1
Exhibit 1
STOCK PURCHASE AGREEMENT
by and between
UNIFIED LIFE INSURANCE COMPANY
and
JOHN ADAMS LIFE CORPORATION
for the capital stock of
JOHN ADAMS LIFE INSURANCE COMPANY OF AMERICA
Dated September 19, 1996
2
TABLE OF CONTENTS
Item Page
---- ----
1. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Capitalization of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Inter-Affiliate Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Insurance Commissioner Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Basic Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.12 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.13 Interests in Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.14 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.15 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.16 Trademarks; Software; Patents; Copyrights; and Know-How . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.17 Licenses; Permits and Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.18 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.20 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.21 Employees; Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.23 Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.24 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.25 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.26 Insurance Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.27 Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.5 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.6 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4. COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Positive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Preparation of Statutory Insurance Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Access to Properties and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.7 Third Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.9 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5. COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4 Completion of Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.5 Corporate Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.6 Purchaser's Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.7 Third Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.8 Positive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6. CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2 Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.4 No Violation of Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.6 Inter-Affiliate or Related Party Debt, Agreement or Investments . . . . . . . . . . . . . . . . . . . . . 33
6.7 Other Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.8 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.9 Resignation of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.10 Corporate Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.11 Minority Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4
7. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 Performance of Purchaser's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 No Violation of Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 Other Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.5 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 Notice of Asserted Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.4 Certain Limitations on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9. TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.1 Methods of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.7 Waivers, Amendments and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.8 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.10 Litigation Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.12 Miscellaneous Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.13 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.15 Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2 Existing Agreements and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3 Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.4 Purchaser's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5
11.5 Transaction Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 Apportionment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7 Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.8 Access to Records, Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.10 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.11 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.12 Operational Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.13 No Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated September 19, 1996, by
and between UNIFIED LIFE INSURANCE COMPANY, a Texas corporation ("Purchaser"),
and JOHN ADAMS LIFE CORPORATION, a California corporation ("Seller").
RECITALS
Seller owns 49,803.16 shares (the "Shares") of common stock, $12.00 par value,
of John Adams Life Insurance Company of America, a California corporation (the
"Company"), which Shares constitute 99.6% of the issued and outstanding shares
of capital stock of Company;
Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, the Shares on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1.
PURCHASE AND SALE OF SHARES
1.1 Agreement to Purchase and Sell. On the Closing Date (as defined in
Section 1.2) and upon the terms and subject to the conditions set
forth in this Agreement, Seller shall sell, assign, transfer, convey
and deliver the Shares to Purchaser, and Purchaser shall purchase and
accept the Shares from Seller.
1.2 Closing. The closing of such sale and purchase (the "Closing") shall
take place at the office of Seller, 11845 West Olympia Blvd., Suite
905, Los Angeles, California 90064, or at such other location as the
parties hereto may agree upon, at such time and date after December
31, 1996 as the parties hereto shall agree in writing (the "Closing
Date") provided each of the conditions set forth in Sections 6 and 7
has been fulfilled or waived; provided further that if, on or before
the fifth calendar day after all of such conditions has been so
satisfied or waived, Purchaser and Seller shall have failed to
establish the Closing
7
Date, the Closing Date shall be at 10:00 a.m., P.D.T., on the last day
of the month during which the last of such conditions has been
satisfied or waived (provided that if such day is a Saturday, Sunday
or legal holiday, the Closing shall occur on the next business day).
At the Closing, Seller shall deliver to Purchaser stock certificates
representing the Shares duly endorsed in blank for transfer or
accompanied by appropriate stock powers duly executed in blank, with
all taxes, direct or indirect, attributable to the transfer of such
Shares paid or provided for by Seller. In full consideration and
exchange for the Shares, Purchaser shall pay to Seller at the Closing
the Purchase Price (as defined in Section 1.3) in accordance with
Section 1.3.
1.3 Purchase Price; Payment. The total purchase price for the Shares (the
"Purchase Price") shall be:
(a) Three Million Three Hundred Fifty Thousand and No/100 Dollars
($3,350,000.00) payable in cash or assets (as provided in
Subsection 1.3(c), below), provided that, in the event a
calculation made according to the formula set forth in Schedule
1.3(a) hereto (the "Formula") as of the end of the month
immediately preceding or coincident with the Closing Date
produces a Purchase Price which is Fifty Thousand and No/100
Dollars ($50,000.00) or more above or below Three Million Three
Hundred Fifty Thousand and No/100 Dollars ($3,350,000.00) the
Purchase Price shall be the amount arrived at under the Formula.
(b) In the event accurate financial information is not available as
of the date of calculation of the Purchase Price under the
Formula prior to Closing, a preliminary Closing shall be made
based upon the best estimate of the Purchaser, as confirmed by
Seller, as to the values produced by the Formula with final
settlement of amounts due to Seller or Purchaser no later than
the filing date for the preceding calendar quarter's Statutory
Insurance Statement. Interest on amounts due either party shall
be calculated at five percent (5%) from the preliminary Closing
Date to the date of final settlement and shall be included in the
final settlement. Any amount of the
(2)
8
Purchase Price payable in cash shall be paid to the Seller on the
Closing Date by wire transfer in immediately available funds to
Seller's bank account pursuant to Seller's wire transfer
instructions.
(c) In partial payment of the Purchase Price Seller may retain
invested assets of Company (the "Retained Assets"), as agreed by
Seller and Purchaser. The Retained Assets shall be valued at
the admitted book value shown for each such asset on the most
recent Statutory Insurance Statement dated prior to or
coincidental with the Closing Date. Such Retained Assets are as
set forth on Schedule 1.3(c) to this Agreement.
2.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents, warrants and agrees as follows:
2.1 Corporate Organization. Seller and the Company are duly organized,
validly existing and in good standing under the laws of their
jurisdiction of incorporation and have all requisite power and
authority (corporate and other) to own their properties and assets and
to conduct their business as now conducted. Company is duly qualified
to do business as a foreign corporation and is in good standing in
every jurisdiction where the nature of the business conducted by it
makes such qualification necessary, except for any states wherein the
failure to be so qualified would not have a material adverse effect on
the assets, properties, business, operations, prospects or financial
condition of the Company. Schedule 2.1 sets forth a list of each
jurisdiction in which the Company is so qualified to do business.
2.2 Capitalization of Company. The authorized, issued and outstanding
capital stock of the Company is as set forth in Schedule 2.2. No
other class of capital stock or other security of Company is
authorized, issued or outstanding. All of the Shares of the Company
have been duly authorized and are validly issued, fully paid and
non-assessable. There are no
(3)
9
outstanding options, warrants, agreements, exchange rights, conversion
rights, preemptive rights or other rights to subscribe for, purchase
or otherwise acquire any of the Shares, any other outstanding,
authorized but unissued, unauthorized or treasury shares of capital
stock of the Company, or any other security of the Company. Neither
Seller nor the Company is a party to any voting trust or other voting
agreement with respect to any of the Shares, the shares of capital
stock of the Company or any other security of the Company, or to any
agreement relating to the issuance, sale, redemption, transfer or
other disposition of any shares of capital stock or any other security
of the Company. Seller has, and will have at the Closing, good and
valid title to 99.6% of the Shares, free and clear of any liens,
claims, charges, security interests, mortgages, pledges or other legal
or equitable encumbrances, limitations or restrictions. Upon the sale
and transfer of the Shares to Purchaser, Seller will have sold and
transferred to Purchaser good and valid title to the Shares, free and
clear of any liens, claims, charges, security interests, mortgages,
pledges or other legal or equitable encumbrances, limitations or
restrictions.
2.3 Inter-Affiliate Investments. The Company does not own, and is not
obligated in any way to acquire, any capital stock, equity interest,
other securities or other ownership or similar interest in any
"affiliate" of the Company, as that term is defined in Article Section
1215 of the California Insurance Code.
2.4 Corporate Authority. Seller has the corporate power to enter into
this Agreement and to carry out its obligations hereunder; the
execution and delivery of this Agreement and the performance by Seller
of its obligations hereunder shall be duly authorized prior to Closing
by the board of directors and shareholders of the Seller, and no other
corporate proceedings on the part of Seller are necessary to authorize
such execution, delivery and performance. Except for the requisite
corporate approvals set forth in this Section 2.4, this Agreement has
been duly executed by Seller and is the valid and binding obligation
of Seller, enforceable against Seller in accordance with the terms
hereof, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights generally or general principles of
(4)
10
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
2.5 No Violation. Subject to the consents and approvals contained in this
Agreement, the execution, delivery and performance by Seller of this
Agreement and the consummation of the transactions by Seller
contemplated hereby do not and will not in any material way
(a) violate, conflict with or result in the breach of any provision
of the respective charter documents or by-laws of Seller or the
Company;
(b) (i) violate, conflict with or result in the breach of any of the
terms or provisions of, (ii) result in or give any contracting
party the right of modification, suspension, termination,
cancellation or acceleration of the performance required by, or
(iii) constitute (or with notice or lapse of time or both, would
constitute) a default or result in the loss of any material
benefit under any permit, instrument, contract, mortgage,
indenture, lease, deed of trust, license, note, loan agreement or
other agreement to which Seller or the Company is a party, or by
or to which any of them or any of their respective assets or
properties may be bound or subject;
(c) violate any order, writ, judgment, ruling, injunction, award or
decree applicable to or binding upon Seller or the Company or
upon the assets or properties of Seller or the Company;
(d) violate any statute, law, rule or regulation applicable to Seller
or the Company or any of their respective assets or properties;
(e) result in the creation or imposition of any lien, mortgage,
pledge, limitation, restriction, charge, claim, security interest
or encumbrance upon any of the properties or assets of Seller or
the Company; or
(5)
11
(f) violate or result in the modification, revocation, termination or
suspension of any of the Licenses (as defined in Section 2.17).
2.6 Consents and Approvals. To Seller's knowledge, except as contemplated
in Sections 4.6, 5.2, and 6.10, no consent, waiver, authorization or
approval of, declaration or notification to, or filing or registration
with, any court, administrative agency, or other governmental
authority or instrumentality, whether federal, state, local or foreign
(a "Governmental Entity") or any individual, corporation, partnership,
joint venture, trust, association or other entity (a "Person"), is
legally required on the part of Seller or the Company in connection
with the execution and delivery of this Agreement by Seller, the
performance by Seller of its obligations hereunder or the compliance
by Seller or the Company with the provisions hereof.
2.7 Insurance Commissioner Statements. Seller has heretofore furnished to
Purchaser complete and correct copies of the Annual Statements and any
Quarterly Statements of Company made to or filed by Company with the
Commissioner of Insurance for the State of California, or any
equivalent official for any jurisdiction, for all periods beginning on
or after January 1, 1995, together with all schedules thereto. All
Annual Statements, Quarterly Statements and independent annual audits
required by the California Department of Insurance, provided for in
this Section 2.7 are hereinafter referred to as the "Statutory
Insurance Statements." To Seller's knowledge, all Statutory Insurance
Statements (i) accurately calculate and report the Company's condition
and results of operations, including claims reserves, statutorily
required life, health and annuity reserves, and agent advances; (ii)
are complete and correct in all material respects and are in
accordance with the books and records of the Company, and in material
compliance with applicable law and statutory insurance accounting
principals; and (iii) can be reconciled with the financial statements
and the financial records maintained and the statutory insurance
accounting methods applied by the Company for financial accounting and
federal income tax purposes.
(6)
12
2.8 Basic Documents. The Seller has delivered to Purchaser true and
complete copies of the Articles of Incorporation and By-Laws of
Company. Such Articles of Incorporation and By-Laws are in full force
and effect. Prior to the Closing, the Seller will have delivered to
Purchaser a copy of the said Articles of Incorporation certified by
the Secretary of State of the State of California, and a copy of the
said By-Laws certified by the Secretary of the Company.
2.9 Absence of Certain Changes or Events.
(a) Except as set forth in Schedule 2.9, since the last day of the
period covered by the Company's most recently filed Statutory
Insurance Statements (i) there has been no material adverse
change in the assets, properties, business, operations,
prospects, or financial condition of the Company, and (ii) the
business of the Company has been operated in the ordinary course
of business consistent with past practice except for the
transactions contemplated by this Agreement. Neither Seller nor
the Company knows of any event, condition or circumstance which
will have or threatens to have a material adverse effect on the
assets, properties, operations, prospects, or financial condition
of the Company.
(b) Except as set forth in Schedule 2.9, or as otherwise contemplated
by this Agreement, since the last day of the period covered by
the Company's most recently filed Statutory Insurance Statement
neither Seller nor the Company has taken any actions referred to
in Section 4.2 of this Agreement that would have required the
consent of Purchaser if such action were to have been taken
during the period between the date hereof and the Closing Date.
2.10 Compliance with Laws. Except as set forth in Schedule 2.10, to
Seller's knowledge the business and operations of the Company have
been and are being conducted in accordance and in substantial
compliance with all laws, statutes, rules, regulations, judgments,
writs, decrees, injunctions, awards, orders and other legal
requirements of any Governmental
(7)
13
Entity applicable thereto, except for violations which heretofore have
been duly cured and except for violations which individually or in the
aggregate would not have a material adverse effect on the assets,
properties, operations, prospects, or financial condition of the
Company taken as a whole. Except as set forth in Schedule 2.10, to
Seller's knowledge neither Seller nor the Company has received notice
of the issuance of any notice, violation or alleged violation of any
such law, statute, rule, regulation, judgment, writ, decree,
injunction, award, order or other legal requirement, except for
violations which heretofore have been duly cured, nor is Seller or
Company in default with respect to any order, writ, judgment, award,
injunction or decree of any Governmental Entity applicable to Seller,
the Company, or any of their respective assets. Except as set forth
on Schedule 2.10, to the best of Seller's knowledge neither Seller nor
the Company has been notified by a Governmental Entity that an
investigation or review by such Governmental Entity, with respect to
the violation by Seller or the Company of any applicable law, statute,
rule, regulation, judgment, writ, decree, injunction,award or order,
is pending or has been threatened.
2.11 Tax Matters. Except as set forth in Schedule 2.11,
(a) The Company or the affiliated, combined or unitary group of which
Company is or was a member, has (i) filed in a timely manner
(taking into account extensions of due dates) with the
appropriate federal, state, local, foreign or other governmental
agencies all Tax returns, estimates and reports and combined or
unitary returns, required to be filed with respect to Taxes and,
as of the time of filing, all such Tax returns were accurately
prepared, (ii) paid in full, all required Taxes or has
established reserves that are adequate therefor and (iii)
complied in all material respects with all Tax laws and rules
pertaining to corporations including particularly corporations
engaged in the life insurance business, except where such
violations would not have a material adverse effect on the
assets, properties, operations, prospects, or financial condition
of the Company taken as a whole.
(8)
14
(b) To Seller's knowledge, there are no Taxes assessed or asserted in
writing in respect of any Tax returns filed by the Company or the
affiliated, combined or unitary group of which such entity is or
was a member, as the case may be, or claimed in writing to be due
by any taxing authority or otherwise that are not adequately
reserved for, (ii) no Tax return of the Company or the common
parent of any affiliated, combined or unitary group for tax
purposes of which such entity is or was a member is currently
being audited by the IRS or other taxing authority (whether
foreign or domestic), (iii) the Company has not been audited by
the IRS or by any state taxing authority in respect of any Tax
year for which the statute of limitations has not currently
expired, (iv) all deficiencies asserted as a result of such
examinations for prior Tax years have been paid, fully settled or
adequately provided for, and no issue has been raised by a
federal, state, local or foreign taxing authority in any such
examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period, (v) neither the
Company nor the common parent of any affiliated, combined or
unitary group of which any such entity is or was a member has
executed or filed with the IRS or any other taxing authority
(whether foreign or domestic) any agreement or other document
that is currently in effect extending, or having the effect of
extending, the period of assessment or collection of any Taxes,
(vi) the Company has not executed or entered into a closing
agreement or a compromise pursuant to Section 7121 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any
predecessor provision thereof or any similar provision of state,
local or foreign law which is binding on the Company for any
taxable period ending after the Closing Date, (vii) all final
adjustments made by the IRS with respect to any federal Tax
return of the Company have been reported to the relevant state,
local or foreign taxing authorities to the extent required by
law, and (viii) no requests for ruling or determination letters
are pending with any taxing authority with regard to the Company
or any common parent of any affiliated, combined or unitary group
of which any such entity is or was a member.
(9)
15
(c) The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the payment
and withholding of Taxes and has timely withheld from employee
wages, and other persons subject to withholding, including
foreign persons and persons subject to backup withholding, and
paid over to the proper governmental authorities all amounts
required to be so withheld and paid over for all periods under
all applicable laws.
(d) The Company is not a party to any agreement that provides for the
payment of any amount that would constitute an "excess parachute
payment" within the meaning of Section 280G of the Code, and (ii)
the Company has not agreed to and is not required to make any
adjustment pursuant to Section 481(a) of the Code by reason of a
change in accounting method initiated by the Company and the
Company has no knowledge that the IRS has proposed any such
adjustment or change in accounting method. Neither Seller nor
the Company has filed an election pursuant to Rev. Proc. 91-11,
1991-1 C.B. 470.
(e) The Company is not a party to, bound by, or has any obligation
under any tax sharing or similar agreement.
(f) The Company is not liable for the Taxes of any other Person under
Treasury Regulation Section 1.1502-6 or similar principles of
state, local, or foreign Tax laws, or other laws creating
successor or transferee liability for the Taxes of another
Person.
(g) To Seller's knowledge, the Company's net operating losses are not
subject to any limitations under Code Section 382 or similar
rules or regulations.
(h) To Seller's knowledge, all life insurance policies issued by the
Company have been and are currently, or will be at Closing, in
compliance with Code Section 7702 and
(10)
16
other applicable Tax law provisions to be defined and qualify as
"life insurance contracts" under Section 7702.
For purposes of this Agreement, "Tax(es)" shall mean all taxes,
charges, fees, imposts, levies or other assessments, including,
without limitation, all net income, gross receipts, premium, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory,
capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, and
property taxes, customs duties, fees, assessments and charges of any
kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority
(domestic or foreign) upon a corporation or any affiliated, combined
or unitary group for tax purposes of which any such corporation is,
was or becomes a member.
2.12 Absence of Undisclosed Liabilities. To Seller's knowledge after due
inquiry at the close of business on the last date of the period
covered by the Company's most recently filed Statutory Insurance
Statement, the Company had no material indebtedness, obligation or
liability, absolute, accrued or contingent, which is not shown or
provided for on such statement or in the notes thereto. Except as
shown on Schedules 2.12 or 2.23 or as shown in the Company's most
recently filed Statutory Insurance Statement, the Company is not
directly or indirectly liable upon or with respect to (by discount,
repurchase agreements or otherwise), or obligated in any other way to
provide funds in respect of, or to guarantee or assume, any debt,
obligation or dividend of any Person (except endorsements in the
ordinary course of business in connection with the deposit of items
for collection), and has not declared, set-aside or paid any dividend
or made any distribution on or with respect to shares of its capital
stock. Except as set forth on Schedule 2.12, since the last date of
the period covered by the Company's most recently filed Statutory
Insurance Statement, the Company has not incurred any indebtedness,
obligation or liability of any kind, whether absolute, accrued,
contingent, which is individually or in the aggregate material to the
Company other than those incurred since such date in the ordinary
course of business consistent with past practice.
(11)
17
2.13 Interests in Real Property. Except as set forth and described in
Schedule 2.13 hereto, the Company has no interest in any owned or
leased real properties and is not in material violation of any
covenant, agreement, or other obligation with respect to any such
interests in real properties.
2.14 Personal Property. All personal property owned by the Company may be
retained by the Seller and title to such property shall pass to Seller
simultaneously with the Closing of this Agreement, except for such
items of machinery or equipment as may be identified as essential to
the continued operation of Company's business. Such items to be
retained by the Company shall be agreed to prior to Closing by
Purchaser and Seller, and a list of such items shall be appended to
this Agreement prior to the Closing.
2.15 Accounts Receivable. Except as set forth on Schedule 2.15, to the
knowledge of Seller and the Company, all notes and accounts receivable
payable to or for the benefit of the Company reflected on the most
recently filed Statutory Insurance Statements or acquired by the
Company after the effective date of that filing have been collected or
are current in amounts not less than the aggregate amount thereof (net
of adequate reserves established in accordance with the Company's
ordinary accounting practices) carried on the books of the Company,
and the Company has not been notified or advised of any defenses or
set-offs to payment of such receivables. All such notes and accounts
receivable have arisen from bona fide transactions in the ordinary
course of business consistent with past practice.
2.16 Trademarks; Software; Patents; Copyrights; and Know-How. To Seller's
and Company's knowledge, the Company possesses, licenses or otherwise
has the right to use all material trademarks, software, patents,
copyrights, trade secrets (including customer lists and renewals) and
proprietary know-how (the "Intangible Assets") necessary for the
conduct of its operations as conducted during the preceding five (5)
years and on the date hereof. The material Intangible Assets used by
the Company are listed on Schedule 2.16. Except as set forth in
Schedule 2.16, there is no restriction affecting the Company's use of
any of the Intangible Assets, each item of the Intangible Assets is
free and clear of all liens,
(12)
18
security interests, claims, mortgages, pledges, charges, encumbrances
and equities and no license has been granted with respect thereto. To
Seller's knowledge, none of the Intangible Assets is currently being
challenged, is involved in any pending or, to the knowledge of Seller
or the Company, threatened administrative or judicial proceeding, or
conflicts with any rights of any other Person. To the knowledge of
Seller and the Company, none of the Company's operations involves any
infringement of any proprietary right of any Person. Neither Seller
nor the Company has received any notice from any Person with respect
to any infringement.
2.17 Licenses; Permits and Governmental Approvals. Set forth in Schedule
2.17 hereto is a true and complete list of all material licenses,
permits, franchises, authorizations and approvals issued or granted to
the Company by any Governmental Entity and all pending applications
therefor. The Company holds all material licenses, permits,
franchises, authorizations and approvals of Governmental Entities
required to permit the continued lawful conduct of the Company's
business in the manner now conducted including a valid Certificate of
Authority to write life insurance issued by the Departments of
Insurance of Arizona, California, Hawaii, Louisiana, New Mexico,
Oregon, Utah and Washington (the "Licenses"), and the Company's
operations are not being conducted in a manner which violates any of
the terms or conditions under which any License was granted such that
the operations, as conducted, will have or threaten to have a material
adverse effect on the assets, properties, operations, prospects or
financial condition of the Company. Each License has been duly
obtained, is valid and in full force and effect, and is not subject to
any pending or, to the knowledge of Seller or the Company, threatened
administrative or judicial proceeding to revoke, cancel or declare
such License invalid in any respect. The Company has not received any
notice to the effect that there is lacking any such License required
in connection with the current operations of its respective
businesses. No default, violation or event, which with notice or the
lapse of time or both would become a default or violation, has
occurred with respect to any such License.
(13)
19
2.18 Title to Assets. Except as set forth on Schedule 2.18 and except for
the consents contemplated by this Agreement, the Company holds, owns
and has an unrestricted right to transfer title to all of the assets
owned by it and used in its business, including without limitation all
of the assets reflected in the latest Statutory Insurance Statement
and acquired since the period covered by that filing, described in
Sections 2.13, 2.14, 2.15, 2.16 or 2.17 hereof or set forth in
Schedules 2.13, 2.14, 2.15, 2.16, and 2.17. In each case, such assets
are free and clear of any lien, charge, security interest, claim,
mortgage, pledge, or encumbrance other than (i) those specifically
described in the latest Statutory Insurance Statement or noted on any
schedule hereto; (ii) assets leased by the Company as described in
such Statutory Insurance Statement or any Schedule hereto; (iii)
assets disposed of in the ordinary course of business since the period
covered by the latest Statutory Insurance Statement; (iv) liens of
current property taxes and assessments not in default; or (v) liens or
other encumbrances of a character that do not interfere with or impair
the present and continued use thereof in the usual and normal conduct
of the business of the Company and which are disclosed on the
Schedules hereto.
2.19 Litigation. To Seller's knowledge, except as set forth in Schedule
2.19, there are no claims, actions, suits, proceedings, complaints,
charges, labor disputes or investigations ("Claims") pending or, to
the knowledge of Seller or Company, threatened before any Governmental
Entity or before any arbitrator of any nature, brought by or against
Seller, the Company or any of their respective officers, directors,
employees, agents or affiliates involving, affecting or relating to
the Company. To Seller's knowledge, except as set forth in Schedule
2.19, neither Seller nor the Company nor any of their respective
assets or properties is subject to or overtly threatened by any order,
writ, judgment, award, injunction or decree of any Governmental Entity
or arbitrator ("Orders"), which affects or might affect their
respective assets, properties, operations, prospects, or financial
condition or which would or might interfere with the transactions
contemplated by this Agreement, except for Claims and Orders made in
the ordinary course of insurance business other than those based upon
allegations of lack of good faith and fair dealing and
(14)
20
except for Claims or Orders which will not have a material adverse
effect on the assets, properties, operations, prospects, or financial
condition of the Company.
2.20 Contracts. Set forth in Schedule 2.20 hereto is a true and complete
list and summary description of all material contracts, agreements and
other instruments of whatsoever nature to which the Company is a party
or otherwise relating to or affecting any of its respective assets,
properties or operations (other than contracts, agreements and
instruments listed in other Schedules to this Agreement). The Company
has performed in all material respects all the obligations required to
be performed by it under all such contracts, instruments or
agreements. The Company is not in material default under any of such
contracts, instruments or agreements, nor does any condition exist
which, with notice or lapse of time or both, would constitute a
material default by the Company thereunder, or, to the knowledge of
Seller or the Company, by any other party thereto. True and complete
originals or copies of all documents listed or required to be listed
in Schedule 2.20 or in any other Schedule have been made available, or
will be made available at Purchaser's request prior to Closing, by
Seller to Purchaser or its representatives. Each of such contracts,
instruments or agreements is valid and enforceable against the Company
and, to the knowledge of Seller and the Company, against the party or
parties thereto, in accordance with its terms. No previous or current
party to any such contract, instrument or agreement has given notice
of or made a claim with respect to any material breach or default
currently existing thereunder. With respect to any of such contracts,
instruments or agreements which were assigned or subleased to the
Company by a third party, all necessary consents to assignments or
subleases have been obtained.
2.21 Employees; Employee Plans. Company employs the employees listed on
Schedule 2.21 hereto. With respect to any "employee benefit plans" as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") or any other benefit arrangement or
payroll practice provided by Company with respect to any of its
employees, ("Employee Benefit Plans"), Company has either terminated
or will have
(15)
21
terminated any such Employee Benefit Plan prior to Closing or will
have transferred all liability for or resulting from such Employee
Benefit Plans to Seller or another affiliate of the Company, without
recourse, such that Company will have no liability as to such Plans at
Closing. Except as to liability which will not have or threaten to
have a material adverse effect on the assets, properties, operations,
prospects, or financial condition of the Company, Company has no
liability to any employee, past or present, with respect to any
manuals, brochures or publications or similar documents regarding
office administration, personnel matters and hiring, evaluation,
supervision, training, termination and promotion of employees of the
Company, including but not limited to an affirmative action plan, or
any written communications disseminated to employees concerning such
matters (collectively "Employee Policies and Procedures"), or with
respect to any employee arising under the Consolidated Omnibus Benefit
Reconciliation Act of 1985 ("COBRA"), or the Americans With
Disabilities Act of 1990 ("ADA") or any other similar state or federal
law or regulation pertaining to the rights of employees. Further,
Company has no long-term (one (1) year or more in duration) employment
contracts, arrangements or commitments as to any of its employees,
officers, directors, consultants, or other representatives and has no
such long-term contracts, arrangements or commitments to any such
persons concerning stock options, warrants, share appreciation,
bonuses, incentive plans or any other form of compensation for
services as an employee or otherwise.
2.22 Insurance. Set forth in Schedule 2.22 hereto is a true and complete
list (specifying the insurer and describing any pending claims
thereunder of more than $5,000) of all insurance policies or fidelity
bonds in force on the date hereof owned by or purchased on behalf of
Company to insure its directors, officers, employees, assets,
properties or operations, together with a summary description
including the premiums currently paid thereon, type of policy, name of
insured, the insurer, expiration date, the hazards insured against and
the dollar amount of coverage per occurrence and in the aggregate and
deductibles. All such policies and fidelity bonds are in full force
and effect. True and complete copies of all such insurance policies
and fidelity bonds have been made available for review, or will be
made available for review upon Purchaser's request prior to
(16)
22
Closing, to Purchaser by Seller. Except for claims set forth in
Schedule 2.22, there are no outstanding unpaid claims under any of
such policies or bonds, and the Company has received no notice of
cancellation or non-renewal thereof.
2.23 Transactions with Related Parties. Except as set forth in Schedule
2.23, and except for transactions which will not have or threaten to
have a material adverse effect on the assets, properties, operations,
prospects, or financial condition of the Company, there have not been,
nor are there now, any transactions between the Company and (i)
Seller, (ii) any director, officer, employee, stockholder or affiliate
(as defined in Rule 405 promulgated under the Securities Act of 1933,
as amended (the "Securities Act") and as defined by Section 1215 of
the California Insurance Code) of Seller or the Company, or (iii) any
relative or spouse (or relative of such spouse) of any such director,
officer, employee, stockholder or affiliate of Seller or the Company
(such persons in clauses (i), (ii), and (iii) referred to herein as a
"Related Party" or collectively as the "Related Parties"). Except as
set forth in Schedule 2.23, no Related Party owns, directly or
indirectly, in whole or in part, any tangible or intangible property
material to the condition of the Company, or that the Company uses in
the conduct of its business. Except as set forth in Schedule 2.23, no
Related Party owes any money or other amounts to, nor is any Related
Party owed any money or other amounts by, the Company. All
indebtedness of the Company to any Related Party, and all indebtedness
of any Related Party to the Company is set forth on Schedule 2.23, and
all indebtedness of the Company to any Related Party will be forgiven
on or prior to the Closing Date. Except as set forth on Schedule
2.23, the Company has not directly or indirectly (i) created, incurred
or assumed any indebtedness for borrowed money or otherwise to any
Related Party, or (ii) made any loans, payments or transfers of assets
of the Company to any Related Party other than for salaries paid for
services actually performed in amounts in keeping with past practice
and in the ordinary course of business. Except as set forth on
Schedule 2.23, neither the Seller nor the Company, or any affiliate of
Seller or any officer or employee of any of them (i) owns any direct
or indirect interest of any kind in, or controls or is a director,
officer, employee or partner of, or consultant to, or lender to or
borrower from or has the right to participate in the
(17)
23
profits of, any Person which is (A) a competitor, supplier, customer,
landlord, tenant, creditor or debtor of the Company, (B) engaged in a
business related to the business of the Company or (C) participating
in any transaction to which the Company is a party, or (ii) is a party
to any contract, instrument or agreement with the Company.
2.24 Books and Records. During the five (5) year period preceding the
execution of this Agreement, the books and records of the Company
contain in all material respects true, correct and complete entries of
all of its material business transactions and have been maintained in
accordance with good business practice and applicable statutory
insurance accounting principles, except to the extent the failure to
so maintain the Company's books and records would not have a material
adverse effect on the assets, properties, operations, prospects or
financial condition of the Company taken as a whole.
2.25 Accuracy of Information. To Seller's knowledge, all documents,
agreements and other papers and materials delivered by or on behalf of
Seller or the Company in connection with this Agreement and the
transactions contemplated hereby are true and correct in all material
respects. None of the representations, warranties or statements of
Seller or the Company, as the case may be, contained in this
Agreement, in the Schedules hereto, or in any other agreement,
instrument or document executed or delivered by Seller or Company in
connection with the transactions contemplated by this Agreement
contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the
representations, warranties or statements contained herein or therein
not misleading in light of the circumstances under which they were
made, other than such statements or omissions which will not have or
threaten to have a material adverse effect on the assets, properties,
operations, prospects, or financial condition of the Company.
2.26 Insurance Business. All policies of insurance currently being
marketed by the Company are, to the extent required under applicable
law, on forms approved by applicable insurance regulatory authorities
in the jurisdiction where issued or have been filed with
(18)
24
and not objected to by such authorities within the period provided for
objection. Copies of all such approved forms issued or used by the
Company have previously been made available for inspection to
Purchaser or will be made so available no later than thirty (30) days
prior to the Closing Date. To the best knowledge of Seller, the
transactions contemplated by this Agreement will not materially
adversely affect the validity and binding character of any policy of
insurance issued by the Company.
2.27 Regulatory Filings. The Seller has heretofore furnished Purchaser
with true and correct copies of the two latest California Department
of Insurance Examination Reports and independent audits of the Company
completed since December 31, 1994. The Seller will allow Purchaser
access to complete and correct copies of all registrations, filings,
or submissions made by the Company with any Governmental Entity and
any reports of examinations issued by any such Governmental Entity
since January 1, 1991, that relate to the Company including any
examinations performed by the California Department of Insurance in
the last five (5) years. The Company has filed all reports,
statements, documents, registrations, filings or submissions it is
required to file with any Governmental Entity.
3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents, warrants and agrees as follows:
3.1 Corporate Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Texas, and has all requisite power and authority (corporate and other)
to own its properties and assets and to conduct its business as now
conducted.
3.2 Corporate Authority. Purchaser has the corporate power to enter into
this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement, and the performance of
Purchaser's obligations hereunder shall be duly authorized prior to
(19)
25
Closing by the shareholders and the Board of Directors of Purchaser
and no other corporate proceedings on the part of Purchaser are
necessary to authorize such execution, delivery and performance.
Except for requisite corporate approvals set forth in the preceding
sentence, this Agreement has been duly executed by Purchaser as the
valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with the terms hereof, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors'
rights generally or general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
3.3 No Violation. The execution, delivery and performance by Purchaser of
this Agreement and the consummation of the transactions contemplated
hereby do not and will not
(a) violate, conflict with or result in the breach of any provision
of the charter documents or by-laws of Purchaser;
(b) violate, conflict with or result in the breach of any of the
terms or provisions of, result in a modification, suspension,
termination or cancellation of, or acceleration of the
performance required by, or otherwise give any other contracting
party the right to modify, suspend, terminate or cancel or
accelerate the performance required by, or constitute (or with
notice or lapse of time or both would constitute) a default or
result in the loss of any material benefit under any permit,
instrument, contract, mortgage, indenture, lease, deed of trust,
license, note, loan agreement or other agreement to which
Purchaser is a party, or by or to which it or its assets or
properties may be bound or subject;
(c) violate any order, writ, judgment, ruling, injunction, award or
decree applicable to or binding upon Purchaser or upon the assets
or properties of Purchaser;
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(d) violate any statute, law, rule or regulation of any Governmental
Entity applicable to Purchaser or any of its assets or
properties;
(e) result in the creation or imposition of any lien, mortgage,
pledge, limitation, restriction, charge, claim, security interest
or encumbrance upon any of the properties or assets of Purchaser;
or
(f) violate or result in the modification, revocation, termination or
suspension of any material license, permit, franchise,
authorization or approval of any Governmental Entity required to
permit the continued lawful conduct of Purchaser's business in
the manner now conducted.
3.4 Consents and Approvals. Except as contemplated in Sections 4.6 and
5.2, no consent, waiver, authorization or approval of, declaration or
notification to, or filing or registration with, any Governmental
Entity or Person is legally (by law, regulation, contract or
otherwise) required on the part of Purchaser in connection with the
execution and delivery of this Agreement by Purchaser or the
performance by Purchaser of its obligations hereunder or compliance by
Purchaser with the provisions hereof.
3.5 Accuracy of Information. All documents, agreements and other papers
and materials delivered by or on behalf of Purchaser in connection
with this Agreement and the transactions contemplated hereby are true
and correct in all material respects. None of the representations,
warranties or statements of Purchaser contained in this Agreement, or
in any other agreement, instrument or document executed or delivered
by or on behalf of Purchaser in connection with the transactions
contemplated by this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any
material fact necessary to make the representations, warranties or
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
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3.6 Investment Intent. Purchaser is purchasing the Shares for its own
account and not with a view to distribution or sale.
3.7 Litigation. Except as set forth in Schedule 3.7, there are no claims,
actions, suits, proceedings, complaints, charges, labor disputes or
investigations pending or, to the knowledge of Purchaser, threatened
before any Governmental Entity or before any arbitrator of any nature,
brought by or against Purchaser or any of its officers, directors,
employees, agents or affiliates. Except as set forth in Schedule 3.7,
Purchaser nor any of its assets or properties is subject to or overtly
threatened by any order, writ, judgment, award, injunction or decree
of any Governmental Entity or arbitrator, which affects or might
affect its assets, properties, operations, prospects, or financial
condition or which would or might interfere with the transactions
contemplated by this Agreement, except for claims made in the ordinary
course of insurance business other than those based upon allegations
of lack of good faith and fair dealing and except for claims which
will not have a material adverse effect on the assets, properties,
operations, prospects, or financial condition of the Purchaser.
3.8 Compliance with Laws. Except as set forth in Schedule 3.8, to
Purchaser's knowledge, the business and operations of the Purchaser
have been and are being conducted in accordance and in substantial
compliance with all laws, statutes, rules, regulations, judgments,
writs, decrees, injunctions, awards, orders and other legal
requirements of any Governmental Entity applicable thereto, except for
violations which heretofore have been duly cured and except for
violations which individually or in the aggregate would not have a
material adverse effect on the assets, properties, operations,
prospects, or financial condition of the Purchaser taken as a whole.
Except as set forth in Schedule 3.8, to Purchaser's knowledge
Purchaser has not received notice of the issuance of any notice,
violation or alleged violation of any such law, statute, rule,
regulation, judgment, writ, decree, injunction, award, order or other
legal requirement, except for violations which heretofore have been
duly cured, nor is Purchaser in default with respect to any order,
writ, judgment, award, injunction or decree of any Governmental
Entity. Except as set
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forth on Schedule 3.8, to the best of Purchaser's knowledge, Purchaser
has not been notified by a Governmental Entity that an investigation
or review by such Governmental Entity, with respect to the violation
by Purchaser of any applicable law, statute, rule, regulation,
judgment, writ, decree, injunction, award or order, is pending or has
been threatened.
4.
COVENANTS OF SELLER
Seller hereby covenants and agrees with Purchaser as follows:
4.1 Conduct of Business. Except as otherwise provided in this Agreement,
from the date hereof through the Closing Date, Seller shall cause the
Company not to enter, perform or agree to enter or perform any
transaction or act that would result in any of the representations and
warranties contained in Section 2 to be untrue or incorrect in any
material respect as of the Closing Date, that would be likely to cause
any condition set forth in this Agreement to be unsatisfied or that
would otherwise jeopardize the transactions contemplated hereby.
Seller shall cause the Company to conduct its business in the ordinary
course of business consistent with past practice. Seller shall
further use reasonable efforts from the date hereof through the
Closing Date to preserve and enhance the business of the Company and
to preserve intact the business organization of the Company and to
otherwise preserve its present business relationships and the good
will of those having business relationships with the Company.
4.2 Negative Covenants. Except for actions required by law, regulation, a
Governmental Entity or which will not have or threaten to have a
material adverse effect on the assets, properties, operations,
prospects, or financial condition of the Company, during the period
commencing on the date of this Agreement and ending on the Closing
Date, Seller shall not, without the prior consent of Purchaser, cause,
permit or suffer the Company to take any action within Seller's
control to:
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(a) Amend its charter documents or by-laws;
(b) Declare, set aside or pay any dividend or make any distribution
on or with respect to shares of its capital stock (including the
Shares);
(c) Transfer, issue, sell or otherwise dispose of any shares of
capital stock or other security of the Company or grant or enter
into any options, warrants, agreements, conversion rights,
exchange rights, preemptive rights or other rights to subscribe
for, purchase or otherwise acquire, or issue securities
convertible into or exchangeable for or pledge or encumber any
shares of capital stock or other security of the Company, or
purchase, call, redeem or otherwise acquire any shares of capital
stock or other security of the Company;
(d) Acquire any assets or properties, other than in the ordinary
course of business and consistent with past practice;
(e) Sell, lease, transfer, dispose of, any assets or properties,
other than for fair consideration in the ordinary course of
business and consistent with past practice;
(f) Enter into or effect any merger, consolidation, reclassification,
recapitalization or other business combination or reorganization;
(g) Assume, guarantee, endorse or otherwise become liable or
responsible (whether direct, contingent or otherwise) for the
obligations of any other Person, except endorsements in the
ordinary course of business and consistent with past practice in
connection with the deposit of items for collection;
(h) Except in the ordinary course of business, make any loans,
advances or capital contributions to or investments in any
Person;
(24)
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(i) Cause or permit any of Company's own current insurance (or
reinsurance) policies to be canceled or terminated or any of the
coverage thereunder to lapse or to be decreased, unless
simultaneously with such termination, cancellation or lapse, the
Company obtains replacement policies from the same or comparable
insurers providing coverage which is the same as or comparable to
that provided under the canceled, terminated or lapsed policies;
(j) Sell, transfer, license or otherwise dispose of or encumber any
item of Intangible Assets;
(k) Cancel or compromise any debt or claim or waive, release, grant
or transfer any rights of value or modify or change in any
material respect any existing license, lease, contract or other
document, other than in the ordinary course of business and
consistent with past practice;
(l) Except in the ordinary course of business, hire any employees or
implement any Employee Benefit Plans or Employee Policies and
Procedures;
(m) Grant any stock options, restricted stock grants or stock
appreciation rights;
(n) Enter into any contract, lease, commitment or other agreement of
any type whatsoever, unless terminable without liability to it on
notice of thirty (30) days or less;
(o) Create, incur or assume any indebtedness except for normal trade
payables incurred in the ordinary course of business;
(p) Cause or permit the Company's assets and properties to not be
maintained in their current condition, ordinary wear and tear
excepted;
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(q) (i) Not maintain Company's books, accounts and records other than
in the ordinary course of business consistent with past
practices, (ii) not continue to collect accounts receivable and
pay accounts payable utilizing Company's normal procedures and
(iii) not comply with all material contractual and other
obligations applicable to its operations;
(r) Enter into any commitment for capital expenditures of the Company
in excess of $10,000 for any individual commitment and $50,000
for all commitments in the aggregate;
(s) Enter into any transaction or make or enter into any contract,
agreement or instrument which by reason of its size or otherwise
is not in the ordinary course of business consistent with past
practice; or
(t) Enter into any contract, agreement, instrument or transaction in
excess of $10,000, individually, or $50,000 in the aggregate, not
including insurance policies or reinsurance agreements;
(u) Write any insurance policy or enter into any reinsurance
agreement, except in the ordinary course of business;
(v) Take any action or fail to take any action which would cause the
Company's Licenses to lapse;
(w) Make any material change in the underwriting, actuarial,
financial or accounting practices customarily followed by the
Company.
4.3 Positive Covenants. On or prior to the Closing Date, Seller shall
take or cause Company to take the following actions:
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(a) Seller will cancel and unconditionally forgive the surplus
debenture in the amount of $400,000.00 made payable to Seller
from Company and dated September 7, 1982, (Certificate No. 2) and
the surplus debenture in the amount of $300,000.00 made payable
to Seller from Company and dated July 2, 1982 (Certificate No.,
1) (the "Debentures") and, at Closing, will provide a release of
the Debentures to Purchaser executed by an authorized officer of
Seller, relieving Company of any obligation whatsoever under the
Debentures;
(b) Seller will redeem or satisfy in full all securities and/or debt
(including notes payable) issued by Seller and owned by or made
to Company, or the value of any such securities or debt may be
deducted from the Net Cash Settlement and the security or debt so
applied shall be canceled and forgiven by Company in a release
acceptable to Seller;
(c) Seller will cooperate with and assist Purchaser in acquiring
ownership of the 196.84 shares of the Company's common stock
currently owned by the State of California (the "Minority
Shares") by virtue of having been escheated to the state. Seller
will pay one-half (1/2) of the purchase price paid to the State
of California by Purchaser to acquire the Minority Shares and
one-half (1/2) of any costs directly attributable to such
acquisition.
(d) Seller will amend its Schedules provided pursuant to Article 2 as
necessary prior to the Closing Date to make its representations
and warranties true and correct as of the Closing.
4.4 Preparation of Statutory Insurance Statements. For any statutory
accounting period which ends prior to the Closing, Seller shall
prepare (or have prepared) and file, at its expense, any Statutory
Insurance Statements due after Closing, and Purchaser shall cooperate
fully with Seller in the preparation of such Statements.
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4.5 Access to Properties and Records. To permit Purchaser to make such
business, accounting and legal review and examination of the Company
as Purchaser shall desire, Seller shall afford, and shall cause the
Company to afford, to Purchaser and Purchaser's accountants, counsel
and other representatives, access throughout the period prior to the
Closing Date to the business, operations, properties, books,
contracts, commitments and records of the Company as Purchaser or its
representatives shall reasonably request. Seller shall cause the
Company to cooperate with Purchaser and its representatives in their
investigation and examination of the assets and properties of the
Company.
4.6 Consents and Approvals. Seller (i) shall use its reasonable efforts
to promptly obtain all necessary consents, waivers, authorizations and
approvals of all Governmental Entities and Persons required in
connection with the execution, delivery and performance by it of this
Agreement and the transactions contemplated hereby, and (ii) shall
diligently assist and cooperate with Purchaser in preparing and filing
all documents required to be submitted by Purchaser to any
Governmental Entity in connection with such transactions (which
assistance and cooperation shall include, without limitation, timely
furnishing to Purchaser all information concerning Seller or the
Company which, in the opinion of counsel to Purchaser, is required to
be included in such documents), and in obtaining any governmental, or
other third party consents, waivers, authorizations or approvals which
may be required to be obtained by Purchaser in connection with such
transactions, including, without limitation, the approvals
contemplated in Section 5.2.
4.7 Third Party Agreements. Seller shall cooperate with Purchaser and use
its reasonable efforts to assist Purchaser in obtaining any consents,
or similar assurances from third parties required under or reasonably
requested by Purchaser in connection with agreements, licenses,
permits and other documents or instruments of the Company.
4.8 Further Assurances. Upon the reasonable request of Purchaser at any
time on or after the Closing Date, Seller will, at its reasonable
expense, forthwith execute and deliver such further instruments of
assignment, transfer, conveyance, endorsement, direction or
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authorization and other documents as Purchaser or its counsel may
request in order to perfect title of Purchaser and its successors and
assigns in and to the Shares or otherwise to effect the purposes of
this Agreement.
4.9 Satisfaction of Conditions. Seller agrees to use its reasonable
efforts to cause the conditions to obligations of Purchaser set forth
in Section 6 to be fulfilled.
5.
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees with Seller as follows:
5.1 Conduct of Business. From the date hereof through the Closing Date,
Purchaser shall not enter, perform or agree to enter or perform any
transaction or act which would result in any of the representations
and warranties contained in Section 3 to be untrue or incorrect in all
material respects as of the Closing Date, that would be likely to
cause any condition set forth in this Agreement to be unsatisfied or
that would otherwise jeopardize the transactions contemplated hereby.
5.2 Consents and Approvals. Purchaser (i) shall use its reasonable
efforts to promptly obtain all necessary consents, waivers,
authorizations and approvals of appropriate Governmental Entities or
other Persons required in connection with the execution, delivery and
performance by Purchaser of this Agreement and (ii) shall diligently
assist and cooperate with Seller in preparing and filing all documents
required to be submitted by Seller to any Governmental Entity in
connection with such transactions (which assistance and cooperation
shall include, without limitation, timely furnishing to Seller all
information concerning Purchaser which, in the opinion of counsel to
Seller, is required to be included in such documents), and in
obtaining any governmental or third party consents, waivers,
authorizations or approvals which may be required to be obtained by
Seller in connection with such transactions, including without
limitation, the consents and approvals contemplated in Section 4.6
hereof.
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5.3 Satisfaction of Conditions. Purchaser agrees to use best efforts to
cause the conditions to obligations of Seller set forth in Section 7
to be fulfilled.
5.4 Completion of Due Diligence. Purchaser and Purchaser's
representatives shall complete their due diligence review of the
Company (the "Due Diligence"), at Purchaser's expense, within thirty
(30) days of execution of this Agreement (the "Due Diligence
Completion Date"). If on or before the Due Diligence Completion Date,
the Due Diligence is not satisfactory to Purchaser or if Purchaser
notifies Seller of any condition which is not as represented in
Section 2, Purchaser shall have the unilateral right to terminate this
Agreement immediately upon written notice to Seller. The notice shall
specify with particularity the unsatisfied condition or conditions or
due diligence issue(s) that Purchaser reasonably asserts as a basis
for the proposed termination. The termination shall be effective
following twenty (20) days from the date of receipt of the notice
unless the specified unsatisfied condition or conditions or due
diligence issue(s) have been cured on or before the effective date for
termination. Purchaser shall inform Seller of any information that it
considers necessary to review in order to make a determination to
purchase the stock and shall inform Purchaser of any additional
information that it deems necessary to review prior to Closing.
5.5 Corporate Approvals. Purchaser shall have secured the requisite
approval of this Agreement and the transactions contemplated hereby
from the board of directors of Purchaser and Purchaser's stockholders
within ten business days of execution of this Agreement.
5.6 Purchaser's Intent. Purchaser is purchasing the stock for its own
account and not with a view to the distribution thereof.
5.7 Third Party Agreements. Purchaser shall cooperate with Seller and use
its reasonable efforts to assist Seller in obtaining any consents, or
similar assurances from third parties
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required under or reasonably requested by Seller in connection with
agreements, licenses, permits and other documents or instruments of
the Company.
5.8 Positive Covenants. On or prior to the Closing Date, Purchaser will
take the following actions:
(a) Purchaser will cause Company to forgive agents balances due
Company from the Firingline as of the Closing Date and will
further cause Company to pay to Firingline in full all agent's
commissions due on the business represented by forgiven balances
pursuant to the Agency Agreement;
(b) Purchaser may, in its sole discretion, cause Company to re-hire,
on terms agreed to by Purchaser, Company and the employee, such
employees as Purchaser shall desire to retain for Purchaser
and/or Company;
(c) Purchaser, and its successors and assigns, will ratify and
re-affirm the Supervising General Agent's Commission Agreement
originally entered into with OZCO Insurance Services, Inc. on
February 1, 1976, and assigned to Firingline Corporation on June
24, 1985, and all amendments, modifications and additions thereto
(the "Firingline Agreement"), upon the same terms and conditions
set forth in the Firingline Agreement as of the date of execution
of this Agreement.
(d) Purchaser will pay one-half ( 1/2) of the purchase price paid to
the State of California to acquire the Minority Shares and one-
half ( 1/2) of any costs directly attributable to such
acquisition.
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6.
CONDITIONS TO OBLIGATIONS OF PURCHASER
All obligations of Purchaser under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of the following conditions:
6.1 Representations and Warranties of Seller. All representations and
warranties made by Seller in this Agreement shall be true and correct
in all material respects on and as of the time of Closing as if again
made by Seller on and as of such date, and Purchaser shall have
received a certification of that fact dated as of the Closing Date and
signed by the President or any authorized Vice President of the
Seller.
6.2 Covenants of Seller. Seller shall have performed and complied in all
material respects with all covenants and obligations required under
this Agreement to be performed with which it must comply on or prior
to the Closing Date, and Purchaser shall have received a certificate
to such effect dated the Closing Date and signed by the President or
any authorized Vice President of the Seller.
6.3 Consents and Approvals. All consents, waivers, authorizations and
approvals of any Governmental Entity, arbitrator or Person, required
in connection with the execution, delivery and performance of this
Agreement, including, without limitation, (i) the approvals
contemplated in Section 5.2, and (ii) any and all material consents
required from third parties under any contracts, agreements, licenses,
leases and other instruments, relating to the business of the Company,
shall have been duly obtained and shall be in full force and effect on
the Closing Date and in form and substance reasonably satisfactory to
Purchaser provided that Purchaser may terminate this Agreement
pursuant to Section 9.1(b) and have no further obligation thereunder
of any kind in the event:
(a) Purchaser is unable on or before January 1, 1997, to obtain the
required approval of Governmental Entities with proper
jurisdiction for acquisition of the Company's Shares; or
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(b) Purchaser is unable, on or before January 1, 1997, to obtain the
required approval of Governmental Entities with proper
jurisdiction to merge the Company with Purchaser; or
(c) Purchaser is unable, on or before January 1, 1997, to obtain such
regulatory approval that will allow it to simultaneously acquire
the Company's license or certificate of authority or a new
license or certificate of authority for Purchaser as the merger
survivor in California.
6.4 No Violation of Orders. There shall not be in effect on the Closing
Date any statute, rule, regulation, rule, decree, writ, order,
preliminary or permanent injunction or other order issued, promulgated
or enacted by any Governmental Entity which declares this Agreement
invalid in any respect or prevents the consummation of the
transactions contemplated hereby; and no action or proceeding shall
have been instituted or threatened by any Governmental Entity which
seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement or any term or provision hereof or
seeks damages as a result of the transactions contemplated by this
Agreement.
6.5 No Material Adverse Change. During the period from the date of this
Agreement to the Closing Date, there shall have been no material
adverse change in or any event or occurrence which would result in a
material adverse change in, or any litigation, which in the reasonable
opinion of Purchaser, might result in any material adverse change in
the assets (including insurance in force), liabilities, properties,
operations, prospects, or financial condition of the Company, and
Purchaser shall have received a certificate to such effect dated the
Closing Date and signed by the President of the Seller.
6.6 Inter-Affiliate or Related Party Debt, Agreement or Investments.
Purchaser shall have received such agreements and assurances as it
shall reasonably require evidencing the forgiveness and release of all
inter-affiliate or other obligations owed by the Company to
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Seller or any of their respective affiliates, or Related Parties; the
cancellation and forgiveness of any obligation under any inter-
affiliate or Related Party contracts, agreements, arrangements or
understandings of any nature; and the elimination of any inter-
affiliate or Related Party investment owned by the Company.
6.7 Other Closing Documents. Purchaser shall have received such other
certificates, instruments and documents in confirmation of the
covenants, representations, warranties of Seller contained in this
Agreement or in furtherance of the transactions contemplated by this
Agreement, as Purchaser or its counsel may reasonably request.
6.8 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of
Seller under the provisions of this Agreement, and all other actions
and proceedings required to be taken by or on behalf of Seller in
furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for Purchaser.
6.9 Resignation of Directors and Officers. The individuals constituting
all of the directors and officers of the Company shall have delivered
to Purchaser their written resignations from all positions elected to
and/or held in such entity.
6.10 Corporate Approvals. Seller shall have secured the requisite approval
of this Agreement and the transactions contemplated hereby from the
board of directors of Seller within fifteen (15) business days of
execution of this Agreement and approval of Seller's shareholders no
later than November 30, 1996, unless extended by agreement of Seller
and Purchaser.
6.11 Minority Shares. Purchaser shall have acquired ownership of the
Minority Shares on or prior to the Closing Date.
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7.
CONDITIONS TO OBLIGATIONS OF SELLER
All obligations of Seller under this Agreement are subject to the fulfillment,
at or prior to the Closing Date, of the following conditions:
7.1 Representations and Warranties of Purchaser. All representations and
warranties made by Purchaser in this Agreement shall be true and
correct in all material respects as of the Closing Date as if again
made by Purchaser on and as of such date, and Seller shall have
received a certificate to such effect dated the Closing Date and
signed by the Chairman of the Board, the President or any Vice
President of Purchaser.
7.2 Performance of Purchaser's Obligations. Purchaser shall have
performed and complied in all material respects with all obligations
required under this Agreement to be performed by it on or prior to the
Closing Date, and Seller shall have received a certificate to such
effect dated the Closing Date and signed by the Chairman of the Board,
the President or any Vice President of Purchaser.
7.3 No Violation of Orders. There shall not be in effect on the Closing
Date any statute, rule, regulation, decree, writ, executive order,
preliminary or permanent injunction or other order issued by any
Governmental Entity which declares this Agreement invalid or
unenforceable in any respect or which prevents the consummation of the
transactions contemplated hereby; and no action or proceeding shall
have been instituted or threatened by any Governmental Entity which
seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement or any term or provision hereof or
seeks damages as a result of the transactions contemplated by this
Agreement.
7.4 Other Closing Documents. Seller shall have received such other
certificates, instruments and documents in confirmation of the
covenants, representations and warranties of
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Purchaser or in furtherance of the transactions contemplated by this
Agreement as Seller or its counsel may reasonably request.
7.5 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of
Purchaser under the provisions of this Agreement, and all other
actions and proceedings required to be taken by or on behalf of
Purchaser in furtherance of the transactions contemplated hereby,
shall be reasonably satisfactory in form and substance to counsel for
Seller.
7.6 Consents and Approvals. All consents, waivers, authorizations and
approvals of any Governmental Entity, arbitrator or Person, required
in connection with the execution, delivery and performance of this
Agreement, including, without limitation, (i) the approvals
contemplated in Section 4.6, and (ii) any and all material consents
required from third parties under any contracts, agreements, licenses,
leases and other instruments, relating to the business of the Company,
shall have been duly obtained and shall be in full force and effect on
the Closing Date and in form and substance satisfactory to Seller,
provided that Seller may terminate this Agreement pursuant to Section
9.1(c) and have no further obligation thereunder of any kind in the
event:
(a) Purchaser or Seller is unable to obtain the required approval of
Governmental Entities with proper jurisdiction for the
transaction contemplated by this Agreement; or
(b) Purchaser is unable, within sixty (60) days following regulatory
approval to acquire the Shares, to obtain the required approval
of Governmental Entities with proper jurisdiction to merge the
Company with Seller; or
(c) Purchaser is unable to obtain such regulatory approval following
the merger to simultaneously acquire the Company's license or
certificate of authority or a new license or Certificate of
Authority for Purchaser as the merger survivor in California.
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(d) Seller is unable to obtain timely approvals under Section 6.11.
8.
INDEMNIFICATION
8.1 Indemnification by Seller. Subject to the terms and conditions of
this Section 8, Seller shall indemnify, defend and hold harmless
Purchaser and its directors, officers, employees, agents and
subsidiaries from and against any and all losses, costs, liabilities,
damages and expenses, including, without limitation, reasonable legal
fees and other expenses incurred in the investigation and defense of
claims and actions (the "Damages") resulting from or arising out of
any material inaccuracy in or material breach of any representation,
warranty, covenant or agreement of Seller contained in this Agreement
or in any Schedule, Exhibit, instrument or other document delivered
pursuant to or in connection with this Agreement; provided, however,
that any claim hereunder:
(a) with respect to representations, warranties, covenants and
agreements of Seller contained in or pertaining to Article 2.11
and Article 11, must be made within the period of limitation
provided in Section 11.11, herein;
(b) with respect to any representations, warranties, covenants and
agreements of Seller contained in this Agreement not specified in
or subject to Subsections (a), above, must be made no later than
two (2) years after the Closing Date.
8.2 Indemnification by Purchaser. Subject to the terms and conditions of
this Section 8, Purchaser shall indemnify, defend and hold harmless
Seller and its directors, officers, employees, agents and subsidiaries
from and against any and all Damages resulting from or arising out of
any material inaccuracy in or material breach of any representation,
warranty, covenant or agreement of Purchaser contained in this
Agreement, or in any Schedule, Exhibit, instrument or other document
delivered pursuant to or in connection with this Agreement; provided,
however, that any claim hereunder must be made no later than two (2)
years after the Closing Date.
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8.3 Notice of Asserted Liability. Promptly after receipt by any party
(the "Indemnitee") of notice of the assertion of any claim or the
commencement of any action against it in respect of which indemnity or
reimbursement may be sought hereunder (an "Assertion"), such
Indemnitee shall promptly give written notice (the "Claims Notice") to
the party obligated to provide indemnification pursuant to this
Section 8 (the "Indemnitor") of the Assertion, but the failure to so
notify any Indemnitor shall not relieve any Indemnitor of any
liability it may have to the Indemnitee hereunder except to the extent
such Indemnitor has been prejudiced thereby. The Indemnitor shall be
entitled to participate in and, to the extent the Indemnitor elects by
written notice to the Indemnitee within 30 calendar days after receipt
by the Indemnitor of notice of such Assertion, to assume the defense
of such Assertion, at its own expense, with counsel chosen by the
Indemnitor and reasonably satisfactory to the Indemnitee.
Notwithstanding that the Indemnitor shall have elected by such written
notice to assume the defense of any Assertion, the Indemnitee shall
have the right to participate in the investigation and defense
thereof, with separate counsel chosen by such Indemnitee, but in such
event the fees and expenses of such counsel shall be paid by such
Indemnitee unless (i) the Indemnitor shall have agreed to pay such
fees and expenses, (ii) the Indemnitor shall have failed to assume the
defense of such Assertion with counsel reasonably satisfactory to such
Indemnitee, or (iii) in the reasonable judgment of such Indemnitee,
based upon advice of its counsel, a conflict of interest exists
between the Indemnitor and such Indemnitee with respect to such
Assertion (in which case, if such Indemnitee notifies the Indemnitor
that such Indemnitee elects to employ separate counsel, the Indemnitor
shall not have the right to assume the defense of such Assertion on
behalf of such Indemnitee). Notwithstanding anything to the contrary
in this Section 8.3, the Indemnitor shall not, without the written
consent of such Indemnitee, settle or compromise any action or consent
to the entering of any judgment which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff
to such Indemnitee of a duly executed written release of such
Indemnitee from all liability in respect of such Assertion, which
release shall be satisfactory in form and substance to counsel to such
Indemnitee, or settle or compromise any action in any manner that, in
the sole judgment of such Indemnitee or its counsel, may materially
and adversely affect such Indemnitee.
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8.4 Certain Limitations on Remedies. Notwithstanding anything to the
contrary set forth in this Agreement:
(a) Seller shall not have any obligation to protect, hold harmless or
indemnify Purchaser from and against any Damages resulting from
or arising out of the breach of any warranty, representation,
covenant or agreement of Seller until Purchaser has suffered
aggregate losses by reason of all such breaches in excess of
$50,000.00 (after which point Seller will be obligated to
indemnify Purchaser from and against all such aggregate Damages
in excess of $10,000.00; provided, however, Seller's maximum
liability under this Agreement shall not exceed the aggregate
amount of the Purchase Price.
(b) The parties hereto shall make appropriate adjustments for tax
benefits and insurance proceeds (reasonably certain of receipt as
verified by an independent, qualified CPA firm) in determining
the amount of Indemnitee's Damages.
9.
TERMINATION AND ABANDONMENT
9.1 Methods of Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(a) by the mutual written consent of Seller and Purchaser;
(b) by Purchaser, if all of the conditions set forth in Section 6 of
this Agreement shall not have been substantially satisfied or
waived on or prior to January 1, 1997;
(c) by Seller, if all of the conditions set forth in Section 7 or
Section 6.3(ii)(a), (b) and (c) of this Agreement shall not have
been substantially satisfied or waived on or prior to January 1,
1997;
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(d) by either Seller or Purchaser if the Closing has not occurred
(other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this
Agreement) on or before January 30, 1997, or such later date as
the parties may mutually agree upon;
(e) by Purchaser if Purchaser, in its sole discretion, is not
satisfied, on or before the Due Diligence Completion Date , that
all life insurance policies issued by the Company either have
been or are currently in compliance with Code Section 7702 and
other applicable Tax law provisions to be defined and qualify as
"life insurance contracts" under Section 7702, whether Seller has
knowledge of any instance of non-compliance or not.
provided, that no party shall have the right to terminate this
Agreement unilaterally pursuant to Section 9.1(b) or (c) if the
failure to consummate the transactions contemplated hereby shall be
primarily attributable to the party seeking such unilateral
termination or to any affiliate of such party. The party electing to
terminate this Agreement under section 9.1(b) or (c) shall give notice
of such termination to the other party. The notice shall specify with
particularity the condition or conditions not satisfied upon which the
proposed termination is based. The termination shall be effective
following twenty (20) days from the date of receipt of the notice
unless the specified unsatisfied condition or conditions have been
cured on or before the effective date for termination.
9.2 Effect of Termination. In the event of termination and abandonment of
this Agreement pursuant to Section 9.1 hereof, written notice thereof
shall forthwith be given to the other party, and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned
without further action by Seller or Purchaser. In the event of
termination of this Agreement as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability
or obligation on the part of Seller or Purchaser except as set forth
in Sections 10.3, 10.4, 10.10, 10.13 and 10.14 and except to the
extent that such
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termination results from the willful breach by a party hereto of any
of its representations, warranties, covenants or agreements set forth
herein.
10.
MISCELLANEOUS PROVISIONS
10.1 Survival. The respective representations, warranties, covenants,
agreements and indemnification obligations of each of the parties to
this Agreement shall survive the Closing Date and the consummation of
the transactions contemplated by this Agreement for the periods set
forth in Sections 8.1 and 8.2 hereof as to Seller and Purchaser,
respectively. In the event of a material breach of any of such
representations, warranties, covenants or agreements, the party to
whom such representations, warranties, covenants or agreements have
been made shall have all rights and remedies for such breach available
to it under the provisions of this Agreement or otherwise, whether at
law or in equity, regardless of any investigation made by or on behalf
of such party on or before the Closing Date; provided, however, if the
damaged party knew or had reason to know of any misrepresentation or
any breach of a representation, warranty, covenant or agreement on or
before the Closing, such party's sole remedy shall be the release of
its obligation to close this transaction.
10.2 Successors and Assigns. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective
successors, heirs, representatives and assigns, as the case may be;
provided, however, that no party shall assign or delegate this
Agreement or any of the rights or obligations created hereunder
without the prior written consent of the other party. Except as set
forth in this Section 10.2, nothing in this Agreement shall confer
upon any Person not a party to this Agreement, or the legal
representatives of such Person any rights or remedies of any nature or
kind whatsoever under or by reason of this Agreement.
10.3 Brokers and Finders. Seller represents and warrants that it has not
engaged any broker or finder in connection with the transactions
contemplated by this Agreement. Purchaser
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represents and warrants that Purchaser has not engaged any broker or
finder in connection with the transactions contemplated by this
Agreement.
10.4 Expenses. Except as otherwise expressly provided in this Agreement,
the parties hereto shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, representatives, counsel
and accountants.
10.5 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been given or
made, if delivered personally or transmitted by telex, telecopy or
telegram, on the date so delivered or transmitted, or if mailed by
registered or certified mail (postage prepaid, return receipt
requested), on the fifth business day after the date so mailed, to the
parties at the following addresses:
(a) if to Purchaser, to: Unified Life Insurance Company
7201 W. 129th Street, Suite 300
Overland Park, Kansas 66213
Attn: Frank Neidig
Fax: (913) 685-2204
with a copy to: Roan & Autrey, P.C.
710 First State Bank Building
400 West Fifteenth Street
Austin, Texas 78701-1647
Attn: Jeff W. Autrey
Fax: (512) 469-0470
(b) if to Seller, to: John Adams Life Corporation
11845 West Olympic Boulevard, Suite 905
Los Angeles, California 90064
Attn: Benjamin A. DeMotto
Fax: (310) 444-5296
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with a copy to: Alvin S. Milder
134 Greenfield Avenue
Los Angeles, CA 90049
Fax: (310) 472-5652
or to such other persons or at such other addresses as shall be
furnished by any party by like notice to the other, and such notice or
communication shall be deemed to have been given or made as of the
date so delivered or transmitted or on the fifth business day after
the date so mailed.
10.6 Entire Agreement. This Agreement, together with the Schedules
attached hereto, represents the entire agreement and understanding of
the parties hereto with reference to the transactions set forth
herein, and no representations, warranties or covenants have been made
in connection with this Agreement, either express or implied, other
than those expressly set forth herein, in the Schedules or in the
certificates, agreements and other documents delivered in connection
with the transactions contemplated hereby. This Agreement supersedes
all prior negotiations, discussions, correspondence, communications,
understandings and agreements between the parties relating to the
subject matter of this Agreement and all prior drafts of this
Agreement, all of which are merged into this Agreement. Each party
hereto agrees to adhere to a standard of reasonableness in determining
its approvals and in exercising its discretion under this Agreement.
10.7 Waivers, Amendments and Remedies. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by Seller and Purchaser
or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any
waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of
any other such right, power or privilege.
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10.8 Section Headings. The Section headings contained in this Agreement
are solely for convenience of reference and shall not affect the
meaning or interpretation of this Agreement or of any term or
provision hereof.
10.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of
which together shall be considered one and the same agreement.
10.10 Litigation Assistance. Seller agrees from and after the Closing Date
to cooperate with Purchaser and the Company, at Purchaser's expense,
unless Seller is an Indemnitor under section 8.1 hereof, with respect
to any action, suit, proceeding or investigation pending or threatened
against the Company or any of its respective successors and assigns.
10.11 Schedules. The Schedules referenced herein have been delivered to
all parties and are a part of this Agreement as if fully set forth
herein. All references herein to Sections, clauses, Schedules shall
be deemed references to such parts of this Agreement, unless the
context shall otherwise require.
10.12 Miscellaneous Undertakings. From the date of this Agreement until the
earlier of (i) the Closing or (ii) the termination of this Agreement,
the Seller agrees that it will not, directly or through any
representative, solicit, engage in any discussions relating to, or
accept any other offers for the acquisition or other disposition of
Company. Nothing in this Agreement shall be deemed to prohibit or
hinder the Board of Directors of Seller or the Company from performing
their respective fiduciary duties.
10.13 Arbitration. Any controversy or claim arising out of, or relating to,
this Agreement, or the making, performance, or interpretation of it,
will be settled by arbitration under the commercial arbitration rules
of the American Arbitration Association then existing, and judgment on
the arbitration award may be entered in any court having jurisdiction
over the
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subject matter of the controversy. The prevailing party shall be
entitled to recover reasonable attorney fees and other costs in any
action brought under this Agreement.
10.14 Confidentiality. Purchaser agrees that, unless and until the Closing
has been consummated, Purchaser and its officer, directors, and other
representatives will hold in strict confidence, all data and
information about the business of Seller and Company obtained in
connection with this transaction or Agreement. If the transactions
contemplated by this Agreement are not consummated, Purchaser will
return to Seller all data and information that Seller may reasonably
request.
10.15 Materiality. Notwithstanding anything to the contrary in this
Agreement, any inaccurate representation or any alleged violation of
any representation, warranty or covenant contained herein that does
not have a material adverse effect on the financial, operational or
legal standing of the Company, Seller or Purchaser, respectively,
shall not constitute grounds for asserting a breach of this Agreement
by a party. For the purposes of this Agreement, the term "material
adverse effect" shall mean:
(a) Any adverse financial circumstances, condition or development
which would adversely affect the financial condition of Seller,
Company or Purchaser, respectively, in an amount equal to or
greater than $50,000.00; or
(b) Any adverse operational circumstance, condition or development
which would have a significant affect on the ability of Seller,
Company or Purchaser to continue their operations in the ordinary
course of business; or
(c) Any adverse legal circumstance, condition or development which
would have a significant affect on the ability of Seller, Company
or Purchaser to continue their operations in the ordinary course
of business
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11.
TAX MATTERS
11.1 Certain Defined Terms. For purposes of this Agreement: (a)
"Pre-Acquisition Periods" means all periods (whether or not they
conclude with the end of a taxable year or taxable period) ending on
or before the Closing, (b) "Post-Acquisition Periods" means all
periods (whether or not they commence with the beginning of a taxable
year or taxable period) beginning after the Closing, (c) "Period"
means both a Pre-Acquisition Period and Post-Acquisition Period, and
(d) the "Affiliated Group" of any corporation is the "affiliated
group" of corporations (as defined in Section 1504(a) of the Code)
that includes that corporation.
11.2 Existing Agreements and Other Matters. At the Closing Date, any Tax
sharing agreement to which the Company is a party shall be terminated,
and the Company shall have no further obligations under any Tax
sharing agreement. Seller will not elect to retain or reattribute any
net operating loss carryovers or capital loss carryovers of the
Company under Treasury Regulation Section 1.1502-20(g).
11.3 Seller's Obligations. Except as provided in Section 11.7, the Seller
shall be responsible for and pay or discharge and shall indemnify and
hold harmless the Purchaser and the Company with respect to (i) any
and all Taxes imposed on the Company or for which the Company is
liable, with respect to any Pre-Acquisition Period, (ii) all Taxes
imposed on Purchaser, Company, or an affiliate of either of them
arising out of a breach of the Seller's representations, warranties or
covenants contained in Section 2.11 hereof, (iii) any costs or
expenses with respect to Taxes indemnified under this Section 11.3,
(iv) any liability for Taxes arising out of the inclusion of the
Company in any consolidated, combined or unitary return, with respect
to any Pre-Acquisition Period, including any Taxes attributable to
deferred income triggered into income by Treasury Regulation Sections
1.1502-14 and any excess loss accounts taken into income under
Treasury Regulation Section 1.1502-19 on the Seller's consolidated
income tax return and (v) any Taxes arising out of any adjustment
pursuant to Section 481(a) of the Code to the extent such adjustment
arose in
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a Pre-Acquisition Period. The Seller shall be entitled to any refund,
net of any tax effect to the Purchaser or Company, of any and all
Taxes that are the Seller's responsibility pursuant to this Section
and, unless such refunds are received directly by Seller from the
relevant taxing authority, Purchaser agrees to deliver to Seller an
amount of cash equal to such refunds plus the interest actually
received thereon within thirty (30) business days after receipt of
such refunds by Purchaser or Company.
11.4 Purchaser's Obligations. Except as provided in Section 11.7, from and
after the Closing, Purchaser and the Company shall be solely
responsible for the payment or discharge of, and shall indemnify and
hold Seller harmless from, all Taxes imposed on the Company (i) with
respect to all Post-Acquisition Periods and (ii) any costs or expenses
with respect to such Taxes. The Purchaser or the Company shall be
entitled to any refund of any and all Taxes that are Purchaser's and
the Company's responsibility pursuant to the immediately preceding
sentence.
11.5 Transaction Taxes All sales, use, transfer, real property gains,
stamp, conveyance, and value added Taxes, duties, excises or
government charges (except filing fees) with respect to the
transactions contemplated by this Agreement shall be shared by Seller
and Purchaser. Seller and Purchaser shall cooperate with each other
in order to minimize the payments of Taxes contemplated by this
Section 11.5.
11.6 Apportionment. For the sole purpose of appropriately apportioning any
Taxes relating to a period that includes (but that would not end on)
the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing authority to treat for
all purposes the Closing Date as the last day of a taxable period of
the Company. In the case where applicable law does not permit the
Company to treat the Closing Date as the last day of a taxable period,
then for purposes of this Agreement, the portion of such Tax that is
attributable to the Company for the part of such taxable period that
ends on the Closing Date shall be (a) in the case of a Tax that is not
based on net income, the total amount of such Tax for the full taxable
period that includes the Closing Date multiplied
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by a fraction, the numerator of which is the number of days from the
beginning of such taxable period to and including the Closing Date and
the denominator of which is the total number of days in such full
taxable period, and (b) in the case of a Tax that is based on net
income, the Tax that would be due with respect to such partial period,
if such partial period were a full taxable period, apportioning
income, gain, expenses, loss, deductions and credits equitably based
on an interim closing of the books. The benefits of lower tax
brackets and other similar benefits shall be apportioned in making the
calculation of such allocated portions on the basis of the number of
days in the respective Purchaser's and the Seller's holding periods
for the taxable period beginning before and ending after the Closing
Date. Within thirty days after the actual liability for such Taxes
has been determined, the Purchaser and Seller shall jointly prepare a
schedule detailing the calculation of the actual liability, including
the allocations required under this Section 11.6. Promptly
thereafter, the Purchaser or the Seller, as the case may be, shall
make a payment to the other party reflecting the allocations.
11.7 Contests. For purposes of this Agreement, a "Contest" is any audit,
court proceeding or other dispute with respect to any Tax matter that
affects the Company. Unless the Purchaser has previously received
written notice from the Seller of the existence of such Contest, the
Purchaser shall give written notice to the Seller of the existence of
any Contest relating to a Tax matter that is the Seller's
responsibility under Section 11.3 within ten (10) days from the
receipt by the Purchaser of any written notice of such Contest, but no
failure to give such notice shall relieve the Seller of any liability
hereunder except to the extent such failure increases any interest or
penalties that otherwise would be payable by Seller hereunder. Unless
the Seller has previously received written notice from the Purchaser
of the existence of such Contest, the Seller shall give written notice
to the Purchaser of the existence of any Contest relating to a Tax
matter for which the Purchaser has responsibility within ten (10) days
from the receipt by the Seller of any written notice of such Contest
but no failure to give such notice shall relieve the Purchaser of any
liability hereunder except to the extent such failure increases any
interest or penalties that otherwise would be payable by Purchaser
hereunder. The Purchaser, on the one hand, and
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the Seller, on the other, agree, in each case at no cost to the other
party, to cooperate with the other and the other's representatives in
a prompt and timely manner in connection with any Contest. Such
cooperation shall include, but not be limited to, making available to
the other party, during normal business hours, all books, records,
returns, documents, files, other information (including without
limitation working papers and schedules), officers or employees
(without substantial interruption of employment) or other relevant
information necessary or useful in connection with any Contest
requiring any such books, records, files, other items, persons and
information. The Seller shall, at its election, have the right to
represent the Company's interests in any Contest relating to a Tax
matter relating to or arising in a Pre-Acquisition Period, to employ
counsel of its choice at its expense, which counsel shall be
reasonably acceptable to the Purchaser, and to control the conduct of
such Contest, including settlement or other disposition thereof;
provided, however, that the Purchaser shall have the right to consult
with the Seller regarding any such Contest that may affect the Company
for any Post-Acquisition Periods at the Purchaser's own expense,
provided further that any settlement or other disposition of any such
Contest may only be made with the consent of Purchaser, which consent
shall not be unreasonably withheld. With regard to Contests relating
solely to Tax matters that are the Seller's responsibility under
Section 11.3 and which could have no effect on any Taxes that are the
Purchaser's responsibility under Section 11.4, the Seller shall have
the exclusive right to decide whether any consent or waivers to extend
applicable statutes of limitations shall be granted. The Purchaser
shall have the sole and exclusive right to control the conduct of any
Contest, including settlement or other disposition thereof, with
respect to any Tax matter relating to or arising in a Post-Acquisition
Period; provided, however, that the Seller shall have the right to
consult with the Purchaser regarding any such Contest that may affect
the Company for any Pre-Acquisition Periods at the Seller's own
expense, provided further that any settlement or other disposition of
any such Contest may only be made with the consent of Seller, which
consent shall not be unreasonably withheld.
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11.8 Access to Records, Cooperation. Seller and Purchaser hereby agree to
afford the other party access to its books and records to the extent
necessary to achieve the objectives of this Section 11. The Seller,
the Purchaser, and the Company will cooperate fully with each other in
connection with (a) the allocation of any item of income, deduction,
gain, loss or credit for the taxable year in which the Closing occurs
and (b) the preparation of any Tax return or report for the taxable
period in which the Closing occurs.
11.9 Filing of Returns The Seller shall prepare or cause to be prepared,
consistent with past practices, all Tax returns of the Company (or any
Affiliated Group of which it is or was a member) for all tax periods
ending on or prior to the Closing Date. Seller shall deliver to the
Purchaser for review a draft copy of such Tax returns thirty (30) days
before the due date, including extensions of such returns, to the
extent such returns have not been filed as of the execution date of
this Agreement. The Purchaser or Company shall prepare and bear the
expense of preparation of all other Tax returns of the Company.
11.10 Survival. All obligations under this Section 11 shall survive the
Closing hereunder and continue until the end of three (3) years
following the Closing Date.
11.11 Disputes. Any dispute as to any matter covered under this Section 11
shall be resolved by a nationally recognized accounting firm, to be
chosen jointly by the Purchaser and the Seller. The fees and expenses
of such accounting firm shall be borne equally by the parties.
11.12 Operational Rules. For all purposes of determining the sharing and
allocation of Taxes and other matters under the provisions of this
Section 11, the following rules and principles shall in all cases
apply:
(a) The determination of a Tax with respect to a Period (or portion
of a Period) shall, except as otherwise provided herein, be
determined under applicable Tax law, including applicable Tax law
relating to carryovers, without regard to timing or other
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adjustments, such as the debiting or crediting of reserves for
Taxes, as may result under financial accounting principles.
(b) Any payment made under Sections 11.3, 11.4, 11.6, or 11.7 shall
be net of any Tax benefits to (i) the Purchaser or the Company,
or (ii) the Seller, as the case may be. For example, but
without limitation, if, upon examination by any taxing authority
of any Tax return or Tax payment of the Company, an item of
deduction is shifted from a Pre-Acquisition Period to a
Post-Acquisition Period, other than by way of carrybacks or
carryovers, and such shifting results in a Tax benefit to the
Purchaser or the Company in a Post-Acquisition Period and a Tax
liability (or detriment) to the Seller or the Company in a
Pre-Acquisition Period, then the Purchaser shall pay the Seller
the lesser of the amount of such benefit or the amount of such
liability (or detriment). It is intended by this Section
11.12(b) that neither party (Seller, on the one hand, or the
Company or Purchaser, on the other) shall achieve a double
benefit, or incur a double liability (or detriment), arising out
of the same item of adjustment. Any payment required hereunder
shall be made when such Tax benefit is realized (e.g., as a
refund or as a reduction of Tax shown on a return) and shall
include interest actually received from or allowed by such taxing
authority.
(c) If and to the extent that any party (Seller and the Company on
the one hand, or Purchaser, on the other hand) makes or has made
a payment to the other party, a taxing authority, or other person
with respect to an item of Tax (including estimated Tax), the
paying party shall have a right of payment against the other
party under this Section 11 with respect to such item of Tax if
and to the extent necessary to assure that double payments and
omissions shall be avoided and the allocation of liability for
Taxes among the parties under this Section 11 shall be
implemented. The parties shall settle the balances owing between
them for Taxes as promptly as practicable under the circumstances
unless otherwise specifically provided.
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11.13 No Section 338(h)(10) Election. Purchaser does not intend to make an
express election pursuant to Code Section 338(h)(10) with respect to
the purchase and sale of the stock of the Company hereunder. Seller
shall not take any action where such act is inconsistent with such
intent.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be duly
executed all as of the date first written above.
PURCHASER:
UNIFIED LIFE INSURANCE COMPANY
By: WILLIAM M. BUCHANAN
----------------------------------
Its: Chairman of the Board
---------------------------------
SELLER:
JOHN ADAMS LIFE CORPORATION
By: BENJAMIN A. DeMOTTO
----------------------------------
Its: CEO and President
---------------------------------
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RIDER ATTACHED TO AND MADE A PART OF STOCK PURCHASE AGREEMENT (THE "AGREEMENT")
BY AND BETWEEN UNIFIED LIFE INSURANCE COMPANY ("PURCHASER") AND JOHN ADAMS LIFE
CORPORATION ("SELLER") FOR THE CAPITAL STOCK OF JOHN ADAMS LIFE INSURANCE
COMPANY OF AMERICA ("COMPANY").
________________________________________________________________
The Agreement is hereby amended as follows:
A. The date of the Agreement shall be October 24, 1996 (the "date of
execution of this Agreement").
B. Section 6.3 is amended by changing "January 1,1997" to "ninety (90)
days from the date of execution of this Agreement" in subsections (a), (b) and
(c) of Section 6.3.
C. Section 6.10 is amended by changing "November 30, 1996" to "seventy
(70) days from the date of execution of this Agreement".
D. Section 9.1 is amended (i) by changing "January 1, 1997" to "ninety
(90) days from the date of execution of this Agreement" in subsections (b) and
(c); and (ii) by changing "January 30, 1997" to "120 days from the date of
execution of this Agreement" in subsection(d).
All other terms and conditions of the Agreement shall remain in full force and
effect.
Purchaser:
Unified Life Insurance Company
By: WILLIAM M. BUCHANAN
------------------------------------
Seller:
John Adams Life Corporation
By: BENJAMIN A. DeMOTTO
------------------------------------
59
SCHEDULES
1.3(a) Purchase Price - Formula
1.3(c) Retained Assets
2.1 Corporate Organization
2.2 Capitalization of Company
2.9 Absence of Certain Changes or Events
2.10 Compliance with Laws
2.11 Tax Matters
2.12 Absence of Undisclosed Liabilities
2.13 Interests in Real Property
2.14 Personal Property Retained by Company
2.15 Accounts Receivable
2.16 Intangible Assets
2.17 Licenses, Permits and Governmental Approvals
2.18 Title of Assets
2.19 Litigation
2.20 Contracts
2.21 Employee; Employee Plans
2.22 Insurance
2.23 Transactions with Related Parties
60
SCHEDULE 1.3(A)
PURCHASE PRICE FORMULA
The purchase price shall be the sum of the amounts set forth below, based on
the last preceding month end statutory statement:
1. Statutory capital and surplus; plus
2. The Asset Valuation Reserve; plus
3. The Interest Maintenance Reserve; plus
4. $405,000.00.