EXHIBIT 2.1
_______________________________________________________
STOCK PURCHASE AGREEMENT
by and between
ANTHEM INSURANCE COMPANIES, INC.,
ANTHEM CASUALTY INSURANCE GROUP, INC.
AND
VESTA INSURANCE GROUP, INC.
DATED AS OF APRIL 23, 1997
_______________________________________________________
SALE OF ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
ANTHEM CASUALTY INSURANCE GROUP, INC.
AND
THE SHELBY INSURANCE COMPANY
STOCK PURCHASE AGREEMENT
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITION OF CERTAIN TERMS....................................... 2
Section 1.01. Terms......................................................... 2
Section 1.02. Additional Terms.............................................. 5
ARTICLE 2. SALE AND PURCHASE OF THE SHARES................................... 6
Section 2.01. Sale and Purchase of the Shares............................... 6
Section 2.02. Purchase Price................................................ 6
Section 2.03. Closing....................................................... 6
Section 2.04. Deliveries by Anthem and Seller............................... 6
(1) The Shares.................................................. 6
(2) Officer's Certificate....................................... 7
(3) Resolutions of Anthem and Seller............................ 7
(4) Opinion of Counsel.......................................... 7
(5) Required Approvals; Consents; Elimination of Debt........... 7
(6) Resignations................................................ 8
Section 2.05. Deliveries by Purchaser....................................... 8
(1) Officer's Certificate....................................... 8
(2) Opinion of Counsel.......................................... 8
(3) Certified Resolutions....................................... 8
(4) Purchase Price.............................................. 8
Section 2.06. Post-Closing Matters.......................................... 8
(1) Closing Balance Sheet....................................... 8
(2) Dispute Resolution.......................................... 9
(3) Purchase Price Adjustment................................... 9
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ANTHEM AND SELLER............... 10
Section 3.01. Organization, Standing and Corporate Authority of Anthem...... 10
Section 3.02. Anthem's and Seller's Transaction Authority; Corporate
Proceedings; Enforceability................................................. 10
Section 3.03. Organization, Standing, Permits, Certificates of Authority,
etc., of Seller and the Subsidiaries........................................ 11
Section 3.04. Title to the Shares........................................... 13
Section 3.05. The Subsidiaries.............................................. 14
Section 3.06. Consents and Approvals; No Violations......................... 14
Section 3.07. Financial Statements and Insurer Convention Statements........ 15
Section 3.08. No Default.................................................... 16
Section 3.09. Environmental Matters......................................... 16
Section 3.10. Legal Proceedings............................................. 17
Section 3.11. Property and Title; Liens..................................... 18
Section 3.12. Brokers....................................................... 18
i
Section 3.13. Compliance With Laws.......................................... 18
Section 3.14. Insurance Business............................................ 19
Section 3.15. Regulatory Filings............................................ 20
Section 3.16. Contracts..................................................... 20
Section 3.17. No Material Adverse Change.................................... 21
Section 3.18. Conduct of Business........................................... 21
Section 3.19. Security Deposits............................................. 21
Section 3.20. Real Estate................................................... 21
Section 3.21. Intangible Property and Computer Software..................... 23
Section 3.22. Liabilities................................................... 23
Section 3.23. Employee Benefit Plans........................................ 23
Section 3.24. Employee Relations............................................ 26
Section 3.25. Reinsurance and Coinsurance................................... 26
Section 3.26. Insurance..................................................... 27
Section 3.27. Officers, Directors, and Key Employees........................ 27
Section 3.28. Accounting Practices.......................................... 27
Section 3.29. Powers of Attorneys; Guarantees............................... 28
Section 3.30. Loss Reserves................................................. 28
Section 3.31. No Material Misrepresentations................................ 28
Section 3.32. Personal Property Leases...................................... 29
Section 3.33. Bank Accounts; Custodial Accounts............................. 29
Section 3.34. Improper Payments............................................. 29
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................ 30
Section 4.01. Organization, Standing and Corporate Authority of Purchaser... 30
Section 4.02. Purchaser's Transaction Authority; Corporate Proceedings;
Enforceability.............................................................. 30
Section 4.03. No Violation.................................................. 30
Section 4.04. No Default.................................................... 31
Section 4.05. Legal Proceedings............................................. 31
Section 4.06. Investment Purpose............................................ 31
Section 4.07. Brokers....................................................... 32
Section 4.08. Seller Financial Statements and Insurer Convention Statements. 32
Section 4.09. Disclosure.................................................... 32
Section 4.10. Financing..................................................... 32
Section 4.11. Articles, By-Laws, etc........................................ 32
ARTICLE 5. COVENANTS OF SELLER................................................ 33
Section 5.01. Conduct of Business........................................... 33
Section 5.02. Litigation.................................................... 36
Section 5.03. Additional Financial Information.............................. 36
Section 5.04. Disposition of Affiliate Relationships........................ 36
Section 5.05. Notifications by Seller....................................... 36
Section 5.06. Required Approvals and Consents............................... 37
Section 5.07. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings..................................... 37
Section 5.08. Non-Solicitation.............................................. 37
Section 5.09. Acquisition Proposals......................................... 38
Section 5.10. Instruments................................................... 38
Section 5.11. Transfer of Certain Assets by Seller.......................... 38
Section 5.12. Use of Names.................................................. 38
ii
Section 5.13. [Deleted]..................................................... 39
Section 5.14. Pre-Closing Maintenance of Insurance and Reinsurance.......... 39
Section 5.15. Continuation of Certain Insurance............................. 39
Section 5.15. Certain Investments........................................... 39
Section 5.17. Preservation of Permits and Services.......................... 39
Section 5.18. Confidential Nature of Information Obtained by Anthem and the
Seller...................................................................... 40
ARTICLE 6. COVENANTS OF PURCHASER............................................ 40
Section 6.01. Required Approvals............................................ 40
Section 6.02. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings..................................... 40
Section 6.03. Use of Name and Logo.......................................... 40
Section 6.04. Indemnification............................................... 41
Section 6.05. Continued Access by Seller.................................... 41
Section 6.06. Conduct of Business........................................... 42
Section 6.07. Notifications by Purchaser.................................... 42
Section 6.08. Non-Solicitation.............................................. 42
Section 6.09. Instruments................................................... 42
ARTICLE 7. JOINT COVENANTS OF SELLER AND PURCHASER........................... 43
Section 7.01. Corporate Examinations and Investigations..................... 43
Section 7.02. Expenses...................................................... 44
Section 7.03. Further Assurances............................................ 44
Section 7.04. Public Announcements.......................................... 44
Section 7.05. Certain Benefit Programs...................................... 44
Section 7.06 Managed Care Workers' Compensation Business................... 45
Section 7.07. Certain Insurance............................................. 45
Section 7.08. Further Assurances............................................ 46
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING.................................... 46
Section 8.01. Conditions to Obligations of All Parties...................... 46
(1) No Injunction, etc.......................................... 46
(2) HSR Act Satisfied........................................... 46
(3) Required Approvals.......................................... 46
(4) Managed Care Workers' Compensation Business................. 47
Section 8.02. Additional Conditions to Obligations of Purchaser............. 47
(1) Performance................................................. 47
(2) Seller's Warranties True.................................... 47
(3) Deliveries Tendered by Anthem and Seller.................... 47
(4) Transfer Taxes.............................................. 47
Section 8.03. Additional Conditions to the Obligations of Anthem or Seller.. 47
(1) Performance................................................. 47
(2) Purchaser's Warranties True................................. 48
(3) Deliveries Tendered by Purchaser............................ 48
ARTICLE 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................ 48
Section 9.01. Survival...................................................... 48
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ARTICLE 10. INDEMNIFICATION.................................................. 48
Section 10.01. Indemnification by Anthem.................................... 48
Section 10.02. Indemnification by Purchaser................................. 48
Section 10.03. Third Party Claims........................................... 49
Section 10.04. Limitations.................................................. 50
Section 10.05. Closing Loss Reserve Reconciliation.......................... 50
ARTICLE 11. TAX MATTERS...................................................... 52
Section 11.01. Representations and Warranties............................... 52
Section 11.02. Anthem Indemnity............................................. 55
Section 11.03. Purchaser Indemnity.......................................... 55
Section 11.04. Effect of Carryovers and Carrybacks.......................... 55
Section 11.05. Payment for Tax Benefits Realized in Connection with
Indemnity by Anthem or Seller............................................... 56
Section 11.06. Allocation Between Partial Periods........................... 56
Section 11.07. Filing of Returns............................................ 56
Section 11.08. Post-Closing Audits and Other Proceedings.................... 57
Section 11.09. Cooperation.................................................. 57
Section 11.10. Termination of Existing Tax Sharing Agreements............... 57
Section 11.11. Section 338(h)(10) Election.................................. 58
ARTICLE 12. TERMINATION OF AGREEMENT......................................... 60
Section 12.01. Termination.................................................. 60
Section 12.02. Procedure for Termination.................................... 60
Section 12.03. Effect of Termination........................................ 60
ARTICLE 13. MISCELLANEOUS.................................................... 61
Section 13.01. Notices...................................................... 61
Section 13.02. Pronouns..................................................... 62
Section 13.03. Assignment................................................... 62
Section 13.04. No Third Party Beneficiaries................................. 62
Section 13.05. Counterparts................................................. 62
Section 13.06. Entire Agreement; Amendment.................................. 63
Section 13.07. Captions..................................................... 63
Section 13.08. Severability................................................. 63
Section 13.09. Schedules.................................................... 63
Section 13.10. Governing Law; Venue......................................... 63
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SCHEDULE INDEX
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SCHEDULE
No. SUBJECT
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2.04(4) Opinion of Counsel to SELLER
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2.05(2) Opinion of Counsel to PURCHASER
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3 SELLER'S Disclosure Letter
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3.03 The COMPANY and the SUBSIDIARIES
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3.06(1) SELLER'S REQUIRED APPROVALS
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3.10 Certain Litigation
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3.11 Certain Assets and Liabilities of Seller
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3.14(3) Agents; Brokers; Compensation; Side Agreements
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3.16 Contracts (Excluding Real Estate)
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3.19 Deposits of Securities
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3.20 Real Estate, Leases and Contracts; Permitted Exceptions
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3.23 Employee Benefit Plans
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3.23(7) Certain Qualified Orders
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3.24 Employee Relations Exceptions
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3.25 Reinsurance and Coinsurance Agreements
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3.26 Insurance Policies Held
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3.27 Officers, Directors and Key Employees; Compensation
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3.28 Accounting Changes
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3.29 Powers of Attorney; Guarantees
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3.32 Leases of Personal Property
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v
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3.33 Bank Accounts; Custodial Accounts
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5.11 Certain Assets and Liabilities to be Transferred
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11.01(2) RETURNS
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11.01(4) TAX Audits
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11.01(6) Statutes of Limitations
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11.01(7) Powers of Attorney Relating to TAX
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11.01(8) Tax Sharing Agreements
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11.01(9) Transaction Not Taxable
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11.01(11)No Partnership
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11.01(16)Elections
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vi
STOCK PURCHASE AGREEMENT
------------------------
This is an agreement ("AGREEMENT") made to be effective as of April 23,
1997 by and among Anthem Insurance Companies, Inc., an Indiana mutual insurance
company ("ANTHEM"), Anthem Casualty Insurance Group, Inc., a Delaware
corporation (the "SELLER"), and Vesta Insurance Group, Inc., a Delaware
corporation ("PURCHASER").
Recitals:
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(A) ANTHEM owns all of the outstanding common stock, without par
value, of SELLER.
(B) SELLER owns all of the issued and outstanding shares (i) of Anthem
Casualty Insurance Company, an Indiana corporation ("ACIC"), and (ii) of The
Shelby Insurance Company, an Ohio corporation ("SHELBY") (all of the issued and
outstanding shares of ACIC and of SHELBY, collectively, the "SHARES").
(C) ACIC owns all of the issued and outstanding shares of Mound Agency
Inc., an Illinois corporation ("MOUND AGENCY"). MOUND AGENCY owns all of the
issued and outstanding Class B Shares of Mound Agency of Ohio, Inc., an Ohio
corporation ("MOUND OHIO").
(D) SHELBY owns all of the issued and outstanding shares of
Affirmative Insurance Company ("AFFIRMATIVE"), of Insura Property and Casualty
Insurance Company ("INSURA"), and of Shelby Financial Corporation ("SHELBY
FINANCIAL"), each an Ohio corporation (ACIC, SHELBY, AFFIRMATIVE, and INSURA,
collectively, the "INSURERS"; and the INSURERS, MOUND AGENCY , MOUND OHIO, and
SHELBY FINANCIAL, collectively, the "SUBSIDIARIES").
(E) SELLER desires to sell, and PURCHASER desires to purchase, the
SHARES.
NOW, THEREFORE, in consideration of their promises and of their mutual
agreements, covenants, representations and warranties set forth in this
AGREEMENT, and for other good and valuable consideration received to their full
satisfaction, the parties hereto make the following agreement, intending to be
bound legally thereby:
ARTICLE 1
Definition of Certain Terms
---------------------------
Section 1.01. When used in this AGREEMENT, the following terms shall
------------
have the meanings specified in this Section 1.01; and the plural of any such
term means more than one thereof:
"AFFILIATE" means a PERSON controlling, controlled by or under common
control with another PERSON specified herein.
"ADVERSE LOSS RESERVE DEVELOPMENT" means the dollar amount by which
the ADJUSTED CLOSING LOSS RESERVES exceed the CLOSING LOSS RESERVES.
"BUSINESS DAY" means a day other than a Saturday or a Sunday on which
banks in Indianapolis, Indiana are not authorized or required by law or
executive order to close.
"CLAIM" means a claim, loss, damage, liability and legal or other
expense (including, without limitation, reasonable attorneys' fees, witnesses'
fees, investigation fees, court reporters' fees and other out-of-pocket
expenses), arising as a result of, among other things, any action, suit, demand,
assessment, judgment, cost, fine, injunction or penalty, to the extent not
compensated or compensable by insurance proceeds of Seller.
"CLAIM NOTICE" means a notice specifying, in reasonable detail, (i)
the nature of a CLAIM, (ii) each applicable provision of this AGREEMENT or other
instrument under which such CLAIM arises, and (iii) if then known, the amount of
such CLAIM or the method of computation thereof.
"CLOSING" means the closing of the sale and purchase of the SHARES
contemplated by this AGREEMENT.
"CONVENTION STATEMENT" means an annual convention statement or
equivalent of each of the INSURERS filed with the insurance department or other
insurance regulatory authority of the state of its incorporation.
"ENVIRONMENTAL LAW" means, without limitation, any of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S)(S)9601 et seq., the Emergency Planning and Community Right-to-Know Act of
-- ---
1986, 42 U.S.C. (S)(S) 42 U.S.C. (S)(S) 11001 et seq., the Resource Conservation
-- ---
and Recovery Act, 42 U.S.C. (S)(S) 6901 et seq., the Toxic Substances Control
-- ---
Act, 15 U.S.C. (S)(S) 2601 et seq., the Federal Insecticide, Fungicide, and
-- ---
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Rodenticide Act, 7 U.S.C. (S)(S) 136 et seq., the Clean Air Act, 42 U.S.C.
-- ---
(S)(S) 7401 et seq., the Clean Water Act (Federal Water Pollution Control Act),
-- ---
33 U.S.C. (S)(S) 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. (S)(S)
-- ---
300f et seq., the Occupational Safety and Health Act, 29 U.S.C. (S)(S) 641 et
-- --- --
seq., the Hazardous Materials Transportation Act, 49 U.S.C. (S)(S) 1801 et seq.,
--- -- ---
the Endangered Species Act, 16 U.S.C. (S)(S) 1531 et seq. and the Oil Pollution
-- ---
Act of 1990, 33 U.S.C. (S)(S) 2701 et seq., as any of the above statutes have
-- ---
been amended as of the CLOSING DATE, all rules and regulations promulgated
pursuant to any of the above statutes, and all applicable judicial and
administrative decisions, orders, and decrees interpreting such statutes.
"HAZARDOUS SUBSTANCES" means any pollutants, contaminants, toxic or
hazardous substances, materials, wastes, constituents, compounds, chemicals,
natural or man-made elements or forces (including, without limitation, petroleum
or any by-products or fractions thereof, any form of natural gas, lead, asbestos
and asbestos-containing materials ("ACM"), building construction materials and
debris, polychlorinated biphenyls ("PCBs") and PCB-containing equipment, radon
and other radioactive elements, infectious carcinogenic, multagenic, or
etiologic agents, pesticides, defoliants, explosives, flammables, corrosives and
urea formaldehyde foam insulation) that are regulated by any Environmental Laws.
"INDEMNITEE" means a party hereto claiming indemnification from
another party hereto pursuant to the terms hereof.
"INDEMNITOR" means a party hereto from whom indemnification is claimed
by an INDEMNITEE.
"KNOWLEDGE" means (i) in the case of SELLER, the actual knowledge of
any of the department directors, officers, directors, or managers of any of
ANTHEM, SELLER and the SUBSIDIARIES or any other employees of any of them who
have managerial or supervisory responsibilities and (ii) in the case of
PURCHASER, the actual knowledge of any of officers, directors, managers,
supervisors, or other employees of PURCHASER who have managerial or supervisory
responsibilities.
"LIEN" means a lien, pledge, mortgage, security interest,
hypothecation, charge, option, call, commitment, voting trust, right of refusal,
easement, covenant, restriction, transfer restriction under any shareholder or
similar agreement, or other encumbrance or title exception, other than a
PERMITTED EXCEPTION.
-3-
"LOSS RESERVES" means all reserves for all losses and loss adjustment
expenses, including, without limitation, case reserves, reserves for loss
adjustment expenses, both allocated and unallocated, reserves for incurred but
not reported losses and loss adjustment expenses, and otherwise determined in
accordance with those generally accepted actuarial standards and principles
applied in determining the LOSS RESERVES reflected in the SELLER FINANCIAL
STATEMENTS.
"MATERIAL ADVERSE EFFECT" means an effect that (i) is materially
adverse to the business (including any PERMIT), financial condition or results
of operations of a specified person or specified group of persons, (ii) is
materially adverse to the transactions contemplated hereby, and/or (iii)
materially impairs the ability of a party hereto to consummate the transactions
to be undertaken by it as contemplated thereby.
"PERMIT" means a license, permit, order, approval, registration,
authorization, qualification and/or filing with, from or under a federal, state,
local or foreign law and/or governmental or regulatory authority, or an industry
or other non-governmental self-regulatory organization created by statute.
"PERMITTED EXCEPTION" means those exceptions identified in Schedule
3.20.
"PERSON" means an individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory authority or other
entity.
"QUARTERLY CONVENTION STATEMENT" means the quarterly convention
statement or equivalent of each of the INSURERS filed with the insurance
department or other insurance regulatory authority of the state of its
incorporation.
"REQUIRED APPROVAL" means an approval, consent, authorization or
clearance of or filing with a governmental or regulatory authority or official
required in order to permit, authorize or entitle a specified party hereto to
execute and deliver this AGREEMENT, to perform its obligations hereunder, or to
consummate the transactions to be undertaken by it as contemplated hereby.
"RETURN" means each return, declaration report, statement, and other
document required to be filed in respect of any TAX.
-4-
"STATUTORY ACCOUNTING PRINCIPLES" means the statutory accounting
practices prescribed for or permitted to each of the INSURERS by the insurance
department or other insurance regulatory authority of the state of its
incorporation.
"TAX" means a tax, however denominated (together with any interest,
penalties or additions that may become payable in respect thereof) imposed on
any of ANTHEM, SELLER, and the SUBSIDIARIES by any federal, state, local or
foreign government, or any agency or political subdivision of any such
government, and includes, without limiting the generality of the foregoing, all
income taxes (including, but not limited to, United States federal income taxes
and state income and franchise taxes), payroll, employee, and other withholding
taxes, unemployment contributions and taxes, social security, Medicare,
Medicaid, sales and use taxes, premium taxes, excise taxes, franchise taxes, net
worth taxes, occupation taxes, real and personal property taxes, stamp taxes,
transfer taxes, workers' compensation premiums and taxes, and other obligations
of the same or similar nature.
Section 1.02. When used in this AGREEMENT, the following terms shall
------------
have the meanings specified in that part hereof identified in the following
table:
TERM DEFINED IN
---- ----------
ACQUISITION PROPOSAL.................. Section 5.09
ADJUSTED CLOSING LOSS RESERVES........ Section 10.05(1)
AFFIRMATIVE........................... Recital (B)
AGREEMENT............................. Preamble
ACIC.................................. Recital (B)
ANTHEM................................ Preamble
Anthem Marks.......................... Section 6.03(2)
Audit Date............................ Section 2.06(1)
Auditors.............................. Section 2.06(1)
Closing Balance Sheet................. Section 2.06(1)
Closing Date.......................... Section 2.03
CLOSING LOSS RESERVES................. Section 3.30
Code.................................. Section 3.23
Confidentiality Agreement............. Section 7.01(2)
ERISA................................. Section 3.23
Federal Tax Sharing Agreement......... Section 11.01(8)
HSR Act............................... Section 5.07
INDEPENDENT ARBITER................... Section 2.06(2)
Indiana Tax Sharing Agreement......... Section 11.01(8)
Insura................................ Recital (B)
INSURER CONVENTION STATEMENTS......... Section 3.07(2)
Insurer Qualified Jurisdictions....... Section 3.03(2)
Insurers.............................. Recital (B)
MOUND AGENCY.......................... Recital (B)
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MOUND OHIO............................ Recital (C)
Net Worth............................. Section 2.06(3)
Notes................................. Section 5.01(2)(viii)
Other Qualified Jurisdictions......... Section 3.03(3)
Owned Real Property................... Section 3.20
Plans................................. Section 3.23
Post-Closing Partial Period........... Section 11.03
Pre-Closing Partial Period............ Section 11.02
Purchase Price........................ Section 2.02
PURCHASER............................. Preamble
PURCHASER'S REPRESENTATIVES........... Section 7.01(2)
SELLER................................ Preamble
SELLER FINANCIAL STATEMENTS........... Section 3.07(1)
SELLER QUALIFIED JURISDICTIONS........ Section 3.03(1)
Shares................................ Recital (B)
SHELBY................................ Recital (B)
SHELBY FINANCIAL...................... Recital (B)
SUBSIDIARIES.......................... Recital (B)
ARTICLE 2
Sale and Purchase of the SHARES
-------------------------------
Section 2.01. Sale and Purchase of the SHARES. Upon the terms and
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subject to the conditions set forth herein, SELLER shall sell, transfer, assign
and deliver to PURCHASER, and PURCHASER shall purchase from SELLER, all of the
right, title, and interest of SELLER in and to all of the SHARES.
Section 2.02. PURCHASE PRICE. As the purchase price for the
-----------------------------
SHARES, PURCHASER shall pay to SELLER the sum of $238,750,000 (the "PURCHASE
PRICE") as provided elsewhere herein.
Section 2.03. CLOSING. Subject to the satisfaction or waiver of
----------------------
the terms and conditions hereof, the CLOSING shall be held at the offices of
SELLER at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ on such date (the "CLOSING
DATE") and commencing at such time as SELLER and PURCHASER shall mutually
designate.
Section 2.04. Deliveries by ANTHEM and SELLER. At the CLOSING,
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ANTHEM and SELLER shall cause all of the following to be delivered to PURCHASER,
all of which shall be in form and content reasonably satisfactory to PURCHASER
and PURCHASER'S counsel:
(1) The SHARES. One or more instruments of assignment, duly
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executed on behalf of SELLER, transferring, assigning and selling to PURCHASER,
free and clear of all claims, liens, security interests, pledges,
hypothecations, restrictions
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or other encumbrances, all of the SHARES, together with each stock certificate
evidencing the same.
(2) Officer's Certificate. The certificate of the President or a
---------------------
Vice-President of each of ANTHEM and SELLER, dated no earlier than the CLOSING
DATE and stating that, to the best of his knowledge and belief, (i) SELLER has
fully performed and satisfied all covenants and conditions required hereunder to
be performed and satisfied by it at or prior to the CLOSING, and (ii) each of
the warranties and representations set forth in Article 3 are true and accurate
as if made as of the date of such certificate.
(3) Resolutions of ANTHEM and SELLER.
--------------------------------
(A) Copies of one or more resolutions duly adopted by the Board of
Directors of ANTHEM, duly approving and adopting this AGREEMENT and authorizing
the performance by ANTHEM of its obligations hereunder, accompanied by the
certificate of the President or a Vice-President of ANTHEM, dated no earlier
than the CLOSING DATE and stating that each such resolution has been duly
adopted by the Board of Directors of ANTHEM and is in full force and effect,
without amendment, as of the date of such certificate.
(B) Copies of one or more resolutions duly adopted by the Board of
Directors of SELLER, duly approving and adopting this AGREEMENT and authorizing
the performance by SELLER of its obligations hereunder, accompanied by the
certificate of the President or a Vice-President of SELLER, dated no earlier
than the CLOSING DATE and stating that each such resolution has been duly
adopted by the Board of Directors of SELLER and is in full force and effect,
without amendment, as of the date of such certificate.
(4) Opinion of Counsel. An opinion of one or more counsel to each
------------------
of ANTHEM and SELLER, substantially in the form of Schedule 2.04(4); each of
ANTHEM and SELLER may provide the opinion of more than one counsel, each of
which may cover less than all, if together such opinions cover all, of the
opinions set forth in Schedule 2.04(4).
(5) REQUIRED APPROVALS; Consents; Elimination of Debt. A
-------------------------------------------------
certificate duly executed by the President or a Vice-President of ANTHEM, dated
no earlier than the CLOSING DATE and certifying that, to the best of his
knowledge and belief:
(i) each REQUIRED APPROVAL identified in Schedule 3.06(1)
has been obtained and/or made; and
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(ii) each consent, waiver and approval required under each
contract specified in Section 3.06(2)(ii) is identified in such certificate and
has been obtained.
(6) Resignations. The written resignation (effective upon
------------
consummation of the Closing) of each director of any of the SUBSIDIARIES
requested by PURCHASER in a writing delivered to SELLER at least ten BUSINESS
DAYS prior to the CLOSING DATE.
Section 2.05. Deliveries by PURCHASER. At the CLOSING, PURCHASER
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shall cause all of the following to be delivered to SELLER:
(1) Officer's Certificate. A certificate duly executed by the
---------------------
President or a Vice-President of PURCHASER, dated no earlier than the CLOSING
DATE and certifying that, to the best of his knowledge and belief, (i) PURCHASER
has fully performed and satisfied all covenants and conditions required
hereunder to be performed and satisfied by it at or prior to the CLOSING, (ii)
each of the warranties and representations PURCHASER set forth in Article 4 are
true and accurate as if made as of the date of such certificate, and (iii) each
REQUIRED APPROVAL required to be obtained or made by PURCHASER has been obtained
or made.
(2) Opinion of Counsel. An opinion of counsel to PURCHASER,
------------------
substantially in the form of Schedule 2.05(2).
(3) Certified Resolutions. Copies of one or more resolutions duly
---------------------
approved by the Board of Directors of PURCHASER, duly approving and adopting
this AGREEMENT and authorizing the performance by PURCHASER of its obligations
hereunder, accompanied by the certificate of the President or a Vice-President
of PURCHASER, dated no earlier than the CLOSING DATE and certifying that each
such resolution has been duly adopted and is in full force and effect, without
amendment, as of the date of such certificate.
(4) PURCHASE PRICE. By wire transfer of immediately available
--------------
funds, to an account which shall be designated by SELLER prior to the CLOSING
DATE, an amount equal to the PURCHASE PRICE.
Section 2.06. Post-Closing Matters.
-----------------------------------
(1) CLOSING BALANCE SHEET. As promptly as is practicable after
---------------------
consummation of the CLOSING, an audit of the affairs of each of the SUBSIDIARIES
as of the last day of the
-8-
month immediately preceding the consummation of the CLOSING (the "AUDIT DATE")
shall be conducted in accordance with generally accepted auditing standards by
Ernst & Young LLP (the "AUDITORS"). Upon completion of such audit, the AUDITORS
shall deliver to PURCHASER and to ANTHEM a consolidated balance sheet of the
SUBSIDIARIES as of the AUDIT DATE (the "CLOSING BALANCE SHEET") and the related
consolidated statement of income and stockholder's equity for the period ended
on the AUDIT DATE, together with their report on such financial statements. The
said financial statements shall be prepared in accordance with generally
accepted accounting principles applied consistently with those used in preparing
the SELLER FINANCIAL STATEMENTS.
(2) Dispute Resolution. If the AUDITORS, ANTHEM and/or PURCHASER
------------------
disagree as to any amount set forth in or omitted from the CLOSING BALANCE
SHEET, and if (i) such disagreement cannot be resolved among the AUDITORS,
ANTHEM and PURCHASER within ten (10) BUSINESS DAYS after delivery of the CLOSING
BALANCE SHEET to ANTHEM and PURCHASER, (ii) such disagreement would affect by
more than $25,000 the adjustment to the PURCHASE PRICE under Section 2.06(3), or
(iii) the report of the AUDITORS is qualified, the matter giving rise to such
difference and/or qualification shall be referred to a national "Big Six"
accounting firm, or a successor thereto, mutually designated by PURCHASER and
ANTHEM (the "INDEPENDENT ARBITER") for resolution, the CLOSING BALANCE SHEET
and/or such report thereon shall be adjusted as necessary to reflect such
resolution by the INDEPENDENT ARBITER, and the CLOSING BALANCE SHEET and said
report thereon, as so resolved by the INDEPENDENT ARBITER, shall be final,
conclusive and binding on the parties hereto for purposes of Section 2.06(3).
If there is no such disagreement regarding the CLOSING BALANCE SHEET and/or the
report thereon of the AUDITORS is not qualified, the CLOSING BALANCE SHEET shall
be final, conclusive and binding on the parties hereto for purposes of Section
2.06(3). The fees of the AUDITORS for conducting the said audit, together with
the fees of the INDEPENDENT ARBITER for resolving any difference and/or
qualification in respect of the CLOSING BALANCE SHEET, shall be borne equally by
PURCHASER and ANTHEM.
(3) PURCHASE PRICE Adjustment. As an adjustment to the PURCHASE
-------------------------
PRICE, ANTHEM shall pay to PURCHASER the amount by which the NET WORTH shown on
the SELLER FINANCIAL STATEMENTS exceeds the NET WORTH shown on the CLOSING
BALANCE SHEET, or PURCHASER shall pay to SELLER (or, if SELLER has been
dissolved or merged or consolidated with ANTHEM, to ANTHEM) the amount by which
the NET WORTH shown on the CLOSING BALANCE SHEET exceeds the NET WORTH shown on
the SELLER FINANCIAL STATEMENTS, as the case may be, within ten (10) BUSINESS
DAYS after the later
-9-
of the dates when the AUDITORS or the INDEPENDENT ARBITER, if any, shall have
given the CLOSING BALANCE SHEET to each of PURCHASER and ANTHEM. For purposes of
this Section 2.06, the term "NET WORTH" means the amount by which the total
assets shown on the SELLER FINANCIAL STATEMENTS or on the CLOSING BALANCE SHEET
(adjusted in the case of each of the SELLER FINANCIAL STATEMENTS and of the
CLOSING BALANCE SHEET, however, to reflect the fixed maturity securities shown
therein at amortized cost) as the case may be, exceeds the total liabilities
(excluding any liability for payment of the NOTES) shown therein.
ARTICLE 3
Representations and Warranties of ANTHEM and SELLER
---------------------------------------------------
Each of ANTHEM and SELLER represents and warrants to PURCHASER that, except
as expressly disclosed in reasonable detail in SELLER'S Disclosure Letter
included as Schedule 3 or elsewhere herein, as of the date hereof:
Section 3.01. Organization, Standing and Corporate Authority of
----------------------------------------------------------------
ANTHEM. ANTHEM is a mutual insurance company duly organized, validly
------
existing and in good standing under the laws of the State of Indiana; is duly
qualified, licensed or otherwise in good standing as a foreign corporation in
each jurisdiction where the ownership of its property or the conduct of its
business makes necessary such qualification, licensing or good standing.
Section 3.02. ANTHEM'S and SELLER'S Transaction Authority; Corporate
---------------------------------------------------------------------
Proceedings; Enforceability.
---------------------------
(1) Each of ANTHEM and SELLER has all requisite corporate power and
authority to execute and deliver this AGREEMENT; to perform its obligations
hereunder; and to consummate the transactions to be undertaken by it as
contemplated hereby.
(2) The execution and delivery of this AGREEMENT by each of ANTHEM and
SELLER, the performance by it of its obligations hereunder, and the consummation
by it of the transactions to be undertaken by it as contemplated hereby, have
been duly and validly authorized by all necessary action of the Board of
Directors of each of ANTHEM and SELLER; and no other corporate act or proceeding
on the part of ANTHEM or SELLER is necessary to authorize its execution and
delivery of this AGREEMENT, its performance of its obligations hereunder, or its
consummation of the transactions to be undertaken by it as contemplated hereby.
-10-
(3) This AGREEMENT has been duly and validly executed and delivered on
behalf of each of ANTHEM and SELLER; constitutes its valid and binding
agreement; and is enforceable against it in accordance with its terms.
Section 3.03. Organization, Standing, PERMITS, Certificates of
---------------------------------------------------------------
Authority, etc., of SELLER and the SUBSIDIARIES.
-----------------------------------------------
(1) SELLER is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; is duly qualified,
licensed or otherwise in good standing as a foreign corporation in each
jurisdiction where the ownership of its property or the conduct of its business
makes necessary such qualification, licensing or good standing; and has all
requisite corporate power and authority to own, lease and use its properties,
and to carry on its business, as and in the places where such properties and
business are now owned, leased, used and conducted. Without limiting the
generality of the foregoing, SELLER has all PERMITS and is duly qualified,
licensed, or otherwise authorized to conduct the business being conducted by it,
and is in good standing, in each of the licensing jurisdictions identified as to
it in Schedule 3.03 (the "SELLER QUALIFIED JURISDICTIONS"), which named
jurisdictions are the only jurisdictions in which such qualification or
authorization is required by law in order to carry on its business as now being
conducted, except for any jurisdiction in which the absence of such
qualification has no MATERIAL ADVERSE EFFECT. No other jurisdiction has
claimed, in writing or otherwise to SELLER'S KNOWLEDGE, that SELLER is required
to qualify or otherwise be licensed therein. SELLER does not own or lease real
property in any jurisdiction other than the SELLER QUALIFIED JURISDICTIONS.
(2) Each of the INSURERS is a stock property - casualty insurance
corporation duly organized, validly existing and in good standing under the laws
of that state identified in Schedule 3.03 as the state of its incorporation; has
the requisite corporate power and authority, and is legally entitled, licensed,
authorized and admitted, to own, lease and use its properties, to transact
insurance business as currently being transacted, and to carry on its other
business as and in the places where such properties and business are now owned,
leased, used and conducted; and is duly qualified, licensed, admitted or
otherwise authorized to transact insurance business as currently being
transacted, and any other business, as a foreign corporation in each
jurisdiction where the ownership of its properties or the conduct of its
business makes such authorization necessary. Without limiting the generality of
the foregoing, each of the INSURERS has all PERMITS and is duly
-11-
qualified, licensed, admitted or otherwise authorized to transact the insurance
business conducted by it by the appropriate insurance regulatory authority of,
and is otherwise in good standing, in each of the licensing jurisdictions
identified as to it in Schedule 3.03 (the "INSURER QUALIFIED JURISDICTIONS"),
which named jurisdictions are the only jurisdictions in which such qualification
or authorization is required by law in order to carry on their businesses as now
being conducted, except for any jurisdiction in which the absence of such
qualification has no MATERIAL ADVERSE EFFECT. No other jurisdiction has claimed,
in writing or otherwise to SELLER'S KNOWLEDGE, that any of the INSURERS are
required to qualify or otherwise be licensed therein. The INSURERS do not own or
lease real property in any jurisdiction other than the INSURER QUALIFIED
JURISDICTIONS. Each of the INSURERS is authorized to write insurance in the
INSURER QUALIFIED JURISDICTIONS in the respective lines of insurance specified
on Schedule 3.03 as such insurance is defined in the insurance laws of the
respective jurisdictions. None of the INSURERS' certificates of authority or
similar PERMITS to transact insurance in INSURER QUALIFIED JURISDICTIONS have
been limited, revoked or suspended, nor are such certificates of authority or
similar PERMITS the subject of a proceeding for limitation, suspension or
revocation; no insurer has received any written or oral communication from any
of the INSURER QUALIFIED JURISDICTIONS threatening to limit, suspend or revoke
any of their certificates of authority; and no INSURER is operating under a
voluntary agreement with the insurance regulatory authorities of any INSURER
QUALIFIED JURISDICTION which restricts its authority to transact insurance
pursuant to such certificates of authority.
(3) Each of MOUND AGENCY, MOUND OHIO and SHELBY FINANCIAL is a
corporation duly organized, validly existing and in good standing under the laws
of the state of incorporation identified as to it in Schedule 3.03; is duly
qualified, licensed or otherwise in good standing as a foreign corporation in
each jurisdiction where the ownership of its property or the conduct of its
business makes necessary such qualification, licensing or good standing; and has
all requisite corporate power and authority to own, lease and use its
properties, and to carry on its business, as and in the places where such
properties and business are now owned, leased, used and conducted. Without
limiting the generality of the foregoing, each of MOUND AGENCY, MOUND OHIO, and
SHELBY FINANCIAL has all PERMITS and is duly qualified, licensed, admitted or
otherwise authorized to conduct the business conducted by it, and is in good
standing, in each of the licensing jurisdictions identified as to it in Schedule
3.03 (the "OTHER QUALIFIED JURISDICTIONS"), which named jurisdictions are the
only jurisdictions in which such qualification or
-12-
authorization is required by law in order to carry on their business as now
being conducted, except for any jurisdiction in which the absence of such
qualification has no MATERIAL ADVERSE EFFECT. No other jurisdiction has claimed,
in writing or otherwise to SELLER'S KNOWLEDGE, that MOUND AGENCY, MOUND OHIO, or
SHELBY FINANCIAL is required to qualify or otherwise be licensed therein. None
of MOUND AGENCY, MOUND OHIO and SHELBY FINANCIAL owns or leases real property in
any jurisdiction other than the OTHER QUALIFIED JURISDICTIONS.
Section 3.04. Title to the SHARES.
----------------------------------
(1) The total number of shares of stock that ACIC has authority to
issue consists of 500,000 shares of common stock, without par value, of which
64,000 shares are (i) issued and outstanding, (ii) held by SELLER, and (iii)
included in the SHARES.
(2) The total number of shares that SHELBY is authorized to issue
consists of 8,000,000 common shares, par value $1 per share, 3,058,667 Class A
preferred shares, par value $1 per share, and 1,280,000 Class B preferred
shares, par value $1 per share, of which 8,000,000 common shares are (i) issued
and outstanding, (ii) held by SELLER, and (iii) included in the SHARES. There
are no shares of capital stock of SHELBY that are currently issued and
outstanding, other than 8,000,000 of its authorized common shares, all of which
are held by SELLER.
(3) SELLER owns all of the SHARES, free and clear of any LIEN. Other
than this AGREEMENT, there is no outstanding agreement of SELLER to sell,
transfer or encumber any interest in the SHARES. There are no outstanding
options, warrants, subscriptions, calls, agreements, convertible securities,
unsatisfied preemptive rights, or other agreements, commitments, rights or
claims of any sort pursuant to which either of ACIC and SHELBY is or may become
obligated to issue, sell, purchase or redeem any of its authorized shares.
Except for ownership or interest by reason of securities held in the investment
portfolio of any of the SUBSIDIARIES, none of the SUBSIDIARIES has any direct or
indirect ownership interest, by way of stock ownership or otherwise, in any
corporation, association, joint venture or other business enterprise or other
entity. The SHARES are duly authorized, validly issued, fully paid and
nonassessable, and were not issued in violation of the preemptive rights of any
PERSON or of any agreement, law or regulation by which the issuer thereof was
bound at the time of issuance.
-13-
Section 3.05. The SUBSIDIARIES.
-------------------------------
(1) Schedule 3.03 correctly identifies the name of each of the
SUBSIDIARIES, the state of its incorporation, its authorized shares, the number
of such shares duly issued and outstanding, and the holder of all such shares.
SELLER owns all of the issued and outstanding shares of ACIC and of SHELBY
which, collectively, constitute the SHARES; ACIC owns all of the issued and
outstanding shares of MOUND AGENCY; MOUND AGENCY owns all of the issued and
outstanding Class B shares of MOUND OHIO; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ owns all of the
issued and outstanding Class A shares of MOUND OHIO; and SHELBY owns all of the
issued and outstanding shares of AFFIRMATIVE, INSURA and SHELBY FINANCIAL, in
each case free and clear of any LIEN. There are no outstanding options,
warrants, subscriptions, calls, agreements, convertible securities, unsatisfied
preemptive rights, or other agreements, commitments, rights or claims of any
sort whatsoever pursuant to which any of the SUBSIDIARIES is or may become
obligated to issue, sell, purchase or redeem any of its authorized shares.
Except for ownership or interest by reason of securities held in its investment
portfolio, none of the SUBSIDIARIES has any direct or indirect ownership
interest, by way of stock ownership or otherwise, in any corporation,
association, joint venture or other business enterprise or other entity. The
outstanding shares of each of the SUBSIDIARIES are duly authorized, validly
issued, fully paid and nonassessable, and were not issued in violation of the
preemptive rights of any PERSON or of any agreement, law or regulation by which
the issuer thereof was bound at the time of issuance.
(2) SELLER has furnished to PURCHASER copies of the certificate or
articles of incorporation, by-laws and regulations (or comparable documents) of
each of the SUBSIDIARIES, all of which documents are true and complete.
(3) The minute books of each of the SUBSIDIARIES accurately reflect
all actions taken at all meetings, and all consents and actions taken in writing
in lieu of meetings, of and by its shareholders and directors since the date
when it became an AFFILIATE of ANTHEM. All actions taken by the SUBSIDIARIES
requiring the approval of the Board of Directors or the shareholders, as the
case may be, have been so approved.
Section 3.06. Consents and Approvals; No Violations.
----------------------------------------------------
(1) Schedule 3.06(1) identifies each REQUIRED APPROVAL required to be
obtained by any of ANTHEM, SELLER, and the SUBSIDIARIES.
-14-
(2) Neither the execution and delivery of this AGREEMENT by either of
ANTHEM and SELLER, nor its consummation of the transactions to be undertaken by
it as contemplated hereby, will (i) violate any provision of the articles or
certificate of incorporation, by-laws or regulations (or any comparable
document) of any of ANTHEM, SELLER, and the SUBSIDIARIES; (ii) constitute (upon
notice, lapse of time or otherwise) a breach or a default (by way of
substitution, novation or otherwise, or give rise to any right of termination,
cancellation or acceleration) under any material contract to which any of
ANTHEM, SELLER, and the SUBSIDIARIES is a party or by or to which it, or any of
its assets or properties, may be bound or subject (including any contract
identified in Schedule 3.16 or Schedule 3.20), assuming that all consents,
waivers and/or approvals required under each such contract have been obtained
and which shall be set forth on the certificate delivered pursuant to Section
2.04(5)(ii); (iii) violate any order, judgment, injunction, award or decree of
any court, arbitrator or governmental or regulatory authority against, or any
agreement with or condition imposed by any governmental or regulatory authority,
binding upon any of ANTHEM, SELLER, and the SUBSIDIARIES or upon the property,
assets or business of any of them; (iv) result in the imposition of any LIEN
upon any of ANTHEM, SELLER, and the SUBSIDIARIES, or upon the property or assets
of any of them; (v) result in the breach of any of the terms or conditions of,
constitute a default under, or otherwise cause any impairment of any of its
PERMITS; or (vi) violate any statute, law, rule or regulation of any federal,
state, local or other governmental authority applicable to any of ANTHEM,
SELLER, and the SUBSIDIARIES or the property, assets or business of any of them,
excluding from the foregoing clauses (i) through and including (vi) such
breaches, defaults, results and violations that, in the aggregate, do not have a
MATERIAL ADVERSE EFFECT on the SUBSIDIARIES.
Section 3.07. Financial Statements and INSURER CONVENTION STATEMENTS.
---------------------------------------------------------------------
(1) SELLER has furnished to PURCHASER copies of the audited
consolidated balance sheets of SELLER and the SUBSIDIARIES as at December 31,
1996, and the related consolidated statements of income, stockholder's equity
and cash flow for the year then ended and the notes thereto (the "SELLER
FINANCIAL STATEMENTS"). The SELLER FINANCIAL STATEMENTS present fairly the
financial condition of SELLER and the SUBSIDIARIES at the date indicated, and
the results of operations of SELLER and the SUBSIDIARIES for the period then
ended, on a consolidated basis and in accordance with generally accepted
accounting principles applied on a consistent basis with prior periods.
-15-
(2) SELLER has furnished to PURCHASER copies of the CONVENTION
STATEMENTS of each of the INSURERS for the year ended December 31, 1996 (the
"INSURER CONVENTION STATEMENTS"). The INSURER CONVENTION STATEMENTS, together
with the schedules included therein, present fairly the statutory financial
condition of each of the INSURERS at the date indicated, together with the
statutory results of operations of each of the INSURERS and other data contained
in the INSURER CONVENTION STATEMENTS for the period then ended, and were
prepared in conformity with STATUTORY ACCOUNTING PRINCIPLES applied on a
consistent basis with prior periods, except as (i) expressly set forth therein
or (ii) otherwise required by a rule or regulation of an insurance regulatory
authority.
Section 3.08. No Default. None of ANTHEM, SELLER, and the
-------------------------
SUBSIDIARIES is in default under or in violation of, and no event has occurred
that, upon notice or lapse of time or both, would constitute a default under or
violation of (i) any of its PERMITS; (ii) its articles or certificate of
incorporation, by-laws, or regulations (or any comparable document); or (iii)
any contract to which it is a party or by or to which it, or any of its assets
or properties, may be bound or subject, excluding from the foregoing clauses
(i), (ii) and (iii) such defaults, violations and events that, in the aggregate,
do not have a MATERIAL ADVERSE EFFECT on the SUBSIDIARIES.
Section 3.09. Environmental Matters.
------------------------------------
(1) Each of the SUBSIDIARIES has obtained and is in material
compliance with the terms and conditions of all material PERMITS, licenses and
other authorizations required under any ENVIRONMENTAL LAW;
(2) Each of the SUBSIDIARIES is in compliance with all ENVIRONMENTAL
LAWS, and there are no past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans that may interfere with or
prevent continued compliance with all ENVIRONMENTAL LAWS;
(3) No asbestos, equipment containing polychlorinated biphenyls,
leaking underground or above-ground storage tanks or other HAZARDOUS SUBSTANCE
is contained in or located, in violation of any ENVIRONMENTAL LAW, (i) at any
property or improvement thereon which is or has been owned by any of the
SUBSIDIARIES, or (ii) to SELLER'S KNOWLEDGE, at any property or improvement
thereon that is or has been leased or controlled by any of the SUBSIDIARIES; and
-16-
(4) There have been no (i) past emissions or releases of any HAZARDOUS
SUBSTANCE from (a) any property or improvement which is or has been owned by any
of the SUBSIDIARIES, or (b) to SELLER'S KNOWLEDGE, any property or improvement
thereon that is or has been leased or controlled by any of the SUBSIDIARIES, or
(ii) other events, conditions, circumstances, activities, practices, incidents,
actions or plans related to any such property or improvement, that could result
in any common law or legal liability or otherwise form the basis of any valid
claim, action, suit, proceeding, hearing or investigation involving any of the
SUBSIDIARIES under any ENVIRONMENTAL LAW; and
(5) None of the SUBSIDIARIES has received notice from any governmental
agency of any allegation which is inconsistent with the foregoing
representations.
Section 3.10. Legal Proceedings.
--------------------------------
(1) Other than outstanding orders, judgments, injunctions, awards or
decrees of any court, governmental or regulatory agency or arbitrator relating
to insurance claims made in connection with policies of insurance underwritten
or assumed by any of the INSURERS in the ordinary course of business, there are
no outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory agency or arbitrator against, by or affecting any of
ANTHEM, SELLER, and the SUBSIDIARIES, or any of the directors, officers or
employees thereof in their capacities as such, that could (i) prevent the
performance of this AGREEMENT or the consummation of any of the transactions
contemplated hereby, (ii) prevent materially the use by the PURCHASER of any
assets of any of the SUBSIDIARIES, in each case in accordance with past
practices, (iii) affect the validity or enforceability of this AGREEMENT or
compliance with the terms hereof by SELLER, (iv) affect materially the PERMITS,
business, financial condition or results of operations of the SUBSIDIARIES,
taken as a whole, or (v) have a MATERIAL ADVERSE EFFECT.
(2) To SELLER'S KNOWLEDGE, other than actions, suits or claims or
legal, administrative or arbitration proceedings or investigations relating to
insurance claims made in connection with policies of insurance underwritten or
assumed by any of the INSURERS (i) in the ordinary course of business, (ii) that
do not allege or seek damages in excess of policy limits or exemplary or
punitive damages, and (iii) are not brought or purported to be brought on behalf
of a class of PERSONS, and except as set forth in Schedule 3.10, there are no
actions, suits or claims or legal, administrative or arbitration
-17-
proceedings or investigations overtly threatened (in a writing received by any
of ANTHEM, SELLER, and the SUBSIDIARIES) or pending in any court or before any
governmental agency or arbitrator against, by or affecting any of ANTHEM,
SELLER, and the SUBSIDIARIES, or any of the directors, officers or employees
thereof in their capacities as such, or its properties or assets.
Section 3.11. Property and Title; LIENS.
----------------------------------------
(1) Each of the SUBSIDIARIES owns and has good and marketable title to
all of its property and assets including, but not limited to, its property and
assets reflected in the balance sheet as at December 31, 1996 included in either
the SELLER FINANCIAL STATEMENTS or the INSURER CONVENTION STATEMENTS, as
applicable (other than property and assets disposed of in the ordinary course of
business since December 31, 1996), free and clear of all LIENS, except (i) as
disclosed in the SELLER FINANCIAL STATEMENTS, the INSURER CONVENTION STATEMENTS,
or the notes thereto, and (ii) PERMITTED EXCEPTIONS.
(2) Except for the NOTES and the SHARES and except as set forth on
Schedule 3.11, SELLER has no assets or liabilities. Schedule 3.11 identifies
all assets and liabilities of SELLER as of March 31, 1997, and there has been no
material change in the assets or liabilities of SELLER since that date.
Section 3.12. Brokers. None of ANTHEM, SELLER, the SUBSIDIARIES,
----------------------
and any party acting on behalf of any of them has paid or become obligated to
pay any fee or commission to any broker, finder, intermediary, financial advisor
or other PERSON for or on account of this AGREEMENT or the transactions
contemplated hereby, other than the fees of Credit Suisse First Boston
Corporation, for which ANTHEM is solely responsible.
Section 3.13. Compliance With Laws. To SELLER'S KNOWLEDGE, (i)
-----------------------------------
none of the SUBSIDIARIES is in violation of any applicable order, judgment,
injunction, award, decree or other requirement of any federal, state, local or
foreign law, statute, ordinance, rule, regulation, order, writ, injunction,
decree, or PERMIT, applicable to it or its property, assets or business, and
none of the SUBSIDIARIES has received notice (written or oral) from any
governmental agency that any such violation is being alleged, (ii) each of the
SUBSIDIARIES has complied in all material respects with all laws, statutes,
ordinances, rules, regulations and requirements applicable to the conduct of its
business and to its property and assets (including, without limitation,
applicable state licensing requirements for the insurance agents and brokers of
the INSURERS), and none of the SUBSIDIARIES has received notice (written or
oral) from any
-18-
governmental agency that any such violation is being alleged, and (iii) none of
the SUBSIDIARIES has committed any act, or omitted to perform any act, that
would provide reasonable grounds for termination or non-renewal of any of its
PERMITS, and no insurance regulatory authority or other governmental agency has
asserted otherwise in a writing delivered to any of them, excluding from the
foregoing clauses (i) and (ii) such violations and failures to comply that, in
the aggregate, do not have a MATERIAL ADVERSE EFFECT on the SUBSIDIARIES.
Section 3.14. Insurance Business.
---------------------------------
(1) Except with respect to terms specifically negotiated with
policyholders, to SELLER'S KNOWLEDGE, (i) all policies of insurance issued by
the INSURERS as now in force are, to the extent required under applicable law,
on forms that have been approved by applicable insurance regulatory authorities
or that have been filed and not objected to by such authorities within the
period provided for objection, and (ii) any premium rates required to be filed
with or approved by insurance regulatory authorities have been so filed and/or
approved or are otherwise in compliance with existing law, and premium rates
established by each of the INSURERS conform thereto.
(2) To SELLER'S KNOWLEDGE, (i) each of the contracts between the
INSURERS and their respective agents, managers or brokers is valid, binding, and
in full force and effect in accordance with its terms, assuming no breach or
default by any such agent, manager or broker thereunder and except for any such
contract that, if not valid, binding or in effect, would not have a MATERIAL
ADVERSE EFFECT; (ii) none of the INSURERS is in breach or default in any
material respect under any such contract; and (iii) no such contract contains
any provision providing that a party thereto other than any of the INSURERS may
terminate the same by reason of the transactions contemplated by this AGREEMENT
or any other provision that would be altered or otherwise become applicable
solely by reason of such transactions.
(3) Schedule 3.14 hereto contains a complete and accurate list of
agents, brokers, and other persons or entities who or that, collectively,
produced at least ninety percent (90%) of the premiums written by the INSURERS
during the period of twelve (12) months ended March 31, 1997. The INSURERS
enjoy good relations with their insurance agents as a whole. None of SELLER and
the SUBSIDIARIES has received any notification (written or oral) by such agents
threatening litigation or termination of their agency agreements with the
INSURERS or otherwise establishing a basis reasonably to believe that such
agents are likely to cease to do business with the INSURERS in
-19-
the same manner as such business has been conducted historically, whether as a
result of the transactions contemplated by this AGREEMENT or otherwise. Set
forth on Schedule 3.14 is a true and correct summary description of each
INSURER'S compensation arrangements with its agents identified therein.
(4) Except as set forth in Schedule 3.14, there are no side agreements
or other agreements (whether oral or written) between any of the SUBSIDIARIES
and its agents or former agents, including, without limitation, agreements with
respect to the payment of compensation by any of the SUBSIDIARIES to its agents
or former agents in existence on the date hereof and on the CLOSING DATE.
(5) None of the SUBSIDIARIES is in default with respect to any
contract or other agreement with any PERSON set forth in Schedule 3.14, and no
such contract or other agreement contains any provision providing that the other
party thereto may terminate the same by reason of the transactions contemplated
by this AGREEMENT or any other provision which would be altered or otherwise
become applicable by reason of such transactions.
Section 3.15. Regulatory Filings. Each of ANTHEM, SELLER, and the
---------------------------------
SUBSIDIARIES has filed all material reports, statements, documents,
registrations, filings or submissions required to be filed by it with any
governmental or regulatory authority, except (i) those with respect to which the
imposition, levy or collection of all fines, penalties, assessments, TAXES,
forfeitures, money judgments or sanctions of any type are barred by applicable
statutes of limitation, and (ii) as otherwise agreed to in writing by the
governmental or regulatory authority involved; all such registrations, filings
and submissions were in material compliance with applicable law when filed; and
no material deficiencies have been asserted by any such governmental or
regulatory authority with respect to such registrations, filings or submissions
that have not been remedied or otherwise satisfied.
Section 3.16. Contracts. Schedule 3.16 identifies all material
------------------------
written contracts (other than leases of real estate and other contracts
identified in Schedule 3.20, tax sharing agreements identified in Schedule
11.01(8), insurance policies issued by the INSURERS in the ordinary course of
business, reinsurance and coinsurance treaties and agreements identified on
Schedule 3.25, and those contracts identified in any other Schedule to this
AGREEMENT), to which any of the SUBSIDIARIES is a party or by or to which it or
its assets or properties are bound or subject. There have been delivered or made
available to PURCHASER true and complete copies of all of the contracts
-20-
identified in Schedule 3.16 or any other Schedule to this AGREEMENT. Each such
contract and other agreement is valid, in full force and effect, and binding
upon each of the SUBSIDIARIES party thereto in accordance with its terms, none
of which (and, to SELLER'S KNOWLEDGE, no other party thereto) is in default in
any material respect under any of such contracts to which it is a party. For
purposes of this AGREEMENT, a contract is material only if (i) the liability
thereunder of any of the SUBSIDIARIES or any third party thereto for any
calendar year, or in the aggregate, is at least $100,000 or, (ii) if no such
monetary liability is involved, the obligations thereunder of any third party
thereto provide a benefit to any of the SUBSIDIARIES that is material to its
financial condition or operations.
Section 3.17. No Material Adverse Change. Except for conditions
-----------------------------------------
affecting generally the industry in which they conduct business, since December
31, 1996, there has been no change in the properties, business or operations of
the SUBSIDIARIES, taken as a whole, other than such changes (i) that, in the
aggregate, do not have a MATERIAL ADVERSE EFFECT as to the SUBSIDIARIES, taken
as a whole, and (ii) as are expressly required or permitted by this AGREEMENT.
Section 3.18. Conduct of Business. Except as contemplated by this
----------------------------------
AGREEMENT, since December 31, 1996, each of SELLER and the SUBSIDIARIES has
conducted its operations in the ordinary and usual course of its business,
consistent with past practice. Without limiting the generality of any of the
provisions of the foregoing, except as contemplated by this AGREEMENT since
December 31, 1996, none of SELLER and the SUBSIDIARIES has taken any of the
actions described in Section 5.01 of this AGREEMENT.
Section 3.19. Security Deposits. Schedule 3.19 (i) identifies all
--------------------------------
securities deposited by each of the INSURERS with state insurance departments
and other regulatory authorities and (ii) has been completed in accordance with
the instructions applicable to the Schedule of Deposits appearing in the
CONVENTION STATEMENTS for the period ended December 31, 1996.
Section 3.20. Real Estate. Schedule 3.20 sets forth a list and
--------------------------
summary description of (i) all real property owned by any of the SUBSIDIARIES
and all buildings located thereon, other than real property acquired through
salvage or subrogation (the "OWNED REAL PROPERTY"); (ii) all material leases,
subleases or other agreements under which any of the SUBSIDIARIES is the lessor
or lessee of any real property; (iii) all material options held by any of the
SUBSIDIARIES, and all material contractual obligations thereof, to purchase or
acquire any interest in real
-21-
property; and (iv) all material contractual obligations of any of the
SUBSIDIARIES to sell or dispose of any interest in real property. Except for
PERMITTED EXCEPTIONS and except as otherwise set forth in Schedule 3.20:
(1) One of the SUBSIDIARIES owns fee simple title to the OWNED REAL
PROPERTY;
(2) One of the SUBSIDIARIES has good, valid and marketable title to
the OWNED REAL PROPERTY, free and clear of all title defects or objections,
liens, claims, encumbrances, charges, security interests or other encumbrances
of any nature whatsoever, including, without limitation, leases, chattel
mortgages, pledges, conditional sales contracts, collateral security
arrangements, and other title or interest retention arrangements, and the OWNED
REAL PROPERTY is not subject to any right of way, easement (other than easements
of record), building use restriction, exception, variance, reservation or
limitation or any nature whatsoever;
(3) There are no options, rights of first refusal or contracts of sale
affecting the fee title in the OWNED REAL PROPERTY;
(4) There is no pending or, to SELLER'S KNOWLEDGE, threatened
condemnation of all or any portion of the OWNED REAL PROPERTY;
(5) All improvements now situated on the OWNED REAL PROPERTY are
completely within the boundaries of the same, and none of the SUBSIDIARIES has
received, and to SELLER'S KNOWLEDGE there is no, claim from or by any PERSON
alleging or claiming that any portion of the OWNED REAL PROPERTY or the
improvements, fixtures, equipment or personal property on the OWNED REAL
PROPERTY encroaches upon any real property, easement, or right of way held by
any PERSON;
(6) SELLER has made available to PURCHASER true and correct copies of
surveys and appraisals in the possession of any of ANTHEM, SELLER, and the
SUBSIDIARIES, if any, relating to or affecting the OWNED REAL PROPERTY;
(7) The use for which the OWNED REAL PROPERTY is now being used does
not violate any applicable zoning, and the continued use thereof as currently
being used will not violate any subdivision, deed or other restriction; and
(8) All leases set forth on Schedule 3.20 are valid, binding and
enforceable in accordance with their terms,
-22-
except to the extent that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights and remedies generally, and are in full force and effect;
there are no existing defaults by any of the SUBSIDIARIES thereunder; and no
event of default has occurred which (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute a
material default thereunder by any of the SUBSIDIARIES or, to SELLER'S
KNOWLEDGE, by any other party thereto.
Section 3.21. Intangible Property and Computer Software. Each of
--------------------------------------------------------
the SUBSIDIARIES has at all times through the date hereof owned, had registered,
or had valid rights to use such trade marks, trade names, copyrights and
computer software as have been necessary for the conduct of its business. To
SELLER'S KNOWLEDGE, none of the SUBSIDIARIES has received written notice, and
none of them has reason to believe, that it has not, during such period, owned,
had registered, or had valid rights to use any such trade marks, trade names,
copyrights, computer software, or any application pending therefor as were
necessary for the conduct of its business.
Section 3.22. Liabilities. To SELLER'S KNOWLEDGE, none of the
--------------------------
SUBSIDIARIES has any liability or obligation of any nature (whether accrued,
absolute, contingent or other and whether due or to be become due), other than
those (i) that are fully and adequately reflected or reserved against in the
SELLER FINANCIAL STATEMENTS or the INSURER CONVENTION STATEMENTS for the year
ended December 31, 1996, (ii) incurred in the ordinary course of business since
December 31, 1996, and (iii) that, in the aggregate, do not have a MATERIAL
ADVERSE EFFECT or the SUBSIDIARIES.
Section 3.23. Employee Benefit Plans. Schedule 3.23 identifies all
-------------------------------------
employee benefit plans (the "PLANS") sponsored by SELLER under which it is
required to contribute with respect to employees or former employees of Seller
or the Subsidiaries, or their dependents. The Subsidiaries have no obligations
or liabilities under the Plans or under any other employee benefit plans with
respect to any employees or former employees of Seller or the Subsidiaries, or
their dependents. The PLANS identified in Schedule 3.23 include (i) each
"employee benefit plan" (described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and (ii) each formal or
informal plan, arrangement or contract involving direct or indirect
compensation, maintained or formerly maintained by any of SELLER and the
SUBSIDIARIES, or with respect to which any employees or former employees of any
of them are participants
-23-
and to which any of them have any liability or under which any of them have any
present or future obligations or liability on behalf of its employees or former
employees or their dependents or beneficiaries, including, but not limited to,
each retirement, pension, profit-sharing, thrift, savings, target benefit,
employee stock ownership, cash or deferred, multiple employer, multiemployer or
other similar plan or program, each other deferred or incentive compensation,
bonus, stock option, employee stock purchase, "phantom stock" or stock
appreciation right plan, each other program providing payment or reimbursement
for or of medical, dental or vision care, psychiatric counseling, or vacation,
sick, disability or severance pay (including "basic severance pay") and each
other "fringe benefit" plan or welfare plan arrangement. Schedule 3.23
identifies each of the PLANS that is intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "CODE"). Schedule
3.23 also identifies each former employee of any of the SUBSIDIARIES who, as of
the date hereof, is receiving or entitled to receive retiree medical benefits,
retiree life insurance benefits, or group accident insurance benefits from any
of them. Except as set forth in Schedule 3.23:
(1) SELLER has delivered or made available to PURCHASER copies of the
following documents, as they may have been amended to the date hereof, embodying
or relating to the PLANS: (i) all written documents for each of the PLANS
identified in Schedule 3.23, including all amendments thereto, and any related
trust agreements, group annuity contracts, insurance policies or other funding
agreements or arrangements; (ii) the most recent determination letter, if any,
received from the Internal Revenue Service with respect to the qualification of
any of the PLANS intended to be qualified under Section 401(a) of the CODE;
(iii) actuarial valuations for each of the PLANS, if applicable, for the most
recent plan year for which such valuations are available; (iv) the current
summary plan description, if any, for each of the PLANS; and (v) the most
recently filed annual return/report on Form 5500, 5500-C or 5500-R, if any, for
each of the PLANS.
(2) the written terms of each of the PLANS and any related trust
agreement, group annuity contract, insurance policy or other funding arrangement
are in substantial compliance and are being operated in compliance in all
material respects with the requirements of all applicable statutes, orders, or
governmental rules and regulations, including without limitation, ERISA and the
CODE; each of the PLANS is in substantial compliance, and is being operated in
compliance in all material respects, with the requirements prescribed by ERISA
and the CODE;
-24-
(3) all contributions to each of the PLANS intended to be qualified
under Section 401(a) of the CODE are and have been in the year to which they
relate fully deductible pursuant to Section 404 of the CODE and are not subject
to excise tax under Section 4972 of the CODE;
(4) none of ANTHEM, SELLER, the SUBSIDIARIES, any other "disqualified
person" or "party in interest," as defined in Section 4975 of the CODE and
Section 3(14) of ERISA, respectively, and any party required to be indemnified
by SELLER has engaged in a "prohibited transaction," as such term is defined in
Section 4975 of the CODE and Section 406 or 407 of ERISA, with respect to any of
the PLANS subject to ERISA that could subject any of the SUBSIDIARIES to a tax
or penalty on prohibited transactions imposed by either Section 502 of ERISA or
Section 4975 of the CODE;
(5) there has been no act or omission by any of ANTHEM, SELLER, the
SUBSIDIARIES, any administrator, any fiduciary of any of the PLANS (or any agent
of any of the foregoing), and any party required to be indemnified by SELLER,
that could subject any of the SUBSIDIARIES to any material liability for a
breach of fiduciary duty under ERISA or any other law applicable to any of the
PLANS;
(6) the execution and delivery of this AGREEMENT by SELLER and the
consummation of the transactions contemplated hereby will not (a) involve any
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the CODE; or (b) accelerate the payment of any benefits under any of the
PLANS;
(7) other than qualified domestic relations orders as defined in
Section 414(p) of the CODE and qualified medical child support orders as defined
in Section 609(a)(2)(A) of ERISA, each of which, if any, is listed on Schedule
3.23(7), and except for claims for benefits in the ordinary course, there are no
actions, suits, arbitrations, disputes, legal, administrative or other
proceedings or governmental investigations pending against any of the PLANS, the
assets of any of the PLANS or any PERSON who is a fiduciary with respect to any
of the PLANS;
(8) (a) no PLAN subject to Title IV of ERISA maintained by any of the
SUBSIDIARIES has been terminated; and (b) no proceeding has been initiated by
the Pension Benefit Guaranty Corporation to terminate any of the PLANS;
-25-
(9) none of the PLANS that is an "employee benefit pension plan," as
defined in Section 3(2) of ERISA, has incurred an "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
CODE, nor has any of the SUBSIDIARIES at any time requested a minimum funding
waiver within the meaning of Section 412(d) of the CODE;
(10) no "reportable event" (within the meaning of Section 4043(c)(1)-
(13) of ERISA) requiring the filing of a notice has occurred with respect to any
of the PLANS subject to Title IV of ERISA; and
(11) none of the SUBSIDIARIES has at any time maintained, contributed
to or had an obligation to contribute to any plan under which more than one
employer makes contributions (within the meaning of Section 4064(a) of ERISA)
or any "multiemployer plan" (within the meaning of Section 3(37) of ERISA).
Section 3.24. Employee Relations. To SELLER'S KNOWLEDGE, Schedule
---------------------------------
3.24 describes the status of all union organizing efforts known to any of the
SUBSIDIARIES conducted within the last three (3) years or now being conducted.
To SELLER'S KNOWLEDGE, none of the SUBSIDIARIES has at any time during the last
five (5) years had, nor is there now threatened as to it, a strike, picket, work
stoppage, work slowdown, or other similar labor unrest involving a group or
groups of its employees.
Section 3.25. Reinsurance and Coinsurance.
------------------------------------------
(1) Schedule 3.25 sets forth a list of all reinsurance and coinsurance
treaties or agreements to which any of the SUBSIDIARIES is a party or is a named
reinsured and which either (i) covers loss or potential loss arising out of any
event occurring (whether or not reported) during the period of three (3) years
ending on the date hereof or (ii) covers one or more losses reported prior to
the date hereof. Except as indicated on Schedule 3.25, all such treaties or
agreements as set forth in such Schedule are, to SELLER'S KNOWLEDGE, in full
force and effect. None of the SUBSIDIARIES or, to SELLER'S KNOWLEDGE, any other
party to any agreement listed in Schedule 3.25, is in default thereunder in any
material respect, and no such agreement contains any provision providing that
the other party thereto may terminate such agreement by reason of the
transactions contemplated by this AGREEMENT.
(2) The INSURERS are not aware of any claims or losses which have
arisen or may arise under policies written by
-26-
the Insurers and for which reinsurance has been purchased that are not covered
under such reinsurance contracts.
Section 3.26. Insurance. To SELLER'S KNOWLEDGE, Schedule 3.26 sets
------------------------
forth a list and brief description (specifying the insurer and the policy
number or covering note number with respect to binders, describing each pending
claim thereunder of more than $50,000 (or, in the case of policies of workers'
compensation, more than $100,000), setting forth the aggregate amounts paid out
under each such policy since January 1, 1992 through the date hereof, and the
aggregate limit, if any, of the insurer's liability thereunder) of all policies
or binders of fire, liability, product liability, workers' compensation,
vehicular, and other insurance held by or on behalf of any of the SUBSIDIARIES
other than (i) coinsurance and reinsurance treaties and agreements listed on
Schedule 3.25, (ii) policies in respect of which any of the SUBSIDIARIES is an
insured mortgagee or lessor, and (iii) policies issued by any of ANTHEM and the
SUBSIDIARIES. Such policies and binders are, to the SELLER'S KNOWLEDGE, valid
and enforceable in accordance with their terms, are in full force and effect,
and insure against risks and liabilities to the extent and in the manner deemed
appropriate and sufficient by any of ANTHEM and the SUBSIDIARIES insured
thereunder.
Section 3.27. Officers, Directors, and Key Employees. Schedule 3.27
-----------------------------------------------------
sets forth: (i) the name and total compensation of each officer, director and
each other employee of each of the SUBSIDIARIES, and the name and total
compensation of each employee of SELLER, whose total compensation exceeds
$75,000 per year; (ii) all bonuses received by such persons since December 31,
1994, and any accrual for such bonuses; and (iii) all commitments or agreements
by any of the SUBSIDIARIES to increase the compensation of any of these persons.
Except as set forth on Schedule 3.27, none of the SUBSIDIARIES has any
contractual arrangement (written or oral) with any current or former officer,
director or employee of any of the SUBSIDIARIES or any AFFILIATE thereof.
Section 3.28. Accounting Practices. To SELLER'S KNOWLEDGE, except
-----------------------------------
as set forth on Schedule 3.28 and except for changes disclosed in the SELLER
FINANCIAL STATEMENTS or the INSURER CONVENTION STATEMENTS, since December 31,
1993, none of the SUBSIDIARIES has made any change in its accounting methods,
practices or policies, including, without limitation, any change with respect to
establishment of reserves for unearned premiums, losses (including incurred but
not reported losses), and loss adjustment expenses, or made any change in
depreciation or amortization policies or rates adopted by it, except as required
-27-
by law, generally accepted accounting principles, or STATUTORY ACCOUNTING
PRINCIPLES.
Section 3.29. Powers of Attorneys; Guarantees. None of the
----------------------------------------------
SUBSIDIARIES has any obligation to act under any outstanding power of attorney
or any obligation or liability, either actual, accrued, accruing or contingent,
as guarantor, surety, co-signer, endorser, co-maker, or indemnitor in respect to
the obligation of any PERSON, corporation, partnership, joint venture,
association, organization, or other entity (other than for purposes of
collection in the ordinary course of its business and other than with respect to
reinsurance assumed in the ordinary course of its business).
Section 3.30. LOSS RESERVES. The LOSS RESERVES reflected in the
---------------------------------------------------
INSURER CONVENTION STATEMENTS, in any subsequent QUARTERLY CONVENTION STATEMENTS
provided to the PURCHASER after the date hereof and prior to the CLOSING DATE,
and the LOSS RESERVES reflected in the CLOSING BALANCE SHEET were or will be
determined in accordance with generally accepted actuarial standards and
principles applied on a basis consistent with those applied in determining the
LOSS RESERVES reflected in the SELLER FINANCIAL STATEMENTS, it being understood
and agreed that the LOSS RESERVES reflected in the INSURER CONVENTION STATEMENTS
and any QUARTERLY CONVENTION STATEMENTS are or will be net of reinsurance
recoverables, and the LOSS RESERVES reflected in the SELLER FINANCIAL STATEMENTS
are or will be gross. The LOSS RESERVES set forth in the CLOSING BALANCE SHEET,
net of reinsurance recoverables (other than intercompany reinsurance) (the
"CLOSING LOSS RESERVES") make or will make good and sufficient provision for the
settlement of the total amount of all liabilities and obligations incurred by
the INSURERS through the CLOSING DATE under all insurance and reinsurance
contracts pursuant to which the INSURERS have any liability or obligation. The
determination of whether, and the extent to which, the CLOSING LOSS RESERVES
make good and sufficient provision for the settlement of all such liabilities
and obligation shall be made in accordance with Section 10.05 of this AGREEMENT.
Section 3.31. No Material Misrepresentations. No warranty or
----------------------------------------------
representation of any of ANTHEM, SELLER, or the SUBSIDIARIES contained in this
AGREEMENT, or documents furnished to the PURCHASER pursuant to this AGREEMENT,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statement contained in such warranty, representation,
or document, in light of the circumstances under which it was made, not
misleading.
-28-
Section 3.32. Personal Property Leases. Schedule 3.32 contains an
---------------------------------------
accurate and complete list of each lease and sublease pursuant to which any of
the SUBSIDIARIES lease personal property for an annual rental exceeding $20,000.
Except as set forth in Schedule 3.32, each such lease is valid, binding and
enforceable in accordance with its terms, except to the extent that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors' rights and remedies generally, and
are in full force and effect; there are no existing defaults by any of the
SUBSIDIARIES thereunder; and no event of default has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default thereunder by any of the SUBSIDIARIES
or, to SELLER'S KNOWLEDGE, any other party thereto.
Section 3.33. Bank Accounts; Custodial Accounts. Schedule 3.33
------------------------------------------------
contains a true and complete list of each and every bank account, safe deposit
box, brokerage account, trust account, depository account or other custodial
account of each of the SUBSIDIARIES. Other than the assets (i) deposited in the
accounts listed in Schedule 3.33 and/or (ii) identified in Schedule 3.19, none
of the SUBSIDIARIES has any other liquid assets or investments held or
maintained with any other PERSON or entity at any location.
Section 3.34. Improper Payments. To SELLER'S KNOWLEDGE, since
--------------------------------
December 31, 1996:
(1) no funds or assets of any of the SUBSIDIARIES have been used
for any illegal purpose;
(2) no unrecorded fund or asset of any of the SUBSIDIARIES has
been established for any purpose;
(3) no accumulation or use of corporate funds of any of the
SUBSIDIARIES has been made without being properly accounted for on the books and
records of one of the SUBSIDIARIES;
(4) all payments by or on behalf of any of the SUBSIDIARIES have been
duly and properly recorded and accounted for on its books and records; and
(5) no false or artificial entry has been made on the books and
records of any of the SUBSIDIARIES for any reason whatsoever.
-29-
ARTICLE 4
Representations and Warranties of PURCHASER
-------------------------------------------
PURCHASER represents and warrants to each of ANTHEM and SELLER that, as of
the date hereof:
Section 4.01. Organization, Standing and Corporate Authority of
----------------------------------------------------------------
PURCHASER. PURCHASER is a corporation duly organized, validly existing and
---------
in good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to purchase, own and hold the SHARES.
Section 4.02. PURCHASER'S Transaction Authority; Corporate
-----------------------------------------------------------
Proceedings; Enforceability.
---------------------------
(1) PURCHASER has all requisite corporate power and authority to
execute and deliver this AGREEMENT; to perform its obligations hereunder; and to
consummate the transactions to be undertaken by it as contemplated hereby.
(2) The execution and delivery of this AGREEMENT by PURCHASER, the
performance by it of its obligations hereunder, and the consummation by it of
the transactions to be undertaken by it as contemplated hereby, have been duly
and validly authorized by all necessary corporate acts and proceedings on the
part of PURCHASER, its shareholders and directors.
(3) This AGREEMENT has been duly and validly executed and delivered on
behalf of PURCHASER; constitutes the valid and binding agreement of PURCHASER;
and is enforceable against PURCHASER in accordance with its terms.
Section 4.03. No Violation. Neither the execution and delivery of
---------------------------
this AGREEMENT by PURCHASER, nor its consummation of the transactions to be
undertaken by it as contemplated hereby, will (i) violate any provision of its
articles or certificate of incorporation, by-laws or regulations (or any
comparable document); (ii) constitute (upon notice, lapse of time or otherwise)
a breach or a default (by way of substitution, notation or otherwise, or give
rise to any right of termination, cancellation or acceleration) under any
contract to which it is a party or by or to which it or any of its assets or
properties may be bound or subject; (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory authority against, or any agreement with, or condition imposed by,
any governmental or regulatory authority, binding upon it; or (iv) violate any
statute, law, rule or regulation of any federal, state, local or other
-30-
governmental authority applicable to it or its property, assets or business,
excluding from the foregoing clauses (i) through and including (iv) such
breaches, defaults, results and violations that, in the aggregate, do not have a
MATERIAL ADVERSE EFFECT.
Section 4.04. No Default. PURCHASER is not in default under or in
-------------------------
violation of, and no event has occurred that, upon notice or lapse of time or
both, would constitute a default under or violation of (i) its articles or
certificate of incorporation, by-laws, or regulations (or any comparable
document); (ii) any contract to which it is a party or by or to which it, or any
of its assets or properties, may be bound or subject; or (iii) any order,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory authority against, or any agreement with or condition imposed by
any governmental or regulatory authority, binding upon PURCHASER, its property,
assets or business, excluding from the foregoing clauses (i), (ii) and (iii)
such defaults, violations and events that, in the aggregate, do not have a
MATERIAL ADVERSE EFFECT on PURCHASER.
Section 4.05. Legal Proceedings.
--------------------------------
(1) There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, governmental or regulatory authority against, by or
affecting PURCHASER, or any of its directors, officers or employees in their
capacities as such, that could (i) prevent the performance of this AGREEMENT or
the consummation of any of the transactions contemplated hereby, or (ii) affect
the validity or enforceability of this AGREEMENT or compliance with the terms
hereof by PURCHASER, excluding from the foregoing clauses (i) and (ii) such
orders, judgments, injunctions, awards and decrees that, in the aggregate, do
not have a MATERIAL ADVERSE EFFECT on PURCHASER.
(2) To PURCHASER'S KNOWLEDGE, there are no actions, suits or claims or
legal, administrative or arbitration proceedings or investigations overtly
threatened (in a writing received by PURCHASER) or pending in any court or
before any governmental agency or arbitrator against, by or affecting PURCHASER
or any of its directors, officers or employees in their capacities as such, or
its properties or assets, excluding any such action, suit, claim, proceeding or
investigation that, if determined adversely to PURCHASER or any such director,
officer or employee, would not have a MATERIAL ADVERSE EFFECT on PURCHASER.
Section 4.06. Investment Purpose. PURCHASER shall acquire the
---------------------------------
SHARES for its own account, for the purpose of investment only, and not with a
-31-
view to the resale or distribution of all or any part of the SHARES; provided,
however, that the foregoing representation shall in no way limit PURCHASER'S
right to dispose of all or any portion of the SHARES in one or more transactions
registered under or exempt from the registration requirements of the Securities
Act of 1933, as amended, at any time and in PURCHASER'S sole discretion.
Section 4.07. Brokers. Neither PURCHASER nor any party acting on
----------------------
its behalf has paid or become obligated to pay any fee or commission to any
broker, finder, intermediary, financial advisor or other PERSON for or on
account of this AGREEMENT or the transactions contemplated hereby, other than
the fees of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation and/or of KPMG
Peat Marwick LLP, for which PURCHASER is solely responsible.
Section 4.08. SELLER FINANCIAL STATEMENTS and INSURER CONVENTION
-----------------------------------------------------------------
STATEMENTS. PURCHASER has received from SELLER copies of the SELLER
----------
FINANCIAL STATEMENTS and the INSURER CONVENTION STATEMENTS.
Section 4.09. Disclosure. PURCHASER is a sophisticated investor
-------------------------
and has had full opportunity to make such investigation of each of SELLER and
the SUBSIDIARIES as PURCHASER has deemed necessary or desirable in order to make
an informed decision regarding the transactions contemplated hereby. The only
representations and warranties that ANTHEM and/or SELLER, or any party acting as
agent or otherwise on behalf of ANTHEM and/or SELLER, has made with respect to
any of the SUBSIDIARIES, their properties, assets, business or otherwise in
connection with the transactions contemplated hereby, are those contained in
this AGREEMENT, including the Schedules hereto.
Section 4.10. Financing. PURCHASER will have available to it the
------------------------
funds required immediately to pay the PURCHASE PRICE at the CLOSING and to
consummate the transactions to be undertaken by it as contemplated hereby.
Section 4.11. Articles, By-Laws, etc. PURCHASER has received from
--------------------------------------
SELLER copies of the certificate or articles of incorporation, by-laws and
regulations (or comparable documents) of each of the SUBSIDIARIES.
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ARTICLE 5
Covenants of SELLER
-------------------
Section 5.01. Conduct of Business. Except as otherwise permitted
----------------------------------
or required by this AGREEMENT, during the period from the date hereof to the
later of the CLOSING DATE or the later date specified herein:
(1) ANTHEM and SELLER will use reasonable efforts to cause each of the
SUBSIDIARIES to conduct its operations according to the ordinary and usual
course of business and consistent with past practice; and
(2) without limiting the generality of any of the provisions of the
foregoing paragraph (1), ANTHEM and SELLER shall not cause, permit or suffer any
of the SUBSIDIARIES to:
(i) create, authorize, issue, sell or deliver any of its capital stock
(whether authorized and unissued or held in treasury), bonds or
other of its securities or any instrument convertible into any of
them, or grant or otherwise issue any options, warrants or other
rights with respect thereto, or split up, combine or reclassify
any of its outstanding stock or enter into any contract or
commitment to do any of the foregoing;
(ii) other than in the ordinary course of business consistent with past
practice, incur, assume, guarantee or otherwise become liable with
respect to any indebtedness for money borrowed, or make any
payment with respect to any obligation for money borrowed before
such payment is due except as may be necessary, due to possible
transmittal delays, to assure that payment will be timely made;
(iii) amend its articles or certificate of incorporation, by-laws or
regulations (or other comparable document) or take any action with
respect to any such amendment;
(iv) make any capital expenditures, capital additions or capital
improvements other than those necessary to conduct business in the
ordinary course;
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(v) enter into any collective bargaining agreement;
(vi) merge or consolidate with any other corporation or entity or
acquire or agree to acquire any stock or substantially all of the
assets of any other PERSON, firm, association, corporation or
other entity;
(vii) [DELETED];
(viii) declare or pay any dividends, or declare or make any other
distributions of any kind to its shareholders, or make any direct
or indirect redemption, retirement, purchase or other acquisition
of any shares of its capital stock, except (i) dividends or
distributions made to enable SELLER to meet payments due in
respect of those certain 6 3/4 percent Senior Guaranteed Notes due
2003 issued by SELLER (THE "NOTES") and (ii) dividends or other
distributions that, in the reasonable determination of any of the
SUBSIDIARIES, would not reduce the NET WORTH to be shown on the
CLOSING BALANCE SHEET below that shown on the SELLER FINANCIAL
STATEMENTS;
(ix) except as required by law, generally accepted accounting
principles, or STATUTORY ACCOUNTING PRINCIPLES, or as otherwise
disclosed to PURCHASER, make any change in its accounting methods
or practices including, without limitation, any change with
respect to establishment of reserves for unearned premiums, losses
(including losses incurred but not reported) and loss adjustment
expenses, or make any change in depreciation or amortization
policies or rates adopted by it;
(x) enter into any lease (as lessor or lessee) under which any of the
SUBSIDIARIES would be obligated to make or would receive payments
in any one year of one hundred thousand dollars ($100,000) or
more; sell, abandon, or make any other disposition of any of its
assets or properties having a fair market value of one hundred
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thousand dollars ($100,000) or more, excluding investment assets;
grant or suffer any material lien on any of its assets other than
liens excepted in Section 3.11; amend any contract required to be
listed on Schedule 3.16; or enter into any other material contract
(as defined in Section 3.16);
(xi) terminate or fail to renew, any contract relating to the assets,
liabilities, business, operations, financial condition, or results
of operations of the SUBSIDIARIES, except where such termination
or failure to renew would not have a MATERIAL ADVERSE EFFECT on
the SUBSIDIARIES;
(xii) sell, assign, or transfer any of the assets (including any portion
of the investment portfolio) of any of the SUBSIDIARIES which
individually or in the aggregate would have a MATERIAL ADVERSE
EFFECT on the SUBSIDIARIES;
(xiii) make any loan or advance to ANTHEM, SELLER or any directors,
officers or employees, consultants, agents or other
representatives of any of ANTHEM, SELLER, and the SUBSIDIARIES, or
make any other loan or advance otherwise than in the ordinary
course of business;
(xiv) enter into any employment agreements with, increase the rate of
compensation of, or pay or agree to pay any bonus to any of its
directors, officers or employees (provided however, that any of
the SUBSIDIARIES may grant reasonable annual merit increases to
some or all of its employees in the ordinary course of its
business);
(xv) implement any new employee benefit plan or arrangement or modify
or amend any arrangement now in effect; or
(xvi) make any material change in the nature of its business or
operations;
provided, however, that nothing contained in this Section 5.01 shall be
construed to prevent (i) SELLER from transferring all or substantially all of
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its assets (other than the SHARES) and liabilities (other than the NOTES) to one
or more of the SUBSIDIARIES or (ii) one or more of the SUBSIDIARIES from
purchasing title insurance insuring title to one or more parcels of the OWNED
REAL PROPERTY.
Section 5.02. Litigation. SELLER shall notify PURCHASER promptly
-------------------------
of any actions or proceedings that, to SELLER'S KNOWLEDGE, have been threatened,
or commenced against any of the SUBSIDIARIES, any officer, director or employee
(in his or her capacity as such) or any properties or assets of any of them,
that, if pending or threatened on the date hereof, would be required to be
disclosed on Schedule 3.10 hereto.
Section 5.03. Additional Financial Information. As soon as
-----------------------------------------------
reasonably practicable after they become available, SELLER shall furnish to
PURCHASER the QUARTERLY CONVENTION STATEMENTS of each of the INSURERS for all
interim quarterly periods ended after December 31, 1996 and at least sixty (60)
days prior to the CLOSING DATE. Said QUARTERLY CONVENTION STATEMENTS will
present the financial position and results of operations of each of the INSURERS
at such dates and for such periods (subject to year-end adjustments consisting
only of normal recurring accruals) in accordance with STATUTORY ACCOUNTING
PRINCIPLES applied on a consistent basis or as expressly set forth in such
QUARTERLY CONVENTION STATEMENTS or as required in a rule or regulation of an
insurance regulatory authority), and the schedules thereto, when considered in
relation to the statutory financial statements included therein, will present
fairly in all material respects the information contained therein.
Section 5.04. Disposition of AFFILIATE Relationships. All
-----------------------------------------------------
service agreements and management agreements between each of the SUBSIDIARIES on
the one hand and ANTHEM and/or SELLER on the other hand shall be terminated
effective upon consummation of the CLOSING and all inter-AFFILIATE balances
(except balances among any of the SUBSIDIARIES) shall be terminated by payment
on or before consummation of the CLOSING.
Section 5.05. Notifications by SELLER. SELLER shall promptly
--------------------------------------
notify PURCHASER in writing of any (i) material violation or breach of, or
default under, this AGREEMENT by ANTHEM and/or SELLER, (ii) material inaccuracy
or misrepresentation made by ANTHEM and/or SELLER in this AGREEMENT, and/or
(iii) any condition to be satisfied by SELLER hereunder that cannot reasonably
be expected to be satisfied of which SELLER acquires KNOWLEDGE prior to the
CLOSING DATE. No notification made by SELLER pursuant to this Section 5.05
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shall be deemed to cure any breach of a representation or warranty made in this
AGREEMENT, nor shall any such notification be deemed to constitute or give rise
to a waiver (full or partial) of any condition precedent to PURCHASER'S
obligations under this AGREEMENT or otherwise affect any right of PURCHASER to
pursue breach of warranty or misrepresentation claims against ANTHEM and/or
SELLER.
Section 5.06. REQUIRED APPROVALS; Consents.
-------------------------------------------
(1) ANTHEM and/or SELLER shall (i) take all reasonable steps necessary
or appropriate to obtain, as promptly as possible, all REQUIRED APPROVALS
required of it, (ii) cooperate reasonably, and shall cause each of the
SUBSIDIARIES to cooperate reasonably, with PURCHASER in obtaining all REQUIRED
APPROVALS required of PURCHASER, and (iii) provide such information and
communications to governmental and regulatory authorities as they or PURCHASER
reasonably request in connection with obtaining any REQUIRED APPROVAL.
(2) Each of ANTHEM, SELLER, and the SUBSIDIARIES shall use reasonable
efforts to obtain each consent, waiver, and/or approval required under each
material contract to which it is a party in order that neither the execution and
delivery of this AGREEMENT by ANTHEM and SELLER, nor their consummation of the
transactions to be undertaken by them as contemplated thereby, constitutes a
breach or default, or gives rise to any right of termination, cancellation or
acceleration, of any such material contract.
Section 5.07. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. Each of ANTHEM and
----------------------------------------
SELLER shall (i) promptly make the filings required of it under the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the rules of the
Federal Trade Commission thereunder (collectively, the "HSR ACT"), (ii) comply
at the earliest practicable date with any request for additional information
received by it from the Federal Trade Commission or the Antitrust Division of
the Department of Justice pursuant to the HSR ACT, (iii) use all reasonable
efforts to assist PURCHASER in making filings required of PURCHASER under the
HSR ACT, and (iv) request early termination of the applicable waiting period
under the HSR ACT.
Section 5.08. Non-Solicitation. Without PURCHASER'S consent,
-------------------------------
ANTHEM and SELLER agree not to solicit any PERSON who is a senior management
employee of any of the SUBSIDIARIES on the date hereof to leave such employment
during the period of four (4) years commencing on the CLOSING DATE; provided,
however, that the foregoing restriction shall not apply to any such employee who
is also an employee of SELLER on the date hereof and to whom comparable
-37-
employment is not offered or continued by any of the SUBSIDIARIES during such
four-year period.
Section 5.09. ACQUISITION PROPOSALS. Except as contemplated by
------------------------------------
this AGREEMENT, none of ANTHEM, SELLER, and the SUBSIDIARIES, nor any officer,
director, affiliate, employee, representative or agent of any of them, shall
directly or indirectly solicit, initiate or participate in any way in
discussions or negotiations with, or provide any information or assistance to,
or enter into any agreement with, any PERSON or group of PERSONS concerning an
acquisition of a substantial equity interest in, or in a merger, consolidation,
liquidation, dissolution, disposition of assets (other than in the ordinary
course of business) of any of the SUBSIDIARIES or of all or any part of the
SHARES or of all or any part of the shares of SELLER now or hereafter
authorized, issued or outstanding (each, an "ACQUISITION PROPOSAL"), or assist
or participate in, facilitate or encourage any effort or attempt by any other
PERSON to do or seek to do any of the foregoing. SELLER shall promptly
communicate to PURCHASER the terms of any ACQUISITION PROPOSAL that it or any
such other PERSON may receive.
Section 5.10. Instruments. Any monies, checks, drafts, money
--------------------------
orders, postal notes and other instruments received after consummation of the
CLOSING by ANTHEM or SELLER in payment of any amounts due to any of the
SUBSIDIARIES shall forthwith after such receipt be transferred and delivered to
PURCHASER, as agent for the SUBSIDIARIES, by ANTHEM or SELLER, and each such
instrument made payable to ANTHEM or SELLER when so delivered shall bear all
endorsements required to effectuate the transfer thereof to any of the
SUBSIDIARIES, as appropriate.
Section 5.11. Transfer of Certain Assets by Seller. On or prior to
----------------------------------------------------
the Closing, in consideration of the payment by the Subsidiaries to the Seller
of an amount equal to the sum of Seller's pension reserves and Seller's FAS 106
liability less the amount of Seller's deferred tax assets associated with such
liabilities, all as of the date of such transfer, Seller shall sell, transfer
and convey unto the Subsidiaries and cause the Subsidiaries to acquire from
Seller all of Seller's right, title and interest in and to the assets set forth
on Schedule 5.11 hereto, free and clear of all claims, liens, security
interests, pledges, hypothecations, restrictions or other encumbrances, and the
Subsidiaries shall assume all of the unsatisfied liabilities of Seller set forth
in Schedule 5.11 hereto.
Section 5.12. Use of Names. ANTHEM specifically agrees that it
---------------------------
will not, either directly or indirectly, use or permit any of its AFFILIATES to
use the names "Shelby,"
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"Affirmative," "Insura" or any name which is confusingly similar thereto in
connection with its business or the insurance business generally after the
consummation of the CLOSING.
Section 5.13. [Deleted].
------------------------
Section 5.14. Pre-Closing Maintenance of Insurance and Reinsurance
-------------------------------------------------------------------
. From the date hereof through the CLOSING DATE, ANTHEM shall cause each of
SELLER and the SUBSIDIARIES to maintain in force (including necessary renewals
thereof) the insurance policies listed on Schedule 3.26 and the reinsurance
treaties or agreements listed on Schedule 3.25, except to the extent that they
may be replaced with materially equivalent policies or agreements appropriate to
insure or reinsure the assets, properties and business of each of the
SUBSIDIARIES to the same extent as currently insured or reinsured, as the case
may be; provided, however, that ANTHEM shall cause each of SELLER and the
SUBSIDIARIES to provide a copy or other confirmation of any such replacement
policies or agreements to the PURCHASER on or prior to the CLOSING DATE.
Section 5.15. Continuation of Certain Insurance. ANTHEM covenants
------------------------------------------------
and agrees to cause each of SELLER and the SUBSIDIARIES to complete and execute
such applications as may be reasonably necessary for PURCHASER to arrange for
the continuation or replacement of insurance at PURCHASER's expense for periods
after the CLOSING DATE.
Section 5.16. Certain Investments. Any cash flow of the
----------------------------------
SUBSIDIARIES which in the reasonably judgment of the senior management of any of
the SUBSIDIARIES is available for investment prior to the CLOSING DATE, whether
from sales of securities or otherwise, shall, to the extent reinvested, be used
to purchase United States Treasury obligations which mature in thirty (30) days
or less or in commercial paper with a rating of AA or better. Without the
consent of PURCHASER, none of the SUBSIDIARIES will sell any investment security
maturing in more than six (6) months after the proposed date of sale of the
security.
Section 5.17. Preservation of Permits and Services. ANTHEM shall
---------------------------------------------------
cause each of the SUBSIDIARIES to use reasonable efforts (i) to preserve all of
its PERMITS and the services of its present officers, employees, consultants and
agents, except where the loss of its PERMIT or the services of its said
personnel will not have a MATERIAL ADVERSE EFFECT, and (ii) to maintain its
present suppliers and customers and preserve its goodwill.
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Section 5.18. Confidential Nature of Information Obtained by the
-----------------------------------------------------------------
ANTHEM and SELLER. ANTHEM and SELLER shall keep confidential and shall not
-----------------
use in any manner any information or documents obtained from PURCHASER
concerning its assets, liabilities, properties, business and operations, unless
(i) readily ascertainable from public or published information, or trade
sources, (ii) already known or subsequently developed by ANTHEM or SELLER
independently of the transactions contemplated by this AGREEMENT, or (iii)
received from a third party not under any obligation to PURCHASER of which
ANTHEM or SELLER has KNOWLEDGE to keep information confidential.
ARTICLE 6
Covenants of PURCHASER
----------------------
Section 6.01. REQUIRED APPROVALS. PURCHASER shall take all steps
---------------------------------
necessary or appropriate to obtain, as promptly as possible, all REQUIRED
APPROVALS required of it and shall (i) cooperate reasonably with each of ANTHEM,
SELLER, and the SUBSIDIARIES in obtaining all REQUIRED APPROVALS required of any
of them and (ii) provide such information and communications to governmental and
regulatory authorities as they or SELLER reasonably request in connection with
obtaining any REQUIRED APPROVALS required of any party hereto.
Section 6.02. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. PURCHASER shall (i)
----------------------------------------
promptly make the filings required of it under the HSR ACT, (ii) comply at the
earliest practicable date with any request for additional information received
by it from the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR ACT, (iii) use all reasonable efforts
to assist each of ANTHEM and SELLER in making filings required of it under the
HSR ACT, (iv) pay the filing fees required to be paid in connection with such
filings under the HSR ACT, and (v) request early termination of the applicable
waiting period under the HSR ACT.
Section 6.03. Use of Name and Logo.
-----------------------------------
(1) As soon as is practicable, but in no event later than ninety (90)
days, after consummation of the CLOSING, PURCHASER shall cause ACIC to take all
necessary corporate action and make all necessary regulatory applications to
change its corporate name to a name that does not include the name "Anthem," or
any word or expression similar thereto or derivative thereof, or begin with the
letter "A," and shall diligently pursue the approval of such applications.
After approval of each such name change, PURCHASER shall promptly deliver to
-40-
ANTHEM a copy of the amendment to the articles or certificate of incorporation
of ACIC, certified by the Secretary of State of Ohio, reflecting such corporate
name change.
(2) PURCHASER will use its best efforts to cause each of the
SUBSIDIARIES to cease using, as soon as is practicable following consummation of
the CLOSING, any ANTHEM ▇▇▇▇ in any written or other communication; and, in any
event, PURCHASER will cause each of the SUBSIDIARIES to cease using, on or
before the later of (i) the 270th day next following the consummation of the
CLOSING, or (ii) the date on which all necessary regulatory approvals
contemplated by paragraph (1) of this Section 6.03 have been obtained, any
ANTHEM ▇▇▇▇ and any written or other communication that contains any ANTHEM
▇▇▇▇.
Section 6.04. Indemnification. PURCHASER agrees that all rights
------------------------------
to indemnification now existing in favor of any employee, agent, director or
officer of any of the SUBSIDIARIES, as provided in the articles or certificate
of incorporation, by-laws or regulations (or comparable document) of any of
them, shall survive the CLOSING.
Section 6.05. Continued Access by SELLER. At any time on or after
-----------------------------------------
the CLOSING DATE and for a period of five (5) years thereafter or, in connection
with the preparation, amendment or audit of one or more RETURNS of any of
ANTHEM, SELLER, and the SUBSIDIARIES, until each relevant tax year is closed by
applicable statutes of limitation, PURCHASER shall allow and enable each of
ANTHEM and SELLER, during regular business hours upon reasonable notice to
PURCHASER, through employees and representatives of ANTHEM or its AFFILIATE, to
examine and make copies of documents in the possession or under the control of
any of PURCHASER and the SUBSIDIARIES pertaining to business conducted by any of
the SUBSIDIARIES prior to the consummation of the CLOSING, in order to
facilitate the preparation, amendment or audit of (i) RETURNS of any of ANTHEM,
SELLER, and the SUBSIDIARIES; (ii) interim consolidated financial statements
therefor covering each fiscal quarter of each of ANTHEM and SELLER through the
consummation of the CLOSING; (iii) CONVENTION STATEMENTs of each of the
INSURERS; and (iv) QUARTERLY CONVENTION STATEMENTS of each of the INSURERS
covering each fiscal quarter of each through the consummation of the CLOSING.
Any information obtained pursuant to this Section 6.05 by SELLER shall be kept
confidential except as may otherwise be necessary in connection with the actions
described herein and/or as reflected or disclosed in said consolidated financial
statements and/or said QUARTERLY CONVENTION STATEMENTS. All reasonable out-of-
pocket costs and expenses incurred by PURCHASER in complying with this Section
-41-
6.05 shall be borne by ANTHEM, but such costs and expenses shall be limited to
those reasonable amounts paid to outside parties that would not otherwise be
paid but for the request of ANTHEM or SELLER.
Section 6.06. Conduct of Business. From the date hereof through
----------------------------------
the consummation of the CLOSING, PURCHASER shall use reasonable efforts to
conduct its affairs in such a manner that it will be able (i) to perform its
obligations hereunder, (ii) to consummate the transactions to be undertaken by
it as contemplated hereby, and (iii) to satisfy all conditions precedent to such
performance and consummation to be satisfied by it hereunder.
Section 6.07. Notifications by PURCHASER. PURCHASER shall
-----------------------------------------
promptly notify ANTHEM and SELLER in writing of any (i) material violation or
breach of, or default under, this AGREEMENT by PURCHASER, (ii) material
inaccuracy or misrepresentation made by PURCHASER in this AGREEMENT, and/or
(iii) any condition to be satisfied by PURCHASER hereunder that cannot
reasonably be expected to be satisfied of which PURCHASER acquires KNOWLEDGE
prior to the CLOSING DATE. No notification made by PURCHASER pursuant to this
Section 6.07 shall be deemed to cure any breach of a representation or warranty
made in this AGREEMENT, nor shall any such notification be deemed to constitute
or give rise to a waiver (full or partial) of any condition precedent to any
obligation of ANTHEM or SELLER under this AGREEMENT or otherwise affect any
right of ANTHEM or SELLER to pursue breach of warranty or misrepresentation
claims against PURCHASER.
Section 6.08. Non-Solicitation. In the event of termination of
-------------------------------
this AGREEMENT in accordance with its terms or upon a breach or violation of, or
default under, this AGREEMENT by PURCHASER, for a period of four (4) years from
the date hereof, PURCHASER agrees not to solicit, contract with or attempt to
contract, directly or indirectly, with any PERSON who is an officer or employee
of any of ANTHEM, SELLER, and the SUBSIDIARIES at the date hereof.
Section 6.09. Instruments. If any monies, checks, drafts, money
--------------------------
orders, postal notes and other instruments are received after the CLOSING by any
of PURCHASER and the SUBSIDIARIES in payment of any amounts due to ANTHEM or
SELLER, PURCHASER shall, forthwith after such receipt, cause the same (i) to be
transferred and delivered to ANTHEM, and (ii) when so delivered, to bear all
endorsements required to effectuate the transfer thereof to ANTHEM.
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ARTICLE 7
Joint Covenants of SELLER and PURCHASER
---------------------------------------
Section 7.01. Corporate Examinations and Investigations.
--------------------------------------------------------
(1) PURCHASER shall be entitled, through its employees and
representatives, to make such investigation of the assets, liabilities,
properties, business and operations of each of the SUBSIDIARIES, and such
examination of its books, records and financial condition, as PURCHASER elects.
Any such investigation and examination shall be conducted at reasonable times
and under reasonable circumstances so as not to interfere with the smooth
operation of any of ANTHEM, SELLER, and the SUBSIDIARIES, each of which ANTHEM
shall cause to cooperate fully therein. In order that PURCHASER might have full
opportunity to make such business, accounting and legal review, examination or
investigation as it may wish of the business and affairs of each of the
SUBSIDIARIES, ANTHEM shall cause each of the SUBSIDIARIES to furnish the
representatives of PURCHASER with access to all such information and documents
concerning its affairs as such representatives may reasonably request and shall
cause its officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with such representatives in connection with such review and
examination. PURCHASER shall promptly notify SELLER of any event, condition or
circumstance discovered during its investigation of any of the SUBSIDIARIES that
could constitute a breach or default under this AGREEMENT by ANTHEM or SELLER.
No notification made by PURCHASER pursuant to this Section 7.01 shall be deemed
to cure any breach of a representation or warranty made in this AGREEMENT, nor
shall any such notification be deemed to constitute to give rise to a waiver
(full or partial) of any condition precedent to PURCHASER's obligations under
this AGREEMENT or otherwise affect any right of PURCHASER to pursue breach of
warranty or misrepresentation claims against ANTHEM or SELLER.
(2) PURCHASER shall, and shall cause each of its directors, officers,
employees, agents and representatives (collectively, "PURCHASER'S
REPRESENTATIVES") to, use all information relating to any of ANTHEM, SELLER, and
the SUBSIDIARIES acquired by any of them pursuant to the provisions of this
AGREEMENT or in the course of negotiations with ANTHEM or SELLER or examination
of any of the SELLER and the SUBSIDIARIES only in connection with the
transactions contemplated hereby and shall cause all information obtained by any
of them pursuant to this AGREEMENT and such negotiations and examinations, to
the extent not publicly available, to be kept confidential. In the event of
termination of this AGREEMENT, PURCHASER will cause to be delivered to SELLER
the original and all copies of all documents, work papers and other material
obtained by any of PURCHASER and PURCHASER'S REPRESENTATIVES from any of ANTHEM,
-43-
SELLER, and the SUBSIDIARIES, without retaining (or permitting or suffering
retention by any of PURCHASER'S REPRESENTATIVES of) copies thereof, whether so
obtained before or after the date hereof, and PURCHASER shall not, and shall not
permit or suffer PURCHASER'S REPRESENTATIVES to, use or disclose, directly or
indirectly, any information relating to any of ANTHEM, SELLER, and the
SUBSIDIARIES acquired by any of them pursuant to the provisions of this
AGREEMENT or in the course of negotiations with ANTHEM or SELLER or examination
of any of the SUBSIDIARIES, and will cause all such information to be kept
confidential. All information relating to any of ANTHEM, SELLER, and the
SUBSIDIARIES acquired by PURCHASER and/or PURCHASER'S REPRESENTATIVES pursuant
to the provisions of this AGREEMENT or in the course of negotiations with or
examination of any of ANTHEM, SELLER, and the SUBSIDIARIES shall be deemed to be
confidential information under and shall be subject the terms and provisions of
that certain letter agreement made as of January 15, 1997 between PURCHASER and
Credit Suisse First Boston on behalf of ANTHEM (the "CONFIDENTIALITY
AGREEMENT").
Section 7.02. Expenses. Except as otherwise expressly provided
-----------------------
herein, each party to this AGREEMENT shall bear its own 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, legal counsel, actuaries and
accountants, whether or not the transactions contemplated by this AGREEMENT
shall be consummated.
Section 7.03. Further Assurances. Each of the parties to this
---------------------------------
AGREEMENT shall execute such documents and other papers and take such further
actions as may reasonably be required or desirable to carry out the provisions
hereof and to consummate the transactions contemplated hereby.
Section 7.04. Public Announcements. Except as may be required by
-----------------------------------
law, no party to this AGREEMENT shall make, encourage or permit disclosure of
any kind or form in respect of this AGREEMENT or the transactions contemplated
hereby unless ANTHEM and PURCHASER mutually agree in advance on the form, timing
and contents of any such disclosure, whether to the financial community, a
governmental agency, the public generally or otherwise.
Section 7.05. Certain Benefit Programs. ANTHEM and PURCHASER
---------------------------------------
agree that, effective upon consummation of the CLOSING:
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(1) Except to the extent required pursuant to the applicable
provisions of the PLANS, the CODE and ERISA, participation in the PLANS by the
employees and former employees (and eligible dependents of such employees and
former employees) of each of the SUBSIDIARIES shall terminate.
(2) PURCHASER shall cause each employee of each of the SUBSIDIARIES
(excluding any former employees) to be provided with employee benefits under
benefit plans which are similar to the benefits provided to employees of the
PURCHASER generally, such benefits to be determined in accordance with all
applicable laws in effect in the respective jurisdictions and subject to the
terms and conditions of the various plans as may be in effect from time to time.
(3) ANTHEM shall assume all liabilities under any deferred
compensation program, bonus program and retiree health program which have
accrued as of the CLOSING DATE with respect to each employee or former employee
of each of the SUBSIDIARIES.
Section 7.06 Managed Care Workers' Compensation Business '. Each
--------------------------------------------------------------------
of PURCHASER and SELLER shall negotiate with the other in good faith, and shall
------------
otherwise use all reasonable efforts to enter into, one or more agreements in
form and substance reasonably acceptable to each of them and pursuant to which
(i) PURCHASER shall permit ANTHEM and/or its AFFILIATE to continue to write
managed care workers' compensation business through one or more of the
SUBSIDIARIES for a period of two (2) years next following the consummation of
the CLOSING, (ii) ANTHEM shall maintain full responsibility for all aspects of
such business, both financial and operational, including the payment of all
CLAIMS, losses and loss adjustment expenses, with the result that PURCHASER
shall have no responsibility, liability or obligation for such business, (iii)
ANTHEM shall indemnify PURCHASER and hold it harmless from and against any and
all costs and expenses relating in any way to such business, and (iv) ANTHEM
shall have the irrevocable right, power and authority to cause one or more of
the SUBSIDIARIES to sell, by reinsurance or otherwise, all or any part of such
business and to cause the proceeds to such sale to be paid to and retained by
ANTHEM and/or its AFFILIATE, all at ANTHEM'S expense.
Section 7.07. Certain Insurance. Following consummation of the
--------------------------------
CLOSING, ANTHEM may elect to purchase insurance to insure its indemnification
risk arising under Section 10.01(i) and, in such event, PURCHASER shall, and
shall cause each of the SUBSIDIARIES to, (i) afford to ANTHEM reasonable access,
during regular business hours and upon reasonable notice, to its books and
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records and the cooperation of its employees, and (ii) allow ANTHEM to examine
and make copies of documents in its possession or under its control, all as
reasonably necessary in order to facilitate the purchase of such insurance by
ANTHEM.
Section 7.08. Further Assurances. Following the consummation of the
---------------------------------------------------------------------
CLOSING, each of the parties hereto shall execute such documents and other
-------
papers, and shall take such further actions, as may be reasonably requested by
the other of them to assure and/or confirm that (i) all of the assets identified
in Schedule 5.11 have been transferred to and acquired by one or more of the
SUBSIDIARIES and (ii) all of the liabilities identified in Schedule 5.11 have
been assumed by one or more of the SUBSIDIARIES.
ARTICLE 8
Conditions Precedent to CLOSING
-------------------------------
Section 8.01. Conditions to Obligations of All Parties. The
-------------------------------------------------------
respective obligations of the parties to this AGREEMENT to consummate the
transactions contemplated hereby are subject to the satisfaction, at or prior to
the CLOSING, of each of the following conditions precedent:
(1) No Injunction, etc. No party to this AGREEMENT shall be
-------------------
subject to any order, decree or injunction of a court of competent jurisdiction
that prevents or delays consummation of any of the transactions contemplated by
this AGREEMENT. No request for voluntary postponement of the CLOSING shall have
been received by any party to this AGREEMENT from any federal, state or local
governmental agency or department, nor shall any action, suit or proceeding
seeking to enjoin or restrain the CLOSING have been instituted or threatened by
any federal, state or local governmental agency or department. No court or
governmental or regulatory authority shall have taken any action prohibiting or
making illegal on the CLOSING DATE the transactions contemplated by this
AGREEMENT.
(2) HSR ACT Satisfied. The applicable provisions of the HSR ACT
-----------------
shall have been fully satisfied and any and all applicable waiting periods
thereunder shall have expired or otherwise terminated.
(3) REQUIRED APPROVALS. All REQUIRED APPROVALS shall have been
------------------
obtained and be in full force and effect, without conditions or limitations that
unreasonably restrict the ability of the parties hereto to perform this
AGREEMENT, and PURCHASER and SELLER shall have been furnished with appropriate
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evidence, reasonably satisfactory to them and their respective counsel, of the
granting of such consents and approvals.
(4) Managed Care Workers' Compensation Business. PURCHASER and
-------------------------------------------- -------------
SELLER shall have effected each of the agreements contemplated by Section 7.06.
Section 8.02. Additional Conditions to Obligations of PURCHASER.
----------------------------------------------------------------
The obligations of PURCHASER to consummate the transactions contemplated by this
AGREEMENT are subject to the satisfaction, at or prior to the CLOSING, of each
of the following conditions precedent, any one or more of which may be waived by
PURCHASER:
(1) Performance. Each of ANTHEM and SELLER shall, in all material
-----------
respects, have complied with, performed and satisfied the covenants and
conditions required by this AGREEMENT to be complied with, performed and
satisfied by it at or prior to the CLOSING.
(2) ANTHEM'S AND SELLER'S Warranties True. The representations and
-------------------------------------
warranties of ANTHEM and SELLER set forth in this AGREEMENT shall be true and
correct on and as of the CLOSING DATE, except for such inaccuracies or
deficiencies that would not have a MATERIAL ADVERSE EFFECT.
(3) Deliveries Tendered by ANTHEM and SELLER. ANTHEM and SELLER
----------------------------------------
shall have tendered the deliveries required of it pursuant to Section 2.04 and
elsewhere herein.
(4) Transfer Taxes. SELLER shall have paid, or caused to be paid,
--------------
all stock transfer and other taxes required to be paid in connection with the
sale and delivery to the PURCHASER of the SHARES, and shall have caused all
appropriate stock transfer tax stamps to be affixed to the certificate or
certificates representing the SHARES so sold and delivered.
Section 8.03. Additional Conditions to the Obligations of ANTHEM or
--------------------------------------------------------------------
SELLER. The obligation of ANTHEM or SELLER to consummate the transactions
------
contemplated by this AGREEMENT is subject to the satisfaction, at or prior to
the CLOSING, of each of the following conditions precedent, any one or more of
which may be waived by ANTHEM:
(1) Performance. PURCHASER shall, in all material respects, have
-----------
complied with, performed and satisfied the covenants and conditions required by
this AGREEMENT to be complied with, performed and satisfied by it at or prior to
the CLOSING.
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(2) PURCHASER'S Warranties True. The representations and
---------------------------
warranties of PURCHASER set forth in this AGREEMENT shall be true and correct on
and as of the CLOSING DATE, except for such inaccuracies or deficiencies that
would not have a MATERIAL ADVERSE EFFECT.
(3) Deliveries Tendered by PURCHASER. PURCHASER shall have tendered
--------------------------------
the deliveries required of it pursuant to Section 2.05 and elsewhere herein.
ARTICLE 9
Survival of Representations and Warranties
------------------------------------------
Section 9.01. Survival. The representations and warranties made
-----------------------
by the respective parties to this AGREEMENT shall survive the CLOSING and shall
expire on the second anniversary of the CLOSING DATE, except for (i) those of
ANTHEM and SELLER contained in Sections 3.04, 3.11 and 3.12, which shall not
expire, (ii) those of PURCHASER set forth in Sections 4.06 and 4.07, which shall
not expire, and those of ANTHEM and SELLER set forth in Section 11.01, which
shall expire upon the expiration of applicable statutes of limitation (giving
effect to any waiver or extension thereof).
ARTICLE 10
Indemnification
---------------
Section 10.01. Indemnification by ANTHEM. After consummation of
-----------------------------------------
the CLOSING, subject to the provisions of Section 10.04, ANTHEM shall indemnify
PURCHASER, and hold it harmless, from and against (i) any ADVERSE LOSS RESERVE
DEVELOPMENT in excess of $10,000,000 and (ii) every CLAIM incurred by or
asserted against any of PURCHASER and the SUBSIDIARIES that arises out of, or
results from a condition that would constitute, any breach of or default under
any warranty, agreement, covenant or other obligation of ANTHEM or SELLER under
this AGREEMENT. Notwithstanding the provisions of Section 10.04, ANTHEM shall
indemnify PURCHASER and hold it harmless against any and all CLAIMS made against
PURCHASER arising out of the NOTES, which indemnification shall not be subject
to any limitation.
Section 10.02. Indemnification by PURCHASER. After consummation
--------------------------------------------
of the CLOSING, subject to the provisions of Section 10.04, PURCHASER shall
indemnify each of ANTHEM and SELLER, and hold it harmless, from and against
every CLAIM incurred by or asserted against ANTHEM or SELLER that arises out of,
or results from a condition that would constitute, any breach of or default
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under any warranty, agreement, covenant or other obligation of PURCHASER
contained in this AGREEMENT.
Section 10.03. Third Party CLAIMS. If any CLAIM for which
----------------------------------
INDEMNITEE would be entitled to indemnification under this AGREEMENT arises out
of a claim or liability asserted against or sought to be collected from
INDEMNITEE by a third party, INDEMNITEE shall promptly give to INDEMNITOR a
CLAIM NOTICE in respect of such CLAIM. INDEMNITOR shall have thirty (30)
BUSINESS DAYS following the giving of a CLAIM NOTICE to it to notify INDEMNITEE
whether or not INDEMNITOR elects to defend INDEMNITEE in respect of such CLAIM;
and:
(1) if INDEMNITOR so elects to defend INDEMNITEE in respect of such
CLAIM, INDEMNITOR shall either settle or, by appropriate proceedings, defend
such claim; and INDEMNITEE shall cooperate as reasonably requested by INDEMNITOR
in connection with such settlement or defense, to the extent not involving
expense to INDEMNITEE. INDEMNITOR shall (i) have the right to control the
defense or settlement of the CLAIM involved, (ii) pay all costs and expenses of
such proceedings incurred by it, and (iii) pay the amount of any resulting
settlement, judgment or award if it shall be determined that such CLAIM is
subject to indemnification by INDEMNITOR under this AGREEMENT; provided,
however, that INDEMNITOR shall effect no settlement of such CLAIM if such
settlement would affect the liability of INDEMNITEE unless INDEMNITEE shall
consent thereto in writing, which consent shall not be unreasonably delayed or
withheld. If INDEMNITEE desires to participate in, without controlling, any
such defense or settlement by INDEMNITOR, it may do so at INDEMNITEE's sole cost
and expense.
(2) if INDEMNITOR shall not so elect to defend INDEMNITEE in respect
of such CLAIM, INDEMNITEE shall either settle or, by appropriate proceedings,
defend such CLAIM, and INDEMNITOR shall cooperate as reasonably requested by
INDEMNITEE in connection with such settlement or defense. INDEMNITEE shall (i)
have the right to control the defense or settlement of the CLAIM involved and
(ii) be indemnified by INDEMNITOR for its reasonable costs and expenses of such
defense, and for the amount of any resulting settlement, judgment or award, if
it shall be determined that such CLAIM is subject to indemnification by
INDEMNITOR under this AGREEMENT; provided, however, that INDEMNITEE shall effect
no settlement of such CLAIM if such settlement would affect the liability of
INDEMNITOR unless INDEMNITOR shall consent to such settlement in writing, which
consent shall not be unreasonably delayed or withheld. If INDEMNITOR desires to
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participate in, without controlling, any such defense or settlement by
INDEMNITEE, it may do so at its sole cost and expense.
Section 10.04. Limitations. Anything contained in this Article 10
---------------------------
or elsewhere to the contrary notwithstanding, PURCHASER shall not be entitled to
indemnification under Section 10.01 or otherwise in respect of this AGREEMENT:
(1) for any CLAIM in respect of which PURCHASER shall not have given a
CLAIM NOTICE to ANTHEM on or before the 548th day next following the CLOSING
DATE, other than a CLAIM arising out of a breach or inaccuracy of any
representation and warranty set forth in any of Sections 3.04, 3.11, 3.12, and
11.01;
(2) in respect of any breach of representation, warranty or covenant
of ANTHEM or SELLER hereunder (other than the breach of representations,
warranties or covenants set forth in Sections 3.12 and 11.01 of this AGREEMENT,
for which ANTHEM shall be completely liable) or any other act or omission of
ANTHEM or SELLER not resulting in CLAIMS exceeding $2,000,000 in the aggregate.
PURCHASER shall be entitled to indemnification hereunder for the full amount of
all CLAIMS in excess of $2,000,000, subject to the limitation set forth in
Section 10.04(3) herein.
(3) that exceeds the total, aggregate amount of $30,000,000.
Section 10.05. Closing Loss Reserve Reconciliation. Any
---------------------------------------------------
deficiencies in the CLOSING LOSS RESERVES shall be calculated and paid as
follows:
(1) As soon as reasonably practicable after it becomes available,
PURCHASER shall deliver to SELLER a statement setting forth the CLOSING LOSS
RESERVES recalculated as of the end of the calendar quarter ending immediately
prior to the second anniversary of the CLOSING DATE (the "ADJUSTED CLOSING LOSS
RESERVES"). The ADJUSTED CLOSING LOSS RESERVES shall equal the sum of (i) all
payments made subsequent to the consummation of the CLOSING for losses and loss
adjustment expenses, net of all recoveries paid or payable to any of the
INSURERS in respect thereof, with respect to all liabilities and obligations of
the INSURERS as of the CLOSING DATE under any and all insurance and reinsurance
contracts of any of the INSURERS and (ii) the amount of LOSS RESERVES, net of
reinsurance recoverables (other than intercompany reinsurance), as determined as
of the end of the most recently completed calendar quarter, necessary to make
good and sufficient provision for the settlement of all liabilities and
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obligations of the INSURERS as of the CLOSING DATE under any and all insurance
and reinsurance contracts of any of the INSURERS. PURCHASER shall engage the
actuarial firm at the time engaged by or on behalf of AFFILIATES of PURCHASER
that are property and casualty insurers, to certify their reserves, to perform
an actuarial review and certification of the ADJUSTED CLOSING LOSS RESERVES,
which review shall be conducted in accordance with generally accepted actuarial
standards and principles applied on a basis consistent with those applied in
establishing the CLOSING LOSS RESERVES. Such certification shall be delivered
to SELLER along with PURCHASER'S statement of the ADJUSTED CLOSING LOSS
RESERVES. The parties acknowledge and agree that it is their intent that, in
determining any ADVERSE LOSS RESERVE DEVELOPMENT, the LOSS RESERVES reflected in
each of the ADJUSTED CLOSING LOSS RESERVES and the CLOSING LOSS RESERVES shall
be determined in accordance with the same actuarial standards and principles and
otherwise on the same basis and shall be net of reinsurance recoverables (other
than intercompany reinsurance), notwithstanding the fact that the LOSS RESERVES
reflected in any financial statement referred to herein may be presented therein
on a different basis.
(2) After consummation of the CLOSING, PURCHASER shall cause each of
the INSURERS to adjust, settle and pay all of its obligations and liabilities as
of the CLOSING DATE under any and all of its insurance and reinsurance contracts
pursuant to appropriate standards and principles that are (i) generally accepted
in the property and casualty insurance industry and (ii) applied by each of the
INSURERS consistently during all periods following the consummation of the
CLOSING.
(3) If SELLER disputes PURCHASER'S determination of the ADJUSTED
CLOSING LOSS RESERVES, and if PURCHASER and SELLER are unable to resolve such
dispute within forty-five (45) days after such redetermination, they shall
jointly engage the INDEPENDENT ARBITER to determine such disputed item or items.
The INDEPENDENT ARBITER shall be asked to render its determination as to the
amount or treatment of the disputed item or items within ninety (90) days after
being retained. SELLER and PURCHASER shall each pay one-half of the cost of
hiring the INDEPENDENT ARBITER. The determination of the INDEPENDENT ARBITER
shall be final and binding on both parties.
(4) Within sixty (60) days following PURCHASER'S delivery to SELLER of
its statement setting forth the ADJUSTED CLOSING LOSS RESERVES, or within thirty
(30) days following the INDEPENDENT ARBITER'S determination rendered under
subsection (2) above, whichever is later, SELLER shall pay PURCHASER the amount,
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if any, by which the ADVERSE LOSS RESERVE DEVELOPMENT exceeds $10,000,000,
subject to the limitations set forth in Section 10.04(3).
(5) The indemnities set forth in this Section 10.05 shall be the sole
remedy of PURCHASER with respect to LOSS RESERVES under this AGREEMENT.
ARTICLE 11
Tax Matters
-----------
Section 11.01. Representations and Warranties. Each of ANTHEM and
----------------------------------------------
SELLER represents and warrants to PURCHASER that, except as disclosed in
reasonable detail in SELLER'S Disclosure Letter included as Schedule 3 or
elsewhere herein, or except as previously disclosed to PURCHASER in writing, as
of the date hereof:
(1) ANTHEM is the "common parent" of an "affiliated group" of
corporations (as those terms are used in Section 1504(a) of the CODE and the
Treasury Regulations promulgated under Section 1502 of the CODE) that includes
SELLER and the SUBSIDIARIES. ANTHEM, SELLER, and the SUBSIDIARIES are eligible
to file consolidated federal income tax returns for all taxable periods ending
on or before the date hereof for which the applicable statute of limitations for
the assessment of a federal income tax against any of the SUBSIDIARIES has not
lapsed.
(2) Each of ANTHEM, SELLER, and the SUBSIDIARIES has timely filed with
the appropriate taxing authorities all RETURNS (including, without limitation,
information returns and other material information) required to be filed through
the date hereof); the information set forth in said RETURNS is complete and
accurate in all material respects; and except as specified in Schedule 11.01(2),
none of ANTHEM, SELLER, and the SUBSIDIARIES has requested any extension of time
within which to file any RETURNS.
(3) All TAXES in respect of periods beginning before the date hereof
have been paid, or an adequate reserve has been established therefor, and none
of the SUBSIDIARIES has any liability for TAXES in excess of the amounts so paid
and reserves so established.
(4) Except as set forth in Schedule 11.01(4), no material deficiencies
for TAXES have been claimed, proposed or assessed by any taxing or other
governmental authority. Except as set forth in Schedule 11.01(4), there are no
pending or, to SELLER'S KNOWLEDGE, threatened audits, investigations or claims
for or relating to any material liability in respect of TAXES, and there are no
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matters under discussion with any governmental authorities with respect to TAXES
that in the reasonable judgment of any of ANTHEM, SELLER, and the SUBSIDIARIES
is likely to result in a material additional amount of TAXES. Audits of
federal, state and local RETURNS by the relevant taxing authorities have been
completed for each period identified in Schedule 11.01(4) and, except as set
forth in such Schedule, none of ANTHEM, SELLER, the SUBSIDIARIES has been
notified that any taxing authority intends to audit a RETURN for any other
period. Except as set forth in Schedule 11.01(4), no extension of a statute of
limitations relating to TAXES is in effect with respect to any of ANTHEM,
SELLER, and the SUBSIDIARIES.
(5) Each of the SUBSIDIARIES has withheld from its employees,
customers, and other payees (and timely paid to the appropriate governmental
authority) all amounts required by the tax withholding provisions of applicable
federal, state, local, and foreign laws (including, without limitation, income,
Social Security, and employment tax withholding for all types of compensation
and withholding or payments to non-United States PERSONS) in respect of TAXES
for all taxable periods through the date hereof.
(6) Schedule 11.01(6) sets forth, for each taxable period beginning
before the date hereof for which the applicable statute of limitations for the
assessment of an income or franchise tax against any of the SUBSIDIARIES has not
lapsed, (i) all jurisdictions in which any of the SUBSIDIARIES has filed an
income or franchise tax return and (ii) all consolidated, combined, unitary and
group income or franchise tax returns in which any of the SUBSIDIARIES has been
included. To SELLER'S KNOWLEDGE, no other jurisdiction has claimed in writing
that any of the and the SUBSIDIARIES is required to file an income or franchise
tax return in such jurisdiction.
(7) Except as provided on Schedule 11.01(7), no power of attorney has
been granted to any PERSON with respect to any of the SUBSIDIARIES relating to
any TAX for any taxable period.
(8) Except for the tax sharing agreements identified in Schedule
11.01(8), there is no contract, agreement, or intercompany account system under
which any of the SUBSIDIARIES has, or may at any time in the future have, an
obligation to assume, share, or contribute to the payment of any portion of a
TAX (or any amount calculated with reference to any portion of a TAX) determined
on a consolidated, combined, unitary or group basis with respect to any group of
corporations of which any of the SUBSIDIARIES is or was a member. One of said
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tax sharing agreements is dated February 24, 1992 and applies to the
SUBSIDIARIES only in respect of the consolidated federal income tax (the
"FEDERAL TAX SHARING AGREEMENT"), and one of said tax sharing agreements applies
to the SUBSIDIARIES only in respect of the consolidated Indiana income tax (the
"INDIANA TAX SHARING AGREEMENT").
(9) Except as set forth in Schedule 11.01(9), neither the acquisition
of the SUBSIDIARIES by PURCHASER nor any other transaction contemplated by this
AGREEMENT will cause any payment to be made by or on behalf of any of the
SUBSIDIARIES to be non-deductible, in whole or in part, for federal income tax
purposes by reason of Section 280(G) of the CODE.
(10) Neither ANTHEM nor SELLER is a "foreign person" as defined in
Section 1445(f)(3) of the CODE, and no TAX is required to be withheld pursuant
to Section 1445 of the CODE as a result of any transactions contemplated by this
AGREEMENT.
(11) To SELLER'S KNOWLEDGE, except as set forth in Schedule 11.01(11),
for federal income tax purposes, none of the SUBSIDIARIES is subject to any
joint venture, partnership or other arrangement or contract which is treated as
a partnership.
(12) No asset of any of the SUBSIDIARIES is property which is required
to be treated as being owned by any other PERSON pursuant to the so-called "safe
harbor lease" provisions of Section 168(f)(8) of the Internal Revenue CODE of
1954, as amended, and in effect before the enactment of the Tax Reform Act of
1986, nor is any such asset "tax exempt use property" within the meaning of
Section 168(h) of the CODE.
(13) None of the SUBSIDIARIES has filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the CODE (or any
corresponding provision of state, local or foreign income tax law) or agreed to
have Section 341(f)(2) of the CODE (or any corresponding provision of state,
local or foreign income tax law) apply to any disposition of any asset owned by
it.
(14) None of the SUBSIDIARIES has made or will make a deemed dividend
election under Treasury Regulations (S)1.1502-32(f)(2) or a consent dividend
election under Section 565 of the CODE.
(15) None of the SUBSIDIARIES has agreed to make, or is required to
make, any adjustment under Section 481(a) of the CODE by reason of a change in
accounting method or otherwise.
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(16) All material elections with respect to TAXES affecting any of the
SUBSIDIARIES as of the date hereof are set forth in Schedule 11.01(16).
Section 11.02. ANTHEM Indemnity. After consummation of the
--------------------------------
CLOSING, subject to the provisions of Article Ten and without affecting the
generality thereof, ANTHEM shall indemnify each of PURCHASER and the
SUBSIDIARIES, and hold it harmless, from and against all TAXES (i) with respect
to all taxable periods ending on or prior to the CLOSING DATE, (ii) with respect
to any taxable period beginning before the CLOSING DATE and ending after the
CLOSING DATE, but only with respect to the portion of such period up to and
including the CLOSING DATE ("PRE-CLOSING PARTIAL PERIOD"), or (iii) payable as a
result of a material breach of any representation or warranty set forth in
Section 11.01. Notwithstanding the foregoing and/or anything to the contrary
elsewhere herein, ANTHEM shall not be required to indemnify any of PURCHASER and
the SUBSIDIARIES for any TAX (x) to the extent of the reserves set forth on the
CLOSING BALANCE SHEET, or (y) payable as a result of any events occurring on the
CLOSING DATE, but after the consummation of the CLOSING, that are outside the
ordinary course of business. ANTHEM shall be entitled to any net refunds of
TAXES (including interest thereon) with respect to the periods described in
clauses (i) and (ii) above, except to the extent such refund arises as a result
of a carryback of a loss or other tax benefit from a period beginning after the
CLOSING DATE.
Section 11.03. PURCHASER Indemnity. After consummation of the
-----------------------------------
CLOSING, subject to the provisions of Article Ten and without affecting the
generality thereof, PURCHASER shall indemnify each of ANTHEM and SELLER, and
hold it harmless, from and against all TAXES (i) with respect to all taxable
periods beginning after the CLOSING DATE, (ii) with respect to any taxable
period beginning before the CLOSING DATE and ending after the CLOSING DATE, but
only with respect to the portion of such period beginning the day after the
CLOSING DATE ("POST-CLOSING PARTIAL PERIOD"), or (iii) payable as a result of
any events occurring on the CLOSING DATE, but after consummation of the CLOSING,
which are outside the ordinary course of business. PURCHASER shall be entitled
to all refunds of TAXES with respect to the periods described in clauses (i) and
(ii) above.
Section 11.04. Effect of Carryovers and Carrybacks . For purposes of
---------------------------------------------------
this Article 11, TAX or TAXES shall include the amount of TAXES that would have
been paid but for the application of any credit or net operating or capital loss
deduction attributable to periods beginning after the CLOSING DATE, or to any
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POST-CLOSING PARTIAL PERIOD, but shall not include amounts that would have been
paid but for the application of any credit or net operating or capital loss
deduction attributable to periods beginning on or prior to the CLOSING DATE or
to any PRE-CLOSING PARTIAL PERIOD.
Section 11.05. Payment for Tax Benefits Realized in Connection with
--------------------------------------------------------------------
Indemnity by ANTHEM or SELLER. If either ANTHEM or SELLER is required to
-----------------------------
make an additional payment (either directly to a governmental authority as a TAX
or to PURCHASER as an indemnity payment under Section 11.02) and, in connection
with such payment, any of PURCHASER and the SUBSIDIARIES obtains a deduction or
credit, PURCHASER shall pay to ANTHEM an amount equal to the actual tax savings
produced by such deduction or credit. The amount of any such tax savings for
any period shall be the amount of the reduction in TAXES reflected on any
consolidated federal income tax return or any foreign, state or local RETURN
(net of any resulting increases in TAXES reflected on any other such RETURN) for
such period as compared to the TAXES that would have been reflected on such
RETURN in the absence of such deduction or credit. Any deduction or credit not
resulting in an actual tax savings for the taxable period for which it relates
or for any earlier period shall be carried forward to succeeding taxable years
until used to the extent permitted by law. All payments pursuant to this
Section 11.05 shall be made within 30 days after the filing of the applicable
RETURN for the period in which such deduction or credit results in a reduction
in the TAXES paid by the entity receiving such deduction or credit. If
PURCHASER makes a payment pursuant to this Section 11.05 and it is later
determined that PURCHASER did not receive the actual tax savings (or portion
thereof) relating to such payment (including non-receipt of such tax benefit as
a result of the absorption of other losses or tax benefits incurred by any of
PURCHASER and the SUBSIDIARIES), ANTHEM shall promptly refund such payment (or
such allocable portion thereof) with interest (at the prevailing prime rate) to
PURCHASER.
Section 11.06. Allocation Between Partial Periods. Any TAXES for
--------------------------------------------------
a period including a PRE-CLOSING PARTIAL PERIOD and a POST-CLOSING PARTIAL
PERIOD shall be apportioned between such PRE-CLOSING PARTIAL PERIOD and such
POST-CLOSING PARTIAL PERIOD based, in the case of real and personal property
taxes, on a per diem basis and, in the case of other TAXES, on the actual
activities, taxable income or taxable loss of each of the SUBSIDIARIES during
such PRE-CLOSING PARTIAL PERIOD and such POST-CLOSING PARTIAL PERIOD.
Section 11.07. Filing of RETURNS. ANTHEM shall include the
---------------------------------
SUBSIDIARIES in the consolidated federal income tax return and in any
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consolidated, combined, or unitary state, local or foreign RETURN filed by
ANTHEM and/or SELLER for the period ending on or prior to the CLOSING DATE.
ANTHEM, with the assistance and cooperation of employees of the SUBSIDIARIES,
shall prepare books and working papers (including a closing of the books) which
will clearly demonstrate the income and activities of each of the SUBSIDIARIES
for the period ending on the CLOSING DATE and any PRE-CLOSING PARTIAL PERIOD.
PURCHASER shall include each of the SUBSIDIARIES in the consolidated federal
income tax return and in any consolidated, combined, or unitary state, local or
foreign tax return filed by PURCHASER for periods beginning after the CLOSING
DATE. An election under Treasury Regulations (S)1.1502-76(b)(5) (relating to
the 30-day election rules) shall not be made by any of the SUBSIDIARIES.
Section 11.08. Post-Closing Audits and Other Proceedings. ANTHEM
---------------------------------------------------------
and PURCHASER agree to give prompt notice to the other of each proposed
adjustment to any TAX for periods ending on or prior to the CLOSING DATE or any
other PRE-CLOSING PARTIAL PERIOD. ANTHEM and PURCHASER shall cooperate with
each other in the conduct of any audit or other proceedings involving any of the
SUBSIDIARIES for such periods and each may participate therein at its own
expense, provided that ANTHEM shall have the right to control the conduct of any
such audit or proceeding for which ANTHEM agrees that any resulting TAX is
covered by the indemnity provided in Section 11.02 of this AGREEMENT.
Notwithstanding the foregoing, ANTHEM may not settle or otherwise resolve any
such claim, suit or proceeding without the consent of PURCHASER, which consent
shall not be unreasonably withheld or delayed.
Section 11.09. Cooperation. Without limiting the generality of
---------------------------
Section 6.05, ANTHEM and PURCHASER shall furnish or cause to be furnished to the
other, as promptly as practicable following request therefor, such information
and assistance (including access to books, records and employees) relating to
the SUBSIDIARIES as is reasonably necessary for the preparation of any RETURN,
claim for refund or audit, and the prosecution or defense of any claim, suit or
proceeding relating to any proposed TAX adjustment. Furthermore, ANTHEM will
cooperate with PURCHASER in persuading the District Director of the Internal
Revenue Service to exercise his authority to limit the liability of the
SUBSIDIARIES under Treasury Regulations (S)1.1502-6 for TAXES of the affiliated
group of which ANTHEM is the common parent.
Section 11.10. Termination of Existing Tax Sharing AGREEMENTS.
--------------------------------------------------------------
The FEDERAL TAX SHARING AGREEMENT and the INDIANA TAX SHARING AGREEMENT and any
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similar arrangements with respect to or involving the SUBSIDIARIES shall be
terminated prior to the consummation of the CLOSING, and following such
termination, none of the SUBSIDIARIES shall be bound thereby or have any
liability thereunder for amounts due in respect of periods prior to such
termination.
Section 11.11. Section 338(h)(10) Election.
-------------------------------------------
(1) ANTHEM, SELLER and PURCHASER shall, at PURCHASER'S request, join
in making the elections provided for in Section 338(g) and Section 338(h)(10) of
the CODE and the Treasury regulations promulgated under Section 338 of the CODE
(the "Section 338 Regulations") (collectively, the "338 Elections") with respect
to the purchase of the SHARES. The parties shall make such other similar
elections as may be necessary to achieve substantially the same results to the
parties for state and local income or franchise tax purposes as the 338
Elections achieve for federal income tax purposes. For purposes of this
AGREEMENT, the term "338 Elections" shall include any such state or local tax
elections.
(2) PURCHASER must exercise its request to make the 338 Elections
within thirty (30) days after the later of (i) the date of delivery of the
CLOSING BALANCE SHEET by the AUDITORS to PURCHASER and (ii) the date of delivery
by SELLER and/or ANTHEM to PURCHASER of the statement to be made by PURCHASER
pursuant to Section 11.11(6). If the request is not made by PURCHASER within
this time frame, ANTHEM and SELLER shall not be obligated to make the 338
Elections.
(3) Within ninety (90) days after the CLOSING DATE, PURCHASER shall
provide to SELLER a schedule of the fair market values of all the material
assets of SELLER and the SUBSIDIARIES as of the CLOSING DATE. PURCHASER shall
bear the cost of any appraisal of such assets. The parties will negotiate in
good faith and use their reasonable efforts to agree on the fair market value of
all material assets of SELLER and the SUBSIDIARIES. To the extent that the
parties agree on such values, then each party shall apply such values in all
applicable filings related to the 338 Elections and in all relevant tax returns.
Whether or not the parties agree to any such values, SELLER and PURCHASER shall
each notify the other in writing as soon as reasonably practicable of any audit
adjustment or proposed audit adjustment by any taxing authority that affects the
"adjusted grossed up bases" and "modified deemed sales price" of such assets (as
those terms are defined in the Section 338 Regulations).
(4) If the 338 Elections are made, ANTHEM, SELLER and PURCHASER will
comply fully with all filing and other requirements necessary to effectuate the
338 Elections on a
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timely basis and agree to cooperate in good faith with each other in the
preparation and timely filing of any tax returns required to be filed in
connection with the making of the 338 Elections, including the exchange of
information and the joint preparation and filing of Form 8023 and related
schedules.
(5) All items of income, deduction, gain or loss recognized as a
result of, and in accordance with, the 338 Elections shall be included in the
consolidated federal income tax return that includes SELLER for its taxable
period that includes the CLOSING DATE. Any income, deduction, gain or loss
recognized as a result of, and in accordance with, the making of the 338
ELECTIONS under any state or local statute or regulation similar to Section
338(h)(10) of the Code shall be included in the consolidated, combined, or
unitary state or local income or franchise tax return that includes SELLER. All
taxes resulting from the 338 Elections, whether determined on a consolidated,
combined, unitary, or separate company basis, shall be paid by ANTHEM or SELLER.
(6) Notwithstanding anything in this AGREEMENT to the contrary,
PURCHASER shall be solely responsible for and pay to SELLER and/or ANTHEM (or
reimburse to SELLER and/or ANTHEM if SELLER and/or ANTHEM is legally obligated
to pay) any taxes or increased taxes resulting from or arising out of, directly
or indirectly, any election or deemed election pursuant to Section 338 of the
CODE made with respect to the purchase by PURCHASER of the SHARES and/or any
payment made by Purchaser pursuant to this Section 11.11(6). Within thirty (30)
days after receipt from PURCHASER of the schedule of fair market values
contemplated by Section 11.11(3), ANTHEM or SELLER shall deliver to PURCHASER a
statement of the payment to be made by PURCHASER pursuant to this Section
11.11(6) in the event that the 338 Elections are made, together with appropriate
workpapers, or a statement that no such payment is required. If PURCHASER and
ANTHEM disagree as to the amount set forth in such statement, and if such
disagreement cannot be resolved between ANTHEM and PURCHASER within ten (10)
BUSINESS DAYS after delivery of such statement to PURCHASER, the matter shall be
referred to the INDEPENDENT ARBITER for resolution, the statement that is the
subject of such dispute shall be adjusted as necessary to reflect such
resolution by the INDEPENDENT ARBITER, and the statement, as so adjusted by the
INDEPENDENT ARBITER, shall be final, conclusive and binding on the parties
hereto. Fees of the INDEPENDENT ARBITER for resolving any such dispute shall be
borne equally by PURCHASER and ANTHEM.
(7) If the 338 Elections are not made, each of PURCHASER and SELLER
shall negotiate with the other in good faith, and shall otherwise use all
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reasonable efforts to enter into, one or more agreements in form and substance
reasonably satisfactory to each of them and pursuant to which the PURCHASE PRICE
shall be allocated between the shares of SHELBY included in the SHARES and the
shares of ACIC included in the SHARES.
ARTICLE 12
Termination of AGREEMENT
------------------------
Section 12.01. Termination. This AGREEMENT may be terminated as
---------------------------
follows:
(1) by the mutual, written consent of PURCHASER and ANTHEM;
(2) by PURCHASER at any time after July 1, 1997 if, on the date of
such termination, (i) a condition precedent to the obligation of PURCHASER to
close hereunder has not been satisfied, through no fault of PURCHASER, or (ii)
the CLOSING has not been consummated for any reason other than a breach or
default hereunder by PURCHASER;
(3) by ANTHEM at any time after July 1, 1997 if, on the date of such
termination, (i) a condition precedent to the obligation of either ANTHEM or
SELLER to close hereunder has not been satisfied, through no fault of ANTHEM or
SELLER, or (ii) the CLOSING has not been consummated for any reason other than a
breach or default hereunder by either ANTHEM or SELLER; and
(4) By ANTHEM at any time after July 1, 1997 if any action, suit or
proceeding instituted by any governmental or regulatory authority and seeking to
modify, or to restrain or enjoin the consummation of, any of the transactions
contemplated hereby shall be pending; provided, that during the pendency of any
such action, suit or proceeding, the date specified in Section 12.01(2) after
which PURCHASER may terminate this AGREEMENT shall be extended to SEPTEMBER 1,
1997.
Section 12.02. Procedure for Termination. The termination of this
-----------------------------------------
AGREEMENT by any party hereto shall be effective only if previously authorized
by its board of directors and will be effective only after written notice
thereof (stating in reasonable detail the grounds therefor and signed by the
chairman of board or president of the terminating party) has been given to the
other party hereto.
Section 12.03. Effect of Termination. If this AGREEMENT is
-------------------------------------
terminated as provided elsewhere herein, it shall thereafter be void and of no
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further force and effect, the transactions contemplated hereby shall be
abandoned, and no party hereto shall have any liability in respect of such
termination or otherwise hereunder, except that (i) Sections 6.08, 7.01(2) and
7.02 and the CONFIDENTIALITY AGREEMENT shall remain in full force and effect and
(ii) if such termination is based upon a breach or default under any covenant or
agreement hereunder, unless the breaching or defaulting party is also entitled
to terminate this AGREEMENT, the breaching or defaulting party shall be liable
to the other party for its actual damages.
ARTICLE 13
Miscellaneous
-------------
Section 13.01. Notices. Any notice or other communication
-----------------------
required or permitted hereunder must be in writing and shall be deemed to have
been duly given when (i) delivered to the party to whom it is given personally,
(ii) deposited in the U.S. mail if sent by certified or registered mail (return
receipt requested), postage prepaid and addressed to the party to whom it is
given as provided immediately below, or (iii) sent by facsimile transmission if
transmitted to each telephone number specified immediately below for so giving
such notice or communication to the party to whom it is given:
(1) If to ANTHEM or SELLER, to:
Anthem Insurance Companies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Financial Officer
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
Facsimile Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
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(2) If to PURCHASER, to:
Vesta Insurance Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may from time to time by notice given in accordance with this
Section 13.01 to the other party hereto substitute a different address,
telephone number or PERSON for receipt of notices and communications hereunder
by the party giving such notice.
Section 13.02. Pronouns. The number and gender of each pronoun
------------------------
used herein shall be construed to be such number and gender as the context,
circumstances or its antecedent may require. The words "hereof," "herein,"
"hereto," "hereunder" and words of similar import shall be construed to refer to
this AGREEMENT as a whole, and not to any particular Article, Section or
provision, unless expressly stated otherwise.
Section 13.03. Assignment. This AGREEMENT shall be binding upon,
--------------------------
and shall inure to the benefit of and be enforceable by, the respective
successors and permitted assigns (including successive, as well as immediate,
successors and permitted assigns) of the parties hereto, but neither this
AGREEMENT nor any right hereunder may be assigned by any party without the
written consent of the other party hereto.
Section 13.04. No Third Party Beneficiaries. Nothing contained in
--------------------------------------------
this AGREEMENT is intended or shall be construed to afford to any PERSON, other
than a party hereto, any legal or equitable right, remedy or claim under or in
respect of this AGREEMENT or any provision hereof.
Section 13.05. Counterparts. This AGREEMENT may be executed in
----------------------------
one or more counterparts, each of which shall be deemed to be a duplicate
original, but all of which, taken together, shall be deemed to constitute a
single instrument; and each such counterpart may consist of multiple copies
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hereof, each signed by less than all, if together signed by all, of the parties
hereto.
Section 13.06. Entire Agreement; Amendment. This AGREEMENT and
-------------------------------------------
the CONFIDENTIALITY AGREEMENT constitute the entire understanding of the parties
hereto and supersede all prior and contemporaneous agreements between the
parties hereto in respect of the subject matter hereof and thereof. This
AGREEMENT may be amended only by a written instrument duly executed on behalf of
all parties hereto.
Section 13.07. Captions. The Article and Section headings and any
------------------------
other captions appearing in this AGREEMENT are included only for convenience of
reference and do not define, limit, explain or modify this AGREEMENT or its
interpretation, construction or meaning and are not to be construed as a part
hereof.
Section 13.08. Severability. If any provision of this AGREEMENT
----------------------------
shall be invalid or unenforceable for any reason, such invalidity or
enforceability shall not affect the validity or enforceability of any other
provision or portion hereof.
Section 13.09. Schedules. The Schedules referred to herein and
-------------------------
attached hereto are part of this AGREEMENT as if fully set forth herein.
Section 13.10. Governing Law; Venue. This AGREEMENT shall be
------------------------------------
governed by and construed and enforced in accordance with the internal laws of
the State of Indiana applicable to agreements made and to be performed entirely
within such state, without giving effect to the choice-of-law or conflict-of-
laws principles thereof. Any action, suit or proceeding in respect of or
arising from or out of this AGREEMENT must be prosecuted as to any party hereto
at Indianapolis, Indiana. Each party hereto consents to the exercise of
jurisdiction over its person by any court situated at Indianapolis, Indiana and
having jurisdiction over the subject matter of such action, suit or proceeding.
Adequate notice of any such action, suit or proceeding in any such court shall
conclusively be deemed to have been given to any party hereto against whom the
same is instituted if given to such party in accordance with the provisions of
this AGREEMENT or of the applicable rules of civil procedure or otherwise in
accordance with due process of law.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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The parties hereto have caused this Agreement to be duly executed to be
effective as of the date first above written.
ANTHEM: PURCHASER:
Anthem Insurance Companies, Vesta Insurance Group, Inc.
Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------ -----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
its CFO its President and
Chief Executive
Officer
SELLER:
Anthem Casualty Insurance
Group, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
its Treasurer
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