1
EXHIBIT 99
2
================================================================================
AGREEMENT AND PLAN OF MERGER
among
COLUMBIA UNIVERSAL CORPORATION
and
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
and
A H ACQUISITION CORPORATION
-----------------
January 2, 1997
-----------------
================================================================================
3
TABLE OF CONTENTS
Preamble
ARTICLE 1
The Merger..........................................................................................................2
Section 1.1 Surviving Corporation.............................................................................2
Section 1.2 Articles of Incorporation.........................................................................2
Section 1.3 Bylaws............................................................................................3
Section 1.4 Directors.........................................................................................3
Section 1.5 Officers..........................................................................................3
Section 1.6 Effective Time....................................................................................4
Section 1.7 Effective Date....................................................................................4
ARTICLE 2
Effect of the Merger on Stockholders and Option Holders.............................................................4
Section 2.1 Conversion of AH Acquisition's Common Stock and Columbia's
Common Stock and Options..........................................................................4
(a) Columbia's Common Stock...........................................................................4
(b) AH Acquisition's Common Stock.....................................................................5
(c) Treasury Stock....................................................................................5
(d) Columbia Options..................................................................................5
Section 2.2 Dissenting Shares.................................................................................6
Section 2.3 Exchange of Shares and Options....................................................................6
(a) Exchange Agent....................................................................................6
(b) Payment Procedure.................................................................................8
(c) Lost, Stolen or Destroyed Certificates or Options. ..............................................9
Section 2.4 No Further Rights................................................................................10
Section 2.5 Closing of Columbia's Stock Transfer Books.......................................................10
ARTICLE 3
Certain Agreements.................................................................................................10
Section 3.1 Audit............................................................................................10
Section 3.2 Due Diligence....................................................................................11
Section 3.3 Communications With Agents, Employees or Policyholders...........................................11
Section 3.4 Stockholder Approval.............................................................................12
Section 3.5 Intercompany Accounts............................................................................12
Section 3.6 No Solicitation by Columbia......................................................................12
(a) No Solicitation by Columbia......................................................................12
(b) No Change of Approval............................................................................13
(c) Termination Upon Change..........................................................................15
(d) Notification by Columbia.........................................................................15
i
4
(e) Breakup Fee......................................................................................15
ARTICLE 4
Representations and Warranties.....................................................................................16
Section 4.1 Representations and Warranties of Columbia.......................................................16
(a) Columbia Organization and Good Standing; Authority to Conduct Business...........................16
(b) Power and Authority..............................................................................16
(c) No Conflicts.....................................................................................17
(d) Consents and Approvals...........................................................................17
(e) Capital Structure of Columbia....................................................................17
(f) Subsidiaries.....................................................................................18
(g) Organization and Good Standing of Columbia Financial.............................................19
(h) Organization and Good Standing of Columbia Life; Authority to Conduct Business...................19
(i) Columbia Financial Statements....................................................................20
(j) Columbia Undisclosed Liabilities.................................................................21
(k) Columbia Life Financial Statements...............................................................21
(l) Columbia Life Undisclosed Liabilities............................................................23
(m) Intercompany Accounts............................................................................24
(n) Litigation.......................................................................................24
(o) Real and Personal Property.......................................................................24
(p) Leases and Rental Contracts......................................................................25
(q) Contracts........................................................................................25
(r) Compliance with Other Instruments and Laws.......................................................28
(s) Regulatory Filings...............................................................................29
(t) Absence of Certain Changes.......................................................................30
(u) Taxes............................................................................................31
(v) Insurance Policies...............................................................................33
(w) Transactions with Interested Persons.............................................................34
(x) Bank and Brokerage Accounts......................................................................34
(y) Disclosure.......................................................................................34
(z) Employee Benefit Plans...........................................................................35
(aa) Employees. ............................................................................38
(bb) Intellectual Property. ................................................................39
(cc) Brokers.................................................................................40
(dd) Surplus Relief. ........................................................................40
(ee) Insurance Issued by Columbia Life. .....................................................40
(ff) No Threatened Cancellation..............................................................43
(gg) Computer Software. ....................................................................43
(hh) Books and Records. ....................................................................44
(ii) No Investment Company. ................................................................44
(jj) Investment Portfolio. .................................................................45
ii
5
(kk) Discussions with Regulators. ..........................................................45
Section 4.2 Representations and Warranties of AHL and AH Acquisition.........................................45
(a) Organization and Good Standing...................................................................45
(b) Power and Authority..............................................................................45
(c) No Conflicts.....................................................................................46
(d) Consents and Approvals...........................................................................47
(e) Disclosure.......................................................................................47
(f) Brokers..........................................................................................48
ARTICLE 5
Covenants..........................................................................................................48
Section 5.1 Covenants of Columbia............................................................................48
(a) Access to Information............................................................................48
(b) Conduct of Business..............................................................................48
(c) Consultation with AH Acquisition Pending Closing.................................................51
(d) Disposition of Shares by Columbia................................................................51
(e) Intercompany Accounts............................................................................51
(f) Termination of Contracts.........................................................................51
(g) Preservation of Business.........................................................................52
(h) Investment Portfolio Requirements................................................................52
(i) Surplus Items....................................................................................52
(j) Notice and Cure..................................................................................52
(k) Further Actions..................................................................................53
(l) Reasonable Efforts...............................................................................53
(m) Changes in Stockholders and Optionees............................................................53
(n) Fund Plan Deficits...............................................................................53
(o) Major Business Decisions.........................................................................54
Section 5.2 Covenants of AHL and AH Acquisition..............................................................54
(a) Further Actions..................................................................................54
(b) Reasonable Efforts...............................................................................54
(c) Notice and Cure..................................................................................54
ARTICLE 6
Conditions Precedent...............................................................................................55
Section 6.1 AHL and AH Acquisition...........................................................................55
(a) Representations and Warranties...................................................................55
(b) Officer Certificates.............................................................................55
(c) Performance of Obligations.......................................................................55
(d) Authorization....................................................................................56
(e) Threatened or Pending Proceedings................................................................56
(f) Approvals and Consents...........................................................................56
(g) Legal Opinions...................................................................................56
(h) No Adverse Change................................................................................57
iii
6
(i) Secretary's Certificates.........................................................................57
(j) Employment Agreement.............................................................................58
(k) Stockholder Approval. ..........................................................................58
(l) Completion of Audit..............................................................................58
(m) Review...........................................................................................58
Section 6.2 Conditions to the Obligations of Columbia........................................................58
(a) Representations and Warranties...................................................................59
(b) Performance of Obligations.......................................................................59
(c) Threatened or Pending Proceedings................................................................59
(d) Approvals and Consents...........................................................................59
(e) Legal Opinion....................................................................................60
(f) Stockholder Approval.............................................................................60
(g) Authorization....................................................................................60
(h) Deposit with Exchange Agent......................................................................60
ARTICLE 7
Closing............................................................................................................60
Section 7.1 Closing..........................................................................................60
Section 7.2 Filings at the Closing...........................................................................61
ARTICLE 8
Termination........................................................................................................61
Section 8.1 Termination......................................................................................61
ARTICLE 9
Confidentiality....................................................................................................63
Section 9.1 Confidentiality..................................................................................63
ARTICLE 10
Miscellaneous......................................................................................................64
Section 10.1 Consent to Jurisdiction and Service of Process...................................................64
Section 10.2 Expenses.........................................................................................64
Section 10.3 Notices..........................................................................................65
Section 10.4 Amendment........................................................................................66
Section 10.5 Counterparts.....................................................................................66
Section 10.6 Governing Law....................................................................................66
Section 10.7 Entire Agreement.................................................................................66
Section 10.8 Waivers..........................................................................................67
Section 10.9 Interpretation...................................................................................67
Section 10.10 No Assignment....................................................................................67
Section 10.11 No Survival of Representations and Warranties....................................................68
Section 10.12 Further Assurances...............................................................................68
iv
7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is made this 2nd day of January,
1997, among COLUMBIA UNIVERSAL CORPORATION, a Nevada corporation ("Columbia"),
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION, a Florida corporation ("AHL"),
and AH ACQUISITION CORPORATION, a Florida corporation and a wholly owned
subsidiary of AHL ("AH Acquisition").
P R E A M B L E
The Board of Directors of AHL, AH Acquisition and Columbia deem it in
the best interests of each corporation, and in the best interest of their
respective stockholders that AHL or American Heritage Life Insurance Company, a
Florida corporation and a wholly owned subsidiary of AHL ("AHLIC"), acquire all
of the outstanding stock of Columbia through the merger of AH Acquisition into
Columbia in accordance with the terms and conditions hereinafter set forth (the
"Merger").
ACCORDINGLY, Columbia, AHL and AH Acquisition hereby agree as follows:
8
ARTICLE 1
THE MERGER
Section 1.1 Surviving Corporation. In accordance with the provisions of
this Agreement, Chapters 78 and 92A of the Nevada Revised Statutes (the "NRS")
and the Florida Business Corporation Act (the "FBCA"), at the Effective Time (as
defined in Section 1.6), AH Acquisition shall be merged with and into Columbia,
and Columbia shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") and shall continue its corporate existence under
the laws of the State of Nevada. The name of the Surviving Corporation shall be
"Columbia Universal Corporation." At the Effective Time, the separate existence
of AH Acquisition shall cease.
Section 1.2 Articles of Incorporation. The Articles of Incorporation of
Columbia, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law; provided, however, that the Articles of Incorporation of the
Surviving Corporation shall contain the provisions with respect to limitation of
director and officer liability set forth in the Articles of Incorporation of
Columbia, which provisions, for a period terminating on the earlier of (i) three
years from the Effective Time, (ii) the closing of a merger of Columbia into
AHL, AHLIC or an Affiliate thereof or (iii) the liquidation of Columbia, shall
not be amended, repealed or otherwise modified in any manner that would
adversely affect the rights thereunder of individuals who were directors or
officers of Columbia at the Effective Time, unless such modification is required
by law. For purposes of this Agreement, an "Affiliate" of a person shall mean
any corporation or other entity controlling, controlled by or under common
control with such person.
2
9
Section 1.3 Bylaws. The Bylaws of Columbia, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law; provided, however, that the Bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Bylaws of Columbia, which provisions, for a
period terminating on the earlier of (i) three years from the Effective Time,
(ii) the closing of a merger of Columbia into AHL, AHLIC or an Affiliate thereof
or (iii) the liquidation of Columbia, shall not be amended, repealed or
otherwise modified in any manner that would adversely affect the rights
thereunder of individuals who were directors, officers, employees or agents of
Columbia at the Effective Time, unless such modification is required by law.
Section 1.4 Directors. The persons who are serving as directors of AH
Acquisition immediately prior to the Effective Time shall be the directors of
the Surviving Corporation and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
Section 1.5 Officers. The persons who are serving as officers of AH
Acquisition immediately prior to the Effective Time shall continue in their
respective offices as the officers of the Surviving Corporation and shall hold
such offices from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
3
10
Section 1.6 Effective Time. The Merger shall become effective at the time
of filing of Articles of Merger (substantially in the form of Exhibit A hereto)
(the "Articles of Merger") with the Secretary of State of the State of Nevada
and the Department of State of the State of Florida, in each case in accordance
with the provisions of Section 92A.200 of the NRS and Section 607.1105 of the
FBCA, respectively, or at the time specified as the effective time in the
Articles of Merger. The date and time when the Merger becomes effective are
herein referred to as the "Effective Time".
Section 1.7 Effective Date. The parties acknowledge that for the accounting
purposes of AHL, AH Acquisition and Columbia, the effective date of the
acquisition of the common stock of Columbia by AHL, AHLIC or an Affiliate
thereof shall be December 31, 1996 with respect to any financial statements
prepared in accordance with generally accepted accounting principles ("GAAP"),
and shall be the Closing Date (as defined in Section 7.1) with respect to
financial statements prepared on a tax basis of accounting and statutory
financial statements; provided, that such treatment shall not affect the other
provisions of this Agreement.
ARTICLE 2
EFFECT OF THE MERGER ON STOCKHOLDERS AND OPTION HOLDERS
Section 2.1 Conversion of AH Acquisition's Common Stock and Columbia's
Common Stock and Options. (a) Columbia's Common Stock. At the Effective Time,
each share of common stock, $.01 par value per share, of Columbia ("Columbia's
Stock") issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive and be
4
11
exchangeable for the Per Share Amount in cash. For purposes of this Agreement,
the "Per Share Amount" shall mean the quotient, rounded to four decimal places,
obtained by dividing (i) $44,000,000 less the Option Amount (as defined in
Section 2.3), by (ii) the aggregate number of shares of Columbia's Stock
outstanding immediately prior to the Effective Time.
(b) AH Acquisition's Common Stock. At the Effective Time, each
share of common stock, $.001 par value per share, of AH Acquisition ("AH
Acquisition's Stock") issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and exchangeable for one share of issued,
outstanding, fully paid and nonassessable share of common stock, $.01 par value
per share, of the Surviving Corporation. All certificates that immediately prior
to the Effective Time represented the outstanding common stock of AH Acquisition
shall be deemed for all purposes to represent the number of shares of common
stock of the Surviving Corporation into which such common stock of AH
Acquisition has been converted pursuant to this Section 2.1(b).
(c) Treasury Stock. Each share of Columbia's Stock held in
Columbia's treasury and each share of AH Acquisition's Stock held in AH
Acquisition's treasury immediately prior to the Effective Time shall, by virtue
of the Merger, be canceled and retired and cease to exist, without any
conversion thereof.
(d) Columbia Options. Prior to the Closing, Columbia shall
cause each outstanding option to purchase shares of Columbia's Stock (an
"Option"), whether or not then exercisable, to be canceled and converted into
the right to receive an amount in cash equal to the product, rounded to four
decimal places, of (i) the amount by which the Per Share Amount
5
12
exceeds the exercise price per share subject to the Option and (ii) the number
of shares subject to the Option.
Section 2.2 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Columbia's Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
Columbia stockholder who (i) does not vote such shares in favor of the Merger
and (ii) delivers to Columbia a notice of intention to demand payment for shares
of Columbia's Stock held by such stockholder (the "Dissenting Shares"), pursuant
to the rights granted a dissenting stockholder under the NRS, shall not be
converted into the amount of money provided for in Section 2.1 (a) hereof but,
rather, shall be converted into the right to receive such consideration as may
be determined to be due with respect to such Dissenting Shares in accordance
with the NRS; provided however, that if any holder of Dissenting Shares shall
subsequently be deemed to not be entitled to dissenter's rights, any of the
Dissenting Shares held by such stockholder shall thereupon be deemed to have
been converted into the amount of money provided for in Section 2.1(a) hereof.
Section 2.3 Exchange of Shares and Options. (a) Exchange Agent. At or
before the Effective Time, AHL shall, or AHL shall cause AH Acquisition to,
pursuant to an agreement reasonably satisfactory to Columbia (the "Exchange
Agreement"), deposit in immediately available funds with the exchange agent for
Columbia's Stock and the Options, which exchange agent shall be selected by AHL
or AH Acquisition and shall be reasonably satisfactory to Columbia (the
"Exchange Agent"), an amount equal to (i) for Columbia's Stock, the product of
(x) the number of shares of Columbia's Stock issued and outstanding at the
Effective Time (the "Columbia Stock Outstanding") multiplied by (y) the Per
Share Amount, plus (ii) an aggregate
6
13
amount for the Options (the "Option Amount") that is equal to (x) the product of
the Per Share Amount and the aggregate number of shares of Columbia's Stock
underlying all of the Options, minus (y) the sum of the amounts obtained for
each Option by multiplying the exercise price per share of each Option by the
number of shares of Columbia's Stock underlying each Option (the "Aggregate
Option Exercise Price") (such amount deposited with the Exchange Agent being
hereinafter referred to as the "Exchange Fund"). For purposes of determining the
Per Share Amount for the purpose of determining the amount of the funds to be
deposited with the Exchange Agent hereunder, the parties shall use the
information and amounts designated on Schedule 4.1(e) (as revised pursuant to
Section 5.1(m)) as in effect at the Effective Time to determine the
Stockholders, Optionees, Columbia Stock Outstanding, Options and the Aggregate
Option Exercise Price. The Exchange Agreement shall provide that out of the
Exchange Fund, the Exchange Agent shall, pursuant to irrevocable instructions,
make the payments referred to in Sections 2.1(a), 2.1(d), 2.2 and 2.3 to each
Stockholder (as defined in Section 2.3(b)) and Optionee (as defined in Section
2.3(b)) listed on Schedule 4.1(e), as such Schedule may be revised in accordance
with Section 5.1(m). Any amount remaining in the Exchange Fund after one year
after the Effective Time may be transferred to the Surviving Corporation at its
option; provided, however, that the Surviving Corporation shall thereafter be
liable for the cash payments required by Sections 2.1(a), 2.1(d), 2.2 and 2.3.
AHL shall or shall cause the Exchange Agent or the Surviving Corporation, as the
case may be, to make the payments required by Sections 2.1(a), 2.1(d), 2.2 and
2.3 solely to the Stockholders and Optionees listed on Schedule 4.1(e) (as
revised pursuant to Section 5.1(m)) as in effect at the Effective Time.
7
14
(b) Payment Procedure. As promptly as practicable after the
Effective Time, the Exchange Agent shall mail and make available to each holder
of record ("Stockholder") of a certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of Columbia's Stock
(a "Certificate") and to each holder of record of an Option (an "Optionee"), a
letter of transmittal that shall specify that delivery shall be effected, and
risk of loss and title to the Certificates and Options shall pass, only upon
delivery of the Certificates and the Options. Upon surrender to the Exchange
Agent of a Certificate for cancellation together with such letter of
transmittal, duly executed, the Exchange Agent shall promptly pay out to the
persons entitled thereto the amount, rounded to the nearest cent, determined by
multiplying (x) the number of shares of Columbia's Stock represented by the
Certificate by (y) the Per Share Amount. Upon surrender to the Exchange Agent of
an Option together with such letter of transmittal, duly executed, the Exchange
Agent shall promptly pay out to the Optionee the amount, rounded to the nearest
cent, determined by multiplying (x) the amount by which the Per Share Amount
exceeds the exercise price per share subject to such Option and (y) the number
of shares subject to such Option. No interest shall be paid or accrued on the
cash payable upon the surrender of a Certificate or an Option. If a Stockholder
or an Optionee requests that payment be made to a person other than the one in
whose name the Certificate or Option surrendered, as the case may be, is
registered, it shall be a condition of payment that the Certificate or Option so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate or Option surrendered or establish to the satisfaction
of the Surviving Corporation that such tax has been paid or is not
8
15
applicable. Until surrendered in accordance with the provisions of this Section
2.3(b), (i) each Certificate shall represent for all purposes only the right to
receive, upon such surrender an amount in cash rounded to the nearest cent,
equal to the Per Share Amount per share of Columbia's Stock being converted and
(ii) each Option shall represent for all purposes only the right to receive,
upon such surrender, an amount in cash equal to the product, rounded to the
nearest cent, of (x) the amount by which the Per Share Amount exceeds the
exercise price per share subject to the Option and (y) the number of shares
subject to the Option.
(c) Lost, Stolen or Destroyed Certificates or Options. In the event any
Certificate or Option shall have been lost, stolen or destroyed, upon delivery
to the Surviving Corporation of an affidavit of that fact by the person claiming
such Certificate or Option to be lost, stolen or destroyed and the delivery of
such other documents as the Surviving Corporation may reasonably request, the
Surviving Corporation shall deliver or cause to be delivered the amount of money
deliverable in respect of such lost, stolen or destroyed Certificate or Option
as determined in accordance with this Article 2; provided, however, that the
Board of Directors of the Surviving Corporation may, as a condition precedent to
the delivery thereof, require the owner of such lost, stolen or destroyed
Certificate or Option to provide to the Surviving Corporation a bond in favor of
the Surviving Corporation, from an issuer satisfactory to the Surviving
Corporation and in an amount equal to the value of the shares of Columbia's
Stock represented by such Certificate or value of such Option, as the case may
be, at the Effective Time or such other security as the Surviving Corporation
shall reasonably deem necessary, as indemnity against any claim that may be made
against the Surviving Corporation with respect to the Certificate or Option
alleged to have been lost, stolen or destroyed.
9
16
Section 2.4 No Further Rights. From and after the Effective Time, the
holders of Certificates shall cease to have any rights as stockholders of the
Surviving Corporation, except as provided herein or by law.
Section 2.5 Closing of Columbia's Stock Transfer Books. After the
Effective Time, there shall be no transfers on the stock transfer books of the
Surviving Corporation of any shares of Columbia's Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for the consideration payable pursuant to this Article 2.
ARTICLE 3
CERTAIN AGREEMENTS
Section 3.1 Audit. Columbia shall engage Coopers & Lybrand, L.L.P., or
such other national firm of certified public accountants mutually agreed upon by
AH Acquisition and Columbia (the "Accountants"), to perform and complete as soon
as reasonably practicable, an audit (the "Audit") (i) of the consolidated
financial statements of Columbia and Columbia's wholly owned subsidiaries,
Columbia Universal Financial Corporation ("Columbia Financial") and Columbia
Universal Life Insurance Company ("Columbia Life"), prepared in accordance with
GAAP and (ii) of the financial statements of Columbia Life, prepared in
accordance with statutory accounting practices ("SAP") prescribed or permitted
by the National Association of Insurance Commissioners and the Texas Department
of Insurance (the "Texas Department"), each as of and for the year ended
December 31, 1996. The parties shall use reasonable efforts and shall cooperate
fully with the mutual intent of causing the completion of the Audit on or prior
to February 15, 1997. In addition, Columbia shall engage the Accountants to
perform a review (the
10
17
"Review") of the books and records of Columbia, Columbia Financial and Columbia
Life from December 31, 1996 through the Effective Time for the purpose of
advising AH Acquisition whether there have been any material adverse changes in
the business or financial condition of Columbia, Columbia Financial or Columbia
Life from December 31, 1996 through the Closing Date. AH Acquisition and its
personnel and representatives shall have the right to consult with the
Accountants with respect to, and monitor and receive the results of, the Audit
and the Review. AH Acquisition shall have the right to determine and establish
specific tests and procedures for the Accountants to perform during the Audit
and the Review, which tests and procedures may be in addition to or more
stringent than those typically performed in connection with such audits and
reviews.
Section 3.2 Due Diligence. AH Acquisition shall have the right from the
date hereof and continuing until the Closing Date to inspect the books and
records and assets of Columbia, Columbia Life and Columbia Financial and
Columbia shall cooperate, and cause Columbia Life and Columbia Financial to
cooperate, with such investigation in accordance with Section 5.1(a) hereof.
Section 3.3 Communications With Agents, Employees or Policyholders.
Columbia shall not, and shall cause Columbia Life and Columbia Financial not to,
communicate with any insurance agents, employees or policyholders of Columbia
Life regarding this Agreement or the transactions contemplated herein, other
than communications that are approved by AH Acquisition or oral responses to
unsolicited inquiries and, with respect to communications with employees, those
communications necessary in connection with the consummation of the transactions
contemplated by this Agreement.
11
18
AH Acquisition shall have the right to participate in the
communications permitted by this Section other than the oral responses to
unsolicited inquiries.
Section 3.4 Stockholder Approval. As soon as reasonably practicable,
Columbia shall send notice to its stockholders and conduct a stockholders
meeting or otherwise obtain stockholder approval for the Merger in accordance
with the NRS and any other applicable laws. Columbia shall permit AH Acquisition
to review all materials to be sent to Columbia's stockholders in connection with
obtaining such stockholder approval. All such materials and the methods of
solicitation shall be submitted to AHL for approval, which approval shall not be
unreasonably withheld. Subject to Section 3.6, Columbia shall recommend to its
stockholders that the stockholders approve the Merger. Columbia shall from time
to time notify AH Acquisition of the percentage of the outstanding shares of
Columbia's Stock as to which Columbia stockholders have delivered notice
pursuant to NRS 92A.420 of their intent to demand payment pursuant to their
dissenters' rights and shall immediately notify AH Acquisition if Columbia
stockholders holding more than ten percent of the outstanding shares of
Columbia's Stock deliver such notice.
Section 3.5 Intercompany Accounts. Except as AH Acquisition may elect
otherwise, Columbia shall cause all intercompany accounts of every nature to
which Columbia or any of the Subsidiaries (as defined in Section 4.1(f)) is a
party (other than those certain debt instruments listed in items 1 and 2 on
Schedule 4.1(m)) to be settled in full prior to the Closing.
Section 3.6 No Solicitation by Columbia.
(a) No Solicitation by Columbia. Columbia shall not, nor shall
it permit any of the Subsidiaries to, nor shall it authorize or permit any
officer, director, employee, investment banker, attorney or other advisor, agent
or representative of Columbia or any of the Subsidiaries
12
19
to, directly or indirectly, (i) solicit, initiate or encourage the submission of
any Columbia Takeover Proposal (as hereinafter defined), (ii) enter into any
agreement with respect to any Columbia Takeover Proposal, (iii) initiate any
discussions or negotiations regarding any proposal that constitutes, or may
reasonably be expected to lead to, any Columbia Takeover Proposal or (iv) except
in response to an unsolicited request, furnish any information with respect to
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Columbia Takeover Proposal. For purposes of this Agreement, a
"Columbia Takeover Proposal" means (i) any proposal or offer, other than a
proposal or offer by AHL or any of its Affiliates, for a merger or other
business combination involving Columbia or Columbia Life, (ii) any proposal or
offer, other than a proposal or offer by AHL or any of its Affiliates, to
acquire from Columbia or any of its Affiliates in any manner, directly or
indirectly, more than 50% of the voting stock of Columbia or Columbia Life or a
material amount of the assets of Columbia and the Subsidiaries, taken as a
whole, or (iii) any proposal or offer, other than a proposal or offer by AHL or
any of its Affiliates, to acquire from the stockholders of Columbia by tender
offer, exchange offer or otherwise more than 50% of Columbia's Stock.
(b) No Change of Approval. Neither Columbia, the Board of Directors of
Columbia nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to AHL or AH Acquisition, the approval
or recommendation by Columbia, the Board of Directors of Columbia or any such
committee of this Agreement or the Merger or take any action having such effect
or (ii) approve or recommend, or propose to approve or recommend, any Columbia
Takeover Proposal. Notwithstanding the foregoing, if the Board of Directors of
Columbia receives an unsolicited Columbia Takeover Proposal that, in the
exercise
13
20
of its fiduciary obligations (as determined in good faith after consultation
with outside counsel), it determines to be a Columbia Superior Proposal (as
hereinafter defined), the Board of Directors of Columbia may withdraw or modify
its approval or recommendation of this Agreement or the Merger and may (subject
to the following sentence) terminate this Agreement, in each case at any time
after the fifth business day following AHL's receipt of written notice (a
"Columbia Notice of Superior Proposal") advising AHL that the Board of Directors
of Columbia has received a Columbia Takeover Proposal that it has determined to
be a Columbia Superior Proposal, specifying the principal terms and conditions
of such Columbia Superior Proposal and identifying the person making such
Columbia Superior Proposal. Columbia may terminate this Agreement pursuant to
the preceding sentence only if the stockholders of Columbia shall not yet have
voted upon the Merger. Nothing contained herein shall prohibit Columbia from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) of the Securities Exchange Act of 1934, as amended, provided that
Columbia does not withdraw or modify its position with respect to the Merger or
take any action having such effect or approve or recommend a Columbia Takeover
Proposal. For purposes of this Agreement, a "Columbia Superior Proposal" means
any bona fide Columbia Takeover Proposal to merge or combine with Columbia or to
acquire, directly or indirectly, more than 50% of Columbia's Stock or of
Columbia Life's voting stock then outstanding or a material amount of the assets
of Columbia and the Subsidiaries, taken as a whole, on terms that the Board of
Directors of Columbia determines in its good faith reasonable judgment (based on
the written advice of a financial advisor of nationally recognized reputation)
to be more favorable to Columbia's stockholders than the Merger.
14
21
(c) Termination Upon Change. If Columbia, the Board of Directors of
Columbia or any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to AHL or AH Acquisition, the approval
or recommendation by Columbia, the Board of Directors of Columbia or any such
committee of this Agreement or the Merger or take any action having such effect,
or (ii) approve or recommend, or propose to approve or recommend, any Columbia
Takeover Proposal, AHL and AH Acquisition may terminate this Agreement.
(d) Notification by Columbia. In addition to the obligations of
Columbia set forth in Section 3.6(b), Columbia shall promptly advise AHL orally
and in writing of the receipt of any Columbia Takeover Proposal or any proposal,
discussion or overture that may lead to a Columbia Takeover Proposal.
(e) Breakup Fee. In the event Columbia, its Board of Directors or a
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to AHL or AH Acquisition, the approval or
recommendation of approval of this Agreement or the Merger by Columbia or its
Board of Directors, or a committee thereof, or take any action having such
effect, or (ii) approve or recommend, or propose to approve, recommend, present
or otherwise disclose in any manner to the Columbia stockholders (including any
recommendation, presentation, disclosure or approval contemplated by Rule
14e-2(a) of the Securities Exchange Act of 1934, as amended), any Columbia
Takeover Proposal, and either (i) the stockholders of Columbia do not approve
the Merger or (ii) Columbia, AHL or AH Acquisition terminates this Agreement
pursuant to this Section 3.6, then Columbia shall immediately thereafter pay AH
Acquisition a fee of $880,000 in cash.
15
22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Columbia. Columbia
represents, warrants and, to the extent that an item relates to a future time
period, covenants to AHL and AH Acquisition as follows:
(a) Columbia Organization and Good Standing; Authority to Conduct
Business. Columbia is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Columbia has all requisite
corporate power and authority to carry on its businesses as presently conducted
and to own or lease and to operate its properties as currently operated. The
copies of the Articles of Incorporation and all amendments thereto and the
Bylaws and all amendments thereto of Columbia, which have heretofore been
delivered, or promptly after the execution hereof will be delivered, to AH
Acquisition, are or will be, as the case may be, true and complete. Columbia is
not in violation of any term of its Articles of Incorporation or Bylaws.
(b) Power and Authority. Columbia has all requisite power and authority
to execute, deliver and perform this Agreement and the Articles of Merger. The
execution, delivery and performance by Columbia of this Agreement and the
Articles of Merger have been duly authorized by all requisite corporate action
on behalf of Columbia and except for obtaining the approval of this Agreement by
the stockholders of Columbia, no other authorizations or approvals by the Board
of Directors or stockholders of Columbia are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
constitutes valid and legally binding obligations of Columbia enforceable
against it in accordance with its terms, except
16
23
as enforceability may be limited by bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors rights generally and general
principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Columbia in accordance
with the terms hereof, upon receipt of the consents and approvals contemplated
by Section 4.1(d), will not violate any existing provision of the Articles of
Incorporation, Certificate of Incorporation, Bylaws or any other organizational
documents of Columbia, Columbia Life or any other Subsidiary or of any law or
violate any existing term or provision of any order, writ, judgment, injunction
or decree of any court or any other governmental department, commission, board,
bureau, agency or instrumentality applicable to Columbia, Columbia Life or any
other Subsidiary or conflict with or result in a breach of any of the terms,
conditions or provisions of any agreement to which Columbia, Columbia Life or
any other Subsidiary is a party, or by which any of their respective properties
are bound, or constitute an event that might permit an early termination of or
otherwise materially affect any such agreement.
(d) Consents and Approvals. Except as set forth on Schedule 4.1(d), no
consent, license, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority, agency, bureau or
commission, or any third party is required to be obtained or made by Columbia,
Columbia Life or any other Subsidiary in connection with the execution,
delivery, performance, validity and enforceability of this Agreement or the
conversion of the shares of Columbia's Stock.
(e) Capital Structure of Columbia. The authorized capital stock of
Columbia consists solely of 10,000,000 shares of Common Stock, par value $.01
per share, of which
17
24
4,478,403 shares are issued and outstanding (the "Outstanding Columbia Shares"),
and 5,000,000 shares of Preferred Stock, par value $.01 per share, of which no
shares are issued and outstanding. The Outstanding Columbia Shares constitute
the only issued and outstanding capital stock of Columbia. All of the
Outstanding Columbia Shares are owned of record as of the date of this Agreement
by the stockholders listed on Schedule 4.1(e) to this Agreement. All of the
Outstanding Columbia Shares have been duly authorized and are validly issued,
fully paid and nonassessable, and except as set forth on Schedule 4.1(e), there
are no existing or outstanding securities convertible into capital stock of
Columbia, or options, warrants, calls, commitments, or agreements, other than
this Agreement, of any character that relate to the authorization, issuance,
delivery, sale, purchase or redemption by Columbia of shares of capital stock of
Columbia.
(f) Subsidiaries. Each corporation, partnership, joint venture or other
entity in which Columbia owns directly or indirectly a voting or other equity
interest, other than issuers of securities held as Investment Assets (as defined
in Section 4.1(jj)) (each a "Subsidiary") is set forth on Schedule 4.1(f), and
except as set forth therein, Columbia has no Subsidiaries. Columbia owns
beneficially and of record all of the outstanding capital stock of each
Subsidiary. The authorized capital stock of Columbia Life consists solely of
240,000 shares of Common Stock, par value $12.50 per share, of which 120,000
shares are issued and outstanding and owned beneficially and of record by
Columbia. The authorized capital stock of Columbia Financial consists solely of
20,000 shares of Common Stock, par value $.01 per share, of which 1,000 shares
are issued and outstanding and owned beneficially and of record by Columbia.
Except as set forth on Schedule 4.1(f), there are no outstanding rights or
options to acquire, nor any
18
25
outstanding securities convertible into capital stock of any class of any
Subsidiary. All of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 4.1(f), all such shares are free
and clear of any and all liens, charges, security interests and other
encumbrances and claims and none of such shares is the subject of any agreement
under which any such lien, charge, security interest or other encumbrance or
claim might arise. The copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and of the Bylaws and all amendments
thereto of each Subsidiary, which have heretofore been delivered, or promptly
after the execution hereof will be delivered, to AH Acquisition, are or will be,
as the case may be, true and complete. No Subsidiary is in violation of any term
of its Articles of Incorporation or Certificate of Incorporation or Bylaws.
(g) Organization and Good Standing of Columbia Financial. Columbia
Financial is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Columbia Financial has all requisite
corporate power and authority to carry on its business as presently conducted
and to own or lease and to operate its properties as currently operated.
(h) Organization and Good Standing of Columbia Life; Authority to
Conduct Business. Columbia Life is a stock insurance company, duly organized,
validly existing and in good standing under the laws of the State of Texas.
Columbia Life has all requisite corporate power and authority to carry on its
business as presently conducted and to own or lease and to operate its
properties as currently operated. Columbia Life is duly licensed and in good
standing to write the lines of insurance and otherwise to do business in the
states and jurisdictions as set
19
26
forth in Schedule 4.1(h) hereto. Columbia has delivered, or promptly after the
execution hereof will deliver, to AH Acquisition correct and complete copies of
all of the insurance licenses of Columbia Life certified by the Secretary of
Columbia Life, all of which are in full force and effect. Columbia Life has full
power and authority to write all the lines of insurance shown on the insurance
licenses of Columbia Life. Columbia Life is not transacting any insurance or
reinsurance or other business in any state requiring a license therefor in which
it is not so licensed.
(i) Columbia Financial Statements. Columbia has delivered, or promptly
after the execution hereof will deliver, to AH Acquisition complete and correct
copies of (i) the audited consolidated financial statements of Columbia and the
Subsidiaries as of and for the years ended December 31, 1993, 1994 and 1995,
together with the notes thereto and the reports thereon of Coopers & Lybrand,
L.L.P. (the "Audited Financial Statements") and (ii) the unaudited consolidated
financial statements of Columbia and the Subsidiaries for the quarters ended
March 31, June 30 and September 30, 1996 (the "Interim Financial Statements" and
collectively with the Audited Financial Statements, the "Columbia Financial
Statements"). The Columbia Financial Statements have been (and all additional
financial statements of Columbia delivered to AH Acquisition pursuant to this
Agreement will be), in each such case, prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved, except in the case of the
Interim Financial Statements, subject to inclusion of footnotes and year-end
adjustments. The Columbia Financial Statements present fairly the financial
position, the assets and the liabilities (whether absolute, accrued, contingent,
or otherwise) of Columbia and the Subsidiaries as of the respective dates
thereof and the results of operations and changes in stockholders' equity and
cash
20
27
flows for the respective periods then ended, all in accordance with GAAP, except
in the case of the Interim Financial Statements, subject to inclusion of
footnotes and year-end adjustments. Except as disclosed in the Columbia
Financial Statements and reports delivered pursuant to this Section, neither
Columbia nor any of the Subsidiaries has any debts, obligations or liabilities,
contingent or otherwise, that could materially adversely affect its financial
condition.
(j) Columbia Undisclosed Liabilities. Other than as set forth in
Schedule 4.1(j), neither Columbia nor any Subsidiary has any liabilities,
whether absolute, accrued, contingent, matured, unmatured, or otherwise, except
(a) as and to the extent reflected or reserved against on the Interim Financial
Statements dated as of September 30, 1996, and (b) liabilities of a nature
similar to those currently reflected on such financial statements and incurred
by Columbia solely in the ordinary course of business and consistent with prior
practices, and, except for liabilities incurred in connection with insurance
polices and annuities, not in the aggregate material, since the date of such
financial statements.
(k) Columbia Life Financial Statements. Columbia has delivered, or
promptly after the execution hereof will deliver, to AH Acquisition complete and
correct copies of (i) the Quarterly Statements of Columbia Life filed with the
Texas Department for the quarters ended March 31, June 30 and September 30, 1996
(the "Quarterly Statements"), (ii) the Annual Statements of Columbia Life filed
with the Texas Department for the years ended December 31, 1993, 1994 and 1995,
together with the exhibits and schedules thereto (the "Annual Statements"), and
(iii) the audited statutory financial statements of Columbia Life for the years
ended December 31, 1993, 1994 and 1995, together with the notes thereto (the
"Audited Statutory Statements").
21
28
The (i) statutory financial statements (the "Statutory Statements") of
Columbia Life contained in the Annual Statements and the Quarterly Statements
and any additional quarterly or annual Statements of Columbia Life filed with
the Texas Department and (ii) Audited Statutory Statements and any additional
audited financial statements of Columbia Life delivered to AH Acquisition, have
been (or, if not yet delivered, will be), in each such case, prepared in
accordance with SAP, and such accounting practices have been applied on a
consistent basis throughout the periods involved. The Audited Statutory
Statements and each of the Statutory Statements present fairly the financial
position, the assets, and the liabilities (whether absolute, accrued,
contingent, or otherwise) of Columbia Life as of the respective dates thereof
and the results of operations and changes in capital and surplus and in cash
flows for the respective periods then ended, all in accordance with SAP.
Since December 31, 1995, there has been no material adverse change in
the composition, nature or risk characteristics (credit quality or otherwise) of
Columbia Life's investment portfolio. Except as disclosed in Schedule 4.1(k),
the financial statements and reports delivered pursuant to this Section, or as
otherwise referred to in this Agreement, Columbia Life has no debts, obligations
or liabilities, contingent or otherwise, that could materially adversely affect
its financial condition.
All reserves, due and uncollected premiums and other related items with
respect to insurance and annuity contracts as established or reflected in the
Statutory Statements (i) were determined in accordance with commonly accepted
actuarial standards consistently applied, (ii) were fairly stated in accordance
with sound actuarial principles, (iii) were based on actuarial assumptions which
produce reserves as great as those called for in any contract provision as to
22
29
reserve basis and method, and are in accordance with all other contract
provisions and the related reinsurance, coinsurance, and other similar
contracts, (iv) met the requirements of the insurance laws and regulations of
each applicable jurisdiction, and of the National Association of Insurance
Commissioners model regulations and actuarial guidelines, and all appropriate
standards of practice as promulgated by the Actuarial Standards Board, (v) were
computed on the basis of assumptions consistent with those used in computing the
corresponding items in the Statutory Statements for the immediately preceding
comparable period, and (vi) when considered in light of the assets held by
Columbia Life with respect to such reserves and related actuarial items
including the investment earnings on such assets, and the considerations
anticipated to be received and retained under such policies and contracts, make
adequate provision, according to presently accepted actuarial standards of
practice, for the unmatured benefits, dividends, losses, claims, expenses and
any other obligations and liabilities (whether absolute, accrued, contingent, or
otherwise) of Columbia Life under all outstanding insurance and annuity
contracts and reinsurance, coinsurance, and other similar contracts pursuant to
which Columbia Life has or could have any obligation or liability (whether
absolute, accrued, contingent or otherwise) as of the date of such Statutory
Statements. Columbia Life owns assets that qualify as legal reserve assets under
the insurance laws and regulations of each applicable jurisdiction in an amount
at least equal to all such required reserves and other similar amounts.
(l) Columbia Life Undisclosed Liabilities. Other than as set forth in
Schedule 4.1(l), Columbia Life does not have, and as of the Closing Date will
not have, any liabilities, whether absolute, accrued, contingent, matured,
unmatured or otherwise, except (a) as and to the extent reflected or reserved
against on the Quarterly Statement for the quarter ended September
23
30
30, 1996, and (b) liabilities of a nature similar to those currently reflected
on such Quarterly Statement and incurred by Columbia Life solely in the ordinary
course of business and consistent with prior practices, and, except for
liabilities incurred in connection with insurance polices and annuities, not in
the aggregate material, since the date of such Quarterly Statement.
(m) Intercompany Accounts. Set forth in Schedule 4.1(m) is a complete
and correct list and summary description of all intercompany accounts payable
and receivable ("Intercompany Accounts") as of December 16, 1996, between or
among Columbia Life, Columbia Financial or Columbia, or any Affiliate thereof.
(n) Litigation. Except as set forth in Schedule 4.1(n) hereto, there is
no judicial, administrative or regulatory action, proceeding, investigation or
inquiry or administrative charge or complaint pending or, to the knowledge of
Columbia, threatened, that might materially adversely affect the condition
(financial or otherwise), properties, assets, liabilities, capitalization,
ownership, business or operations of Columbia or any Subsidiary (Columbia and
the Subsidiaries each being sometimes individually referred to herein as a
"Company" and sometimes collectively referred to herein as the "Companies"), or
result in any liability on the part of any of the Companies or in which there
are claims for damages, or that might materially adversely affect any
registration or insurance license, or the value or marketability of any of the
insurance products of Columbia Life, or that questions the validity of this
Agreement or any action taken or to be taken by any party pursuant hereto or in
connection with the transactions contemplated hereby.
(o) Real and Personal Property. Columbia has provided to AHL and AH
Acquisition a list and summary description of all real and, as of November 30,
1996, tangible personal property owned by each of the Companies, whether or not
used or proposed to be used
24
31
in any of the Companies' business (which together with the additions and
deletions thereto in the ordinary course of business as permitted by this
Agreement are hereinafter called the "Assets"). Each Company has, or prior to
the Closing Date will have, good and indefeasible title to the Assets owned by
such Company, free and clear of all liens, security interests and other
encumbrances and claims or possible claims, except for inchoate liens, liens for
taxes not yet due, statutory liens as to which to the knowledge of Columbia no
dispute exists and those leases and contracts set forth in Schedule 4.1(p). None
of the Companies uses or proposes to use any real or tangible personal property
except as set forth in Schedule 4.1(o) or covered by a lease set forth in
Schedule 4.1(p). All of the Assets are or will be, as the case may be, suitable
for their intended use and are in good condition and repair, subject to ordinary
wear and tear. The Assets constitute all of the real and tangible personal
property necessary to conduct the business of each of the Companies as presently
conducted. No real property leased by any of the Companies is now, nor to
Columbia's knowledge has such property ever been, used for the generation,
storage or disposal of hazardous wastes, hazardous substances, toxic wastes,
petroleum products or other pollutants.
(p) Leases and Rental Contracts. Set forth in Schedule 4.1(p) hereto is
a list and summary description of all leases and contracts under which any of
the Companies leases, as lessor or lessee, or rents, any real or personal
property. All such leases and contracts are in full force and effect without any
existing default or breach thereunder.
(q) Contracts. Set forth in Schedule 4.1(q) hereto (with Section
references corresponding to those set forth below) is a complete and correct
list as of the date hereof of all written or oral agreements, contracts and
commitments, with an annual cost or benefit to any of the Companies of, unless
otherwise indicated, $15,000 or more (the "Contracts"), to which any
25
32
of the Companies is a party or by which any of the Companies is bound or
otherwise affected as of the date hereof (other than insurance or annuity
contracts sold by Columbia Life in the ordinary course of business or any
agreements or contracts listed on another schedule to this Agreement),
including: (i) mortgages, indentures, security agreements, loan and credit
agreements and other agreements and instruments relating to the borrowing of
money or evidence of credit where any of the Companies is debtor, (ii)
agreements or other arrangements with insurance agents and agencies and third
party administrators (including with respect to group life contracts, the name
of the agent of record for such business) pursuant to which Columbia Life or an
Affiliate thereof has paid $25,000 or more in commissions or other consideration
during the calendar year 1995 or 1996, (iii) contracts for the provision of
data-processing services, (iv) finder's, franchise, distribution, sales or
brokerage agreements, (v) contracts or options to purchase or sell real
property, (vi) contracts for the purchase of materials, supplies or equipment,
or for providing services, (vii) contracts, arrangements or treaties with any
party regarding reinsurance, excess insurance, ceding of insurance, assumption
of insurance, or indemnification with respect to insurance currently being
provided directly or indirectly by Columbia Life or regarding the management of
any portion of its business or regarding the sale by it of its products through
any other company or the sale by any other company of its products through it
which have been entered into on or after January 1, 1996, (viii) contracts with
any entity that is an Affiliate of the Companies or with any officer or director
of any of the Companies or any officer or director of any other entity that is
an Affiliate of the Companies, or to the knowledge of Columbia, any corporation
controlled by such officer or director, (ix) agreements and instruments
representing loans or commitments to loan to officers, directors, employees or
agents (other than insurance
26
33
agents) of any of the Companies or of any entity that is an Affiliate of any of
the Companies, (x) contracts of any kind to which the United States government
or any of its agencies is a party, or under any federal, state or local law,
regulation or executive order, (xi) partnership or joint venture agreements of
any kind and (xii) other agreements, contracts and commitments. Columbia has
delivered or made available, or promptly after the execution hereof will deliver
or make available, to AH Acquisition complete and correct copies of all written
Contracts together with all amendments thereto and waivers and consents with
respect thereto. In addition, Columbia has made available, or promptly after the
execution hereof will make available, (i) all insurance policy forms used for
products currently marketed by Columbia Life in its business and that are
currently in force, and (ii) all forms of agreements or other arrangements with
insurance agents and agencies and third party administrators used by Columbia
Life in its business. All of such Contracts are in full force and effect and
each party thereto has performed in all material respects all of the obligations
required to be performed by them to date and are not in default thereunder in
any material respect. Except as specified on Schedule 4.1(q), all of such
Contracts may be terminated by a Company on thirty days' notice with no penalty
to any of the Companies. No Contract to which any of the Companies is a party,
or by which any of the Companies or any of its respective properties is bound,
specifically limits any of the Companies' freedom to compete in any line of
business or with any person or entity. None of the Companies has outstanding any
power of attorney other than customary in the insurance industry to permit
agents to execute binders. All contracts, arrangements or treaties to which
Columbia Life is a party regarding reinsurance, excess insurance, ceding of
insurance, assumption of insurance or indemnification with respect to insurance
are either listed on Schedule 4.1(q) hereto or are listed on Schedule S
27
34
to Columbia Life's annual statement filed with the Texas Department with respect
to the year ending December 31, 1995.
(r) Compliance with Other Instruments and Laws. None of the Companies
is in violation of any term of their respective charters, articles of
incorporation, certificate of incorporation, bylaws, or of any mortgage,
indenture, instrument or agreement relating to indebtedness for borrowed money
or regulatory filing or undertaking of or affecting it or of any judgment,
decree or order in which any such Company is named, or in any violation in any
material respect of any term of any other instrument, contract or agreement, or
of any statute, law, ordinance, rule, governmental regulation, permit,
concession, grant, franchise, license or other governmental authorization or
approval applicable to it or any of its respective properties. All insurance
licenses referred to in Schedule 4.1(h) hereto and all permits, concessions,
grants, franchises, other licenses and other governmental authorizations and
approvals necessary for the conduct of the business of each of the Companies
have been duly obtained and are in full force and effect, and, there are no
proceedings pending or, to the knowledge of Columbia, threatened, that may
result in the revocation, cancellation, or suspension, or any adverse
modification, of any thereof. The execution, delivery and performance of, and
compliance with, this Agreement, and the consummation of the transactions
contemplated hereby by Columbia in accordance with the terms hereof, will not
result in any such violation or be in conflict with or result in any default
under any of the foregoing referred to in this Section 4.1(r), or result in the
creation of any mortgage, pledge, lien, charge or encumbrance upon any of the
properties or assets of any of the Companies or the loss, revocation,
cancellation, suspension or modification of any insurance license listed in
Schedule 4.1(h) hereto, other licenses or material contractual rights held by
any
28
35
of the Companies pursuant to any of the foregoing or result in any such
revocation, cancellation, suspension or modification.
(s) Regulatory Filings. The Companies have filed or otherwise provided
all reports, data, other information and applications required to be filed with
or otherwise provided to the Texas Department and all other federal, state or
local governmental authorities (including, without limitation, insurance
departments) with jurisdiction over any of the Companies and all required
regulatory approvals in respect thereof are in full force and effect on the date
hereof. Columbia has furnished or made available, or promptly after the
execution hereof will furnish or make available, to AH Acquisition complete and
correct copies of (i) the most recent reports of examination issued by state
insurance regulatory authorities in respect of Columbia Life, (ii) the most
recent insurance holding company registrations and annual reports filed with
respect to Columbia Life, (iii) all other regulatory filings by any of the
Companies and (iv) all complaints filed by any regulatory agency and other
regulatory proceedings initiated or pending with respect to any of the Companies
at any time within the preceding five years. Since December 31, 1995, no
deficiencies material to the financial condition or operations of Columbia Life
or any of the other Companies have been asserted by any state regulatory
authorities with respect to any reports or filings made by or with respect to
any of the Companies. Columbia has furnished to AH Acquisition copies of all
written responses submitted by Columbia Life (i) in respect of the most recent
examination report of Columbia Life made by a state insurance regulatory
authority and (ii) to the National Association of Insurance Commissioners
regarding Columbia Life's Insurance Regulatory Information System (IRIS)
ratings. Each of the Companies on the Closing Date will have substantially
completed, in the ordinary course of its business, consistent with its past
29
36
practices and to the extent practicable, the preparation of all reports, data,
other information and applications that it will be required to file with any
federal, state or local governmental authority (including, without limitation,
insurance departments) within 60 days following the Closing Date and such unmade
filings will be in form and substance sufficient to enable the Companies to
complete and make such filings on a timely basis following the Closing Date.
(t) Absence of Certain Changes. Other than as set forth in Schedule
4.1(t), since September 30, 1996, none of the Companies has (i) issued, sold or
delivered or agreed to issue, sell or deliver any additional shares of its
capital stock or any options, warrants or rights to acquire any such capital
stock, or securities convertible into or exchangeable for such capital stock,
(ii) incurred any obligations or liabilities, whether absolute, accrued,
contingent or otherwise (including, without limitation, liabilities as guarantor
or otherwise with respect to obligations of others), other than obligations and
liabilities relating to the issuance of insurance policies and annuity contracts
in the ordinary course of Columbia Life's business, or incurred in the ordinary
course of Columbia's or Columbia Financial's business, or obligations and
liabilities otherwise reflected on financial statements delivered to AH
Acquisition, (iii) mortgaged, pledged or subjected to any lien, lease, security
interest or other charge or encumbrance, any of its assets, tangible or
intangible, (iv) acquired or disposed of any assets or properties, or entered
into any agreement or other arrangements for any such acquisition or
disposition, except for assets acquired or disposed of in the ordinary course of
business, (v) declared, made, paid or set apart any sums for any dividend or
other distribution to its stockholders or any other Affiliate or purchased or
redeemed any shares of its capital stock or granted any option, warrant or right
to purchase any such capital stock, or reclassified such capital stock, (vi)
except as set forth on a
30
37
schedule hereto, paid or become obligated to pay any service fees or other sums
to Columbia or any of its Affiliates, (vii) forgiven or canceled any debts or
claims or waived any statutory, contractual or common law rights of material
value, (viii) entered into any transaction other than in the ordinary course of
business, (ix) granted any rights or licenses under any of their respective
trade names or entered into general agency arrangements, (x) entered into any
agreement regarding reinsurance, surplus relief obligations, excess insurance,
ceding of insurance, assumption of insurance or indemnification with respect to
insurance or management of business, (xi) suffered any adverse change in their
respective operations, financial condition, income, assets or liabilities, (xii)
suffered any damage, destruction or loss, whether or not covered by insurance or
reinsurance, materially adversely affecting, in any case or in the aggregate,
their respective businesses, financial condition, properties or assets or (xiii)
suffered any strike, picketing, boycott or other labor trouble materially
adversely affecting their respective businesses, financial condition or
operations.
(u) Taxes. For the purposes of this Agreement, the term "taxes" shall
include all federal, state, local and foreign taxes, fees and other governmental
charges of any nature (including without limitation, premium taxes), and
interest and penalties with respect thereto, and any payment required under any
tax allocation or sharing agreement. Except as set forth in Schedule 4.1(u): (i)
all tax and information returns and reports of each of the Companies and of any
member of any affiliated group of corporations (within the meaning of section
1504 of the Internal Revenue Code of 1986, as amended (the "Code"), as in effect
at the time of the due date for the filing of such returns and reports) of which
any of the Companies is or was a member required by law to be filed (taking into
account all extensions) have been timely filed, and are
31
38
correct and complete in all material respects; (ii) all taxes upon each of the
Companies or for which any of the Companies may be liable, or in respect of any
of the assets, income or franchises of any of the Companies, have been paid by
such Company or have been paid on such Company's behalf, or adequate accruals,
reserves and provisions have been established on the books of the Companies for
the payment of such taxes; (iii) there are no tax liens upon any of the
properties or assets of any of the Companies, except for ad valorem taxes not
yet delinquent, taxes (other than ad valorem taxes) not yet due and payable, and
taxes the validity of which are being contested in good faith and for which
adequate reserves have been provided; (iv) no foreign, federal, state, local or
other taxing authority has provided any of the Companies or any member of any
affiliated group of corporations of which any of the Companies is or was a
member with any written notice of any audit, investigation, proceeding or claim
with respect to any taxes for which any of the Companies may be liable; (v) none
of the Companies nor any member of any affiliated group of corporations (as
defined above) of which any of the Companies is or was a member has granted any
waiver of any statutes of limitations applicable to any claim for taxes which
has not expired or has agreed to any extension of time with respect to any tax
assessment or deficiency for taxes for which any of the Companies may be liable
which has not expired; (vi) all taxes that any of the Companies is required by
law to withhold or collect have been withheld or collected and, to the extent
required, have been paid over to the proper governmental authorities in a timely
manner; (vii) none of the returns filed by or on behalf of any of the Companies
is currently being audited by any federal, state, local, foreign or other taxing
authority; (viii) the accruals and reserves for taxes (A) reflected in the
Columbia Financial Statements are adequate to cover all liabilities for all
accrued or unpaid taxes for which each of
32
39
the respective Companies has any liability or, as to contested claims, any
reasonably estimated liability for taxes relating to such claims with respect to
the periods covered thereby, and (B) established or to be established on the
books of each of the Companies for the period beginning October 1, 1996, through
the Effective Time will be adequate to cover all such liabilities and reasonably
estimated liabilities with respect to such period, all in accordance with GAAP
applied on a consistent basis throughout the periods involved; (ix) Columbia
Life is, and for all periods prior to the Closing Date will be, a life insurance
company as defined in Section 816 of the Code; (x) all ceding commissions paid
or accrued by Columbia Life (for any period as to which any applicable statute
of limitations remains open) in connection with any reinsurance, coinsurance, or
other similar contract have been capitalized and amortized over the respective
life of each such contract in accordance with all applicable tax laws; (xi) none
of the Companies is a party to or bound by any tax indemnity, tax sharing, tax
allocation or similar agreements; (xii) all material elections with respect to
taxes affecting each of the Companies are set forth in Schedule 4.1(u); (xiii)
none of the Companies is a party to any agreement, contract, arrangement or plan
that has resulted or could result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code; and (xiv) none of the Companies has nor has had a permanent
establishment in any foreign country, as defined in any applicable tax treaty or
convention between the United States and such foreign country.
(v) Insurance Policies. Set forth in Schedule 4.1(v) hereto is a
complete and correct list as of the date hereof of the insurance policies
maintained by or for the benefit of any of the Companies or their Affiliates or
other officers or directors. Such policies are in full force
33
40
and effect, all premiums due thereon have been paid and the insured has complied
in all material respects with the provisions of such policies.
(w) Transactions with Interested Persons. Except as set forth on
Schedule 4.1(w), no officer, director, employee, agent or broker (or spouse or
any child thereof) of any of the Companies, or of any corporation that is an
Affiliate of any of the Companies, owns, directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer,
employee or director of, any customer, insurance agency, competitor or supplier
of any of the Companies or any person or entity that has a material contract or
arrangement with any of the Companies.
(x) Bank and Brokerage Accounts. Columbia has provided, or promptly
hereafter shall provide, AH Acquisition with a complete and accurate list of
each bank or trust company, other financial institution, mutual fund or stock
brokerage firm in which each of the Companies has an account or safe deposit box
and each custodial account maintained by each of the Companies and, in each
case, the names of such accounts, the account numbers and the names of all
persons authorized to draw thereon or to have access thereto. Columbia has
provided, or promptly hereafter shall provide, AH Acquisition with a complete
and accurate list of all credit cards issued to any present or past officer,
employee or agent of any of the Companies under which any of the Companies has
any current or potential future liability.
(y) Disclosure. Neither this Agreement nor any written document,
statement, list, schedule, exhibit, certificate or other instrument furnished or
to be furnished to AH Acquisition or AHL by or on behalf of any of the Companies
in connection with the transactions contemplated hereby contains or will contain
when made or delivered any untrue statement of a
34
41
material fact, or fails to state or will fail to state when made or delivered a
material fact necessary to make the statements contained herein and therein not
misleading. There is no fact known to Columbia that materially adversely
affects, or in the future may materially adversely affect, the condition
(financial or otherwise), properties, assets, liabilities, capitalization,
ownership, business or operations of any of the Companies.
(z) Employee Benefit Plans.
(i) List of Plans. Schedule 4.1(z) includes a complete and
accurate list of all, whether written or oral, employee benefit plans ("Plans")
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and compensation and benefit arrangements, whether
written or oral, that are not Plans other than base compensation of employees
and de minimis fringe benefits ("Benefit Arrangements"), including, but not
limited to any (A) employment or consulting agreements, (B) incentive bonus or
deferred bonus arrangements, (C) arrangements providing termination allowance,
severance or similar benefits, (D) equity compensation plans, (E) deferred
compensation plans, (F) cafeteria plans, (G) employee assistance programs, (H)
bonus programs, (I) scholarship programs, (J) vacation policies, and (K) stock
option plans that (1) are currently in effect or were maintained within three
years of the Effective Time, or have been approved before the Effective Time but
are not yet effective, for the benefit of directors, officers, employees, former
employees, independent contractors or former independent contractors (or their
beneficiaries) of any of the Companies or (2) with respect to which any of the
Companies has or could in the future have a liability or obligation ("Designated
Plans"). Schedule 4.1(z) indicates, with respect to each Designated Plan,
whether the Designated Plan is active, frozen or terminated.
35
42
(ii) No Multiemployer Pension Plans. Neither any Company nor
any entity (whether or not incorporated) that was at any time during the six
years before the Effective Time treated as a single employer together with any
Company under section 414 of the Code has ever maintained, had an obligation to
contribute to, or incurred any liability with respect to a multiemployer pension
plan as defined in Section 4001(a)(3) of ERISA.
(iii) No Title IV Plans. Except as listed on Schedule 4.1(z),
neither any Company nor any entity (whether or not incorporated) that was at any
time during the three years before the Effective Time treated as a single
employer together with any Company under section 414 of the Code has ever
maintained, or had an obligation to contribute to, or incurred any liability
with respect to any plan subject to Title IV of ERISA.
(iv) Plan Documents. With respect to each Designated Plan,
Columbia has delivered to AH Acquisition, as applicable, true and complete
copies of (A) all written documents comprising such Plan or Benefit Arrangement
(including amendments and individual agreements relating thereto); (B) the
trust, group annuity contract or other document that provides for the funding of
the Designated Plan or the payment of Designated Plan benefits, (C) the five
most recent annual Form 5500 reports (including all schedules thereto) filed
with respect to the Designated Plan; (D) the most recent actuarial report,
valuation statement or other financial statement; (E) the most recent Internal
Revenue Service ("IRS") determination letter; (F) the summary plan description
currently in effect and all material modifications thereto; and (G) all other
correspondence from the IRS or Department of Labor received that relate to one
or more of the Designated Plans with respect to any matter, audit or inquiry
that is still pending.
36
43
(v) Compliance with Law. The Companies have operated each
Designated Plan in a manner that is in material compliance with the terms
thereof and with all applicable laws, regulations and administrative agency
rulings and requirements applicable thereto to the extent that failure to do so
would not have a material adverse effect on the Companies. Except as otherwise
disclosed in Schedule 4.1(z), with respect to each Designated Plan that is a
Plan, (A) the Plan is in compliance with ERISA in all material respects,
including but not limited to all reporting and disclosure requirements of Part 1
of Subtitle B of Title I of ERISA; (B) to the extent legally required, the
appropriate Form 5500 has been timely filed, for each year of its existence; (C)
there has been no transaction described in section 406 or 407 of ERISA or
section 4975 of the Code relating to the Plan unless exempt under section 408 of
ERISA or section 4975 of the Code, as applicable; and (D) the bonding
requirements of section 412 of ERISA have been satisfied.
(vi) Contributions and Plan Assets. Full payment has been made
of all amounts which the Companies are required, under applicable law or under
any Designated Plan or any agreement related to any Designated Plan to which the
Company is a party, to have paid as contributions thereto as of the last day of
the most recent fiscal year of each Designated Plan ended prior to the date
hereof and except as disclosed on Schedule 4.1(z), all payments and
contributions for benefits earned under any Designated Plan through the date
hereof but not paid are set forth on the most recent financial statements of the
Companies. Benefits under all Designated Plans are as represented in the
governing instruments providing pursuant to (i) above, and have not been
increased subsequent to the date as of which documents have been provided.
37
44
(vii) Determination Letters. Each Designated Plan, as amended
to date, that is intended to be qualified under sections 401(a) and 501(a) of
the Code has been determined to be so qualified by the IRS, has been submitted
to the IRS for a determination with respect to such qualified status or the
remedial amendment period established under Section 401(b) of the Code with
respect to the Designated Plan will not have expired prior to the Effective Time
and each such Designated Plan has been operated in material compliance with the
qualification provisions of sections 401(a) and 501(a) of the Code.
(viii) Tax or Civil Liability. None of the Companies have
participated in, or is aware of, any conduct that could result in the imposition
upon it of any excise tax under sections 4971 through 4980B of the Code or civil
liability under Section 502(i) of ERISA with respect to any Designated Plan.
(ix) Claims Liability. There is no action, claim or demand of
any kind (other than routine claims for benefits) that has been brought or, to
the knowledge of any Company, threatened against, or relating to, any Designated
Plan, and no Company has knowledge of any pending investigation or
administrative review by any governmental agency relating to any Designated
Plan.
(x) Retiree Medical Coverage. Except as set forth in Schedule
4.1(z), no Designated Plan provides any medical coverage to employees or
independent contractors of any Company beyond termination of their employment
with the Company by reason of retirement or otherwise, other than coverage as
may be required under section 4980B of the Code or Part 6 of ERISA, or under the
continuation of coverage provisions of the laws of any state or locality.
38
45
(aa) Employees. Set forth in Schedule 4.1(aa) hereto is a list
of all employees, agents (other than insurance agents), consultants and similar
persons retained by each of the Companies together with their present rate of
compensation (including bonuses) and a description of any existing or proposed
written or oral agreements with any of them regarding such employment or
engagement, other than agreements described in Schedule 4.1(z) hereto. None of
the Companies is a party to any collective bargaining or other labor union
contract applicable to persons employed by such Company. No Company has breached
or otherwise failed to comply in any material respect with any provision of any
such agreement or contract and there are no formally filed grievances
outstanding against any Company or, to Columbia's knowledge, threatened, against
any Company, under any such agreement or contract. There are no unfair labor
practice complaints pending or, to the knowledge of Columbia, threatened,
against any of the Companies nor any judicial or regulatory proceeding,
investigation or inquiry or employee complaint currently pending or, to the
knowledge of Columbia, threatened, against any of the Companies relating to
union representation or otherwise. Columbia does not know of any current
activities or proceedings of any labor union (or representatives thereof) to
organize any unorganized employees of any of the Companies, nor of any strikes,
slowdowns, work stoppages, lockouts or written threats thereof, by or with
respect to any employees of any of the Companies. During the past five years,
there have not been any formally filed grievances involving employees of any of
the Companies.
(bb) Intellectual Property. To Columbia's knowledge, there are
no United States or foreign patents or patent applications needed by any of the
Companies to operate their respective businesses. Set forth in Schedule 4.1(bb)
hereto is a complete list and summary
39
46
description of all trademarks, trade names, service marks, copyrights (whether
registered or as to which registration has been applied for in any jurisdiction)
and fictitious names relating to the business of each of the Companies and all
common law trademarks and trade names used by each of the Companies, none of
which is owned by or licensed to anyone other than the Companies. To Columbia's
knowledge, there is no existing or, to the knowledge of Columbia, threatened
infringement, misuse or misappropriation by others or pending or threatened
claims by any of the Companies against others for infringement, misuse or
misappropriation of any patent, trademark, trade name, fictitious name,
copyright, trade secret or know-how relating to the business of any of the
Companies.
(cc) Brokers. All activities of the Companies relating to this
Agreement and the transactions contemplated hereunder have been carried on by
the Companies in such manner so as not to give rise to any valid claim by any
person for a finder's fee, brokerage commission or other like payment.
(dd) Surplus Relief. At December 31, 1995, Columbia Life was
not, currently is not and on the Closing Date will not be, subject to any
surplus relief obligations or reinsurance contracts or arrangements involving
financings or otherwise.
(ee) Insurance Issued by Columbia Life.
(i) All insurance or annuity contract benefits
payable by Columbia Life and, to the knowledge of Columbia, by any other person
that is a party to or bound by any reinsurance, coinsurance, or other similar
contract with Columbia Life have been paid in accordance with the terms of the
insurance, annuity, and other contracts under which they arose.
40
47
(ii) Other than as set forth on Schedule 4.1(ee)(ii),
no outstanding insurance or annuity contract issued, reinsured, or underwritten
by Columbia Life entitles the holder thereof or any other person to receive
dividends, distributions, or other benefits based on the revenues or earnings of
any company or any other person.
(iii) All insurance and annuity contracts offered,
issued, reinsured or underwritten by Columbia Life have been duly approved under
all applicable insurance laws and regulations and have been fully reserved for
as prescribed under such laws and regulations.
(iv) The respective underwriting standards utilized
and ratings applied by Columbia Life and, to the knowledge of Columbia, by any
other person that is a party to or bound by any reinsurance, coinsurance or
other similar contracts with Columbia Life conform in all material respects to
industry-accepted practices and to the standards and ratings required pursuant
to the terms of the respective reinsurance, coinsurance, or other similar
contracts.
(v) All amounts (including without limitation amounts
based on paid and unpaid losses) to which Columbia Life is entitled under
reinsurance, coinsurance, assumption fronting or other similar contracts by
which Columbia Life insures, or is insured by, a third person against loss or
liability from risks assumed, are fully collectible.
(vi) Each insurance agent or general agent, at the
time such agent offered, wrote, sold or produced business for Columbia Life, was
duly licensed as an insurance agent for the business offered, written, sold or
produced by such agent in the particular jurisdiction in which such agent
offered, wrote, sold or produced such business for Columbia Life and other than
as set forth on Schedule 4.1(ee)(vi), no such insurance agent, general agent or
any
41
48
group of affiliated agents has written 5% or more of Columbia Life's total
in-force individual life insurance or annuity business.
(vii) To Columbia's knowledge, no insurance agent or
general agent of Columbia Life has violated (or with or without notice or lapse
of time or both, will or would have violated) any term or provision of any law
or any writ, judgment, decree, injunction or similar order applicable to, or
engaged in any misrepresentation with respect to, the writing, sale or
production of business for Columbia Life.
(viii) The terms of any individual retirement annuity
(within the meaning of section 408(b) of the Code) and any annuity contract that
is intended to satisfy the requirements of section 403(b) of the Code issued by
Columbia Life are in material compliance with applicable laws and Columbia Life
has operated any such contract in compliance with its terms. Columbia Life has
not sponsored or maintained any master, prototype, volume submitter, mass
submitter or similar type of retirement plan intended to qualify under section
401(a) of the Code for the benefit of employees of another employer. Columbia
Life does not serve and has not served as plan administrator or plan
recordkeeper for any employee benefit program for the benefit of employees of
another employer.
(ix) The tax treatment under the Code of all Products
(as hereinafter defined) other than ERISA Products (as hereinafter defined) is
and at all times has been, and to Columbia's knowledge, the tax treatment under
the Code of all ERISA Products (as hereinafter defined) is and at all times has
been, the same or more favorable to the purchaser, policyholder or intended
beneficiaries thereof as the tax treatment under the Code for which such
Products or ERISA Products qualify or purported to qualify at the time of their
offer, issuance or
42
49
purchase. For purposes of this Agreement, (i) the terms "Products" means all
insurance, annuity or investment contracts, financial products, employee benefit
plans, individual retirement accounts or annuities or any similar or related
contracts or products, whether individual, group or otherwise, offered, issued
or underwritten by Columbia Life and (ii) the term "ERISA Products" means
Products that constitute arrangements that are intended to satisfy the
requirements of section 79, 105, 401(a), 403(a), 403(b) or 408 of the Code.
(x) All of the Products that are marketed as life
insurance products are "life insurance" contracts as that term is defined in
Code Section 7702(a).
(xi) Other than as set forth on Schedule 4.1(ee)(xi),
all reinsurance agreements between Columbia Life and any non-licensed or
non-approved insurer are secured by letters of credit or other security meeting
applicable statutory requirements sufficient to allow Columbia Life to take full
credit in its accounting and financial statements for such reinsurance.
(ff) No Threatened Cancellation. Since January 1, 1996, no
policyholder, group of policyholder Affiliates or persons writing, selling or
producing insurance business that individually or in the aggregate accounted for
5% or more of the premium or annuity income determined in accordance with SAP of
Columbia Life for the year ended December 31, 1995, has terminated or, to the
knowledge of Columbia, threatened to terminate, its relationship with Columbia
Life.
(gg) Computer Software. Set forth on Schedule 4.1(gg) hereto is a
complete and correct list and summary description of all computer hardware,
software, programs and similar systems owned by or licensed to each of the
Companies or being utilized in connection
43
50
with the business, operations or affairs of any of the Companies. To Columbia's
knowledge, the computer hardware, software, programs and similar systems set
forth on Schedule 4.1(gg) hereto are all of the computer hardware, software,
programs and similar systems necessary to enable each of the Companies to
conduct their respective businesses as presently conducted. Each of the
Companies has to Columbia's knowledge, and at all times after Closing will have,
the right to use, free and clear of any royalty or other payment obligations
(except as disclosed in Schedule 4.1(gg)), claims of infringement or alleged
infringement or other liens all computer hardware, software, programs and
similar systems disclosed in Schedule 4.1(gg) hereto. To Columbia's knowledge,
none of the Companies is in conflict with or in violation or infringement of,
nor has any of the Companies received any notice of any conflict with or
violation or infringement of or any claimed conflict with, any asserted rights
of any other person with respect to any computer hardware, software, programs,
or similar systems, including without limitation any such item disclosed on
Schedule 4.1(gg) hereto.
(hh) Books and Records. The minute books and other similar records of
each of the Companies contain a complete and correct record, in all material
respects, of all actions taken at all meetings and by all written consents in
lieu of meetings of the stockholders and board of directors of each of the
Companies, respectively and of each committee thereof. The books and records of
each of the Companies accurately reflect in all material respects the business
or condition of each of the Companies, respectively, and have been maintained in
all material respects in accordance with good business and bookkeeping
practices.
(ii) No Investment Company. None of the Companies is, and none of the
Companies has registered as, an investment company within the meaning of the
Investment
44
51
Company Act of 1940, as amended. None of the Companies maintains any separate
account or similar fund for the benefit of any policyholder or annuitant.
(j) Investment Portfolio. Columbia has provided AH Acquisition with a
complete and correct list as of November 30, 1996 of all stocks, notes,
debentures, bonds, mortgage loans, policy loans and other securities and
investments owned of record or beneficially by Columbia Life, which as of such
date constituted the entire investment portfolio of Columbia Life (which
portfolio with additions and deletions thereto in the ordinary course of
business as permitted by this Agreement is hereafter called the "Investment
Assets"). Columbia Life has good and indefeasible title to the Investment
Assets, and all of the Investment Assets are in compliance with the requirements
of all applicable laws and insurance regulations. As of the Closing, Columbia
Life's investment portfolio shall consist of the Investment Assets, and Columbia
Life shall own and have good and indefeasible title to the Investment Assets.
(kk) Discussions with Regulators. No employee, agent or representative
of any of the Companies has had any discussions or communications with any
regulators regarding an adverse change in Columbia Life's or any of the other
Companies' condition (financial or otherwise) or regarding a material breach of
market conduct requirements of Columbia Life or any of the other Companies.
Section 4.2 Representations and Warranties of AHL and AH Acquisition.
Each of AHL and AH Acquisition represents, warrants and, to the extent that an
item relates to a future time period, covenants to Columbia as follows:
(a) Organization and Good Standing. Each of AHL and AH Acquisition is a
Florida corporation, validly existing and in good standing under the laws of the
State of Florida.
45
52
(b) Power and Authority. Each of AHL and AH Acquisition has all
requisite power and authority to execute, deliver and perform this Agreement and
any other agreements or instruments contemplated hereby to be executed by it.
The execution, delivery and performance by AHL and AH Acquisition of this
Agreement and any other agreements or instruments contemplated hereby to be
executed by AHL and AH Acquisition have been duly authorized by all requisite
action on behalf of AHL and AH Acquisition and, except for obtaining the
approval of this Agreement by AHL or AHLIC (as the sole shareholder of AH
Acquisition) (which approval AHL shall give or shall cause AHLIC to give, as the
case may be, prior to the Closing Date), no other authorization or approval by
the Board of Directors or stockholders of AHL or the Board of Directors or
stockholder of AH Acquisition or any other Affiliate of AHL is necessary to
consummate the transactions contemplated hereby. This Agreement constitutes, and
each other agreement contemplated hereby to be executed by AHL or AH Acquisition
will constitute when executed and delivered, a valid and legally binding
obligation of AHL and AH Acquisition enforceable against them in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors rights
generally and general principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement and any
other agreements and instruments contemplated hereby by AHL and AH Acquisition
and the consummation of the transactions contemplated hereby, in accordance with
the terms hereof and thereof, upon receipt of the consents and approvals
contemplated by Section 4.2(d), will not violate any existing provision of the
Articles of Incorporation, Bylaws or other organizational documents of AHL or AH
Acquisition or of any law or violate any existing term or provision of
46
53
any order, writ, judgment, injunction or decree of any court or any other
governmental department, commission, board, bureau, agency or instrumentality
applicable to either AHL or AH Acquisition or conflict with or result in a
breach of any of the terms, conditions or provisions of any agreement to which
AHL or AH Acquisition is a party, or by which any of their respective properties
are bound, or constitute an event that might permit an early termination of or
otherwise materially affect any such agreement.
(d) Consents and Approvals. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority, agency, bureau or commission or any third party is required to be
obtained or made by AHL, AH Acquisition or AHLIC, in connection with the
execution, delivery, performance, validity, and enforceability of this
Agreement, except for (i) filings to be made with, and approvals to be obtained
from, the Texas Department and the insurance departments of other states or
jurisdictions, (ii) filings under the pre-merger notification requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR") and (iii)
registrations, declarations or filings required to be made subsequent to the
Closing Date with any governmental entity or third party not entailing any
requirement of consent, license, approval, order or authorization on the part of
such governmental entity or third party.
(e) Disclosure. Neither this Agreement nor any written document,
statement, list, schedule, exhibit, certificate or other instrument furnished or
to be furnished to Columbia by or on behalf of AHL or AH Acquisition in
connection with the transactions contemplated hereby contains or will contain
when made or delivered any untrue statement of a material fact, or fails to
state or will fail to state when made or delivered a material fact necessary to
make the
47
54
statements contained herein and therein not misleading. There is no fact known
to AHL or AH Acquisition that materially adversely affects, or in the future may
materially adversely affect, the condition (financial or otherwise), properties,
assets, liabilities, capitalization, ownership, business or operations of AH
Acquisition or AHL.
(f) Brokers. All activities of AHL and AH Acquisition and any Affiliate
of AHL relating to this Agreement and the transactions contemplated hereunder
have been carried on by such person in such manner so as not to give rise to any
valid claim by any person against Columbia for a finder's fee, brokerage
commission or other like payment.
ARTICLE 5
COVENANTS
Section 5.1 Covenants of Columbia. From the date hereof through the
Closing Date, Columbia will and will cause the Subsidiaries to:
(a) Access to Information. Upon reasonable notice, give AH Acquisition
and its attorneys, accountants, agents and representatives full access at all
mutually agreeable times to all the properties, books, records, contracts,
commitments, employee benefit plans, documents, instruments and other records of
or pertaining to each of the respective Companies and permit AH Acquisition and
its attorneys, accountants, agents and representatives to consult with and ask
questions of the officers and employees of each Company; deliver to AH
Acquisition all audited or unaudited quarterly or annual financial statements of
each such Company prepared subsequent to the date of this Agreement; and
cooperate with and assist AH Acquisition in discussions with insurance
regulators regarding each of the Companies' financial condition and compliance
with insurance laws and regulations.
48
55
(b) Conduct of Business. Keep the books and records of each Company
consistent in all material respects with prior periods and, with respect to
Columbia Life, in accordance with SAP and, with respect to the consolidated
group consisting of Columbia and the Subsidiaries, in accordance with GAAP, and
conduct their respective businesses and corporate affairs in the ordinary course
consistent in all material respects with past practices, and will not:
(i) issue or sell any of their respective capital stock, or
any options, warrants, calls or securities convertible into such capital stock,
or enter into any agreement to do any of the foregoing, or make any change in
its capital structure either by way of stock split, stock dividend or otherwise;
(ii) other than as may be necessary to comply with Section 3.5
or Section 5.1(n), declare or pay any dividends or make any distribution in
respect of capital stock, or purchase, redeem or otherwise acquire or retire any
capital stock;
(iii) other than in the ordinary course of business, without
the prior written consent of AH Acquisition, enter into or assume any contract
or commitment, or terminate or amend any existing contract or commitment, or
incur or prepay any indebtedness for borrowed money;
(iv) other than in the ordinary course of business, make any
loans or advance any funds to anyone, or extend credit;
(v) other than in the ordinary course of business, enter into,
amend or accelerate any payment or contribution under any employment, agency or
consulting agreement or Benefit Plan;
49
56
(vi) other than in the ordinary course of business, without
the prior consent of AH Acquisition, which consent shall not be unreasonably
withheld, hire any new employees or make any changes affecting the rates of
compensation of, or pay any bonuses to (other than accrued bonuses under current
Benefit Plans), or grant any other benefit to, their respective current
directors, officers, agents or employees;
(vii) other than in the ordinary course of business, create or
assume any mortgage or other lien or encumbrance on, or dispose of, any of their
respective assets or properties;
(viii) other than in the ordinary course of business, acquire
any assets or any properties or make any investments, or enter into any
agreements to acquire any assets or properties or to make any investments;
(ix) merge or consolidate with any other corporation, or
acquire or agree to acquire any stock (except investments in the ordinary course
of business) of any person, firm, association, corporation or other business
organization;
(x) make any change in their respective Articles or
Certificate of Incorporation or Bylaws;
(xi) without the prior written consent of AH Acquisition,
enter into any arrangement with any person with respect to any United States or
foreign patents, patent applications, trademarks, applications for registration
of trademarks, trade names, fictitious names, copyrights, know-how or trade
secrets owned by any of them, or in any way relating to their respective
businesses;
50
57
(xii) without the prior written consent of AH Acquisition,
make any election with respect to the computation of taxes or take any position
in any tax return that could have an adverse effect on any of the Companies;
(xiii) other than in the ordinary course of business, without
the prior written consent of AH Acquisition, make any other change in their
businesses, business practices or operations; or
(xiv) enter into any agreement to do any of the foregoing.
(c) Consultation with AH Acquisition Pending Closing. Confer and
consult with AH Acquisition on all material business decisions affecting the
future performance of each of the Companies, other than decisions made in the
ordinary course of business consistent in all material respects with past
practices, including in particular with respect to Columbia Life on all material
business decisions involving (i) increases or decreases in the credited rate of
insurance products issued by Columbia Life and (ii) Columbia Life's investment
policy.
(d) Disposition of Shares by Columbia. With respect to Columbia, not
dispose of, encumber or grant any rights regarding any of the capital stock of
any Subsidiary.
(e) Intercompany Accounts. At least five days before the Closing,
deliver to AH Acquisition a complete and correct list and summary description of
all intercompany accounts between Columbia Life, Columbia Financial and/or
Columbia, or any Affiliate of Columbia, which shall be settled and canceled as
specified in Section 3.5.
(f) Termination of Contracts. Terminate on or prior to the Closing Date
those certain contracts as to which AH Acquisition has determined that
termination thereof will result in tax or other benefits to AH Acquisition or
AHL and that such termination will not materially
51
58
adversely affect the Companies and which have been designated in writing by AH
Acquisition from time to time prior to the Closing.
(g) Preservation of Business. Use all reasonable efforts to (i)
preserve intact each of the Companies' present business organization,
reputation, employees, agents, customers and suppliers, and with respect to
Columbia Life, relations with policyholders, (ii) maintain all licenses of
Columbia Life to do business in each jurisdiction in which it is so licensed,
(iii) maintain in full force and effect all agreements of each Company (except
as otherwise contemplated by this Agreement) and (iv) maintain all assets and
properties of each Company in good working order and condition, ordinary wear
and tear excepted.
(h) Investment Portfolio Requirements. Notify and obtain the written
approval of AH Acquisition, which approval shall not be unreasonably withheld,
prior to making any changes to Columbia Life's investment portfolio or the
Investment Assets that are not in the ordinary course of business or that are
inconsistent in any material respect with Columbia Life's present or past
investment practices and policies.
(i) Surplus Items. Take no actions other than in the ordinary course of
business as contemplated by this Agreement, without the prior written consent of
AH Acquisition, that could cause or result in a reduction in the amount of
Columbia Life's aggregate statutory capital, surplus, asset valuation reserve
and interest maintenance reserve, as set forth in the Quarterly Statement for
the quarter ended September 30, 1996.
(j) Notice and Cure. Notify AH Acquisition promptly in writing of, and
contemporaneously provide AH Acquisition with complete and correct copies of any
and all information or documents relating to, and use all reasonable efforts to
cure before the Closing,
52
59
any event, development, transaction or circumstance occurring after the date of
this Agreement that causes or could cause any covenant or agreement of Columbia
under this Agreement to be breached, or that renders or could render untrue any
representation or warranty of Columbia contained in this Agreement as if the
same were made on or as of the date of such event, development, transaction or
circumstance; and use all reasonable efforts to cure, before the Closing, any
violation or breach of any representation, warranty, covenant or agreement made
by Columbia in this Agreement, whether occurring or arising before or after the
date of this Agreement.
(k) Further Actions. Execute, acknowledge and deliver any further
documents, including, but not limited to, any financial statements of Columbia
Life filed with the Texas Department after the date hereof, reasonably requested
by AH Acquisition consistent with the terms of this Agreement.
(l) Reasonable Efforts. Use its reasonable efforts to fulfill, as soon
as practicable, all of the conditions contained in Section 6.1 hereof.
(m) Changes in Stockholders and Optionees. Promptly, inform AH
Acquisition in writing of any changes in the Stockholders or Optionees listed on
Schedule 4.1(e) to this Agreement.
(n) Fund Plan Deficits. If requested by AH Acquisition, fund any and
all actuarial deficits existing in any Benefit Plan listed on Schedule 4.1(z) of
this Agreement except to the extent that such funding could (i) cause the
Benefit Plan to fail to qualify under section 401(a) of the Code with respect to
some or all persons with beneficial interests in the Benefit Plan (determined
without regard to any modification to the Benefit Plan's benefit formula that
could
53
60
be made to prevent such disqualification) or (ii) cause the imposition of an
excise tax under section 4972 of the Code.
(o) Major Business Decisions. Cause the Chief Executive Officer of
Columbia to consult and confer with the Chief Executive Officer of AHL with
respect to all major business decisions affecting any of the Companies.
Section 5.2 Covenants of AHL and AH Acquisition. From the date hereof
through the Closing Date, AHL and AH Acquisition will each:
(a) Further Actions. Execute, acknowledge and deliver any further
documents reasonably requested by Columbia consistent with the terms of this
Agreement.
(b) Reasonable Efforts. Use their reasonable efforts to fulfill, as
soon as practicable, all of the conditions contained in Section 6.2 hereof.
(c) Notice and Cure. Notify Columbia promptly in writing of, and
contemporaneously provide Columbia with complete and correct copies of, any and
all information or documents relating to, and use all reasonable efforts to cure
before the Closing, any event, development, transaction or circumstance
occurring after the date of this Agreement that causes or could cause any
covenant or agreement of AHL or AH Acquisition under this Agreement to be
breached, or that renders or could render untrue any representation or warranty
of AHL or AH Acquisition contained in this Agreement as if the same were made on
or as of the date of such event, development, transaction or circumstance; and
use all reasonable efforts to cure, before the Closing, any violation or breach
of any representation, warranty, covenant or agreement made by AHL or AH
Acquisition in this Agreement, whether occurring or arising before or after the
date of this Agreement.
54
61
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.1 AHL and AH Acquisition. The obligations of AHL and AH
Acquisition to consummate the transactions provided for in this Agreement shall
be subject to the fulfillment, on or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Columbia set forth in Section 4.1 hereof shall be true and correct in all
material respects on the Closing Date as if made on and as of such date, except
to the extent the representations and warranties speak as of an earlier date,
and AH Acquisition shall have received a certificate to such effect, dated as of
the Closing Date, executed on behalf of Columbia by the Chief Executive Officer
and Chief Financial Officer of Columbia.
(b) Officer Certificates. AH Acquisition shall have received a
certificate executed by Louis F. Crane, Mike Pinkham, Brian D. Forman, Evelynie
Lubowski and Zack G. Athens to the effect that to each of their knowledge, (i)
all representations and warranties of Columbia set forth in this Agreement are
true and correct as of the Closing Date as if made on and as of such date,
except to the extent that such representations and warranties speak as of an
earlier date, and (ii) no event or circumstance has occurred that has not been
disclosed by Columbia on a schedule to this Agreement that might reasonably
create an obligation of Columbia to indemnify any of its officers, employees,
agents or directors.
(c) Performance of Obligations. Columbia and the Subsidiaries shall
have performed in all material respects all of their obligations contained in
this Agreement to be
55
62
performed on or prior to the Closing Date, and AH Acquisition shall have
received a certificate to such effect, executed on behalf of Columbia by the
Chief Executive Officer and Chief Financial Officer of Columbia and dated as of
the Closing Date.
(d) Authorization. All corporate action necessary to authorize the
execution, delivery and performance by Columbia of this Agreement, and the
consummation of the transactions contemplated hereby, shall have been duly and
validly taken by Columbia, and Columbia shall have furnished AH Acquisition with
copies of all applicable resolutions adopted by the Board of Directors and
stockholders of Columbia, certified by the Secretary or Assistant Secretary of
Columbia.
(e) Threatened or Pending Proceedings. No proceedings shall have been
threatened or initiated by any person to enjoin or restrain the consummation of
the transactions contemplated hereby or seeking damages or other relief as a
result thereof.
(f) Approvals and Consents. The waiting period, if any, pursuant to HSR
shall have expired without objection and any necessary approval of the Texas
Department and the insurance departments of other states and jurisdictions, and
all other consents of any person required to permit the consummation of the
transactions contemplated by this Agreement without any violation by AHL, AHLIC,
AH Acquisition, Columbia or the Subsidiaries of any law or obligation shall have
been obtained and such approvals and consents shall not contain any materially
burdensome conditions or requirements on or applicable to AHL, AHLIC, AH
Acquisition, Columbia or any Subsidiary.
(g) Legal Opinions. AH Acquisition shall have received the opinions of
Fulbright & Jaworski L.L.P., Bible, Haney, Hoy, Trachok, Wadhams & Woloson and
at AH
56
63
Acquisition's option, Florida counsel reasonably acceptable to AH Acquisition,
as to such matters as may be reasonably requested by AH Acquisition.
(h) No Adverse Change. Since December 31, 1996, there shall not have
been, occurred or arisen any material adverse change in, or any event,
development, transaction, condition or state of facts of any character
(including without limitation any damage, destruction or loss whether or not
covered by insurance or reinsurance) that individually or in the aggregate has
or could have a material adverse effect on, the business or financial condition
of any Company.
(i) Secretary's Certificates. AH Acquisition shall have received from
Columbia (i) a certificate dated the Closing Date from Columbia's Secretary
attaching (A) a copy of Columbia's Articles of Incorporation certified by the
Secretary of State of Nevada, which certification shall be dated not more than
ten days prior to the Closing Date, (B) a copy of Columbia's Bylaws, and (C) a
Good Standing Certificate for Columbia from the Secretary of State of Nevada,
which Certificate shall be dated no more than ten days prior to the Closing
Date, (ii) a certificate dated the Closing Date from Columbia Life's Secretary
attaching (A) a copy of Columbia Life's Articles of Incorporation, certified by
the Texas Secretary of State, which certification shall be dated not more than
ten days prior to the Closing Date, (B) a copy of Columbia Life's Bylaws, (C) a
Good Standing Certificate for Columbia Life from the Texas Secretary of State,
which Certificate shall be dated not more than ten days prior to the Closing
Date and (D) Certificates of Status and Authority for Columbia Life from the
Texas Department of Insurance and (iii) a certificate dated the Closing Date
from Columbia Financial's Secretary attaching (A) a copy of Columbia Financial's
Certificate of Incorporation, certified by the
57
64
Delaware Secretary of State, which certification shall be dated not more than
ten days prior to the Closing Date, (B) a copy of Columbia Financial's Bylaws
and (C) a Good Standing Certificate for Columbia Financial from the Delaware
Secretary of State, which Certificate shall be dated not more than ten days
prior to the Closing Date.
(j) Employment Agreement. Mike Pinkham shall have executed and
delivered an employment agreement with Columbia Life in form and substance
acceptable to AH Acquisition.
(k) Stockholder Approval. Columbia's stockholders shall have approved
the Merger and Columbia stockholders holding more than ten percent of the
outstanding Columbia's Stock shall not have delivered notice to Columbia
pursuant to NRS Section 92A.420 of their intent to demand payment for their
shares pursuant to dissenters' rights provided by the NRS.
(l) Completion of Audit. The Audit shall have been completed, including
all tests and procedures requested by AH Acquisition, and AH Acquisition shall
have received the Audit report, all supporting workpapers and all other reports,
schedules or other documentation relating to the special tests and procedures
conducted at AH Acquisition's request (the "Audit Documents") and AH Acquisition
shall have had at least ten business days to review all such documents.
(m) Review. The Review shall have been completed and shall indicate
that from December 31, 1996 through the Effective Time, there has not been any
material adverse change in the financial condition of Columbia, Columbia
Financial or Columbia Life.
58
65
Section 6.2 Conditions to the Obligations of Columbia. The obligation
of Columbia to consummate the transactions provided for in this Agreement shall
be subject to the fulfillment, on or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties. The respective representations and
warranties of AHL and AH Acquisition set forth in Section 4.2 hereof shall be
true and correct in all material respects on the Closing Date as if made on and
as of such date, except to the extent such representations and warranties speak
as of an earlier date, and Columbia shall have received certificates to such
effect, executed on behalf of AHL and AH Acquisition by their respective Chief
Executive Officers and Chief Financial Officers, dated as of the Closing Date.
(b) Performance of Obligations. AHL and AH Acquisition shall have
performed in all material respects all of their respective obligations contained
in this Agreement to be performed on or prior to the Closing Date, and Columbia
shall have received certificates to such effect, executed on behalf of AHL and
AH Acquisition by their respective Chief Executive Officers and Chief Financial
Officers, dated as of the Closing Date.
(c) Threatened or Pending Proceedings. No proceedings shall have been
threatened or initiated by any person to enjoin or restrain the consummation of
the transactions contemplated hereby or seeking damages or other relief as a
result thereof.
(d) Approvals and Consents. The waiting period, if any, pursuant to HSR
shall have expired without objection and any necessary approvals of the Texas
Department and the insurance departments of other states or jurisdictions and
all other consents listed on Schedule 4.1(d) required to permit consummation of
the transactions contemplated by this Agreement
59
66
without any violation by Columbia or the Subsidiaries of any law or
obligation shall have been obtained.
(e) Legal Opinion. Columbia shall have received the opinion of LeBoeuf,
Lamb, Greene & MacRae, L.L.P., as to such matters as Columbia shall reasonably
request.
(f) Stockholder Approval. The Columbia stockholders shall have approved
the Merger.
(g) Authorization. All corporate action necessary to authorize the
execution, delivery and performance by AHL and AH Acquisition of this Agreement,
and the consummation of the transactions contemplated hereby, shall have been
duly and validly taken by AHL and AH Acquisition, and AHL and AH Acquisition
shall have furnished Columbia with copies of all applicable resolutions adopted
by their respective Boards of Directors and their respective stockholders,
certified in each case by a Secretary or Assistant Secretary of AHL and AH
Acquisition, respectively.
(h) Deposit with Exchange Agent. There shall have been deposited with
the Exchange Agent the Exchange Fund in accordance with Section 2.3(a).
ARTICLE 7
CLOSING
Section 7.1 Closing. A closing (the "Closing") for the consummation of the
transactions contemplated herein shall be held at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., Jacksonville, Florida, at 9:00 A.M., local time, on the
second business day following the date on
60
67
which all of the conditions set forth in Article 6 have been (or can be at the
Closing) satisfied or have been waived by the party permitted to do so (the
"Closing Date").
Section 7.2 Filings at the Closing. Subject to the provisions of Article 6
hereof, AH Acquisition and Columbia shall at the Closing cause the Articles of
Merger to be filed and recorded in accordance with the provisions of Section
607.1105 of the FBCA and Section 92A.200 of the NRS and shall take any and all
other lawful actions and do any and all other lawful things necessary to cause
the Merger to become effective.
ARTICLE 8
TERMINATION
Section 8.1 Termination. This Agreement, other than the obligations
contained in Article 9 and Section 10.2, which shall survive any termination of
this Agreement, may be terminated as to all parties hereto and the transactions
contemplated herein abandoned prior to the Closing:
(a) by the mutual consent of the parties hereto;
(b) by AH Acquisition at any time after April 15, 1997, if at such time
the conditions set forth in Section 6.1 hereof have not been satisfied through
no fault of AH Acquisition and AH Acquisition gives Columbia notice of such
termination;
(c) by AH Acquisition at any time on or before the tenth business day
after AH Acquisition has received the Audit Documents, in the event that the
results of the Audit are unacceptable to AH Acquisition;
61
68
(d) by AH Acquisition at any time prior to Closing, if the Review
discloses a material adverse change in the condition (financial or otherwise) of
any of the Companies from December 31, 1996 through the Effective Time;
(e) by AH Acquisition at any time on or before February 14, 1997, if
pursuant to the review conducted by AH Acquisition pursuant to Section 3.2
hereof, AH Acquisition discovers any material information, fact, event or
circumstance related to Columbia, Columbia Life or Columbia Financial that AH
Acquisition deems unacceptable or if AH Acquisition, in its sole discretion, is
dissatisfied with the content of the schedules hereto;
(f) by AH Acquisition at any time after holders of greater than ten
percent of the outstanding Columbia's Stock have delivered notice to Columbia
pursuant to the NRS of their intent to demand payment pursuant to the provisions
for dissenters' rights provided by the NRS;
(g) by Columbia at any time after April 15, 1997, if at such time the
conditions set forth in Section 6.2 hereof have not been satisfied through no
fault of Columbia and Columbia gives AH Acquisition notice of such termination;
(h) by Columbia in accordance with the provisions of Section 3.6; and
(i) by AHL and AH Acquisition in accordance with the provisions of
Section 3.6.
Termination of this Agreement as provided in this Agreement shall not
affect any other rights or remedies any party may have at law, in equity or
otherwise for breach of this Agreement or otherwise, including, but not limited
to, any right AH Acquisition may have to receive the fee specified in Section
3.6(e) hereof.
62
69
ARTICLE 9
CONFIDENTIALITY
Section 9.1 Confidentiality. From and after the date hereof, unless
otherwise agreed to by the parties, each of the parties shall keep, and shall
ensure that its directors, officers, employees, contractors, consultants and
agents keep, confidential all information acquired from another party pursuant
to this Agreement or otherwise, including the contents of this Agreement and any
document delivered pursuant thereto or in connection therewith, except that the
foregoing restriction shall not apply to any information that: (i) is or
hereafter becomes generally available to the public other than by reason of any
default with respect to a confidentiality obligation under this Agreement, (ii)
was already known to the recipient party as evidenced by prior written documents
in its possession (unless the information is covered by a prior confidentiality
agreement between the parties), (iii) is disclosed to the recipient party by a
third party who is not in default of any confidentiality obligation to the
disclosing party hereunder, (iv) is developed by or on behalf of the receiving
party, without reliance on confidential information received hereunder, (v) is
submitted by the recipient party to governmental authorities or regulatory
bodies to facilitate the issuance of approvals necessary or appropriate for the
operation of their businesses, provided that reasonable measures shall be taken
to assure confidential treatment of such information, (vi) is provided by the
recipient party to third parties under appropriate terms and conditions,
including confidentiality provisions substantially equivalent to those in this
Agreement and with the consent of the other party or (vii) is otherwise required
to be disclosed in compliance with applicable laws or regulations or order by a
court or other government authority or regulatory body having competent
jurisdiction. Without limiting the generality of the foregoing, no press
63
70
release or similar public announcement or disclosure concerning this Agreement
or the transactions contemplated herein shall be made by any party hereto
without the prior consent of the other parties unless the party making the
announcement or disclosure is informed by such party's counsel that such
information is required to be disclosed in compliance with applicable laws or
regulations or order by a court or other government authority or regulatory body
having competent jurisdiction. Any party shall be entitled, in addition to any
other right or remedy it may have, at law or in equity, to an injunction,
without the posting of any bond or other security, enjoining or restraining the
other parties from any violation or threatened violation of this Section.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Consent to Jurisdiction and Service of Process. Any legal
action, suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any state or federal court
sitting in Duval County, Florida or Travis County, Texas, and each party agrees
not to assert as a defense in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of such court, that the
action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement or the
subject matter hereof may not be enforced in or by such court. Any and all
service of process and any other notice in any such action, suit or proceeding
shall be effective against a party if given properly pursuant to the United
States Federal Rules of Civil Procedure or other applicable rules.
Section 10.2 Expenses. Each party shall bear their respective legal and
other costs and expenses incurred in connection with the preparation, execution,
delivery and performance of this
64
71
Agreement and the transactions contemplated hereby without right of
reimbursement from any other party.
Section 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally, telegraphed, telexed
(with appropriate answerback received), sent by facsimile transmission (with
immediate confirmation thereafter) or sent by registered, certified or express
mail, postage prepaid, return receipt requested, or sent by a nationally
recognized overnight courier service, marked for overnight delivery. Any such
notice shall be deemed given when so delivered personally, telegraphed, telexed
(provided the correct answerback is received) or sent by facsimile transmission
(provided confirmation is received immediately thereafter); or if mailed, upon
receipt or rejection by the addressee; or if sent by overnight courier, one
business day after the date of delivery to the courier service marked for
overnight delivery; in each case addressed as follows:
(a) If to AHL or AH Acquisition, to:
American Heritage Life Investment Corporation
1776 American Heritage Life Drive
Jacksonville, Florida 32224
Attention: T. O'Neal Douglas
Telephone: (904)992-1776
Facsimile: (904)992-2658
with a copy to:
John R. Byers, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
50 North Laura Street, Suite 2800
Jacksonville, FL 32202-3650
Telephone: 904/354-8000
Facsimile: 904/353-1673
65
72
(b) If to Columbia, to:
Columbia Universal Corporation
11044 Research Boulevard
Austin, Texas 78759
Attention: Louis F. Crane and Mike Pinkham
Telephone: 512-345-3200
Facsimile: 512-345-8906
with a copy to:
Robert E. Wilson, Esq.
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Telephone: 713-651-5151
Facsimile: 713-651-5246
or to such other address as the parties hereto may specify from time to time by
notice given as provided herein.
Section 10.4 Amendment. This Agreement may be amended only by an
instrument in writing executed by each of the parties hereto.
Section 10.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without regard to
principles of conflicts of laws.
Section 10.7 Entire Agreement. This Agreement, together with the
Exhibits and Schedules hereto, sets forth the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior negotiations, agreements, understandings or arrangements
between the parties hereto with respect to the subject matter
66
73
hereof, including without limitation thereto, that certain letter agreement
dated December 13, 1996.
Section 10.8 Waivers. The provisions of this Agreement may only be
waived by an instrument in writing executed by the party granting the waiver.
The failure of a party at any time or times to require performance of any
provision hereof in any instance shall in no manner affect the right of such
party at a later time to enforce the same or any other provision of this
Agreement in respect of any subsequent instance. No waiver of any condition or
of the breach of any term contained in this Agreement in one or more instances
shall be deemed to be or construed as a further or continuing waiver of such
condition in respect of any subsequent instance or breach or a waiver of any
other condition or of the breach of any other term of this Agreement. Without
limiting the generality of the foregoing, no action taken pursuant to this
Agreement, other than proceeding with the consummation of the transactions
contemplated herein, shall be deemed to constitute a waiver by the party taking
such action or of compliance with any representations, warranties, covenants or
agreements contained in this Agreement.
Section 10.9 Interpretation. When a reference is made in this Agreement
to Articles, Sections, Exhibits or Schedules, such reference shall be to an
Article, Section, Exhibit or Schedule, respectively, of this Agreement unless
otherwise indicated. The table of contents and the headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation hereof.
Section 10.10 No Assignment. This Agreement and the rights, interests
and obligations hereunder may not be assigned by AHL, by AH Acquisition or by
Columbia, by operation of law or otherwise, except that AH Acquisition may
assign all of its rights, interests and obligations
67
74
hereunder to another wholly owned (directly or indirectly) subsidiary of AHL,
provided that such subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein.
Section 10.11 No Survival of Representations and Warranties. The
respective representations and warranties, obligations, covenants and agreements
contained in this Agreement or in any Schedule, certificate or letter delivered
pursuant hereto (including the officer certificates delivered pursuant to
Section 6.1(b)), other than those contained in Articles 1 and 2, shall expire
and be terminated and extinguished at the Effective Time.
Section 10.12 Further Assurances. From and after the Closing, each
party shall execute and deliver such documents and take such other actions as
the other party may reasonably request to further effect or evidence the
purposes and intent of this Agreement.
68
75
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COLUMBIA UNIVERSAL CORPORATION
By
------------------------------
AH ACQUISITION CORPORATION
By s/T. O. Douglas
------------------------------
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION
By s/T. O. Douglas
------------------------------
76
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COLUMBIA UNIVERSAL CORPORATION
By s/Louis F. Crane
------------------------------
Louis F. Crane
Chairman of the Board
and Chief Executive Officer
AH ACQUISITION CORPORATION
By
------------------------------
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION
By
------------------------------
77
Exhibit A
ARTICLES OF MERGER OF
AH ACQUISITION CORPORATION,
A FLORIDA CORPORATION, WITH AND INTO
COLUMBIA UNIVERSAL CORPORATION,
A NEVADA CORPORATION
Pursuant to the provisions of Section 607.1105 of the Florida Business
Corporation Act, and Nevada Revised Statutes ("NRS") Section 92A.200, the
undersigned corporations do hereby adopt the following Articles of Merger:
1. AH Acquisition Corporation, a Florida corporation ("AH
Acquisition"), and Columbia Universal Corporation, a Nevada
corporation ("Columbia"), are parties to that certain Agreement
and Plan of Merger dated December __, 1996 (the "Agreement") which
has been adopted by each of Columbia and AH Acquisition and which
sets forth the terms and conditions of the merger of AH
Acquisition with and into Columbia (the "Merger").
2. The Agreement was adopted by the written consent of the Board of
Directors of AH Acquisition dated as of December __, 1996 and
approved by the written consent of the sole shareholder of AH
Acquisition dated as of __________, 1997, which consent by the
sole shareholder was sufficient for approval of the Agreement by
the sole shareholder of AH Acquisition.
3. The Agreement was adopted at a telephonic meeting of the Board of
Directors of Columbia held December __, 1996 and approved by the
stockholders of Columbia at a Special Meeting of Stockholders held
on ___________, 1997 at which meeting the Agreement was submitted
to the stockholders of Columbia pursuant to NRS Section 92A.200.
4. At the special meeting of the stockholders of Columbia, of a total
of ____ votes entitled to be cast, owners holding ____ shares of
the issued and outstanding shares of Common Stock of Columbia
voted for approval of the Agreement and owners holding ____ shares
of the issued and outstanding shares of Common Stock of Columbia
voted against approval of the Agreement.
5. With respect to the stockholders of Columbia, the percentage of
owner's interests cast for the Agreement by the owners of the only
class of interest was sufficient for approval by the owners of
that class.
6. The jurisdiction of organization and controlling law of AH
Acquisition is the State of Florida. The jurisdiction of
organization and controlling law of Columbia is the State of
Nevada.
7. Columbia will continue its existence as the surviving corporation
under its present name pursuant to the provisions of the Nevada
General Corporation Act and AH Acquisition will cease its
existence immediately upon the effectiveness of the Merger.
78
8. The Articles of Incorporation of Columbia shall continue as the
Articles of Incorporation of the surviving corporation without
amendment.
9. The date and time of the effectiveness of the Merger shall be upon
the later of the filing of these Articles of Merger with (i) the
Secretary of State of the State of Nevada, or (ii) the Department
of State of the State of Florida.
10. The complete executed Agreement is attached as Exhibit A hereto
and incorporated herein by reference.
Executed as of ______________, 1997.
AH ACQUISITION CORPORATION COLUMBIA UNIVERSAL CORPORATION
By: By:
---------------------- -------------------------
Name: Name:
Title: Title:
By:
-------------------------
Name:
Title:
State of Nevada Section
Section
County of Clark Section
This instrument was acknowledged before me on ___________, 1997 by
________________ as President of Columbia Universal Corporation and by
________________ as Secretary of Columbia Universal Corporation.
-----------------------------
Notary Public
-2-
79
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
AH ACQUISITION CORPORATION
January 2, 1997
Columbia Universal Corporation
11044 Research Boulevard
Building A, 5th Floor
Austin, TX 78759
Ladies and Gentlemen:
Columbia Universal Corporation ("Columbia"), American Heritage
Life Investment Corporation ("AHL") and AH Acquisition Corporation ("AH
Acquisition") are parties to an Agreement and Plan of Merger dated January 2,
1997 (the "Merger Agreement"). It is contemplated in the Merger Agreement that
various Schedules will be included as a part of the Merger Agreement (the
"Schedules"). Columbia hereby agrees that it will finalize all of the Schedules
on or before January 8, 1997. At such time as the Schedules are finalized as
contemplated herein, they shall for all purposes be deemed to constitute a part
of the Merger Agreement as if attached to the Merger Agreement at the time of
the execution thereof. Columbia, AHL and AH Acquisition acknowledge and agree
that (i) in the event Columbia does not finalize the Schedules as required
herein, AH Acquisition shall have the right to terminate the Merger Agreement by
providing written notice to Columbia and (ii) in the event AHL or AH Acquisition
are dissatisfied with the Schedules, AH Acquisition shall have the right to
terminate the Merger Agreement as provided in Article 8 thereof.
80
Columbia Universal Corporation
January 2, 1997
Page 2
The parties shall acknowledge their agreement to the terms of this
letter by executing a copy of this letter in the indicated spaces, whereupon
this letter shall constitute a binding agreement.
Sincerely,
AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION
By s/T. O. Douglas
------------------------
AH ACQUISITION CORPORATION
By s/T. O. Douglas
------------------------
Agreed:
COLUMBIA UNIVERSAL CORPORATION
By
----------------------------
81
Columbia Universal Corporation
January 2, 1997
Page 2
The parties shall acknowledge their agreement to the terms of this
letter by executing a copy of this letter in the indicated spaces, whereupon
this letter shall constitute a binding agreement.
Sincerely,
AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION
By
------------------------
AH ACQUISITION CORPORATION
By
------------------------
Agreed:
COLUMBIA UNIVERSAL CORPORATION
By s/Louis F. Crane
----------------------------