purchase Price ............... 14
SECTION 2.04. Closing .................................................... 14
SECTION 2.05. Closing Deliveries by the Seller ........................... 14
SECTION 2.06. Closing Deliveries by the Purchaser ........................ 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER ..................................... 15
SECTION 3.01. Organization and Authority of the Seller ................... 15
SECTION 3.02. Subsidiaries ............................................... 16
SECTION 3.03. Books and Records .......................................... 19
SECTION 3.04. No Conflict ................................................ 19
SECTION 3.05. Governmental Consents and Approvals ........................ 19
SECTION 3.06. Financial Information; Books and Records ................... 19
SECTION 3.07. No Undisclosed Liabilities ................................. 22
SECTION 3.08. Acquired Assets ............................................ 23
SECTION 3.09. Conduct in the Ordinary Course;
Absence of Certain Changes, Events and Conditions.......... 23
SECTION 3.10. Litigation ................................................. 26
SECTION 3.11. Compliance with Laws ....................................... 26
SECTION 3.12. Environmental and Other Permits and Licenses;
Related Matters ........................................... 27
SECTION 3.13. Material Contracts ......................................... 28
SECTION 3.14. Intellectual Property ...................................... 30
SECTION 3.15. Real Property .............................................. 31
SECTION 3.16. Tangible Personal Property ................................. 32
SECTION 3.17. Assets ..................................................... 33
SECTION 3.18. Products Issued ............................................ 34
SECTION 3.19. Distributors ............................................... 36
SECTION 3.20. Employee Benefit Matters ................................... 36
SECTION 3.21. Labor Matters .............................................. 38
SECTION 3.22. Key Employees .............................................. 39
SECTION 3.23. Certain Interests .......................................... 39
SECTION 3.24. Taxes ...................................................... 39
SECTION 3.25. Risk Management ............................................ 40
SECTION 3.26. Accounts; Lockboxes; Safe Deposit Boxes; Powers of Attorney. 41
SECTION 3.27. Brokers .................................................... 42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER................................... 42
SECTION 4.01. Organization and Authority of the Purchaser.................. 42
SECTION 4.02. No Conflict.................................................. 43
SECTION 4.03. Governmental Consents and Approvals.......................... 43
SECTION 4.04. Litigation................................................... 43
SECTION 4.05. Financing.................................................... 43
SECTION 4.06. Brokers...................................................... 44
SECTION 4.07. Investment Intent............................................ 44
ARTICLE V
ADDITIONAL AGREEMENTS............................... 44
SECTION 5.01. Conduct of Business Prior to the Closing..................... 44
SECTION 5.02. Access to Information........................................ 45
SECTION 5.03. Confidentiality.............................................. 46
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.... 47
SECTION 5.05. Notice of Developments....................................... 50
SECTION 5.06. Consulting Services.......................................... 50
SECTION 5.07. No Solicitation or Negotiation............................... 50
SECTION 5.08. Break-Up Fee................................................. 51
SECTION 5.10. Non-Competition.............................................. 52
SECTION 5.11. Excluded Liabilities......................................... 53
SECTION 5.12. Bulk Transfer Laws........................................... 53
SECTION 5.13. Shareholder Approval......................................... 53
SECTION 5.14. Further Action............................................... 54
SECTION 5.15. Cooperation.................................................. 55
SECTION 5.16. Indemnification.............................................. 56
ARTICLE VI
EMPLOYEE MATTERS.................................... 57
SECTION 6.01. Offer of Employment.......................................... 57
SECTION 6.02. Past-Service Credit.......................................... 57
ARTICLE VII
TAX MATTERS......................................... 58
SECTION 7.01. Returns...................................................... 58
SECTION 7.02. Refunds...................................................... 58
SECTION 7.03. Cooperation and Exchange of Information...................... 58
SECTION 7.04. Conveyance Taxes............................................. 59
SECTION 7.05. Miscellaneous................................................ 59
ARTICLE VIII
CONDITIONS TO CLOSING............................... 60
SECTION 8.01. Conditions to Obligations of the Seller...................... 60
SECTION 8.02. Conditions to Obligations of the Purchaser................... 61
ARTICLE IX
TERMINATION AND WAIVER.............................. 65
SECTION 9.01. Termination.................................................. 65
SECTION 9.02. Effect of Termination........................................ 66
SECTION 9.03. Waiver....................................................... 66
ARTICLE X
GENERAL PROVISIONS.................................. 67
SECTION 10.01. Expenses.................................................... 67
SECTION 10.02. Notices..................................................... 67
SECTION 10.03. Public Announcements........................................ 68
SECTION 10.04. Headings.................................................... 68
SECTION 10.05. Severability................................................ 68
SECTION 10.06. Entire Agreement............................................ 69
SECTION 10.07. Assignment.................................................. 69
SECTION 10.08. No Third Party Beneficiaries................................ 69
SECTION 10.09. Amendment................................................... 69
SECTION 10.10. Governing Law............................................... 69
SECTION 10.11. Counterparts................................................ 69
SECTION 10.12. Specific Performance........................................ 70
SECTION 10.13. Survival.................................................... 70
EXHIBITS
1.01(a) Form of Assumption Agreement
1.01(b) Form of Bill of Sale and Assignment
1.01(c) Liabilities to Be Assumed by SBM Life
2.01 Certain Excluded Assets
2.02 Employment Agreements
2.03(b) Allocation of Purchase Price
8.01(f) Form of Opinion of the Purchaser's Counsel
8.01(j) Form of Subsidiary Release
8.02(f)(i) Form of Opinion of the Seller's General Counsel
8.02(f)(ii) Form of Opinion of the Seller's Counsel
8.02(h) Consents and Approvals
8.02(w) Form of Seller Release