AGREEMENT AND PLAN OF MERGER
among
STANDARD MANAGEMENT CORPORATION,
STANDARD ACQUISITION CORPORATION
and
SAVERS LIFE INSURANCE COMPANY
Dated as of December 19, 1996
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS...........................................1
1.1 TERMS DEFINED 1
1.2 OTHER DEFINITIONAL PROVISIONS 1
ARTICLE II THE MERGER...........................................2
2.1 MERGER 2
2.2 EFFECTIVE TIME 2
2.3 TERMS OF THE MERGER 2
2.4 ARTICLES OF INCORPORATION, BYLAWS AND DIRECTORS AND OFFICERS 2
2.5 CONVERSION OF SECURITIES 2
2.6 STOCK ELECTION 3
2.7 ELECTION PROCEDURE 4
2.8 EXCHANGE AGENT 4
2.9 DIVIDENDS; TRANSFER TAXES 5
2.10 NO FRACTIONAL SECURITIES 6
2.11 RETURN OF EXCHANGE FUND AND FRACTIONAL SECURITIES FUND 6
2.12 ADJUSTMENT OF EXCHANGE RATIO 6
2.13 NO FURTHER OWNERSHIP RIGHTS IN SAVERS COMMON STOCK 7
2.14 DISSENTING SHARES 7
2.15 LOST CERTIFICATES 7
2.16 CLOSING OF COMPANY TRANSFER BOOKS 7
2.17 FURTHER ASSURANCES 7
2.18 CLOSING 8
ARTICLE III PERFORMANCE PREMIUM.................................8
3.1 DECEMBER 31, 1997 PERFORMANCE PREMIUM 8
3.2 DECEMBER 31, 1998 PERFORMANCE PREMIUM 8
3.3 ALLOCATION 9
3.4 CASH OR SMC COMMON STOCK 9
3.5 DELIVERY OF PERFORMANCE PREMIUMS 9
3.6 ARBITRATION 10
3.7 ASSIGNABILITY 10
3.8 CONTINGENT PAYMENT COMMITTEE 10
3.9 RIGHT TO OFFSET 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SAVERS............12
4.1 ORGANIZATION 12
4.2 AUTHORITY. 12
4.3 CAPITAL STOCK 13
4.4 NO SUBSIDIARIES 13
4.5 NO CONFLICTS OR VIOLATIONS 13
4.6 BOOKS AND RECORDS 14
4.7 SAP STATEMENTS 14
4.8 GAAP STATEMENTS 14
4.9 REGISTRATION STATEMENT AND PROXY STATEMENT 15
4.10 AVAILABILITY OF ASSETS 15
4.11 NO OTHER FINANCIAL STATEMENTS 15
4.12 RESERVES 15
4.13 ABSENCE OF CHANGES 16
4.14 NO UNDISCLOSED LIABILITIES 19
4.15 TAXES 19
4.16 LITIGATION 21
4.17 COMPLIANCE WITH LAWS 22
4.18 BENEFIT PLANS, ERISA 23
4.19 EMPLOYEE RELATIONS 26
4.20 PROPERTIES 26
4.21 ENVIRONMENTAL MATTERS 27
4.22 CONTRACTS 28
4.23 INSURANCE ISSUED BY SAVERS 30
4.24 THREATS OF CANCELLATION 31
4.25 LICENSES AND PERMITS 32
4.26 OPERATIONS INSURANCE 32
4.27 INTERCOMPANY ACCOUNTS 32
4.28 BANK ACCOUNTS 33
4.29 BROKERS 33
4.30 DISCLOSURE 33
4.31 STATE TAKEOVER STATUTES 33
4.32 SENSITIVE PAYMENTS 33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SMC................34
5.1 ORGANIZATION 34
5.2 AUTHORITY 34
5.3 NO CONFLICTS OR VIOLATIONS 34
5.4 REGISTRATION STATEMENT AND PROXY STATEMENT 35
5.5 LITIGATION 35
5.6 CAPITALIZATION 36
5.7 BROKERS 36
5.8 DISCLOSURE 36
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING SAC........36
6.1 ORGANIZATION AND STANDING 37
6.2 CAPITAL STRUCTURE 37
6.3 AUTHORITY 37
6.4 NO CONFLICTS OR VIOLATIONS 37
ARTICLE VII COVENANTS OF SAVERS................................38
7.1 CONDUCT OF BUSINESS 38
7.2 FINANCIAL STATEMENTS AND REPORTS 40
7.3 INVESTMENTS 40
7.4 EMPLOYEE MATTERS 40
7.5 NO CHARTER AMENDMENTS 41
7.6 NO ISSUANCE OF SECURITIES 41
7.7 NO DIVIDENDS 42
7.8 NO DISPOSAL OF PROPERTY 42
7.9 NO BREACH OR DEFAULT 42
7.10 NO INDEBTEDNESS 42
7.11 NO ACQUISITIONS 42
7.12 INTERCOMPANY LIABILITIES 42
7.13 TAX MATTERS 43
7.14 NOTICE AND CURE 43
ARTICLE VIII COVENANTS OF SMC..................................43
8.1 NOTICE AND CURE 43
8.2 FORM A FILING 43
8.3 ▇▇▇▇▇ ▇▇▇▇▇▇ TO BE APPOINTED A DIRECTOR 44
8.4 ELECTION OF COMMON STOCK PERFORMANCE PREMIUM PAYMENT 44
ARTICLE IX ADDITIONAL AGREEMENTS...............................44
9.1 STOCKHOLDER APPROVAL 44
9.2 REGISTRATION STATEMENT AND PROXY STATEMENT 44
9.3 STOCK EXCHANGE LISTING 45
9.4 REASONABLE EFFORTS 45
9.5 STATE TAKEOVER LAWS 45
9.6 IMPROVEMENTS ACT FILINGS 45
9.7 FINANCIAL STATEMENTS 46
9.8 CERTAIN NOTICES 46
ARTICLE X CONDITIONS OF BOTH PARTIES...........................46
10.1 STOCKHOLDER APPROVAL 46
10.2 NASDAQ LISTING 46
10.3 REGULATORY APPROVALS 47
10.4 REGISTRATION STATEMENT 47
ARTICLE XI CONDITIONS TO OBLIGATIONS OF SMC AND SAC............47
11.1 REPRESENTATIONS AND WARRANTIES 47
11.2 PERFORMANCE 47
11.3 CERTIFICATES OF OFFICER OF SAVERS 47
11.4 NO INJUNCTION 47
11.5 NO PROCEEDING OR LITIGATION 48
11.6 CONSENTS, AUTHORIZATIONS, ETC. 48
11.7 NO ADVERSE CHANGE 48
11.8 OPINION OF COUNSEL 48
11.9 APPROVAL BY FLEET AND CONSECO 48
11.10 EMPLOYMENT AGREEMENT 49
11.11 LOCKUP AGREEMENTS 49
11.12 DISSENTERS' RIGHTS 49
11.13 SMC STOCKHOLDERS APPROVAL 49
11.14 SAVERS ADJUSTED CAPITAL AND SURPLUS 49
11.15 SAVERS STOCKHOLDERS APPROVAL 49
ARTICLE XII CONDITIONS TO OBLIGATIONS OF SAVERS................49
12.1 REPRESENTATIONS AND WARRANTIES 49
12.2 PERFORMANCE 49
12.3 OFFICERS' CERTIFICATES 49
12.4 NO INJUNCTION 50
12.5 NO PROCEEDING OR LITIGATION 50
12.6 CONSENTS, AUTHORIZATIONS, ETC. 50
12.7 OPINION OF COUNSEL 50
ARTICLE XIII SURVIVAL OF PROVISIONS; REMEDIES..................50
13.1 SURVIVAL 50
13.2 AVAILABLE REMEDIES 51
ARTICLE XIV TERMINATION........................................51
14.1 TERMINATION 51
14.2 EFFECT OF TERMINATION 52
14.3 CERTAIN PAYMENTS 52
ARTICLE XV MISCELLANEOUS.......................................53
15.1 NOTICES 53
15.2 ENTIRE AGREEMENT 54
15.3 EXPENSES 55
15.4 PUBLIC ANNOUNCEMENTS 55
15.5 CONFIDENTIALITY 55
15.6 WAIVER 55
15.7 AMENDMENT 56
15.8 COUNTERPARTS 56
15.9 NO THIRD PARTY BENEFICIARY 56
15.10 GOVERNING LAW 56
15.11 BINDING EFFECT 56
15.12 ASSIGNMENT 56
15.13 HEADINGS, ETC. 56
15.14 INVALID PROVISIONS 56
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December _____, 1996, among
STANDARD MANAGEMENT CORPORATION, an Indiana corporation ("SMC"), STANDARD
ACQUISITION CORPORATION, a North Carolina corporation ("SAC") and SAVERS
LIFE INSURANCE COMPANY, a North Carolina domestic stock insurance company
("Savers") (SAC and Savers being hereinafter collectively referred to as
the "Constituent Corporations").
RECITALS
WHEREAS, subject to the terms hereof, SMC, SAC and Savers have agreed
to the statutory merger (the "Merger") of SAC and Savers upon the terms and
conditions set forth herein, pursuant to which each issued and outstanding
share of common stock, no par value, of Savers (the "Savers Common Stock")
will be converted into shares of the common stock, no par value, of SMC
("SMC Common Stock") and cash.
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a purchase; and
WHEREAS, SMC, SAC and Savers desire to make certain representations,
warranties and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants made herein and of the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 TERMS DEFINED. The capitalized terms used in this Merger
Agreement and not otherwise defined herein shall have the meanings
specified in EXHIBIT A, which Exhibit is incorporated herein by reference.
1.2 OTHER DEFINITIONAL PROVISIONS. Unless the context otherwise
requires, (a) references in this Merger Agreement to the singular number
shall include the plural, and the plural number shall include the singular;
(b) words denoting gender shall include the masculine, feminine and neuter;
(c) the words "hereof," "herein" and "hereunder" and words of similar
import refer to this Merger Agreement as a whole and not to any particular
provision of this Merger Agreement, (d) unless otherwise specified, all
Article and Section references pertain to this Merger Agreement, and all
references to Exhibits or Schedules are to the Exhibits or Schedules to
this Merger Agreement; (e) the term "or" means "and/or"; and (f) the phrase
"ordinary course of business and consistent with past practice" refers to
the business and practice of Savers.
ARTICLE II
THE MERGER
2.1 MERGER. Upon the terms and subject to the conditions hereof,
and in accordance with the North Carolina Business Corporation Act (the
"NCBCA"), SAC shall be merged with and into Savers at the Effective Time
(as hereinafter defined). At the election of SMC, any direct wholly-owned
subsidiary of SMC may be substituted for SAC as a constituent corporation
in the Merger. In such event, the parties agree to execute an appropriate
amendment to this Merger Agreement in order to reflect the foregoing.
Following the Merger, the separate corporate existence of SAC shall cease,
and Savers shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and
obligations of SAC in accordance with the NCBCA.
2.2 EFFECTIVE TIME. The Merger shall become effective when the
Articles of Merger (the "Articles of Merger"), executed in accordance with
the relevant provisions of the NCBCA, are filed with the Secretary of State
of the State of North Carolina; PROVIDED, HOWEVER, that, upon mutual
consent of the Constituent Corporations the Articles of Merger may provide
for a later date of effectiveness of the Merger not more than 90 days after
the date the Articles of Merger are filed. When used in this Merger
Agreement, the term "Effective Time" shall mean the later of the date and
time at which the Articles of Merger are accepted for record or such later
time established by the Articles of Merger. The filing of the Articles of
Merger shall be made as soon as practicable after the satisfaction or
waiver of the conditions to the Merger set forth herein.
2.3 TERMS OF THE MERGER. The Merger shall have the effects set
forth in Section 55-11-06 of the NCBCA.
2.4 ARTICLES OF INCORPORATION, BYLAWS AND DIRECTORS AND OFFICERS.
The Articles of Incorporation and Bylaws of SAC, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation and
Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law. The directors and officers of SAC
at the Effective Time shall be the directors and officers, respectively, of
the Surviving Corporation until their respective successors have been duly
elected or appointed in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation or by applicable law.
2.5 CONVERSION OF SECURITIES. As of the Effective Time, by virtue
of the Merger and without any action on the part of any stockholder of
Savers:
(a) All shares of Savers Common Stock that are held in the
treasury of Savers or by any wholly-owned Subsidiary of Savers and any
shares of Savers Common Stock owned by SMC, SAC or any other wholly-
owned Subsidiary of SMC shall be cancelled, and no capital stock of
SMC or other consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of capital stock of SAC
shall be converted into and become one fully paid and nonassessable
share of Common Stock, no par value per share, of the Surviving
Corporation.
(c) Subject to the provisions of SECTIONS 2.10 and 2.12
hereof, each share of Savers Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be
canceled in accordance with SECTION 2.5(A)) shall be converted into
(i) subject to SECTION 2.6, below, $2.00 in cash, plus (ii) $6.00 in
value of shares of SMC Common Stock, the number of such shares, to be
rounded to the nearest hundredth of a share, determined by dividing
$6.00 by the average of the trading prices as reported by the NASDAQ
National Market (the "Average Trading Price") of SMC Common Stock for
the ten (10) consecutive trading days ending on the fifth day prior to
the earlier of the SMC Stockholders Meeting or the Savers Stockholders
Meeting, plus (iii) the Performance Premium described in ARTICLE III,
below. All such shares of Savers Common Stock, when so converted,
shall no longer be outstanding and shall automatically be cancelled
and retired and each holder of a Certificate (as defined in SECTION
2.8(A)) representing any such shares shall cease to have any rights
with respect thereto, except the right to receive shares of SMC Common
Stock, cash as provided in this SECTION 2.5 and SECTION 2.6 and the
Performance Premium, certain dividends and other distributions as
contemplated by SECTION 2.9 and any cash, without interest, in lieu of
fractional shares to be issued or paid in consideration therefor upon
the surrender of such Certificate in accordance with SECTION 2.8.
(d) Each option to purchase Savers Common Stock ("Savers Stock
Option") outstanding immediately prior to the Effective Time shall be
converted into the right to receive cash from Savers equal in amount
with respect to each such option to the difference between $8.00 per
option share and the exercise price for each such option.
2.6 STOCK ELECTION. Each holder of Savers Common Stock may elect
to receive SMC Common Stock in lieu of the cash to which such holder would
otherwise be entitled pursuant to SECTION 2.5(C). In the event that any
holder of Savers Common Stock shall make such election, such holder shall
be entitled to receive, in lieu of the cash into which such Savers Common
Stock would otherwise be converted pursuant to SECTION 2.5(C), an
additional number of shares of SMC Common Stock, rounded to the nearest
hundredth of a share, determined by dividing $2.00 by the Average Trading
Price applied in SECTION 2.5(C).
2.7 ELECTION PROCEDURE. Each holder of shares of Savers Common
Stock may indicate (an "Election") in a request made in accordance with
this SECTION 2.7 whether such holder wishes to receive cash or SMC Common
Stock pursuant to SECTION 2.5(C)(II):
(a) SMC shall prepare a form (the "Form of Election") pursuant to
which each holder of Savers Common Stock may make an Election. The Form of
Election shall be mailed to stockholders of record of Savers as of the
record date for the Savers Stockholder Meeting and shall accompany the
Proxy Statement.
(b) Savers shall use reasonable commercial efforts to make the Form
of Election available to all persons who become stockholders of record of
Savers during the period between such record date and the fifth Business
Day prior to the date of the Savers Stockholders Meeting.
(c) An Election shall have been properly made only if the Exchange
Agent shall have received, by 5:00 p.m. on the last Business Day preceding
the date of the Savers Stockholders Meeting (the "Election Date") a Form of
Election properly completed and signed.
(d) Any holder of record of shares of Savers Common Stock may at any
time prior to the Election Date change his Election by written notice
received at or prior to the Election Date accompanied by a properly
completed Form of Election. SMC shall have the right in its sole
discretion to permit changes in Elections after the Election Date.
(e) Any holder of record of shares of Savers Common Stock may at any
time prior to the Election Date revoke his Election by written notice
received at or prior to the Election Date. Any Election relating to shares
of Savers Common Stock which become Dissenting Shares shall be deemed
automatically revoked as of the Election Date.
(f) SMC and Savers shall have the right to make rules, not
inconsistent with the terms of this Merger Agreement, governing the
validity of Forms of Election, the issuance and delivery of certificates
for shares of SMC Common Stock into which shares of Savers Common Stock are
converted in the Merger and the payment for the portion of shares of Savers
Common Stock converted into the right to receive cash in the Merger.
2.8 EXCHANGE AGENT.
(a) DELIVERY OF CERTIFICATES AND CASH. SMC shall authorize a
commercial bank (or such other person or persons as shall be acceptable to
SMC and Savers) to act as Exchange Agent hereunder (the "Exchange Agent").
As soon as practicable after the Effective Time, (i) SMC shall deposit with
the Exchange Agent in trust for the holders of certificates which
immediately prior to the Effective Time represented shares of Savers Common
Stock (the "Certificates") certificates representing the shares of SMC
Common Stock, into which the outstanding shares of Savers Common Stock have
been converted pursuant to SECTION 2.5(C)(I) and SECTION 2.6 and (ii) SMC
shall make available to the Surviving Corporation, which in turn shall
deposit with the Exchange Agent in trust for the holders of the
Certificates, the cash into which the outstanding shares of Savers Common
Stock have been converted pursuant to SECTION 2.5(C)(II), (such shares of
SMC Common Stock, together with any dividends or distributions with respect
thereto and such cash, being hereinafter referred to as the "Exchange
Fund").
(b) EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted pursuant to SECTION 2.5 and SECTION
2.6 a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Exchange Agent and shall
contain instructions for use in effecting the surrender of the Certificates
in exchange for certificates representing shares of SMC Common Stock and
cash). Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of SMC Common Stock
plus any cash which such holder has the right to receive pursuant to this
Article II, and the Certificate so surrendered shall forthwith be
cancelled. Until surrendered as contemplated by this SECTION 2.8, each
Certificate shall, at and after the Effective Time, be deemed to represent
only the right to receive, upon surrender of such Certificate, certificates
representing the appropriate number of shares of SMC Common Stock and the
appropriate amount of cash, cash in lieu of fractional shares as
contemplated by SECTION 2.10 and certain dividends and other distributions
as contemplated by SECTION 2.9.
2.9 DIVIDENDS; TRANSFER TAXES. No dividends or other distributions
that are declared on or after the Effective Time on SMC Common Stock or are
payable to the holders of record thereof on or after the Effective Time
will be paid to persons entitled by reason of the Merger to receive
certificates representing SMC Common Stock until such persons surrender
their Certificates, as provided in SECTION 2.8, and no cash payment
pursuant to SECTION 2.5(C)(II) or in lieu of fractional shares pursuant to
SECTION 2.10 shall be paid to any such holder until such holder of such
Certificate shall so surrender such Certificate. Subject to the effect of
applicable law, there shall be paid to the record holder of the
certificates representing such SMC Common Stock (i) at the time of such
surrender or as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with respect to whole
shares of such SMC Common Stock and having a record date on or after the
Effective Time and a payment date prior to such surrender and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the
amount of dividends or other distributions payable with respect to whole
shares of SMC Common Stock and having a record date on or after the
Effective Time but prior to surrender and a payment date subsequent to
surrender. In no event shall the person entitled to receive such dividends
or other distributions be entitled to receive interest on such dividends or
other distributions. If any cash or certificate representing shares of SMC
Common Stock is to be paid to or issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it shall be
a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates
for such shares of SMC Common Stock or delivery of such cash to a Person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
2.10 NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of SMC Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article II, and no
SMC dividend or other distribution or stock split shall relate to any
fractional security, and such fractional interests shall not entitle the
owner thereof to vote or to any rights of a security holder of SMC. In
lieu of any such fractional securities, each holder of Savers Common Stock
who would otherwise have been entitled to a fraction of a share of SMC
Common Stock upon surrender of Certificates for exchange pursuant to this
Article II will be paid, in addition to the cash to which such holder is
entitled pursuant to SECTION 2.5(C)(II), an amount in cash (without
interest) equal to such holder's proportionate interest in the net proceeds
from the sale or sales in the open market by the Exchange Agent, on behalf
of all such holders, of the aggregate fractional shares of SMC Common Stock
issued pursuant to this Article II. As soon as practicable following the
Effective Time, the Exchange Agent shall determine the excess of (x) the
number of full shares of SMC Common Stock delivered to the Exchange Agent
by SMC over (y) the aggregate number of full shares of SMC Common Stock to
be distributed to holders of Savers Common Stock pursuant to SECTION 2.8(B)
(such excess being herein called the "Excess Shares") and the Exchange
Agent, as agent for the former holders of Savers Common Stock, shall sell
the Excess Shares at the prevailing prices on the NASDAQ National Market.
The sale of the Excess Shares by the Exchange Agent shall be executed on
the NASDAQ National Market through one or more member firms of NASDAQ and
shall be executed in round lots to the extent practicable. SMC shall pay
all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of Excess Shares. Until the net proceeds of such
sale have been distributed to the former stockholders of Savers, the
Exchange Agent will hold such proceeds in trust for such former
stockholders (the "Fractional Securities Fund"). As soon as practicable
after the determination of the amount of cash to be paid to former
stockholders of Savers in lieu of any fractional interests, the Exchange
Agent shall make available in accordance with this Merger Agreement such
amounts to such former stockholders.
2.11 RETURN OF EXCHANGE FUND AND FRACTIONAL SECURITIES FUND. Any
portion of the Exchange Fund and the Fractional Securities Fund which
remains undistributed to the former stockholders of Savers for one year
after the Effective Time shall be delivered to SMC, upon demand of SMC, and
any former stockholders of Savers who have not theretofore complied with
this Article II shall thereafter look only to SMC for payment of their
claim for SMC Common Stock, cash, including any cash in lieu of fractional
shares of SMC Common Stock, and any dividends or distributions with respect
to SMC Common Stock.
2.12 ADJUSTMENT OF EXCHANGE RATIO. In the event of any
reclassification, stock split or stock dividend with respect to SMC Common
Stock (or if a record date with respect to any of the foregoing should
occur) between the time the exchange ratio is established and the Effective
Time, appropriate and proportionate adjustments, if any, shall be made to
the exchange ratios referred to in SECTIONS 2.5 and 2.6.
2.13 NO FURTHER OWNERSHIP RIGHTS IN SAVERS COMMON STOCK. All shares
of SMC Common Stock and cash issued or delivered upon the surrender for
exchange of Certificates in accordance with the terms hereof (including any
cash paid pursuant to SECTIONS 2.5(C)(II), 2.9 or 2.10) shall be deemed to
have been issued or delivered in full satisfaction of all rights pertaining
to the shares of Savers Common Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distribution with a record date prior to the Effective Time which may have
been declared or made by Savers on such shares of Savers Common Stock in
accordance with the terms of this Merger Agreement.
2.14 DISSENTING SHARES. Notwithstanding anything in this Merger
Agreement to the contrary, shares of Savers Common Stock which immediately
prior to the Effective Time are held by shareholders who have properly
exercised dissenters' rights under Article 13 of the NCBCA (the "Dissenting
Shares") shall not be converted as provided in SECTION 2.5 hereof, but the
holders of Dissenting Shares shall be entitled to receive such
consideration as shall be determined pursuant to Article 13 of the NCBCA;
PROVIDED, HOWEVER, that, if any such holder shall withdraw or lose such
holder's right to dissent and payment under the NCBCA, such holder's
outstanding shares of Savers Common Stock shall thereupon be deemed to have
been converted as of the Effective Time as provided in SECTION 2.5, without
any adjustment for interest, and such shares shall no longer be Dissenting
Shares. Savers shall give SMC prompt notice of any demands for payment
under Section 55-13-21 of Article 13 of the NCBCA received by Savers.
Except as required by applicable law, prior to the Effective Time, Savers
shall not, except with the prior written consent of SMC, make any payment
with respect to, or settle or offer to settle, any such demands.
2.15 LOST CERTIFICATES. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or
destroyed, the Exchange Agent shall deliver to such person the certificates
representing the SMC Common Stock and the amount of cash to which the
holder of such lost, stolen or destroyed certificate is entitled pursuant
to this Article II. When authorizing such payment in exchange for any
lost, stolen or destroyed Certificate, the person to whom such certificates
and cash are to be delivered shall, as a condition precedent to such
delivery, give the Surviving Corporation an affidavit of lost certificate
and indemnity agreement, indemnifying the Surviving Corporation against
loss, or a bond satisfactory to the Surviving Corporation in such sum as it
may direct or otherwise indemnify the Surviving Corporation in a manner
satisfactory to the Surviving Corporation against any claim that may be
made against SMC, SAC or the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
2.16 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of Savers shall be closed, and no transfer of shares
of Savers Common Stock shall thereafter be made. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall
be cancelled and exchanged as provided in this Article II.
2.17 FURTHER ASSURANCES. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, its right, title or interest
in, to or under any of the rights, privileges, powers, franchises,
properties or assets of either of the Constituent Corporations, or (b)
otherwise to carry out the purposes of this Merger Agreement, the Surviving
Corporation and its proper officers and directors or their designees shall
be authorized to execute and deliver, in the name and on behalf of either
of the Constituent Corporations in the Merger, all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of such
Constituent Corporations, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry
out the purposes of this Merger Agreement.
2.18 CLOSING. The closing of the transactions contemplated by this
Merger Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, in Winston-Salem, North Carolina at 10:00
a.m. local time, on the second business day after the day on which the last
of the conditions set forth in ARTICLES X, XI and XII hereof shall have
been fulfilled or waived or at such other time and place as SMC and Savers
shall agree.
ARTICLE III
PERFORMANCE PREMIUM
A holder of record of Savers Common Stock at the Effective Time
("Record Holder") shall have the following contractual right to receive
additional cash or, at the option of SMC, shares of SMC Common Stock,
subject to the terms and conditions contained herein:
3.1 DECEMBER 31, 1997 PERFORMANCE PREMIUM. If the Surviving
Corporation shall have after-tax net income on a statutory basis for the
full calendar year ending December 31, 1997 ("1997 Statutory Net Income")
in excess of 15% of the total consideration issued or payable to the
stockholders of Savers pursuant to SECTION 2.5 and SECTION 2.6 (the "1997
Required Return"), the Record Holders shall be entitled to receive a
Performance Premium (the "1997 Performance Premium") equal to (a) the
excess of 1997 Statutory Net Income over the 1997 Required Return, plus (b)
$1,000,000.
3.2 DECEMBER 31, 1998 PERFORMANCE PREMIUM. If the Surviving
Corporation shall have after-tax net income on a statutory basis for the
full calendar year ending December 31, 1998 ("1998 Statutory Net Income")
in excess of 15% of the total consideration issued or payable to the
stockholders of Savers pursuant to SECTION 2.5, SECTION 2.6 and SECTION 3.1
(the "1998 Required Return") the Record Holders shall be entitled to
receive a Performance Premium (the "1998 Performance Premium") equal to (a)
the excess of 1998 Statutory Net Income over the 1998 Required Return, plus
(b) $1,000,000.
3.3 ALLOCATION. The Performance Premiums, if any, shall be
allocated among the Record Holders on the basis of the number of shares of
Savers Common Stock held immediately prior to the Effective Time.
3.4 CASH OR SMC COMMON STOCK.
(a) The 1997 Performance Premium and the 1998 Performance
Premium shall be payable either in cash or in shares of SMC Common Stock,
or a combination thereof, at the sole option of SMC. If SMC elects to pay
either Performance Premium, in whole or in part, in shares of SMC Common
Stock, such payment shall consist of the number of shares of SMC Common
Stock determined by dividing (i) the amount of cash to which each Record
Holder would be entitled in payment of such Performance Payment by (ii) the
Average Trading Price of SMC Common Stock for the ten (10) consecutive
trading days ending on the fifth day prior to the payment date of such
Performance Premium, rounded to the nearest hundredth of a share.
(b) The 1997 Performance Premium and the 1998 Performance
Premium shall be calculated as of December 31, 1997, and December 31, 1998,
respectively, based upon the Surviving Corporation's Annual Statements for
the years then ended as filed with the North Carolina Department of
Insurance. The calculations shall be made no later than April 30, of 1998
and 1999, and the payment dates shall be no later than May 31 of 1998 and
1999, respectively.
3.5 DELIVERY OF PERFORMANCE PREMIUMS.
(a) Promptly after the calculation by SMC of the final 1997
Performance Premium and the final 1998 Performance Premium, as the case may
be, SMC shall deliver, to the Exchange Agent in trust for the Record
Holders, the cash or certificates representing the SMC Common Stock payable
with respect to such Performance Premium.
(b) In the event of any reclassification, stock split or stock
dividend with respect to the SMC Common Stock, any change of the SMC Common
Stock into other securities or any other dividend or distribution with
respect to the SMC Common Stock, other than normal quarterly dividends, as
the same may be adjusted from time to time in the ordinary course, or if a
record date with respect to any of the foregoing should occur between the
time the exchange ratio is established and the applicable payment date, the
number of shares determined in accordance herewith shall be appropriately
adjusted so as to afford the equitable benefit of such changes to the
Record Holders.
(c) Unless and until a certificate for the Performance Premium
shall be delivered to the Record Holders, no dividends payable to holders
of record of shares of SMC Common Stock shall be paid to the Record
Holders, but there shall be paid to the Record Holders (i) upon such
delivery to the Record Holders or as soon as practicable thereafter, the
amount, without interest, of the cash dividends with a record date after
the applicable payment date and a payment date prior to the date of
delivery of such certificate to the Record Holder; and (ii) at the
appropriate payment date or as soon as practicable thereafter, the amount,
without interest, of any cash dividends with a record date prior to the
delivery of the certificate to the Record Holders and a payment date
subsequent to such delivery; provided that, with respect to both (i) and
(ii) above, such Record Holder shall not be entitled to receive any such
payments for dividends with a record date for dividends prior to the
applicable payment date.
(d) The Exchange Agent shall deliver any certificates
representing the Performance Premium payable to the Record Holders pursuant
to this Article III to the Record Holders at the addresses of the Record
Holders as they appeared on the stock records of Savers at the Effective
Time or such other addresses as the Record Holders shall provide to the
Exchange Agent by written notice. No fractional shares of SMC Common Stock
shall be issued or delivered pursuant to this Article III. In lieu of any
fractional shares, any Record Holder entitled hereunder to receive
fractional shares of SMC Common Stock but for this SECTION 3.5(D) will be
entitled hereunder to receive instead a cash payment in lieu thereof,
without interest, in an amount equal to (i) the fraction of a share to
which such Record Holder would otherwise have been entitled multiplied by
(ii) the Average Trading Price of SMC Common Stock for the ten (10)
consecutive trading days ending on the fifth day prior to the payment date
of such Performance Premium, rounded to the nearest hundredth of a share.
3.6 ARBITRATION. Any dispute, controversy or claim arising in
connection with the calculation of the Performance Premiums shall be
settled by arbitration by three arbitrators to be appointed pursuant to the
Rules of the American Arbitration Association and said arbitration shall be
conducted in accordance with the Rules of said Association. The
arbitration shall be held in Indianapolis, Indiana. The determination of
the arbitrators shall be final and binding on the parties. The expenses of
the arbitration shall be borne equally between SMC on the one hand, and the
Record Holders, on the other. All fees and expenses of the Record Holders
shall be subtracted from the Performance Premiums; provided, however, that
the arbitrators shall have the discretion to award fees and expenses to the
prevailing party. Judgment upon the award entered by the arbitrators may
be entered in any court having jurisdiction.
3.7 ASSIGNABILITY. The right of each Record Holder to receive
shares of SMC Common Stock pursuant to this Merger Agreement may not be
assigned or transferred in any manner whatsoever except by operation of law
or by will.
3.8 CONTINGENT PAYMENT COMMITTEE. There shall be a "Contingent
Payment Committee" consisting of three (3) members having the duties set
forth in this ARTICLE III. The initial members will be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and J. ▇▇▇▇ ▇▇▇▇▇▇. Any vacancy in the Contingent
Payment Committee caused by the death, resignation or incapacity of a
member shall be filled by appointment by the remaining members of the
committee, or, if none, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. or ▇▇▇▇▇ ▇▇▇▇▇▇▇.
3.9 RIGHT TO OFFSET.
(a) SMC shall have the right to offset against the Performance
Premiums the amount of Losses (as defined in paragraph (b) hereof) incurred
by SMC or any of its Affiliates in connection with or arising from any
breach or alleged breach of any representation, warranty, covenant or
other undertaking of Savers contained in this Merger Agreement.
(b) For purposes of this Section, "Losses" shall mean any and
all losses, costs, obligations, liabilities, settlement payments, awards,
judgments, fines, penalties, damages and expenses (including, but not
limited to, any and all reasonable expenses incurred in connection with
investigating or defending any claim, action, suit or proceeding incident
to any matter indemnified against hereunder, and any and all reasonable
fees, and disbursements of legal counsel, investigators, accountants,
consultants and witnesses) arising after the Effective Time. Amounts
payable to the broker identified in SECTION 4.29 shall not be considered as
a Loss under this SECTION 3.9.
(c) Any claim on account of Losses which is not a Third Party
Claim (as defined below) shall be asserted by written notice (a "Claim
Notice") given by SMC to the Contingent Payment Committee. A Claim Notice
in respect to any action at law or suit in equity by a third party as to
which indemnification will be sought ("Third Party Claim") shall be given
promptly after the action, suit, investigation, or proceeding is commenced;
provided, further, that failure to give such notice shall not prejudice SMC
hereunder, unless such failure shall have materially prejudiced the Record
Holders. Any Claim Notice shall describe in reasonable detail the facts
giving rise to a claim for indemnification hereunder, the amount or method
of computation of the amount of such claim, and a reference to the
representation and warranty which is alleged to have been breached. The
Contingent Payment Committee shall have a period of 30 days within which to
respond thereto. If the Contingent Payment Committee does not respond
within such 30-day period, the Contingent Payment Committee shall be deemed
to have accepted the claim for offset against the Performance Premium and
shall have no further right to contest the validity of such claim. If the
Contingent Payment Committee does respond within such 30-day period and
rejects such claim in whole or in part, the dispute shall be resolved: (i)
by the written agreement between SMC and the Contingent Payment Committee;
(ii) by binding arbitration pursuant to SECTION 3.6 hereof; or (iii) by any
other means to which SMC and the Contingent Payment Committee shall agree.
(d) In the event any Claim Notice received by the Contingent
Payment Committee remains unresolved on any payment date, the portion of
the Performance Premium, if any, which is not subject to any claim of
offset shall be paid in accordance with this ARTICLE III.
(e) SMC shall have the right to conduct and control, through
counsel of its choosing, the defense, compromise or settlement of any Third
Party Claim as to which indemnification will be sought by SMC hereunder;
provided, that the Contingent Payment Committee may participate, through
counsel chosen by it and at its own expense, in the defense of any claim,
action or suit as to which SMC has so elected to conduct and control the
defense thereof; and provided, further, that SMC shall not, without the
written consent of the Contingent Payment Committee (which written consent
shall not be unreasonably withheld), pay, compromise or settle any such
claim, action or suit, except that no such consent shall be required if,
following a written request from SMC, the Contingent Payment Committee
shall fail, within 14 days after the making of such request, to acknowledge
and agree in writing that, if such claim, action or suit shall be adversely
determined, the Contingent Payment Committee, through the provisions of the
offset continued in this SECTION 3.9, has an obligation to provide
indemnification hereunder to SMC. Notwithstanding the foregoing, SMC shall
have the right to pay, settle or compromise any such claim, action or suit
without such consent, provided that in such event SMC shall waive any right
to indemnity therefor hereunder unless such consent is unreasonably
withheld.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SAVERS
Savers hereby represents and warrants to SMC as follows:
4.1 ORGANIZATION. Savers is a domestic stock insurance company
duly organized, validly existing and in good standing under the laws of the
State of North Carolina and has full corporate power and authority to enter
into this Merger Agreement and to perform its obligations under this Merger
Agreement. Except as disclosed in SECTION 4.1 of the Disclosure Schedule,
Savers is duly licensed, qualified, or admitted to do business as an
insurance company and is in good standing in all jurisdictions in which the
failure to be so licensed, qualified, or admitted and in good standing,
individually or in the aggregate with other such failures, has or may
reasonably be expected to have a material adverse effect on the validity or
enforceability of this Merger Agreement, on the ability of Savers to
perform its obligations under this Merger Agreement, or on the Business or
Condition of Savers. SECTION 4.1 of the Disclosure Schedule contains a true
and complete list of the states in which Savers is licensed to write life
and health insurance. Savers has furnished to SMC true and complete copies
of the Articles of Incorporation (as certified by the appropriate
governmental or regulatory authorities) and the Bylaws of Savers, including
all amendments thereto. Savers has made available to SMC the minute books
and stock records of Savers. Such minute books do not omit any material
minutes of meetings or written resolutions of the board of directors,
committees of the board of directors or shareholders of Savers. Such stock
records are accurate and complete in all material respects.
4.2 AUTHORITY. The Board of Directors of Savers has duly and
validly approved this Merger Agreement and the transactions contemplated
hereby. The shareholders of Savers must approve the Merger. Subject to
and upon the prior approval by the shareholders of Savers, this Merger
Agreement constitutes a legal, valid, and binding obligation of Savers and
is enforceable against Savers in accordance with its terms, except to the
extent that (a) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar Laws now or hereafter in
effect relating to or limiting creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of
the court or other similar Person before which any proceeding therefor may
be brought.
4.3 CAPITAL STOCK. The authorized common capital stock of Savers
consists of 20,000,000 shares of common stock, no par value per share, of
which 1,779,908 shares are issued and outstanding at the date hereof, all
of which shares are validly issued and outstanding, fully paid and
nonassessable. Except as disclosed in SECTION 4.3 of the Disclosure
Schedule, there are no outstanding securities, obligations, rights,
subscriptions, warrants, options, charter or founders insurance policies,
phantom stock rights, or (except for this Merger Agreement) other Contracts
of any kind that give any Person the right to (a) purchase or otherwise
receive or be issued any shares of capital stock of Savers (or any interest
therein) or any security or Liability of any kind convertible into or
exchangeable for any shares of capital stock of Savers (or any interest
therein) or (b) receive any benefits or rights similar to any rights
enjoyed by or accruing to a holder of the Common Stock, or any rights to
participate in the equity, income, or election of directors or officers of
Savers. There are no obligations of Savers to repurchase, redeem or
otherwise acquire any of Savers' securities.
4.4 NO SUBSIDIARIES. Savers does not control (whether directly or
indirectly, whether through the ownership of securities or by Contract or
proxy, and whether alone or in combination with others) any corporation,
partnership, business organization, or other similar Person.
4.5 NO CONFLICTS OR VIOLATIONS. The execution and delivery of this
Merger Agreement by Savers does not, and the performance by Savers of its
obligations under this Merger Agreement will not:
(a) subject to obtaining the approvals contemplated by SECTION
4.5(E) of the Disclosure Schedule hereof, violate any term or
provisions of any Law or any writ, judgment, decree, injunction, or
similar order applicable to Savers;
(b) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any of the terms, conditions, or provisions of the Articles of
Incorporation or Bylaws of Savers;
(c) result in the creation or imposition of any Lien upon
Savers or any of its Assets and Properties that individually or in
the aggregate with any other Liens has or may reasonably be expected
to have a material adverse effect on the validity or enforceability of
this Merger Agreement, on the ability of Savers to perform its
obligations under this Merger Agreement, or on the Business or
Condition of Savers or the Surviving Corporation;
(d) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, or give to any Person any right of termination, cancellation,
acceleration, or modification in or with respect to, any Contract to
which Savers is a party or by which any of its Assets or Properties
may be bound and as to which any such conflicts, violations, breaches,
defaults, or rights individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the
validity or enforceability of this Merger Agreement, on the ability of
Savers to perform its obligations under this Merger Agreement, or on
the Business or Condition of Savers or the Surviving Corporation; or
(e) require Savers to obtain any consent, approval, or action
of, or make any filing with or give any notice to, any Person except:
(i) as disclosed in SECTION 4.5(E) of the Disclosure Schedule; or
(ii) those which the failure to obtain, make, or give individually or
in the aggregate with any other such failures has or may reasonably be
expected to have no material adverse effect on the validity or
enforceability of this Merger Agreement, on the ability of Savers to
perform its obligations under this Merger Agreement, or on the
Business or Condition of Savers or the Surviving Corporation.
4.6 BOOKS AND RECORDS. Except as disclosed in SECTION 4.6 of the
Disclosure Schedule, the minute books and other similar records of Savers
contain a true and complete record, in all material respects, of all
actions taken at all meetings and by all written consents in lieu of
meetings of the stockholders, Board of Directors, and each committee
thereof of Savers. The Books and Records of Savers accurately reflect in
all material respects the Business or Condition of Savers, and have been
maintained in all material respects in accordance with good business and
bookkeeping practices.
4.7 SAP STATEMENTS. Savers has previously delivered to SMC true
and complete copies of the Annual Statements, and audited SAP basis
financial statements of Savers for each of the years ended December 31,
1993, 1994, and 1995, and unaudited SAP basis financial statements of
Savers for the nine months ended September 30, 1996 (and the notes relating
thereto, whether or not included therein). Except as disclosed in
SECTION 4.7 of the Disclosure Schedule, each such SAP Statement complied in
all material respects with all applicable Laws when so filed, and all
material deficiencies known to Savers with respect to any such SAP
Statement have been cured or corrected. Each such SAP Statement (and the
notes relating thereto, whether or not included therein), including,
without limitation, each balance sheet and each of the statements of
operations, capital and surplus account, and cash flow contained in the
respective SAP Statement, was prepared in accordance with SAP, is true and
complete in all material respects, and fairly presents the financial
condition, the Assets and Properties, and the Liabilities of Savers as of
the respective dates thereof and the results of operations and changes in
capital and surplus and in cash flow of Savers for and during the
respective periods covered thereby.
4.8 GAAP STATEMENTS. SECTION 4.8 of the Disclosure Schedule
contains (i) the audited balance sheets of Savers as of December 31, 1993,
1994 and 1995 and the related statements of income, stockholders' equity
and cash flows for the years then ended, together with the appropriate
notes to such financial statements, and (ii) the unaudited balance sheet of
Savers as of September 30, 1996 and 1995 and the related statements of
income and cash flows for the nine months then ended. Except as set forth
therein or in the notes thereto, such balance sheets and statements of
income and cash flows, have been prepared in conformity with generally
accepted accounting principles consistently applied except as otherwise
noted, and such balance sheets and related statements of income and cash
flows present fairly the financial position and results of operations of
Savers as of their respective dates and for the respective periods covered
thereby.
4.9 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by Savers for inclusion or
incorporation by reference in the Registration Statement or the proxy
statement (together with any amendments or supplements thereto, the "Proxy
Statement") relating to the Stockholders Meetings will (i) in the case of
the Registration Statement, at the time it becomes effective and at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading or (ii) in the case of the
Proxy Statement, at the time of the mailing of the Proxy Statement and at
the time of each Stockholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to Savers or its
officers and directors should occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the Registration
Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Savers and/or SMC as appropriate. The
Registration Statement will comply (with respect to Savers) as to form in
all material respects with the provisions of the Securities Act, and the
Proxy Statement will (with respect to Savers) comply as to form in all
material respects with the requirements of the Exchange Act.
4.10 AVAILABILITY OF ASSETS. Except as set forth in SECTION 4.10 of
the Disclosure Schedule, Savers owns all of the assets used in its Business
(including, but not limited to, all books, records, computers and computer
programs and data processing systems) and all such assets are in good
condition (subject to normal wear and tear) and serviceable condition and
are suitable for the uses for which intended.
4.11 NO OTHER FINANCIAL STATEMENTS. Except for the financial
statements described in SECTION 4.7 and SECTION 4.8 (collectively, the
"Financial Statements"), since September 30, 1996 no other financial
statements have been prepared by or with respect to Savers (whether on a
GAAP, SAP, or other basis).
4.12 RESERVES. All reserves and other similar amounts with respect
to insurance and annuities as established or reflected in the SAP
Statements of Savers dated as of September 30, 1996 (including, without
limitation, the reserves and amounts reflected respectively on lines 1
through 11.3 of page 3 of the September 30, 1996 Quarterly Statement), were
determined in accordance with generally accepted actuarial principles that
are in accordance with those called for by the provisions of the related
insurance and annuity Contracts and in the related reinsurance,
coinsurance, and other similar Contracts of Savers, and meet the
requirements of the insurance Laws of the State of North Carolina and
states in which such insurance and annuity Contracts were issued or
delivered. All such reserves and other similar amounts will be adequate
(under generally accepted actuarial principles consistently applied) to
cover the total amount of all reasonably anticipated matured and unmatured
benefits, dividends, claims, and other Liabilities of Savers under all
insurance and annuity Contracts under which Savers has or will have any
Liability (including, without limitation, any Liability arising under or as
a result of any reinsurance, coinsurance, or other similar Contract) on the
respective dates of such SAP Statements. Savers owns assets that qualify
as legal reserve assets under applicable insurance Laws in an amount at
least equal to all such required reserves and other similar amounts.
4.13 ABSENCE OF CHANGES. Except as disclosed in SECTION 4.13 of the
Disclosure Schedule or as specifically reflected in the September 30, 1996
SAP Statement, or except for changes or developments relating to the
conduct of the Business of Savers after the date of this Merger Agreement
in conformity with this Merger Agreement, since December 31, 1995, there
has not been, occurred, or arisen any change in, or any event (including
without limitation any damage, destruction, or loss whether or not covered
by insurance), condition, or state of facts of any character that
individually or in the aggregate has or may reasonably be expected to have
a material adverse effect on the Business or Condition of Savers. Except
as disclosed in SECTION 4.13 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below), or except as
specifically reflected in the September 30, 1996 SAP Statement, since
December 31, 1995, Savers has operated only in the ordinary course of
business and consistent with past practice, and (without limiting the
generality of the foregoing) there has not been, occurred, or arisen:
(a) any declaration, setting aside, or payment of any dividend
or other distribution in respect of the capital stock of Savers or any
direct or indirect redemption, purchase, or other acquisition by
Savers of any such stock or of any interest in or right to acquire any
such stock;
(b) any employment, deferred compensation, or other salary,
wage, or compensation Contract entered into between Savers and any of
its officers, directors, employees, agents, consultants, or similar
representatives, except for normal and customary Contracts with
officers, employees, agents and consultants in the ordinary course of
business and consistent with past practices; or any increase in the
salary, wages, or other compensation of any kind, whether current or
deferred, of any officer, director, employee, agent, consultant, or
other similar representative of Savers other than routine increases
that were made in the ordinary course of business and consistent with
past practices; or any creation of any Benefit Plan or any
contribution to or amendment or modification of any Benefit Plan;
(c) any issuance, sale, or disposition by Savers of any
debenture, note, stock, or other security issued by Savers, or any
modification or amendment of any right of the holder of any
outstanding debenture, note, stock, or other security issued by
Savers;
(d) any Lien created on or in any of the Assets and Properties
of Savers, or assumed by Savers with respect to any of such Assets and
Properties, which Lien relates to Liabilities individually or in the
aggregate exceeding $25,000 for Savers or which Lien individually or
in the aggregate with any other Liens has or may reasonably be
expected to have a material adverse effect on the Business or
Condition of Savers or the Surviving Corporation;
(e) any prepayment of any Liabilities individually or in the
aggregate exceeding $10,000;
(f) any Liability involving the borrowing of money by Savers;
(g) any Liability incurred by Savers in any transaction (other
than pursuant to any insurance or annuity Contract entered into in the
ordinary course of business and consistent with past practice) not
involving the borrowing of money;
(h) any damage, destruction, or loss (whether or not covered by
insurance) affecting any of the Assets and Properties of Savers, which
damage, destruction, or loss individually exceeds $25,000 or the
result of which individually or in the aggregate has or may reasonably
be expected to have a material adverse effect on the Business or
Condition of Savers or the Surviving Corporation;
(i) any work stoppage, strike, slowdown, other labor
difficulty, or (to the best knowledge of Savers) union organizational
campaign (in process or threatened) at or affecting Savers;
(j) any material change in any underwriting, actuarial,
investment, financial reporting, or accounting practices or policies
followed by Savers, or in any assumption underlying such a practices
or policies, or in any method of calculating any bad debt,
contingency, or other reserve for financial reporting purposes or for
any other accounting purposes;
(k) any payment, discharge, or satisfaction by Savers of any
Lien or Liability other than Liens or Liabilities that were paid,
discharged, or satisfied since December 31, 1995 in the ordinary
course of business and consistent with past practice, or were paid,
discharged, or satisfied as required under this Merger Agreement;
(l) any cancellation of any Liability owed to Savers by any
other Person;
(m) any write-off or write-down of, or any determination to
write off or down any of, the Assets and Properties of Savers or any
portion thereof, except for write-offs or write-downs that do not
exceed $10,000 individually or in the aggregate for Savers;
(n) any sale, transfer, or conveyance of any investments, or
any other Assets and Properties, of Savers with an individual book
value or with an aggregate book value in excess of $10,000, except as
contemplated in SECTION 7.3, and except in the ordinary course of
business and consistent with past practices;
(o) any amendment, termination, waiver, disposal, or lapse of,
or other failure to preserve, any license, permit, or other form of
authorization of Savers, the result of which individually or in the
aggregate has or may reasonably be expected to have a material adverse
effect on the Business or Condition of Savers or the Surviving
Corporation;
(p) any transaction or arrangement under which Savers paid,
lent, or advanced any amount to or in respect of, or sold,
transferred, or leased any of its Assets and Properties or any service
to, (i) any employee, officer, director or shareholder of Savers
(except for payments of salaries and wages in the ordinary course of
business and consistent with past practice, and except for payments
made pursuant to any Contract disclosed in SECTION 4.13(B) or
SECTION 4.22(A) of the Disclosure Schedule), or of any Affiliate of
Savers, or of any such employee, officer, director or shareholder;
(ii) any business or other Person in which Savers, any such employee,
officer, director or shareholder, or any such Affiliate has any
material interest, except for advances made to, or reimbursements of,
officers or directors of Savers for travel and other business expenses
in reasonable amounts in the ordinary course of business and
consistent with past practice; or any Affiliate of Savers pursuant to
any Contract of the type described in SECTION 4.22(G);
(q) any material amendment of, or any failure to perform all of
its obligations under, or any default under, or any waiver of any
right under, or any termination (other than on the stated expiration
date) of, any Contract that involves or reasonably would involve the
annual expenditure or receipt by Savers of more than $25,000 or that
individually or in the aggregate is material to the Business or
Condition of Savers or the Surviving Corporation;
(r) any decrease in the amount of, or any material change in
the nature of, the insurance or annuities in force of Savers or any
material change in the amount or nature of the reserves, liabilities
or other similar amounts of Savers with respect to insurance and
annuity Contracts (including, without limitation, reserves and other
similar amounts of a type required to be reflected respectively on
lines 1 through 11.3 on page 3 of an Annual Statement of Savers);
(s) any amendment to the Articles of Incorporation or Bylaws of
Savers;
(t) any termination, amendment, or execution by Savers of any
reinsurance, coinsurance, or other similar Contract, as ceding or
assuming insurer;
(u) any expenditure or commitment for additions to property,
plant, equipment or other tangible or intangible capital assets of
Savers, except for any expenditure or commitment that does not exceed
$10,000 individually or the result of which individually or in the
aggregate does not have and may not reasonably be expected to have a
material adverse effect on the Business or Condition of Savers or the
Surviving Corporation;
(v) any amendment or introduction by Savers of any insurance or
annuity Contract other than in the ordinary course of business and
consistent with past practice; or
(w) any Contract to take any of the actions described in this
Section other than actions expressly permitted under this Section.
4.14 NO UNDISCLOSED LIABILITIES. Except to the extent specifically
reflected in the balance sheet included in the September 30, 1996 SAP
Statement (or in the notes relating thereto), or except as disclosed in
SECTION 4.14 of the Disclosure Schedule, there were no Liabilities (other
than policyholder benefits payable in the ordinary course of business and
consistent with past practices) against, relating to, or affecting Savers
as of September 30, 1996 that individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the Business or
Condition of Savers or the Surviving Corporation. Except to the extent
specifically reflected in the balance sheet included in the September 30,
1996 SAP Statement (or in the notes relating thereto), or except as
disclosed in SECTION 4.14 of the Disclosure Schedule, since September 30,
1996, Savers has not incurred any Liabilities (other than policyholder
benefits payable in the ordinary course of business and consistent with
past practice) that individually or in the aggregate have or may reasonably
be expected to have a material adverse effect on the Business or Condition
of Savers or the Surviving Corporation.
4.15 TAXES. Except as disclosed in SECTION 4.15 of the Disclosure
Schedule (with paragraph references corresponding to those set forth
below):
(a) All Tax Returns required to be filed with respect to Savers
have been duly and timely filed, and all such Tax Returns are true and
complete in all material respects. Savers has duly and timely paid
all Taxes that are due, or claimed or asserted by any taxing authority
to be due, from Savers for the periods covered by such Tax Returns or
has duly provided for all such Taxes in the Books and Records of
Savers and in accordance with GAAP and SAP, including, without
limitation, in the Financial Statements. There are no Liens with
respect to Taxes (except for Liens with respect to real and personal
property Taxes not yet due) upon any of the Assets and Properties of
Savers.
(b) With respect to any period for which Tax Returns have not
yet been filed, or for which Taxes are not yet due or owing, Savers
have made due and sufficient current accruals for such Taxes in its
Books and Records and in accordance with SAP and GAAP, and such
current accruals through the Closing Date are duly and fully provided
for in the SAP and GAAP Financial Statements of Savers for the period
then ended.
(c) The United States federal income Tax Returns of Savers and
of each affiliated group (within the meaning of the Code) of which
Savers is or has been a member have not been audited or examined by
the IRS, and the statute of limitations for all periods through the
year 1989 has expired. The state, local, and foreign income Tax
Returns of Savers have not been audited or examined, and all statutes
of limitation for all applicable state, local, and foreign taxable
periods through the respective years specified in SECTION 4.15(C) of
the Disclosure Schedule have expired. There are no outstanding
agreements, waivers, or arrangements extending the statutory period of
limitation applicable to any claim for, or the period for the
collection or assessment of, Taxes due from Savers for any taxable
period. Savers has previously delivered to SMC true and complete
copies of each of the United States federal, state, local, and
foreign income Tax Returns, for each of the last three taxable years,
filed by Savers (insofar as such returns relate to either Savers)
filed by any affiliated or consolidated group of which Savers was then
a member.
(d) No audit or other proceeding by any court, governmental or
regulatory authority, or similar Person is pending or (to the
knowledge of Savers) threatened with respect to any Taxes due from
Savers or any Tax Return filed by or relating to Savers. To the best
knowledge of Savers, no assessment of Tax is proposed against Savers
or any of its Assets and Properties.
(e) No election under any of Sections 108, 168, 338, 441, 463,
472, 1017, 1033, or 4977 of the Code (or any predecessor provisions)
has been made or filed by or with respect to Savers or any of its
Assets and Properties. No consent to the application of
Section 341(f)(2) of the Code (or any predecessor provision) has been
made or filed by or with respect to Savers or any of its Assets and
Properties. None of the Assets and Properties of Savers is an asset
or property that SMC or any of its Affiliates is or will be required
to treat as being owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect immediately before the enactment of the Tax
Reform Act of 1986, or tax-exempt use property within the meaning of
Section 168(h)(1) of the Code. No closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar
provision of any state, local, or foreign Law has been entered into by
or with respect to Savers or any of its Assets and Properties.
(f) Savers has not agreed to nor is required to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method of Savers,
and Savers does not have any application pending with any taxing
authority requesting permission for any changes in any accounting
method of Savers. To the best knowledge of Savers, the IRS has not
proposed any such adjustment or change in accounting method.
(g) Savers has not been or is in violation (or with notice or
lapse of time or both, would be in violation) of any applicable Law
relating to the payment or withholding of Taxes. Savers has duly and
timely withheld from employee salaries, wages, and other compensation
and paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over for all periods under all
applicable Laws.
(h) Savers is not a party to, is not bound by, and has no
obligation under, any Tax sharing Contract or similar Contract;
notwithstanding any disclosure contained in the Disclosure Schedule,
Savers represents and warrants that, at the Closing, Savers shall not
be a party to, be bound by or have any obligation under, any Tax
sharing Contract or similar Contract or arrangement. Savers is not a
foreign person within the meaning of Section 1445(f)(3) of the Code.
(i) Savers has not made any direct, indirect, or deemed
distributions that have been or could be taxed under Section 815 of
the Code.
(j) All ceding commission expenses paid or accrued by Savers in
connection with any reinsurance arrangement or Contract or transaction
have been capitalized and amortized over the life or lives of such
reinsurance arrangement or Contract in accordance with the decision of
the United States Supreme Court in COLONIAL AMERICAN LIFE INSURANCE
COMPANY V. COMMISSIONER OF INTERNAL REVENUE, 109 S.Ct. 240 (1980).
(k) No material Liabilities have been proposed in connection
with any audit or other proceeding by any court, governmental or
regulatory authority, or similar Person with respect to any Taxes due
from Savers or any Tax Return filed by or relating to Savers.
(l) Savers is a not party to any agreement, contract, plan or
arrangement that has resulted, or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code.
4.16 LITIGATION. Except as disclosed in SECTION 4.16 of the
Disclosure Schedule (with paragraph references corresponding to those set
forth below):
(a) There are no actions, suits, investigations, or proceedings
pending, or (to the best knowledge of Savers) threatened, against or
affecting Savers or any of its Assets and Properties, at law or in
equity, in, before, or by any Person that individually or in the
aggregate have or may reasonably be expected to have a material
adverse effect on the validity or enforceability of this Merger
Agreement, on the ability of Savers to perform its obligations under
this Merger Agreement, or on the Business or Condition of Savers or
the Surviving Corporation.
(b) There are no actions, suits, investigations, or proceedings
pending, or (to the best knowledge of Savers) threatened, against
Savers or any of its Assets and Properties, at law or in equity, in,
before, or by any Person that individually involve a claim or claims
for any injunction or similar relief or for Damages exceeding $25,000
or an unspecified amount of Damages.
(c) There are no writs, judgments, decrees, or similar orders
of any Person outstanding against Savers that individually exceed
$10,000 or that individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the
Business or Condition of Savers, and there are no injunctions or
similar orders of any Person outstanding against Savers or the
Surviving Corporation.
4.17 COMPLIANCE WITH LAWS. To the best knowledge of Savers and
except as disclosed in SECTION 4.17 of the Disclosure Schedule, Savers has
not been and is not in violation (or with or without notice or lapse of
time or both, would be in violation) of any term or provision of any Law or
any writ, judgment, decree, injunction, or similar order applicable to
Savers or any of its Assets and Properties, the result of which violation
individually or violations in the aggregate has or may reasonably be
expected to have a material adverse effect on the Business or Condition of
Savers or the Surviving Corporation. Without limiting the generality of the
foregoing:
(a) Since January 1, 1996, Savers has duly and validly filed or
caused to be so filed all reports, statements, documents,
registrations, filings, or submissions that were required by Law to be
filed with any Person and as to which the failure to so file,
individually in the aggregate with other such failures, has or may
reasonably be expected to have a material adverse effect on the
Business or Condition of Savers or the Surviving Corporation; all such
filings complied with applicable Laws in all material respects when
filed and, no material deficiencies have been asserted by any Person
with respect to any such filings.
(b) Savers has previously delivered to SMC the reports
reflecting the results of the most recent financial examination of
Savers issued by the North Carolina Department of Insurance. All
material deficiencies or violations in such previously issued reports
have been resolved to the satisfaction of the State of North Carolina
Department of Insurance.
(c) Except as disclosed in SECTION 4.17(C) of the Disclosure
Schedule, all outstanding insurance and annuity Contracts issued,
reinsured, or underwritten by Savers are, to the extent required under
applicable Laws, on forms approved by the insurance regulatory
authority of the jurisdiction where issued or have been filed with and
not objected to by such authority within the period provided for
objection.
(d) (1) SECTION 4.17(D) of the Disclosure Schedule contains a
true and complete list of each master or prototype (as well as any
individually designed) pension, profit sharing, defined benefit, Code
Section 401(k), and other retirement or employee benefit plan or
Contract (including, but not limited to, simplified employee pension
plans, Code Section 403(a), (b) and (c) annuities, ▇▇▇▇▇ plans, and
individual retirement accounts and annuities) offered or sold by
Savers to, or maintained or sponsored for the benefit of any employees
of, any other Person, and each determination letter relating to the
creation or amendment of any such plan or Contract. Except as
disclosed in SECTION 4.17(D) of the Disclosure Schedule, each such
plan or Contract in all material respects conforms with, and has been
offered, sold, maintained, and sponsored in accordance with, all
applicable Laws. Except as disclosed in SECTION 4.17(D) of the
Disclosure Schedule, Savers is not a fiduciary with respect to any
plan or Contract referenced in this SECTION 4.17(D).
(2) Savers does not provide administrative or other
contractual services for any plan or Contract referenced in this
SECTION 4.17(D), including, but not limited to, any third party
administrative services for an Employee Welfare Benefit Plan.
(3) To the extent that Savers maintains any collective or
commingled funds or accounts which restrict the Persons who may invest
therein to tax-exempt entities or qualified plans, each such fund or
account (of which a true and complete list and description is
disclosed in SECTION 4.17(D)(3) of the Disclosure Schedule) has been
established, maintained and operated in accordance with all applicable
Laws, has maintained its tax-exempt status and has no nonqualified
plans or trusts or other taxable entities investing in it.
(4) In addition to the representations and warranties
contained in SECTION 4.16, there are no claims pending, or (to the
best knowledge of Savers) threatened, against Savers or any of its
Assets and Properties, under any fiduciary liability insurance policy
issued by or to Savers that individually or in the aggregate has or
may reasonably be expected to have a material adverse effect on the
Business or Condition of Savers or the Surviving Corporation.
4.18 BENEFIT PLANS, ERISA.
Except as disclosed in SECTION 4.18 of the Disclosure Schedule,
Savers has not had within the past six (6) years and does not
currently have any Benefit Plan or any commitment or obligation to
create any Benefit Plan.
(a) Neither Savers, nor any of its respective Affiliates has
any Contract, plan, or commitment, whether legally binding or not, to
create any additional Benefit Plan or to modify or change any existing
Benefit Plan. Each contribution or other payment required to be made
or to be voluntarily made by Savers on or before December 31, 1995
with respect to any of the Benefit Plans has been made.
(b) None of the Benefit Plans is or has been a multi-employer
plan, as that term is defined in Section 3(37) of ERISA. There has
been no transaction, action, or omission involving Savers, any ERISA
Affiliate, or (to the best knowledge of Savers) any fiduciary,
trustee, or administrator of any Benefit Plan, or any other Person
dealing with any such Benefit Plan or the related trust or funding
vehicle, that in any manner violates or will result in a violation
(with or without notice or lapse of time or both) of Sections 404 or
406 of ERISA or constitutes or will constitute (with or without notice
or lapse of time or both) a prohibited transaction (as defined in
Section 4975(c)(I) of the Code or Section 406 of ERISA) for which
there exists neither a statutory nor a regulatory exemption and which
could subject Savers or any party in interest (as defined in
Section 3(14) of ERISA) to criminal or civil sanctions under
Section 501 or 502 of ERISA, or to Taxes under Code Section 4975, or
to any other Liability.
(c) There has been no reportable event (as defined in
Section 4043(b) of ERISA) with respect to any Employee Pension Benefit
Plan or any Employee Welfare Benefit Plan for which notice to the PBGC
has not been waived by rule or regulation. Neither Savers, nor any
ERISA Affiliate has any Liability to the PBGC (other than any
Liability for insurance premiums not yet due to the PBGC), to any
present or former participant in or beneficiary of any Benefit Plan
(or any beneficiary of any such participant or beneficiary), or to any
Employee Pension Benefit Plan or any Employee Welfare Benefit Plan.
No event, fact, or circumstance has arisen or occurred that has
resulted or may reasonably be expected to result in any such Liability
or a claim against Savers by the PBGC, by any present or former
participant in or any beneficiary of any Employee Pension Benefit Plan
or any Employee Welfare Benefit Plan (or any beneficiary of any such
participant or beneficiary), or by any such Benefit Plan. No filing
has been or will be made by Savers, or any ERISA Affiliate, and no
proceeding has been commenced, for the complete or partial termination
of any Employee Pension Benefit Plan or any Employee Welfare Benefit
Plan, and no complete or partial termination of any such Benefit Plan
has occurred or, as a result of the execution or delivery of this
Merger Agreement or the consummation of the transactions contemplated
hereby, will occur.
(d) All amounts that Savers is required to pay by Law or under
the terms of the Benefit Plans as a contribution or other payment to
or in respect of such Benefit Plans as of December 31, 1995 have been
paid. The funding method used in connection with each Benefit Plan
that is or at any time has been subject to the funding requirements of
Title I, Subtitle B, Part 3 of ERISA, meets the requirements of ERISA
and the Code. No Benefit Plan subject to Title IV of ERISA (or any
trust established thereunder) has ever incurred any accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412
of the Code), whether or not waived, as of the last day of the most
recent fiscal year of such Benefit Plan. With respect to any period
for which any contribution or other payment to or in respect of any
Benefit Plan is not yet due or owing, Savers has made due and
sufficient current accruals for such contributions and other payments
in accordance with GAAP and SAP, and such current accruals through the
Closing will be duly and fully provided for in the SAP Statement of
Savers for the period then ended.
(e) Each Benefit Plan is and has been operated and administered
in all material respects in accordance with all applicable Laws,
including, without limitation, ERISA and the Code. Each of the
Employee Pension Benefit Plans and Employee Welfare Benefit Plans that
is intended to be qualified within the meaning of Section 401(a) of
the Code is so qualified and satisfies the requirements of Sections
401(a) and 501(a) of the Code. There exists no fact, condition, or
set of circumstances that has or may reasonably be expected to have a
material adverse effect on the qualified status of any Employee
Pension Benefit Plan or any Employee Welfare Benefit Plan intended to
be so qualified or the intended United States federal income Tax
treatment or consequences of any Employee Pension Benefit Plan or any
Employee Welfare Benefit Plan. None of the Benefit Plans, or any
related trust or funding vehicle, conducts or has conducted any
unrelated trade or business as that term is defined in Section 513 of
the Code. All necessary governmental approvals, determinations, and
notifications for all Employee Pension Benefit Plans and all Employee
Welfare Benefit Plans have been obtained.
(f) Any actuarial assumptions utilized by Savers in connection
with determining the funding of each Employee Pension Benefit Plan (as
set forth in the actuarial report for such Benefit Plan) are
reasonable in all material respects. The fair market value of the
Assets or Properties held under each Employee Pension Benefit Plan
exceeds the actuarially determined present value of all accrued
benefits of such Benefit Plan (whether or not vested) determined on an
ongoing-Benefit Plan basis.
(g) Except as disclosed in SECTION 4.18(G) of the Disclosure
Schedule, and except for claims by third parties for benefits owed to
participants or beneficiaries under the Benefit Plans, and except for
divorce proceedings, there are no pending or (to the best knowledge of
Savers) threatened actions, suits, investigations, or other
proceedings by any present or former participant or beneficiary under
any Benefit Plan (or any beneficiary of any such participant or
beneficiary) involving any Benefit Plan or any rights or benefits
under any Benefit Plan or any rights or benefits under any Benefit
Plan other than ordinary and usual claims for benefits by participants
or beneficiaries thereunder. There is no writ, judgment, decree,
injunction, or similar order of any court, governmental or regulatory
authority, or other similar Person outstanding against or in favor of
any Benefit Plan or any fiduciary thereof.
(h) Except as disclosed in SECTION 4.18(H) of the Disclosure
Schedule, Savers is not a party to any employee collective bargaining
agreement, advisory or service agreement, deferred compensation
agreement, confidentiality agreement or covenant not to compete.
(i) Except as disclosed in SECTION 4.18(I) of the Disclosure
Schedule, Savers does not have any stock option, stock purchase, bonus
or other incentive plan or agreement.
(j) SECTION 4.18(J) of the Disclosure Schedule contains: (i) a
list of all employees of Savers as of September 30, 1996 whose then
current annual compensation was in excess of $50,000; (ii) the then
current annual compensation of, and a description of the fringe
benefits (other than those generally available to employees of Savers)
provided by Savers to any such employees; (iii) a list of all present
or former employees of Savers paid in excess of $50,000 in calendar
year 1995 who have terminated or given notice of their intention to
terminate their relationship with Savers since January 1, 1996; (iv) a
list of any increase, effective after December 31, 1995, in the rate
of compensation of any employees if such increase exceeds 10% of the
previous annual salary of such employee; and (v) a list of all
substantial changes in job assignments of, or arrangements with, or
promotions or appointments of, any employees whose compensation as of
December 31, 1995 was in excess of $50,000 per annum.
4.19 EMPLOYEE RELATIONS. Except as set forth in SECTION 4.19 of the
Disclosure Schedule, Savers has complied in respect of the Business with
all applicable laws, rules and regulations which relate to prices, wages,
hours, discrimination in employment and collective bargaining and to the
operation of the Business of Savers and is not liable for any arrears of
wages or any taxes or penalties for failure to comply with any of the
foregoing. Savers believes that its relations with the employees are
satisfactory. Savers is not a party to, and is not affected by or
threatened with, any dispute or controversy with a union or with respect to
unionization or collective bargaining. Savers is not materially affected
by any dispute or controversy with a union or with respect to unionization
or collective bargaining involving any supplier or customer of Savers.
4.20 PROPERTIES. Except as disclosed in SECTION 4.20 of the
Disclosure Schedule (with paragraph references corresponding to those set
forth below):
(a) Savers has good and valid title to all debentures, notes,
stocks, securities, and other assets that are of a type required to be
disclosed in Schedules B through DB of its Annual Statement and that
are owned by it, free and clear of all Liens.
(b) Savers owns good and indefeasible title to, or has a valid
leasehold interest in, all real property used in the conduct of its
business, operations, or affairs or of a type required to be disclosed
in Schedule A of Savers' Annual Statement, free and clear of all
Liens. All such real property, other than raw land, is in good
operating condition and repair and is suitable for its current uses.
No improvement on any such real property owned, leased, or held by
Savers encroaches upon any real property of any other Person. Savers
owns, leases, or has a valid right under Contract to use adequate
means of ingress and egress to, from, and over all such real property.
SECTION 4.20(B) of the Disclosure Schedule contains a brief
description of (i) each parcel of real property owned by Savers (the
"Owned Real Property") (showing the record title holder, legal
description, permanent index number, location, improvements, the uses
being made thereof and any indebtedness secured by a mortgage or other
Lien thereon) and (ii) each option held by Savers to acquire any real
property. Complete and correct copies of any title opinions, surveys
and appraisals Savers' possession or any policies of title insurance
currently in force and in the possession of Savers with respect to
each such parcel have heretofore been delivered to SMC.
(c) Savers owns good and indefeasible title to, or has a valid
leasehold interest in or has a valid right under Contract to use, all
tangible personal property that is used in the conduct of its
business, operations, or affairs, free and clear of all Liens. All
such tangible personal property is in good operating condition and
repair and is suitable for its current uses.
(d) Savers has, and at all times after the Closing will have,
the right to use, free and clear of any royalty or other payment
obligations, claims of infringement or alleged infringement, or other
Liens, all marks, names, trademarks, service marks, patents, patent
rights, assumed names, logos, trade secrets, copyrights, trade names,
and service marks that are used in the conduct of its business,
operations, or affairs (of which a true and complete list and
description is disclosed in SECTION 4.20(D) of the Disclosure
Schedule), and all computer software, programs, and similar systems
owned by or licensed to Savers, or any Affiliate of Savers or used in
the conduct of its business, operations, or affairs (of which a true
and complete list and description is disclosed in SECTION 4.20(D) of
the Disclosure Schedule). Savers is not in conflict with or in
violation or infringement of, and Savers has not received any notice
of any conflict with or violation or infringement of or any claimed
conflict with, any asserted rights of any other Person with respect to
any intellectual property or any computer software, programs, or
similar systems, including, without limitation, any of such items
disclosed in SECTION 4.20(D) of the Disclosure Schedule.
4.21 ENVIRONMENTAL MATTERS. Except as set forth in SECTION 4.21 of
the Disclosure Schedule:
(a) The operations of Savers comply with all applicable
Environmental Laws.
(b) Savers has obtained all environmental, health and safety
Governmental Permits necessary for its operation, and all such
Governmental Permits are in good standing and Savers is in compliance
with all terms and conditions of such permits.
(c) None of Savers nor any of its Property or operations, or
its past Property or operations, is subject to any on-going
investigation by, order from or agreement with any Person(including
without limitation any prior owner or operator of Property) respecting
(i) any Environmental Law, (ii) any Remedial Action or (iii) any claim
of Losses and Expenses arising from the Release or threatened Release
of a Contaminant into the environment.
(d) Savers is not subject to any judicial or administrative
proceeding, order, judgment, decree or settlement alleging or
addressing a violation of or liability under any Environmental Law.
(e) Savers has not with respect to the Business of Savers:
(i) reported a Release of a hazardous substance pursuant to
Section 103(a) of CERCLA, or any state equivalent;
(ii) filed a notice pursuant to Section 103(c) of CERCLA;
(iii) filed notice pursuant to Section 3010 of RCRA,
indicating the generation of any hazardous waste, as that term
is defined under 40 CFR Part 261 or any state equivalent; or
(iv) filed any notice under any applicable Environmental
Law reporting a substantial violation of any applicable
Environmental Law.
(f) There is not now, nor to the best knowledge of Savers has
there ever been, on or in any of its Property:
(i) any treatment, recycling, storage or disposal of any
hazardous waste, as that term is defined under 40 CFR Part 261
or any state equivalent, that requires or required a
Governmental Permit pursuant to Section 3005 of RCRA; or
(ii) any underground storage tank or surface impoundment or
landfill or waste pile.
(g) There is not now on or in any of its Property any
polychlorinated biphenyls (PCB) used in pigments, hydraulic oils,
electrical transformers or other equipment.
(h) Savers has not received any notice or claim to the effect
that it is or may be liable to any Person as a result of the Release
or threatened Release of a Contaminant.
(i) No Environmental Encumbrance has attached to any Property
of Savers.
(j) Any asbestos-containing material which is on or part of any
Property of Savers is in good repair according to the current
standards and practices governing such material, and its presence or
condition does not violate any currently applicable Environmental Law.
4.22 CONTRACTS. SECTION 4.22 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a
true and complete list of each of the following Contracts or other
documents or arrangements (true and complete copies, or, if none, written
descriptions, of which have been made available to SMC, together with all
amendments thereto), to which Savers is a party or by which any of its
Assets and Properties is or may be bound:
(a) all employment, agency, consultation, or representation
Contracts or other Contracts of any type (including, without
limitation, loans or advances) with any present officer, director,
employee, agent, consultant, or other similar representative of Savers
(or former officer, director, employee, agent, consultant or similar
representative of Savers, if there exists any present or future
liability with respect to such Contract, whether now existing or
contingent) (other than Contracts with consultants and similar
representatives who do not receive compensation of $25,000 or more per
year and other than employment or agency Contracts, not containing
terms which are unduly burdensome to Savers, with agents who do not
receive compensation of $25,000 or more per year), and the name,
position, and rate of compensation of each such Person and the
expiration date of each such Contract, as well as all sick leave,
vacation, holiday, and other similar practices, procedures, and
policies of Savers established or administered other than as Benefit
Plans;
(b) all Contracts with any Person containing any provision or
covenant limiting the ability of Savers to engage in any line of
business or to compete with or to obtain products or services from any
Person or limiting the ability of any Person to compete with or to
provide products or services to Savers;
(c) all partnership, joint venture, profit-sharing, alliance or
similar Contracts with any Person (other than Benefit Plans);
(d) all Contracts relating to the borrowing of money by Savers
or to the direct or indirect guarantee by Savers of any obligation for
borrowed money in excess of $25,000 in the aggregate for Savers or any
of its Affiliates, or any other Liability in respect of indebtedness
of any other Person, including without limitation any Contract
relating to the maintenance of compensating balances that are not
terminable by Savers without penalty upon not more than sixty (60)
calendar days' notice, any line of credit or similar facility, the
payment for property, products, or services of any other Person even
if such property, products, or services are not conveyed, delivered,
or rendered, or the obligation to take-or-pay, keep-well, make-whole,
or maintain surplus or earnings levels or perform other financial
ratios or requirements; SECTION 4.22(D) of the Disclosure Schedule
contains a true and complete list of any requirements for consents or
approvals of creditors needed to consummate the transactions
contemplated hereby;
(e) all leases or subleases of real property used in Savers'
business, operations, or affairs, and all other leases, subleases, or
rental or use Contracts for which Savers is liable;
(f) all Contracts relating to the future disposition or
acquisition of any investment in or security of any Person or of any
interest in any business enterprise (other than the disposition or
acquisition of investments in the ordinary course of business and
consistent with past practice);
(g) all Contracts or arrangements (including, without
limitation, those relating to the sharing or allocation of expenses,
personnel, services, or facilities) between or among Savers and any of
its Affiliates or any other Person who is described in
SECTION 4.13(P);
(h) all reinsurance, coinsurance, or other similar Contracts
indicating, with respect to each such Contract, the information
required to be disclosed in Schedule S of Savers' Annual Statement;
(i) all outstanding proxies, powers of attorney, or similar
delegations of authority of Savers, except for powers of attorney for
the service of process pursuant to applicable insurance Laws, except
as incident to participation by Savers in the insurance guaranty fund
of any State wherein Savers is required or elects to participate in
such fund.
(j) all Contracts for any product, service, equipment,
facility, or similar item (other than insurance and annuity Contracts
issued, reinsured, or underwritten by Savers and other than
reinsurance, coinsurance, and other similar Contracts) that by their
respective terms do not expire or terminate or are not terminable by
Savers, without penalty or other Liability, within six (6) months
after December 31, 1996; and
(k) all other Contracts (other than insurance and annuity
Contracts issued, reinsured, or underwritten by Savers) that involve
the payment or potential payment pursuant to the terms of such
Contracts, by or to Savers of more than $10,000 individually or in the
aggregate or that are otherwise material to the Business or Condition
of Savers or the Surviving Corporation.
Except as set forth in SECTION 4.22 of the Disclosure Schedule, each of the
leases, contracts and other agreements listed the Disclosure Schedule
(collectively, the "Savers Agreements") constitutes a valid and binding
obligation of the parties thereto and is in full force and effect and
(except for those Savers Agreements which by their terms will expire or are
otherwise terminated prior to the Effective Time in accordance with the
provisions hereof) and will continue in full force and effect after the
Effective Time, in each case without breaching the terms thereof or
resulting in the forfeiture or impairment of any rights thereunder and
without the consent, approval or act of, or the making of any filing with,
any other party. Savers has fulfilled and performed its obligations under
each of the Savers Agreements, and Savers is not in, or alleged to be in,
breach or default under, nor is there or is there alleged to be any basis
for termination of, any of the Savers Agreements, and no other party to any
of the Savers Agreements has breached or defaulted thereunder, and no event
has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a
default or breach by Savers or by any such other party. Savers is not
currently renegotiating any of the Savers Agreements or paying liquidated
damages in lieu of performance thereunder. None of the Savers Agreements
contains terms unduly burdensome to Savers or is harmful to the Business.
Complete and correct copies of each of the Savers Agreements have
heretofore been made available to SMC.
4.23 INSURANCE ISSUED BY SAVERS. Except as required by Law or
except as disclosed in SECTION 4.23 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below):
(a) All insurance or annuity Contract benefits payable to
Savers by any other Person that is a party to or bound by any
reinsurance, coinsurance, or other similar Contract with Savers have
in all material respects been paid in accordance with the terms of the
insurance, annuity, and other Contracts under which they arose.
(b) No outstanding insurance or annuity Contract issued,
reinsured, or underwritten by Savers entitles the holder thereof or
any other Person to receive dividends, distributions, or to share in
the income of Savers or receive any other benefits based on the
revenues or earnings of Savers or any other Person.
(c) The underwriting standards utilized and ratings applied by
Savers and (to the best knowledge of Savers) by any other Person that
is a party to or bound by any reinsurance, coinsurance, or other
similar Contract with Savers conform in all material respects to
industry accepted practices and to the standards and ratings required
pursuant to the terms of the respective reinsurance, coinsurance or
other similar Contracts.
(d) To the best knowledge of Savers all amounts to which Savers
is entitled under reinsurance, coinsurance, or other similar Contracts
(including without limitation amounts based on paid and unpaid losses)
are fully collectible.
(e) To the best knowledge of Savers, each insurance agent, at
the time such agent wrote, sold, or produced business for Savers, was
duly licensed as an insurance agent (for the type of business written,
sold, or produced by such insurance agent) in the particular
jurisdiction in which such agent wrote, sold or produced such business
for Savers.
(f) To the best knowledge of Savers, no such insurance agent
violated (or with or without notice or lapse of time or both, would
have violated) any term or provision of any Law or any writ, judgment,
decree, injunction, or similar order applicable to the writing, sale
or production of business for Savers.
(g) The tax treatment under the Code of all insurance, annuity
or investment policies, plans, or contracts; all financial products,
employee benefit plans, individual retirement accounts or annuities;
or any similar or related policy, contract, plan, or product, whether
individual, group, or otherwise, issued or sold by Savers is and at
all times has been the same or more favorable to Savers, policyholder
or intended beneficiaries thereof as the tax treatment under the Code
for which such contracts qualified or purported to qualify at the time
of its issuance or purchase. For purposes of this SECTION 4.23(G),
the provisions of the Code relating to the tax treatment of such
contracts shall include, but not be limited to, Sections 72, 79, 89,
101, 104, 105, 106, 125, 130, 401, 402, 403, 404, 408, 412, 415, 419,
419A, 501, 505, 817, 818, 7702, and 7702A of the Code.
(h) There are no reinsurance, coinsurance or other similar
Contracts under which Savers receives or has received surplus relief.
4.24 THREATS OF CANCELLATION. Except as disclosed in SECTION 4.24
of the Disclosure Schedule, since December 31, 1995, no policyholder, group
of policyholder Affiliates, or Persons writing, selling, or producing
insurance business that individually or in the aggregate accounted for five
percent 5% or more of the premium or annuity income of Savers for the year
ended December 31, 1995, has terminated or (to the best knowledge of
Savers) threatened to terminate its relationship with Savers.
4.25 LICENSES AND PERMITS. Except as disclosed in SECTION 4.25 of
the Disclosure Schedule (with paragraph references corresponding to those
set forth below):
(a) Savers owns or validly holds, all licenses, franchises,
permits, approvals, authorizations, exemptions, classifications,
certificates, registrations and similar documents or instruments that
are required for its business, operations and affairs and that the
failure to so own or hold has or may reasonably be expected to have a
material adverse effect on its Business or Condition.
(b) All such licenses, franchises, permits, approvals,
authorizations, exemptions, classifications, certificates,
registrations and similar documents or instruments are valid and in
full force and effect and free of any restrictions imposed by any
Person.
(c) Savers is in compliance in all material respects with its
obligations under the foregoing, with only such exceptions as,
individually or in the aggregate, would not reasonably be expected to
have a material adverse effect on the Business or Condition of Savers,
and no event has occurred that allows, or after notice or lapse of
time, or both, would allow, revocation or termination of any of the
foregoing.
4.26 OPERATIONS INSURANCE. SECTION 4.26 of the Disclosure Schedule
contains a true and complete list and description of all liability,
property, workers' compensation, directors and officers liability and other
similar insurance Contracts that insure the business, operations, or
affairs of Savers or affect or relate to the ownership, use, or operations
of any of the Assets and Properties of Savers and that have been issued to
Savers or any of its Affiliates (including, without limitation, the names
and addresses of the insurers, the expiration dates thereof, and the annual
premiums and payment terms thereof) or that are held by Savers or by any
Affiliate of Savers for the benefit of the Surviving Corporation following
the Effective Time. All such insurance is in full force and effect and (to
the best knowledge of Savers) is with financially sound and reputable
insurers and, in light of the business, operations, and affairs of Savers,
is in amounts and provides coverage that are reasonable and customary for
Persons in similar businesses.
4.27 INTERCOMPANY ACCOUNTS. Except as reflected in the December 31,
1995 SAP Statement, or except as disclosed in SECTION 4.27 of the
Disclosure Schedule, there are no accounts between Savers and any of its
Affiliates, and none of its Affiliates provides or causes to be provided
to Savers any products, services, equipment, facilities, or similar items.
Except as disclosed in SECTION 4.27 of the Disclosure Schedule, since
December 31, 1995, no such intercompany accounts in excess of $10,000 have
been paid or received, and all settlements of such intercompany accounts
have been made, and all allocations of such intercompany expenses have been
applied, in the ordinary course of business and consistent with past
practice. All intercompany accounts shall be written off prior to the
Effective Time and, if constituting an admitted asset, taken into account
in calculating the Adjusted Capital and Surplus of Savers.
4.28 BANK ACCOUNTS. SECTION 4.28 of the Disclosure Schedule
contains a true and complete list of the names and locations of all banks,
trust companies, securities brokers, and other financial institutions at
which Savers has an account or safe deposit box or maintains a banking,
custodial, trading or other similar relationship and a true and complete
list and description of each such account, box and relationship, indicating
in each case the account number and the names of the officers, employees,
agents or other similar representatives of Savers transacting business with
respect thereto.
4.29 BROKERS. All negotiations relative to this Merger Agreement
and the transactions contemplated hereby have been carried out by Savers
directly with SMC, without the intervention of any Person on behalf of
Savers in such manner as to give rise to any valid claim by any Person
against SMC, Savers or the Surviving Corporation for a finder's fee,
brokerage commission, or similar payment. Notwithstanding the foregoing,
Savers is a party to an agreement with Daiwa Securities America, Inc.,
pursuant to which a fee may be owing as a result of the transaction
contemplated by this Merger Agreement
4.30 DISCLOSURE. Neither this Merger Agreement nor any certificate
furnished by Savers or Savers to SMC in connection with this Merger
Agreement or the transactions contemplated hereby contains any untrue
statement of a material fact by Savers or omits to state a material fact by
Savers necessary to make the statements herein or therein not misleading in
light of the circumstances in which they were made. There is no fact which
adversely affects or in the future is likely to adversely affect the
Business or Condition of Savers in any material respect which has not been
set forth or referred to in this Merger Agreement or the Disclosure
Schedule.
4.31 STATE TAKEOVER STATUTES. Valid and irrevocable exemptions from
the Control Share Acquisition Act (Article 9A) and the Shareholder
Protection Act (Article 9) of the NCBCA exist and are applicable to all of
the transactions contemplated by this Merger Agreement. No other similar
laws are applicable to the Merger, this Merger Agreement or the
transactions contemplated hereby.
4.32 SENSITIVE PAYMENTS. Except as disclosed in SECTION 4.32 of the
Disclosure Schedule, (i) to the best knowledge of Savers, Savers is not
involved in any transaction or other situation with any employee, officer,
director or Affiliate of Savers which may be generally characterized as a
"conflict of interest", including, but not limited to, direct or indirect
interests in the business of competitors, suppliers or customers of Savers,
and (ii) there are no situations which involved or involves (A) the use of
any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to political activity, (B) the making of
any direct or indirect unlawful payments to government officials or others
from corporate funds or the establishment or maintenance of any unlawful or
unrecorded funds, (C) the violation of any of the provisions of The Foreign
Corrupt Practices Act of 1977, or any rules or regulations promulgated
thereunder, (D) the receipt of any illegal discounts or rebates or any
other violation of the antitrust laws or (E) any investigation by the
Securities and Exchange Commission or any other federal, foreign, state or
local government agency or authority.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SMC
SMC hereby represents and warrants to Savers as follows:
5.1 ORGANIZATION. SMC is a corporation duly organized, validly
existing, and in good standing under the Laws of the State of Indiana and
has full corporate power and authority to enter into this Merger Agreement
and to perform its obligations under this Merger Agreement. SMC is duly
licensed, qualified, or admitted to do business and is in good standing in
all jurisdictions in which the failure to be so licensed, qualified or
admitted and in good standing, individually or in the aggregate with other
such failure, has or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Merger Agreement, on the
ability of SMC to perform its obligations under this Merger Agreement or on
the Business or Condition of SMC.
5.2 AUTHORITY. The Board of Directors of SMC has duly and validly
approved this Merger Agreement and the transactions contemplated hereby.
Except for the approval of the shareholders of SMC, the execution and
delivery of this Merger Agreement by SMC and the performance by SMC of its
obligations under this Merger Agreement have been duly and validly
authorized by all necessary corporate action on the part of SMC. This
Merger Agreement constitutes a legal, valid, and binding obligation of SMC
and is enforceable against SMC in accordance with its terms, except to the
extent that enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar Laws now or hereafter in
effect relating to or limiting creditors' rights generally, and the remedy
of specific performance and injunctive and other forms of equitable relief
are subject to certain equitable defenses and to the discretion of the
court or other similar Person before which any proceeding therefor may be
brought.
5.3 NO CONFLICTS OR VIOLATIONS. The execution and delivery of this
Merger Agreement by SMC do not, and the performance by SMC of its
obligations under this Merger Agreement will not:
(a) subject to obtaining the approvals contemplated by
ARTICLE X of this Merger Agreement, violate any term or provision of
any Law or any writ, judgment, decree, injunction, or similar order
applicable to SMC;
(b) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any of the terms, conditions, or provisions of the articles of
incorporation or Bylaws of SMC;
(c) except as disclosed in writing to Savers, result in the
creation or imposition of any Lien upon SMC or any of its Assets and
Properties that individually or in the aggregate with any other Liens
has or may reasonably be expected to have a material adverse effect on
the validity or enforceability of this Merger Agreement or on the
ability of SMC to perform its obligations under this Merger Agreement;
(d) except as disclosed in writing to Savers, conflict with or
result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default under, or give to any
person any right of termination, cancellation, acceleration, or
modification in or with respect to, any Contract to which SMC is a
party or by which any of its Assets and Properties may be bound and as
to which any such conflicts, violations, breaches, defaults, or rights
individually or in the aggregate have or may reasonably be expected to
have a material adverse effect on the validity or enforceability of
this Merger Agreement or on the ability of SMC to perform its
obligations under this Merger Agreement; or
(e) require SMC to obtain any consent, approval, or action of,
or make any filing with or give any notice to, any Person except as
contemplated in ARTICLES X and XI of this Merger Agreement, as
disclosed in writing to Savers, or those which the failure to obtain,
make, or give individually or in the aggregate with other such
failures has or may reasonably be expected to have no material adverse
effect on the validity or enforceability of this Merger Agreement or
on the ability of SMC to perform its obligations under this Merger
Agreement.
5.4 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by SMC or SAC for inclusion or incorporation by
reference in the Registration Statement or the Proxy Statement will (i) in
the case of the Registration Statement, at the time it becomes effective
and at the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading or (ii) in
the case of the Proxy Statement, at the time of the mailing of the Proxy
Statement and at the time of each Stockholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If
at any time prior to the Effective Time any event with respect to SMC, its
officers and directors or any of its Subsidiaries shall occur which is
required to be described in the Proxy Statement or the Registration
Statement, such event shall be so described, and an amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated
to the stockholders of Savers and/or SMC, as appropriate. The Registration
Statement will comply (with respect to SMC and SAC) as to form in all
material respects with the provisions of the Securities Act, and the Proxy
Statement will comply (with respect to SMC and SAC) as to form with the
provisions of the Exchange Act.
5.5 LITIGATION. There are no actions, suits, investigations, or
proceedings pending against SMC, or (to the best knowledge of SMC)
threatened against SMC, at law or in equity, in, before, or by any Person,
that individually or in the aggregate have or may reasonably be expected to
have a material adverse effect on the validity or enforceability of this
Merger Agreement, on the ability of SMC to perform its obligations under
this Merger Agreement or on the Business and Condition of SMC.
5.6 CAPITALIZATION. The authorized capital stock of SMC consists
of 20,000,000 shares of common stock and 1,000,000 shares of preferred
stock. As of September 30, 1996, there were issued and outstanding:
5,752,499 shares of common stock, of which 978,229, shares are in the
treasury; stock options to acquire 1,292,170 shares of common stock of
which options to acquire 950,395 shares of common stock were exercisable;
and warrants to acquire 790,280 shares of common stock, of which warrants
to acquire 786,380 shares of common stock were exercisable. 300,000 shares
of Class S Convertible Cumulative Redeemable Preferred Stock ("Class S
Preferred"), which are convertible into common stock, were issued, of which
160,789 are outstanding and 4,211 shares are held in treasury. All
outstanding shares of capital stock of SMC have been duly authorized and
validly issued and are fully paid and nonassessable and free of preemptive
rights. Except as set forth in this SECTION 5.6, there are outstanding (a)
no other shares of capital stock or other voting securities of SMC, (b) no
securities of SMC convertible into or exchangeable for shares of capital
stock or voting securities of SMC and (c) no other options or other rights
to acquire from SMC, and there is no obligation of SMC to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for, or options or warrants to purchase capital stock or
voting securities of SMC (the items in clauses (a), (b) and (c) being
referred to, together with the common stock, collectively as the "SMC
Securities"). Except as disclosed in SECTION 5.6 of the Disclosure
Schedule, there are no outstanding obligations of SMC to repurchase, redeem
or otherwise acquire any SMC Securities.
5.7 BROKERS. All negotiations relative to this Merger Agreement
and the transactions contemplated hereby have been carried out by SMC
directly with Savers, without the intervention of any Person on behalf of
SMC in such manner as to give rise to any valid claim by any Person against
Savers, SMC or the Surviving Corporation for a finder's fee, brokerage
commission or similar payment, except that a fee may be owing to Daiwa
Securities America, Inc. pursuant to its agreement with Savers as disclosed
in SECTION 4.29.
5.8 DISCLOSURE. Neither this Merger Agreement nor any certificate
furnished by SMC to Savers in connection with this Merger Agreement or the
transactions contemplated hereby contains any untrue statement by SMC of
material fact or omits to state a material fact by SMC necessary to make
the statements herein or therein not misleading in light of the
circumstances in which they were made.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING SAC
SMC and SAC jointly and severally represent and warrant to Savers as
follows:.
6.1 ORGANIZATION AND STANDING. SAC is a corporation duly
organized, validly existing, and in good standing under the Laws of the
State of North Carolina and has full corporate power and authority to enter
into this Merger Agreement and to perform its obligations under this Merger
Agreement. SAC was organized solely for the purpose of acquiring Savers
and engaging in the transactions contemplated by this Merger Agreement and
has not engaged in any business since it was incorporated which is not in
connection with the acquisition of Savers and this Merger Agreement.
6.2 CAPITAL STRUCTURE. The authorized capital stock of SAC
consists of 1,000 shares of common stock, no par value per share, all of
which are validly issued and outstanding, fully paid and nonassessable and
are owned by SMC free and clear of all Liens, claims and encumbrances.
6.3 AUTHORITY. The Board of Directors of SAC has duly and validly
approved this Merger Agreement and the transactions contemplated hereby.
The execution and delivery of this Merger Agreement by SAC and the
performance by SAC of its obligations under this Merger Agreement have been
duly and validly authorized by all necessary corporate action on the part
of SAC except stockholder approval. This Merger Agreement constitutes a
legal, valid and binding obligation of SAC and is enforceable against SAC
in accordance with its terms, except to the extent that enforcement may be
limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium, or similar Laws now or hereafter in effect relating to or
limiting creditors' rights generally, and the remedy of specific
performance and injunctive and other forms of equitable relief are subject
to certain equitable defenses and to the discretion of the court or other
similar Person before which any proceeding therefor may be brought.
6.4 NO CONFLICTS OR VIOLATIONS. The execution and delivery of this
Merger Agreement by SAC do not, and the performance by SAC of its
obligations under this Merger Agreement will not:
(a) subject to obtaining the approvals contemplated by ARTICLES
X and XI of this Merger Agreement, violate any term or provision of
any Law or any writ, judgment, decree, injunction, or similar order
applicable to SAC;
(b) violate any term or provision of any Law or any writ,
judgment, decree, injunction, or similar order applicable to SAC;
(c) except as disclosed in writing to Savers, result in the
creation or imposition of any Lien upon SAC or any of its Assets and
Properties that individually or in the aggregate with any other Liens
has or may reasonably be expected to have a material adverse effect on
the validity or enforceability of this Merger Agreement or on the
ability of SAC to perform its obligations under this Merger Agreement;
(d) except as disclosed in writing to Savers, conflict with or
result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default under, or give to any
person any right of termination, cancellation, acceleration or
modification in or with respect to, any Contract to which SAC is a
party or by which any of its Assets and Properties may be bound and as
to which any such conflicts, violations, breaches, defaults or rights,
individually or in the aggregate, have or may reasonably be expected
to have a material adverse effect on the validity or enforceability of
this Merger Agreement or on the ability of SAC to perform its
obligations under this Merger Agreement; or
(e) require SAC to obtain any consent, approval, or action of,
or make any filing with or give any notice to, any Person except as
contemplated in ARTICLES X and XI of this Merger Agreement, as
disclosed in writing to Savers, or those which the failure to obtain,
make, or give individually or in the aggregate with other such
failures has or may reasonably be expected to have no material adverse
effect on the validity or enforceability of this Merger Agreement or
on the ability of SAC to perform its obligations under this Merger
Agreement.
ARTICLE VII
COVENANTS OF SAVERS
Savers covenants and agrees with SMC and SAC that, at all times before
the Effective Time, Savers will comply with all of the covenants and
provisions of this Article VII, except to the extent SMC may otherwise
consent in writing or to the extent otherwise required or permitted by this
Merger Agreement.
7.1 CONDUCT OF BUSINESS. Savers will conduct its business only in
the ordinary course and consistent with past practices. Without limiting
the generality of the foregoing:
(a) Savers will use all commercially reasonable efforts to
(i) preserve intact Savers' present business organization, reputation,
and policyholder relations; (ii) keep available the services of
Savers' present officers, directors, employees, agents, consultants,
and other similar representatives; (iii) maintain all licenses,
qualifications, and authorizations of Savers to do business in each
jurisdiction in which it is so licensed, qualified, or authorized;
(iv) maintain in full force and effect all Contracts, documents, and
arrangements referred to in SECTION 4.22 hereof, (v) maintain all
Assets and Properties of Savers in good working order and condition,
ordinary wear and tear excepted and (vi) continue all current
marketing and selling activities relating to the business, operations
or affairs of Savers.
(b) Savers will cause the Books and Records of Savers to be
maintained in the usual manner and consistent with past practices and
will not permit a material change in any underwriting, investment,
actuarial, financial reporting, or accounting practices or policies of
Savers or in any assumption underlying such practices or policies, or
in any method of calculating any bad debt, contingency, or other
reserve for financial reporting purposes or for other accounting
purposes (including, without limitation, any practice, policy,
assumption, or method relating to or affecting the determination of
Savers' investment income, reserves or other similar amounts, or
operating ratios with respect to expenses, losses, or lapses).
(c) Savers will: (i) properly prepare and duly and timely file
all reports and all Tax Returns required to be filed with any
governmental or regulatory authorities with respect to the business,
operations, or affairs of Savers; and (ii) duly and fully pay all
Taxes indicated by such Tax Returns or otherwise levied or assessed
upon Savers or any of its Assets and Properties and withhold or
collect and pay to the proper taxing authorities or hold in separate
bank accounts for such payment all Taxes that Savers is required to so
withhold or collect and pay, unless such Taxes are being contested in
good faith and, if appropriate, reasonable reserves therefor have been
established and reflected in the Books and Records of Savers in
accordance with GAAP and SAP.
(d) Savers will: (i) cause all reserves and other similar
amounts with respect to insurance and annuity Contracts established or
reflected in Savers' Books and Records to be (A) established and
reflected on a basis consistent with those reserves and other similar
amounts and reserving methods followed by Savers at December 31, 1995
and (B) good, sufficient and adequate (under generally accepted
actuarial principles consistently applied) to cover the total amount
of all reasonably anticipated matured and unmatured benefits,
dividends, losses, claims, expenses, and other Liabilities of Savers
under all insurance and annuity Contracts pursuant to which Savers has
or will have any Liability (including, without limitation, any
Liability arising under or as a result of any reinsurance,
coinsurance, or other similar Contract); and (ii) continue to own
assets that qualify as legal reserve assets under all applicable
insurance Laws in an amount at least equal to the required reserves of
Savers and other similar amounts.
(e) Savers will use all commercially reasonable efforts to
maintain in full force and effect substantially the same levels of
coverage as the insurance afforded under the Contracts listed in
SECTION 4.26 of the Disclosure Schedule. Any and all benefits under
such Contracts paid or payable (whether before or after the effective
date of this Merger Agreement) with respect to the business,
operations, affairs, or Assets and Properties of Savers will be paid
to Savers.
(f) Savers will continue to comply, in all material respects,
with all Laws applicable to its business, operations, or affairs.
(g) Savers will determine its Adjusted Capital and Surplus
consistent with past practices for determining capital and surplus on
its SAP Statements for any interim period and will not take any
actions the effect of which may be to cause the Adjusted Capital and
Surplus of the Surviving Corporation to be less than $7,390,000
immediately after the Effective Time less all amounts paid by Savers
pursuant to SECTION 2.5(D).
(h) Savers will not enter into any reinsurance Contracts
(whether as the ceding company or the assuming company).
7.2 FINANCIAL STATEMENTS AND REPORTS. (a) As promptly as
practicable after December 31, 1996, Savers will deliver to SMC a true and
complete copy of the SAP Statement filed by Savers for the year ended
December 31, 1996, and for each quarter thereafter until the Effective
Time, prepared in accordance with SAP and which shall present fairly the
financial condition, the Assets and Properties, and the Liabilities of
Savers as of the date thereof and the results of operations, changes in the
capital and surplus account and cash flows of Savers for and during each of
the periods covered thereby.
(b) Savers will promptly deliver to SMC audited financial
statements for the year ended December 31, 1996, and for each quarter
thereafter until the Effective Time unaudited financial statements,
prepared in accordance with GAAP which shall present fairly the
financial condition, the Assets and Properties, and the Liabilities of
Savers as of the date thereof and the results of operations, changes
in shareholders' equity and cash flows of Savers for and during each
of the periods covered thereby. Such audited statements shall be
delivered by February 28, 1997, and such unaudited statements shall be
delivered within thirty-five (35) days after the date of the end of
any such quarter.
(c) As promptly as practicable, Savers will deliver to SMC a
true and complete copy of unaudited financial statements for the month
ended November 30, 1996, and for each month thereafter until the
Effective Time, prepared in accordance with SAP which shall present
fairly the financial condition, the Assets and Properties and the
Liabilities of Savers as of the date thereof and the results of
operations, changes in the capital and surplus account and cash flows
of Savers for and during each of the periods covered thereby.
7.3 INVESTMENTS. Savers will invest its future cash flow, any
cash from matured and maturing investments, any cash proceeds from the sale
of its Assets and Properties and any cash funds currently held by Savers,
exclusively in cash equivalent assets, short-term investments or fixed
maturity securities (all of which permissible investments shall consist
only of United States government issued or guaranteed securities,
commercial paper rated A-I or PI, or bonds currently rated NAIC 1 or 2 by
the Standard Valuation office, except as otherwise required by Law or
except as required to provide cash (in the ordinary course of business and
consistent with past practice) to meet Savers' reasonably anticipated
current obligations or except as consented to or required by SMC. Savers
will take such steps as are necessary to ensure that such investment Assets
that are classified as Non-Admitted Assets under SAP or by the applicable
insurance regulatory authorities for Savers, do not at any time exceed the
respective amounts of Non-Admitted assets for Savers as of December 31,
1995.
7.4 EMPLOYEE MATTERS. Except as may be required by Law or as
disclosed in SECTION 7.4 of the Disclosure Schedule, or except for such
representations, promises, changes, alterations, or amendments that do not
and will not result in any Liability to Savers or SMC, Savers will refrain
from directly or indirectly:
(a) making any representation or promise, oral or written, to
any officer, director, employee, agent, consultant or other similar
representative of Savers concerning any Benefit Plan;
(b) making any change to, or amending in any way, the
Contracts, salaries, wages, or other compensation of any officer,
director, employee, agent, consultant or other similar representative
of Savers whose annual compensation exceeds $25,000, other than
routine changes or amendments that (a) are made in the ordinary course
of business and consistent with past practices, (b) do not and will
not result in increases of more than five percent (5%) in the salary,
wages or other compensation of any such Person and (c) do not and will
not exceed, in the aggregate, five percent (5%) of the total salaries,
wages and other compensation of all employees of Savers;
(c) adopting, entering into, amending, altering or terminating,
partially or completely, any Benefit Plan;
(d) adopting, entering into, amending, altering or terminating,
partially or completely, any employment, agency, consultation, or
representation Contract that is, or had it been in existence on the
effective date of this Merger Agreement would have been, required to
be disclosed in SECTION 4.22(A) of the Disclosure Schedule;
(e) approving any general or company-wide pay increases for
officers, directors, employees, agents, consultants, or other similar
representatives of Savers; or
(f) entering into any Contract with any officer, director,
employee, agent, consultant, or other similar representative of Savers
that is not terminable by Savers, without penalty or other Liability,
upon not more than sixty (60) calendar days' notice.
7.5 NO CHARTER AMENDMENTS. Savers will not amend its Articles of
Incorporation or Bylaws and will refrain from taking any action with
respect to any such amendment.
7.6 NO ISSUANCE OF SECURITIES. Except upon the exercise of stock
options outstanding at the date hereof, Savers will refrain from
authorizing or issuing any shares of capital stock or other equity
securities of Savers, or from entering into any Contract or granting any
option, warrant, or right calling for the authorization or issuance of any
such shares or other equity securities, or creating or issuing any
securities directly or indirectly convertible into or exchangeable for any
such shares or other equity securities or issuing any options, warrants or
rights to purchase any such convertible securities.
7.7 NO DIVIDENDS. Except for dividends and distributions which
have been approved in writing by SMC and for which any required regulatory
approvals have been received, Savers will refrain from declaring, setting
aside or paying any dividend or other distribution in respect of its
capital stock and from directly or indirectly redeeming, purchasing, or
otherwise acquiring any of its capital stock or any interest in or right to
acquire any such stock.
7.8 NO DISPOSAL OF PROPERTY. Except as set forth in SECTION 7.8 of
the Disclosure Schedule or as expressly provided in this Merger Agreement,
Savers will not (a) dispose of any of its Assets and Properties or permit
any of its Assets and Properties to be subjected to any Liens, except to
the extent any such disposition or any such Lien is made or incurred in the
ordinary course of the business and consistent with past practices,
(b) sell any part of its insurance products, operations or business to any
third party (other than sales of insurance products in the ordinary course
of business consistent with past practices pursuant to SECTION 7.1(A)),
(c) enter into any Contracts obligating Savers to administer the insurance
operations of any Person other than any Affiliate, (d) enter into any
Contracts permitting any Person other than any Affiliate of Savers to
administer Savers' insurance operations or (e) enter into or assume any
Contract, if doing so could involve a loss, cost, expense or commitment in
excess of $10,000 unless in the ordinary course of business and consistent
with past practices.
7.9 NO BREACH OR DEFAULT. Savers will not violate or breach, and
will not take or fail to take any action that (with or without notice or
lapse of time or both) would constitute a violation, breach or default in
any way under any term or provision of any Contract to which it is a party
or by which any of its Assets and Properties is or may be bound.
7.10 NO INDEBTEDNESS. Savers will not create, incur, assume,
guarantee or otherwise become liable for, and will not cancel, pay, agree
to cancel or pay, or otherwise provide for a complete or partial discharge
in advance of a scheduled payment date with respect to, any Liability, and
will not waive any right to receive any direct or indirect payment or other
benefit under any Liability owing to it.
7.11 NO ACQUISITIONS. Savers will not (a) merge, consolidate or
otherwise combine or agree to merge, consolidate or otherwise combine with
any other Person, (b) acquire or agree to acquire blocks of business of, or
all or substantially all the Assets and Properties or capital stock or
other equity securities of any other Person or (c) otherwise acquire or
agree to acquire control or ownership of any other Person.
7.12 INTERCOMPANY LIABILITIES. At least five Business Days before
the Effective Time, Savers will deliver to SMC a true and complete list and
description of all Liabilities between Savers and any Affiliate of Savers
to be outstanding at the Effective Time. Savers will not enter into any
Contract or, except as required by any Contract disclosed in
SECTION 4.22(G) of the Disclosure Schedule, engage in any transaction with
any of its Affiliates.
7.13 TAX MATTERS. Savers will refrain (a) from making, filing or
entering into any election, consent or agreement described in
SECTION 4.15(E) or SECTION 4.15(F) with respect to Savers or any of its
Assets and Properties and (b) from amending or cancelling any reinsurance
or coinsurance Contract.
7.14 NOTICE AND CURE. Savers will notify SMC promptly in writing
of, and contemporaneously will provide SMC with true and complete copies of
any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Effective Time, any
event, transaction or circumstance occurring after the date of this Merger
Agreement that causes or will cause any covenant or agreement of Savers
under this Merger Agreement to be breached, or that renders or will render
untrue any representation or warranty of Savers contained in this Merger
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Savers also will use all commercially
reasonable efforts to cure, before the Effective Time, any violation or
breach of any representation, warranty, covenant or agreement made by it in
this Merger Agreement, whether occurring or arising before or after the
date of this Merger Agreement.
ARTICLE VIII
COVENANTS OF SMC
SMC covenants and agrees with Savers that, at all times before the
Effective Time, SMC will comply with all covenants and provisions of this
Article VIII, except to the extent Savers may otherwise consent in writing
or to the extent otherwise required or permitted by this Merger Agreement.
8.1 NOTICE AND CURE. SMC will notify Savers promptly in writing
of, and contemporaneously will provide Savers with true and complete copies
of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Effective Time, any
event, transaction or circumstance occurring after the date of this Merger
Agreement that causes or will cause any covenant or agreement of SMC under
this Merger Agreement to be breached, or that renders or will render untrue
any representation or warranty of SMC contained in this Merger Agreement as
if the same were made on or as of the date of such event, transaction or
circumstance. SMC also will use all commercially reasonable efforts to
cure, before the Effective Time, any violation or breach of any
representation, warranty, covenant or agreement made by it in this Merger
Agreement, whether occurring or arising before or after the date of this
Merger Agreement.
8.2 FORM A FILING. Within thirty (30) days of the execution of
this Merger Agreement, SMC will file a Form A with the North Carolina
Department of Insurance relating to the proposed Merger.
8.3 ▇▇▇▇▇ ▇▇▇▇▇▇ TO BE APPOINTED A DIRECTOR. Immediately following
the Effective Time, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., shall be appointed to the Board
of Directors of SMC.
8.4 ELECTION OF COMMON STOCK PERFORMANCE PREMIUM PAYMENT. SMC will
exert its best efforts to assure that any shares of SMC Common Stock
isssued to the former holders of Savers Common Stock as payment of the
Performance Premium provided for in ARTICLE III will be received on a tax-
free basis.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 STOCKHOLDER APPROVAL. (a) Savers shall call a meeting of its
stockholders (the "Savers Stockholder Meeting") for the purpose of voting
upon the Merger and shall use its best efforts to obtain stockholder
approval of the Merger. The Savers Stockholder Meeting shall beheld as
soon as practicable following the date upon which the Registration
Statement becomes effective, and Savers will, through its Board of
Directors, recommend to its stockholders the approval of the Merger and not
rescind its declaration that the Merger is advisable. At the Savers
Stockholder Meeting, all shares of Savers Common Stock held by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be voted in favor of this Merger
Agreement. The vote required for the adoption of this Merger Agreement
shall be the affirmative vote of the holders of a majority of the
outstanding shares of Savers Common Stock as required by the NCBCA. None
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall, prior to the Effective Time, sell,
transfer, assign or otherwise dispose of any shares of Savers Common Stock.
(b) SMC shall promptly call a meeting of its stockholders (the
"SMC Stockholder Meeting" and, together with Savers Stockholder
Meeting, the "Stockholder Meetings") for the purpose of voting upon
the issuance of SMC Common Stock in connection with the Merger and
shall use its best efforts to obtain stockholder approval of such
issuance. The SMC Stockholder Meeting shall be on the date of Savers
Stockholder Meeting or, if such date is not practicable, on the
closest date practicable.
9.2 REGISTRATION STATEMENT AND PROXY STATEMENT. SMC shall prepare
and file with the SEC as soon as practicable the Registration Statement and
shall use all reasonable efforts to have the Registration Statement
declared effective by the SEC as soon as practicable. Savers and SMC shall
prepare and file with the SEC as soon as practicable the Proxy Statement.
SMC shall also take any action required to be taken under state securities
or "Blue Sky" laws in connection with the issuance of the SMC Common Stock
pursuant to the Merger. Savers shall furnish SMC all information
concerning Savers and the holders of Savers Common Stock required for use
in the Registration Statement, and Savers shall take such other actions as
SMC may reasonably request in connection with the preparation of such
Registration Statement and the actions to be taken by SMC pursuant to this
SECTION 9.2. Savers and SMC shall each furnish to the other all
information concerning itself and its subsidiaries required for use in the
Proxy Statement, and shall take such other action as the other party may
reasonably request in connection with the preparation of the Proxy
Statement.
9.3 STOCK EXCHANGE LISTING. SMC shall use its best efforts to list
on the NASDAQ National Market, upon official notice of issuance, the shares
of SMC Common Stock to be issued in connection with the Merger.
9.4 REASONABLE EFFORTS. Upon the terms and subject to the
conditions set forth in this Merger Agreement, each of the parties agrees
to use all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger
and the other transactions contemplated by this Merger Agreement, including
(a) obtaining of all necessary actions or non-actions, waivers, consents
and approvals from Governmental Entities and making of all necessary
registrations and filings and taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity, including but not limited to any
filing under the Improvements Act and any required approvals of the
insurance regulatory authorities in the State of North Carolina and the
State of Indiana, (b) obtaining of all necessary consents, approvals or
waivers from third parties, (c) defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Merger
Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed, (d)
providing such other information and communications to such Governmental
Entities as the other party or such Governmental Entities may reasonably
request, (e) cooperate with the other party in obtaining, as promptly as
practicable, all actions of Governmental Entities referred to above and (d)
the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by this Merger Agreement.
Notwithstanding anything to the contrary in this SECTION 9.4, Savers shall
not commit to any divestiture transaction without SMC's prior consent.
9.5 STATE TAKEOVER LAWS. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, the members of the
Board of Directors of Savers shall use their best efforts to grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to minimize the effects of such
statute or regulations on the transactions contemplated hereby.
9.6 IMPROVEMENTS ACT FILINGS. SMC and Savers shall promptly, if
required, make their respective filings, and shall thereafter promptly make
any required submissions, under the Improvements Act with respect to the
Merger. Each of SMC, SAC and Savers will use its best efforts to cause the
satisfaction of the waiting period under the Improvements Act. SMC and
Savers will furnish to each other such necessary information and reasonable
assistance as may be requested in connection with their respective
preparation of necessary filings or submissions to any governmental agency,
including, without limitation, any filings necessary under the provisions
of the Improvements Act. Savers and SMC will supply each other with copies
of all correspondence, filings or communications (or memoranda setting
forth the substance thereof) between either of them or their respective
representatives and the Federal Trade Commission, the Antitrust Division of
the United States Department of Justice or any other governmental agency or
authority or members of their respective staffs with respect to this Merger
Agreement or the transactions contemplated hereby.
9.7 FINANCIAL STATEMENTS. Savers shall use reasonable efforts to
assist SMC in obtaining the services of ▇.▇. ▇▇▇▇▇▇▇▇ and Company and any
required consent to the use of their report regarding audited financial
statements of Savers as of the Effective Time in such form that they can be
used in connection with SMC's required filings with the Securities and
Exchange Commission. The fees and expenses of ▇.▇. ▇▇▇▇▇▇▇▇ and Company
and all other costs and expenses associated with the preparation of such
audited financial statements shall be paid by Savers.
9.8 CERTAIN NOTICES. Each party shall give prompt written notice to
the other of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would cause any representation or warranty of Savers
contained in this Merger Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or
that will result in the failure to satisfy any of the conditions specified
in ARTICLES X, XI or XII and (ii) any failure of Savers or SMC, as the case
may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder or under any other agreement
or instrument contemplated hereby.
ARTICLE X
CONDITIONS OF BOTH PARTIES
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the
following conditions:
10.1 STOCKHOLDER APPROVAL. The Merger shall have been approved by
the requisite vote of the holders of Savers Common Stock, and the issuance
of shares of SMC Common Stock in connection with the Merger shall have been
approved by the requisite vote of the holders of SMC Common Stock.
10.2 NASDAQ LISTING. The SMC Common Stock issuable in the Merger
shall have been authorized for listing on the NASDAQ National Market, upon
official notice of issuance.
10.3 REGULATORY APPROVALS. All regulatory approvals necessary to
consummation of the Merger shall have been obtained or relevant waiting
periods shall have expired.
10.4 REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and remain in effect. All necessary
state securities or "Blue Sky" authorizations shall have been received.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF SMC AND SAC
The obligations of SMC and SAC hereunder are subject to the
fulfillment, at or before the Effective Time, of each of the following
conditions (all or any of which may be waived in whole or in part by SMC):
11.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Savers in this Merger Agreement and the statements of
Savers contained in the Disclosure Schedule shall be true as of the
effective date of this Merger Agreement, the certifications given pursuant
to SECTION 11.3 shall be true as of the date given, and all of such
representations, warranties, certifications and statements shall be true at
the Effective Time as though such representations, warranties,
certifications and statements were made at the Effective Time.
11.2 PERFORMANCE. Savers shall have performed and complied with all
agreements, covenants, obligations, and conditions required by this Merger
Agreement to be so performed or complied with by Savers at or before the
Effective Time.
11.3 CERTIFICATES OF OFFICER OF SAVERS. Savers shall have delivered
to SMC a certificate, dated the Effective Time in the form of EXHIBIT C
hereto and executed by the chief executive officer or chief financial
officer of Savers, certifying (with respect to Savers) as to the
fulfillment of the conditions set forth in ARTICLE X and this ARTICLE XI.
In addition, Savers shall have delivered to SMC a certificate, dated the
Effective Time and executed by the secretary or any assistant secretary of
Savers, certifying that Savers has duly and validly taken all corporate
action necessary to authorize its execution and delivery of this Merger
Agreement and its performance of its obligations under this Merger
Agreement and that the resolutions (true and complete copies of which shall
be attached to the certificate) of the Board of Directors and the
stockholders of Savers with respect to this Merger Agreement and the
transactions contemplated hereby have been duly and validly adopted and are
in full force and effect.
11.4 NO INJUNCTION. There shall not be in effect at the Effective
Time any writ, judgment, injunction, decree or similar order of any court
or similar Person restraining, enjoining or otherwise preventing
consummation of any of the transactions contemplated by this Merger
Agreement.
11.5 NO PROCEEDING OR LITIGATION. There shall not be instituted,
pending or (to the best knowledge of SMC or Savers) threatened any action,
suit, investigation, or other proceeding in, before, or by any court,
governmental or regulatory authority or other Person to restrain, enjoin or
otherwise prevent consummation of any of the transactions contemplated by
this Merger Agreement or to recover any Damages or obtain other relief as a
result of this Merger Agreement or any of the transactions contemplated
hereby or as a result of any Contract entered into in connection with or as
a condition precedent to the consummation hereof, which action, suit,
investigation or other proceeding may, in the reasonable opinion of SMC,
result in a decision, ruling or finding that individually or in the
aggregate has or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Merger Agreement, on the
ability of Savers or SMC to perform its respective obligations under this
Merger Agreement or on the Business or Condition of SMC or Savers. There
shall not be in effect at the Effective Time any voluntary or involuntary
bankruptcy, receivership, conservatorship or similar proceeding with
respect to Savers.
11.6 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals, and waivers of every Person disclosed pursuant
to SECTIONS 4.5 and 11.10 and necessary to permit SMC to perform its
obligations under this Merger Agreement and to consummate the transactions
contemplated hereby (including, without limitation, any requisite action of
the insurance regulatory authorities in the State of North Carolina and the
State of Indiana, in each case without the abrogation or diminishment of
Savers's authority or license or the imposition of significant restrictions
upon the transactions contemplated hereby) shall have been obtained and
shall be in full force and effect, and Savers shall have obtained all
consents, approvals, authorizations and clearances referred to in ARTICLE
X, and SMC shall have received evidence satisfactory to it of the receipt
of such consents, approvals, authorizations and clearances.
11.7 NO ADVERSE CHANGE. Since December 31, 1995, there shall not
have been, occurred, or arisen any change in, or any event (including,
without limitation, any damage, destruction or loss, whether or not covered
by insurance), condition or state of facts of any character that
individually or in the aggregate has or may reasonably be expected to have
a material adverse effect on the Business or Condition of Savers.
11.8 OPINION OF COUNSEL. Savers shall have delivered to SMC the
opinion, dated the Effective Time, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇,
PLLC, counsel to Savers, to the effect set forth in EXHIBIT D hereto.
11.9 APPROVAL BY FLEET AND CONSECO. Fleet National Bank of
Connecticut and Conseco, Inc. shall have consented to the consummation of
the transactions contemplated under this Merger Agreement and one or both
of them have agreed to loan SMC the sum of $4,000,000 upon terms and
conditions satisfactory to SMC.
11.10 EMPLOYMENT AGREEMENT. The Employment Agreement by and between
SMC and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. shall have been executed and delivered in
substantially the form of EXHIBIT G hereto.
11.11 LOCKUP AGREEMENTS. All holders of 5% or more of Saver's issued
and outstanding capital stock and each director or officer of Savers shall
have executed and delivered Lockup Agreements with SMC substantially in the
form of EXHIBIT H hereto.
11.12 DISSENTERS' RIGHTS. Holders of not more than 5% of Savers
Common Stock outstanding immediately prior to the Effective Time shall be
eligible to exercise appraisal rights under Section 55-13-01, et seq., of
the NCBCA.
11.13 SMC STOCKHOLDERS APPROVAL. The Stockholders of SMC shall have
approved the Merger Agreement and the issuance of SMC Common Stock.
11.14 SAVERS ADJUSTED CAPITAL AND SURPLUS. The Adjusted Capital and
Surplus of the Surviving Corporation, calculated as provided in EXHIBIT B
hereto, shall not be less than $7,390,000 immediately after the Effective
Time.
11.15 SAVERS STOCKHOLDERS APPROVAL. The Stockholders of Savers shall
have approved the Merger Agreement.
ARTICLE XII
CONDITIONS TO OBLIGATIONS OF SAVERS
The obligations of Savers hereunder are subject to the fulfillment,
at or before the Effective Time, of each of the following conditions (all
or any of which may be waived in whole or in part by Savers).
12.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by SMC and SAC in this Merger Agreement shall be true as of
the effective date of this Merger Agreement and shall be true at the
Effective Time as though such representations and warranties were made at
the Effective Time.
12.2 PERFORMANCE. SMC and SAC shall have performed and complied with
all agreements, covenants, obligations, and conditions required by this
Merger Agreement to be so performed or complied with by SMC and SAC at or
before the Effective Time.
12.3 OFFICERS' CERTIFICATES. SMC shall have delivered to Savers a
certificate, dated the Effective Time in the form of EXHIBIT E hereto and
executed by the chief executive officer or the chief financial officer of
SMC, certifying with respect to SMC as to the fulfillment of the conditions
set forth in ARTICLE X and this ARTICLE XII. In addition, SMC shall have
delivered to Savers a certificate, dated the Effective Time and executed by
the secretary or any assistant secretary of SMC certifying that SMC has
duly and validly taken all corporate action necessary to authorize its
execution and delivery of this Merger Agreement and its performance of its
obligations under this Merger Agreement and that the resolutions (true and
complete copies of which shall be attached to the certificate) of the Board
of Directors and the stockholders of SMC with respect to this Merger
Agreement and the transactions contemplated hereby have been duly and
validly adopted and are in full force and effect.
12.4 NO INJUNCTION. There shall not be in effect at the Effective
Time any writ, judgment, injunction, decree or similar order of any court
or similar Person restraining, enjoining or otherwise preventing
consummation of any of the transactions contemplated by this Merger
Agreement.
12.5 NO PROCEEDING OR LITIGATION. There shall not be instituted,
pending or (to the best knowledge of SMC or of Savers) threatened any
action, suit, investigation or other proceeding in, before, or by any
court, governmental or regulatory authority or other Person to restrain,
enjoin, or otherwise prevent consummation of any of the transactions
contemplated by this Merger Agreement or to recover any Damages or obtain
other relief as a result of this Merger Agreement or any of the
transactions contemplated hereby or as a result of any Contract entered
into in connection with or as a condition precedent to the consummation
hereof, which action, suit, investigation or other proceeding may, in the
reasonable opinion of Savers, result in a decision, ruling or finding that
individually or in the aggregate has or may reasonably be expected to have
a material adverse effect on the validity or enforceability of this Merger
Agreement or on the ability of SMC or Savers to perform its obligations
under this Merger Agreement.
12.6 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals, and waivers of every Person disclosed pursuant
to SECTION 4.5 and necessary to permit Savers to perform its obligations
under this Merger Agreement and to consummate the transactions contemplated
hereby shall have been obtained and shall be in full force and effect, and
SMC shall have obtained all consents, approvals, authorizations and
clearances referred to in ARTICLE X and SECTION 11.6 and Savers shall have
received evidence satisfactory to it of the receipt of such consents,
approvals, authorizations and clearances.
12.7 OPINION OF COUNSEL. SMC shall have delivered to Savers the
opinion, dated the Effective Time, of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, counsel to SMC, to
the effect set forth in EXHIBIT F hereto.
ARTICLE XIII
SURVIVAL OF PROVISIONS; REMEDIES
13.1 SURVIVAL. The representations, warranties, covenants, and
agreements respectively made by Savers, SMC and SAC in this Merger
Agreement, in the Disclosure Schedule or in any certificate respectively
delivered by Savers, SMC or SAC pursuant hereto will survive the Merger for
a period of 25 months following the Effective Time.
13.2 AVAILABLE REMEDIES. Each party expressly agrees that,
consistent with its intention and agreement to be bound by the terms of
this Merger Agreement and to consummate the transactions contemplated
hereby, subject only to the performance or satisfaction of precedent
conditions or of precedent requirements imposed upon another party hereto,
the remedy of specific performance shall be available to a non-breaching
and non-defaulting party to enforce performance of this Merger Agreement by
a breaching or defaulting party, including, without limitation, to require
the consummation of the Merger.
ARTICLE XIV
TERMINATION
14.1 TERMINATION. This Merger Agreement may be terminated, and the
transaction contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after any approval by the stockholders of
Savers or SMC:
(a) by mutual written consent of SMC and Savers;
(b) by SMC if (i) Savers shall have failed to comply in any
material respect with any of its covenants or agreements contained in
this Merger Agreement required to be complied with by Savers prior to
the date of such termination, which failure to comply has not been
cured within five Business Days following receipt by Savers of notice
of such failure to comply, (ii) the stockholders of Savers shall have
failed to approve the Merger at the Savers Stockholder Meeting,
provided that, at the time of such termination, SMC has not breached
any of its covenants set forth in ARTICLES VIII or IX; or (iii) the
stockholders of SMC shall have failed to approve the issuance of the
SMC Common Stock at the SMC Stockholder Meeting provided that at the
time of such termination SMC has not breached any of its covenants
set forth in ARTICLES VIII or IX.
(c) by Savers if (i) SMC or SAC shall have failed to comply in
any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with by SMC or
SAC prior to the date of such termination, which failure to comply
has not been cured within five Business Days following receipt by SMC
of notice of such failure to comply, (ii) the stockholders of Savers
shall have failed to approve the Merger at the Savers Stockholder
Meeting provided that at the time of such termination, Savers has not
breached any of its covenants set forth in ARTICLES VII or IX, or
(iii) the stockholders of SMC shall have failed to approve the
issuance of the SMC Common Stock at the SMC Stockholders Meeting,
provided that, at the time of such termination, Savers has not
breached any of its covenants set forth in ARTICLES VII or IX.
(d) by either SMC or Savers if (i) the Merger has not been
effected on or prior to the close of business on May 30, 1997;
provided, however, that the right to terminate this Merger Agreement
pursuant to this clause shall not be available to any party whose
failure to fulfill any obligation of this Merger Agreement has been
the cause of, or resulted in, the failure of the Merger to have
occurred on or prior to the aforesaid date, or (ii) any court of
competent jurisdiction or any governmental, administrative or
regulatory authority, agency or body shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the transactions contemplated by
this Merger Agreement and such order, decree, ruling or other action
shall have become final and nonappealable.
(e) by either SMC or Savers if there has been (i) a material
breach by the other of any representation or warranty that is not
qualified as to materiality or (ii) a breach by the other of any
representation or warranty that is qualified as to materiality, in
each case which breach has not been cured within five Business Days
following receipt by the breaching party of notice of the breach.
(f) by SMC, (i) if the Board of Directors of Savers shall not
have recommended, or shall have resolved not to recommend, or shall
have modified or withdrawn its recommendation of the Merger or
declaration that the Merger is advisable or (ii) if the Board of
Directors of Savers shall have recommended, or shall have resolved to
recommend, to the stockholders of Savers any takeover proposal or
offer of any other Person.
14.2 EFFECT OF TERMINATION. If this Merger Agreement is validly
terminated pursuant to SECTION 14.1, this Merger Agreement will forthwith
become null and void, and there will be no Liability on the part of Savers
or SMC (or any of their respective officers, directors, employees, agents,
consultants or other representatives), except that the provisions relating
to confidentiality in SECTION 15.5 will continue to apply following any
such termination; PROVIDED, HOWEVER, that notwithstanding anything in this
Section to the contrary, no party electing to terminate this Merger
Agreement pursuant to SECTION 14.1 will be relieved of any Liability for
Damages that the electing party may have to the other party by reason of
the electing party's breach of this Merger Agreement (or any
representation, warranty, covenant or agreement included herein).
14.3 CERTAIN PAYMENTS. Notwithstanding any provision in this Merger
Agreement to the contrary, (x) if this Merger Agreement is terminated
pursuant to Sections 14.1(B)(I), 14.1(C)(I) or 14.1(E) on the grounds that
the other party has failed to proceed in good faith, the party terminating
this Merger Agreement shall be entitled to reimbursement from the other
party hereto upon demand for all out-of-pocket fees and expenses incurred
or paid by or on behalf of the terminating party or any of its Affiliates
in connection with this Merger Agreement or the consummation of the Merger,
including, but not limited to, all fees and expenses of counsel, investment
banking firms, accountants, experts and consultants to the terminating
party or any of its Affiliates; provided, however, that the other party
hereto shall not be obligated to make payments pursuant to this clause (x)
in excess of $150,000 in the aggregate; and (y)(i) if the Board of
Directors of Savers fails to make a favorable recommendation or withdraws,
amends or modifies its favorable recommendation to its stockholders of this
Merger Agreement and the Merger and (ii) on or prior to twelve months after
the event described in clause (y)(i) above, a Third Party Acquisition Event
(as defined below) occurs, Savers shall promptly, but in no event later
than the second Business Day following the later to occur of the events
referred to in clauses (i) and (ii), pay to SMC (without prejudice to any
other rights of SMC against Savers) a fee of $500,000 in cash (inclusive of
expenses). In the event that Savers is obligated to make any payment under
clause (y) of this paragraph, it shall be relieved of its obligations, if
any, under clause (x). For purposes of clause (x) above, a refusal by any
party to perform any of its obligations hereunder based upon a failure of
one or more conditions to such obligations shall constitute a breach of
SECTION 9.5 if such condition may be waived by such party and if such a
wavier is unreasonably withheld by such party. A "Third Party Acquisition
Event" means any of the following events: (A) any Person or group of
Persons, other than SMC or its Affiliates, acquires or becomes the
beneficial owner of 25% or more of the outstanding shares of Savers Common
Stock; (B) any new group is formed which beneficially owns 25% or more of
the outstanding shares of Savers Common Stock (other than a group which
includes or may reasonably be deemed to include SMC or any of its
Affiliates); (C) any Person or group of Persons (other than SMC or its
Affiliates) shall have commenced a tender or exchange offer for 25% or more
of the then outstanding shares of Savers Common Stock or publicly proposed
any bona fide merger, consolidation or acquisition of all or substantially
all the assets of Savers or other similar business combination involving
Savers; (D) Savers enters into an agreement, including, without limitation,
an agreement in principle, providing for a merger or other business
combination involving Savers or the acquisition of a substantial interest
in, or a substantial portion of the assets, business or operations of
Savers (other than the transactions contemplated by this Merger Agreement);
(E) any Person or group of Persons (other than SMC or its Affiliates) is
granted any option or right, conditional or otherwise, to acquire or
otherwise become the beneficial owner of shares of Savers Common Stock,
which, together with all shares of Savers Common Stock beneficially owned
by such Person or group of Persons, results or would result in such Person
or group of Persons being the beneficial owner of 25% or more of the
outstanding shares of Savers Common Stock. For purposes of this SECTION
14.3, the terms "group" and "beneficial owner" shall be defined by
reference to Section 13(d) of the Exchange Act.
ARTICLE XV
MISCELLANEOUS
15.1 NOTICES. All notices and other communications under this
Merger Agreement must be in writing and will be deemed to have been duly
given if delivered, telecopied or mailed, by certified mail, return receipt
requested, first class postage prepaid, to the parties at the following
addresses:
If to Savers, to:
Savers Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to SMC or SAC, to:
Standard Management Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman & CEO
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications required or permitted under this
Merger Agreement that are addressed as provided in this ARTICLE XV will, if
delivered personally, be deemed given upon delivery, will, if delivered by
telecopy, be deemed delivered when confirmed and will, if delivered by mail
in the manner described above, be deemed given on the third Business Day
after the day it is deposited in a regular depository of the United States
mail. Any party from time to time may change its address for the purpose of
notices to that party by giving a similar notice specifying a new address,
but no such notice will be deemed to have been given until it is actually
received by the party sought to be charged with the contents thereof.
15.2 ENTIRE AGREEMENT. Except for documents executed by Savers, SMC
and SAC pursuant hereto, this Merger Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter of this Merger Agreement, and this Merger Agreement (including the
exhibits thereto, the Disclosure Schedule and other Contracts and documents
delivered in connection herewith) contains the sole and entire agreement
between the parties hereto with respect to the subject matter hereof.
15.3 EXPENSES. Except as otherwise expressly provided in this
Merger Agreement, each of Savers, SMC and SAC will pay its own costs and
expenses in connection with this Merger Agreement and the transactions
contemplated hereby.
15.4 PUBLIC ANNOUNCEMENTS. At all times at or before the Effective
Time, Savers and SMC will each consult with the other before issuing or
making any reports, statements, or releases to the public with respect to
this Merger Agreement or the transactions contemplated hereby and will use
good faith efforts to agree on the text of a joint public report, statement
or release or will use good faith efforts to obtain the other party's
approval of the text of any public report, statement, or release to be made
solely on behalf of a party. If Savers and SMC are unable to agree on or
approve any such public report, statement or release and such report,
statement or release is, in the opinion of legal counsel to a party,
required by Law or may be appropriate in order to discharge such party's
disclosure obligations, then such party may make or issue the legally
required report, statement or release. Any such report, statement, or
release approved or permitted to be made pursuant to this SECTION 15.4 may
be disclosed or otherwise provided by Savers or SMC to any Person,
including without limitation to any employee or customer of either party
hereto and to any governmental or regulatory authority.
15.5 CONFIDENTIALITY. Each of Savers and SMC will hold, and will
cause its respective officers, directors, employees, agents, consultants
and other representatives to hold, in strict confidence, unless compelled
to disclose by judicial or administrative process (including, without
limitation, in connection with obtaining the necessary approval of
insurance regulatory authorities) or by other requirements of Law, all
confidential documents and confidential information concerning the other
party furnished to it by the other party or such other party's officers,
directors, employees, agents, consultants or representatives in connection
with this Merger Agreement or the transactions contemplated hereby, except
to the extent that such documents or information can be shown to have been
(a) previously lawfully known by the party receiving such documents or
information, (b) in the public domain through no fault of such receiving
party or (c) later acquired by the receiving party from other sources not
themselves bound by, and in breach of, a confidentiality agreement.
Neither Savers nor SMC will disclose or otherwise provide any such
confidential documents or confidential information to any other Person,
except to SMC's lenders and investors and to either party's respective
auditors, actuaries, attorneys, financial advisors and other consultants
and advisors who need such documents or information in connection with this
Merger Agreement.
15.6 WAIVER. Any term or condition of this Merger Agreement may be
waived at any time by the party that is entitled to the benefit thereof.
Such waiver must be in writing and must be executed by the chief executive
officer or the chief operating officer of such party. A waiver on one
occasion will not be deemed to be a waiver of the same or any other breach
on a future occasion. All remedies, either under this Merger Agreement, or
by Law or otherwise afforded, will be cumulative and not alternative.
15.7 AMENDMENT. This Merger Agreement may be modified or amended
only by a writing duly executed by or on behalf of Savers, SMC and SAC.
15.8 COUNTERPARTS. This Merger Agreement may be executed
simultaneously in any number of counterparts, each of which will be deemed
an original, but all of which will constitute one and the same instrument.
15.9 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Merger Agreement are intended solely for the benefit of Savers and SMC, and
their respective successors or assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
15.10 GOVERNING LAW. THIS MERGER AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES) .
15.11 BINDING EFFECT. This Merger Agreement is binding upon and will
inure to the benefit of the parties and their respective successors and
assigns.
15.12 ASSIGNMENT. Except as otherwise provided herein, this Merger
Agreement or any right hereunder or part hereof may not be assigned by any
party hereto without the prior written consent of the other parties hereto.
15.13 HEADINGS, ETC. The headings used in this Merger Agreement have
been inserted for convenience and do not constitute matter to be construed
or interpreted in connection with this Merger Agreement.
15.14 INVALID PROVISIONS. If any provision of this Merger Agreement
is held to be illegal, invalid or unenforceable under any present or future
Law, and if the rights or obligations of Savers, SMC or SAC under this
Merger Agreement will not be materially and adversely affected thereby,
(a) such provision will be fully severable; (b) this Merger Agreement will
be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof; (c) the remaining provisions
of this Merger Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom; and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of
this Merger Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be
possible.
IN WITNESS WHEREOF, this Merger Agreement has been duly executed and
delivered by the parties hereto, effective as of the date first written
above.
STANDARD ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and CEO
SAVERS LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Pres.
STANDARD MANAGEMENT CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and CEO
EXHIBIT A
DEFINITIONS OF TERMS
"ADJUSTED CAPITAL AND SURPLUS" as of any date shall mean Savers'
statutory capital and surplus as of such date, adjusted pursuant to the
Formula set forth on EXHIBIT B hereto and determined based on SAP
consistently applied throughout the specified period and in the immediately
prior comparable period.
"AFFILIATE" shall mean any Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified.
"ANNUAL STATEMENT" shall mean any annual statement of Savers filed
with or submitted to the insurance regulatory authority in the State of
North Carolina on forms prescribed or permitted by such authority.
"ARTICLES OF MERGER" has the meaning set forth in SECTION 2.2.
"ASSETS AND PROPERTIES" shall mean all assets or properties of every
kind, nature, character, and description (whether real, personal, or mixed
whether tangible or intangible, whether absolute, accrued, contingent,
fixed, or otherwise, and wherever situated) as now operated, owned, or
leased by a specified Person, including without limitation cash, cash
equivalents, securities, accounts and notes receivable, real estate,
equipment, furniture, fixtures, insurance or annuities in force, goodwill,
and going-concern value.
"AVERAGE TRADING PRICE" shall have the meaning set forth in SECTION
2.5.
"AVR" shall mean the asset valuation reserve required to be
established and maintained by Savers at any particular date, calculated in
accordance with SAP.
"BENEFIT PLANS" shall mean all Employee Pension Benefit Plans, all
Employee Welfare Benefit Plans, all stock bonus, stock ownership, stock
option, Merger, stock appreciation rights, phantom stock, and other stock
plans (whether qualified or nonqualified), and all other pension, welfare,
severance, retirement, bonus, deferred compensation, incentive
compensation, insurance (whether life, accident and health, or other and
whether key man, group, workers compensation, or other), profit sharing,
disability, thrift, day care, legal services, leave of absence, layoff, and
supplemental or excess benefit plans, and all other benefit Contracts,
arrangements, or procedures having the effect of a plan, in each case
existing on or before the Effective Time under which Savers is or may
hereafter become obligated in any manner (including without limitation
obligations to make contributions or other payments) and which cover some
or all of the present or former officers, directors, employees, agents,
consultants, or other similar representatives providing services to or for
Savers; PROVIDED, HOWEVER, that such term shall not include (a) routine
employment policies and procedures developed and applied in the ordinary
course of business and consistent with past practice, including without
limitation sick leave, vacation, and holiday policies, and (b) directors
and officers liability insurance.
"BOOKS AND RECORDS" shall mean all accounting, financial reporting,
Tax, business, marketing, corporate, and other files, documents,
instruments, papers, books, and records of a specified Person, including
without limitation financial statements, budgets, projections, ledgers,
journals, deeds, titles, policies, manuals, minute books, stock
certificates and books, stock transfer ledgers, Contracts, franchises,
permits, agency lists, policyholder lists, supplier lists, reports,
computer files, retrieval programs, operating data or plans, and
environmental studies or plans.
"BUSINESS DAY" shall mean a day other than Saturday, Sunday, or any
day on which the principal commercial banks located in the City of
Indianapolis are authorized or obligated to close under the Laws of the
State of Indiana.
"BUSINESS OR CONDITION" shall mean the organization, existence,
authority, capitalization, business, licenses, condition (financial or
otherwise), cash flow, management, sales force, solvency, prospects, SAP
and GAAP results of operations, insurance or annuities in force, SAP
capital and surplus, Mandatory Securities Valuation Reserve, Liabilities,
or Assets and Properties of a specified Person.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. 9601 ET SEQ., any
amendments thereto, any successor statutes, and any regulations promulgated
thereunder.
"CERTIFICATE" has the meaning set forth in SECTION 2.8.
"CLAIM NOTICE" has the meaning set forth in SECTION 3.9.
"CLASS S PREFERRED" has the meaning set forth in SECTION 5.6.
"CLOSING" has the meaning set forth in SECTION 2.18.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
(including without limitation any successor code), and the rules and
regulations promulgated thereunder.
"CONSTITUENT CORPORATIONS" has the meaning set forth in the Preamble.
"CONTAMINANT" means any waste, pollutant, hazardous or toxic substance
or waste, petroleum, petroleum-based substance or waste, special waste, or
any constituent of any such substance or waste.
"CONTINGENT PAYMENT COMMITTEE" has the meaning set forth in SECTION
3.8.
"CONTRACT" shall mean any agreement, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, insurance policy,
annuity, reinsurance agreement, reinsurance treaty, or other contract or
commitment (whether written or oral).
"DAMAGES" shall mean any and all monetary damages, Liabilities, fines,
fees, penalties, interest obligations, deficiencies, losses, and expenses
(including without limitation punitive, treble, or other exemplary or extra
contractual damages, amounts paid in settlement, interest, court costs,
costs of investigation, fees and expenses of attorneys, accountants,
actuaries, and other experts, and other expenses of litigation or of any
claim, default, or assessment).
"DISCLOSURE SCHEDULE" shall mean the bound record, dated the effective
date of the Merger Agreement, furnished by Savers to SMC, and containing
all lists, descriptions, exceptions, and other information and materials as
are required to be included therein pursuant to the Merger Agreement.
"DISSENTING SHARES" has the meaning set forth in SECTION 2.14.
"EFFECTIVE TIME" has the meaning set forth in SECTION 2.2.
"ELECTION" has the meaning set forth in SECTION 2.7.
"ELECTION DATE" has the meaning set forth in SECTION 2.7.
"EMPLOYEE PENSION BENEFIT PLAN" shall mean each employee pension
benefit plan (whether or not insured), as defined in Section 3(2) of ERISA,
which is or was in existence on or before the Effective Time and to which
Savers is or may hereafter become obligated in any manner as an employer.
"EMPLOYEE WELFARE BENEFIT PLAN" shall mean each employee welfare
benefit plan (whether or not insured), as defined in Section 3(1) of ERISA,
which is or was in existence on or before the Effective Time and to which
Savers is or may hereafter become obligated in any manner as an employer.
"ENVIRONMENTAL ENCUMBRANCE" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law, or
(ii) damages arising from, or costs incurred by such Governmental Body in
response to, a Release or threatened Release of a Contaminant into the
environment.
"ENVIRONMENTAL LAW" means all Requirements of Laws derived from or
relating to all federal, state and local laws or regulations relating to or
addressing the environment, health or safety, including but not limited to
CERCLA, OSHA and RCRA and any state equivalent thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended (including without limitation any successor act), and the
rules and regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any Person under common control (as
defined in Section 414 of the Code) with Savers.
"EXCESS SHARES" has the meaning set forth in SECTION 2.10.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder).
"EXCHANGE AGENT" has the meaning set forth in SECTION 2.8.
"EXCHANGE FUND" has the meaning set forth in SECTION 2.8.
"EXPENSES" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, consultants, accountants and other
professionals).
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.11.
"FORM OF ELECTION" has the meaning set forth in SECTION 2.7.
"FORMULA" shall have the meaning set forth in EXHIBIT B.
"FRACTIONAL SECURITIES FUND" shall have the meaning set forth in
SECTION 2.10.
"GAAP" shall mean generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"GOVERNMENTAL ENTITY" means any foreign, federal, state, local or
other governmental authority or regulatory entity.
"GOVERNMENTAL PERMITS" means Seller owns, holds or possesses all
licenses, franchises, permits, privileges, immunities, approvals and other
authorizations from a Governmental Body.
"IMPROVEMENTS ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976.
"IMR" shall mean the interest maintenance reserve required to be
established and maintained by Savers at any particular date, calculated in
accordance with SAP.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"LAW OR LAWS" shall mean all laws, statutes, ordinances, regulations,
and other pronouncements having the effect of law in the United States of
America, any foreign country, or any domestic or foreign state, province,
commonwealth, city, country, municipality, territory, protectorate,
possession, court, tribunal, agency, government, department, commission,
arbitrator, board, bureau, or instrumentality thereof.
"LIABILITY OR LIABILITIES" shall mean all debts, obligations, and
other liabilities of a Person (whether absolute, accrued, contingent,
fixed, or otherwise, or whether due or to become due).
"LIEN" shall mean any mortgage, pledge, assessment, security interest,
lease, sublease, lien, adverse claim, levy, charge, or other encumbrance of
any kind, or any conditional sale Contract, title retention Contract, or
other Contract to give or to refrain from giving any of the foregoing.
"LOSSES" has the meaning set forth in SECTION 3.9.
"MERGER AGREEMENT" shall mean this Merger Agreement, together with the
exhibits and the Disclosure Schedule attached hereto, and the Contracts and
other documents to be executed and delivered by Savers pursuant hereto.
"NAIC" shall mean the National Association of Insurance Commissioners.
"NCBCA" has the meaning set forth in SECTION 2.1.
"NON-ADMITTED ASSETS" shall mean any assets of the Company required to
be reported as "assets not admitted" on EXHIBIT 13 of any Annual Statement
or Quarterly Statement filed by Savers.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
651 ET SEQ., any amendment thereto, any successor
statute, and any regulations promulgated thereunder.
"OWNED REAL PROPERTY" has the meaning set forth in SECTION 4.20.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA.
"PERFORMANCE PREMIUM" means either the 1997 Performance Premium or the
1998 Performance Premium or both.
"PERSON" means any natural person, corporation, general partnership,
limited partnership, proprietorship, trust, union, association, court,
tribunal, agency, government, department, commission, self-regulatory
organization, arrbitrator, board, bureau, instrumentality, or other entity,
enterprise, authority, or business organization.
"PROXY STATEMENT" has the meaning set forth in SECTION 4.9.
"QUARTERLY STATEMENT" shall mean any quarterly statement of Savers
filed with or submitted to the insurance regulatory authority in the State
of North Carolina on forms prescribed or permitted by such authority.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
6901 ET SEQ., and any successor statute, and any
regulations promulgated thereunder.
"RECORD HOLDER" has the meaning set forth in ARTICLE III.
"REGISTRATION STATEMENT" has the meaning set forth in SECTION 4.9.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any
Property of Savers, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Property of Savers.
"REQUIREMENTS OF LAW" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without
limitation, those pertaining to electrical, building, zoning, environmental
and occupational safety and health requirements) or common law.
"SAC" has the meaning set forth in the Preamble.
"SAP" shall mean the accounting practices required or permitted by the
National Association of Insurance Commissioners and the insurance
regulatory authority in the State of North Carolina, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"SAP STATEMENTS" shall mean the Annual Statements, Quarterly
Statements, and other financial statements and presentations of Savers
prepared in accordance with SAP and delivered to SMC pursuant to of
SECTIONS 4.7, 4.11 and 7.2.
"SAVERS" has the meaning set forth in the Preamble.
"SAVERS AGREEMENT" has the meaning set forth in SECTION 4.22.
"SAVERS COMMON STOCK" shall have the meaning ascribed to it in this
Merger Agreement.
"SAVERS STOCKHOLDERS MEETING" has the meaning as set forth in SECTION
9.1.
"SAVERS STOCK OPTION" has the meaning set forth in SECTION 9.4.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder).
"SMC" shall mean Standard Management Corporation.
"SMC COMMON STOCK" shall have the meaning ascribed to it in the
Preamble of this Merger Agreement.
"SMC SECURITIES" has the meaning set forth in SECTION 5.6.
"SMC STOCKHOLDERS MEETING" has the meaning set forth in SECTION 9.1.
"STANDARD VALUATION OFFICE" shall mean the financial instruments
rating entity for the NAIC.
"STOCKHOLDER MEETINGS" has the meaning set forth in SECTION 9.1.
"SURVIVING CORPORATION" has the meaning set forth in SECTION 2.1.
"TAXES" shall mean all taxes, charges, fees, levies, or other similar
assessments or Liabilities, including without limitation income, gross
receipts, ad valorem, premium, excise, real property, personal property,
windfall profit, sales, use, transfer, licensing, withholding, employment,
payroll, Phase III, and franchise taxes imposed by the United States of
America or any state, local, or foreign government, or any subdivision
agency, or other similar Person of the United States or any such
government; and such term shall include any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to, or
incurred in connection with any such tax or any contest or dispute thereof.
"TAX RETURNS" shall mean any report, return, or other information
required to be supplied to a taxing authority in connection with Taxes.
"THIRD PARTY ACQUISITION EVENT" has the meaning set forth in SECTION
14.3.
"THIRD PARTY CLAIM" has the meaning set forth in SECTION 3.9.
"WORK PAPERS" shall mean all summaries, calculations, compilations and
similar written documentation derived from the accounts of Savers and used
or prepared by accountants in the process of computing Adjusted Capital and
Surplus.
"1997 STATUTORY NET INCOME" has the meaning set forth in SECTION 3.1.
"1997 REQUIRED RETURN" has the meaning set forth in SECTION 3.1.
"1997 PERFORMANCE PREMIUM" has the meaning set forth in SECTION 3.1.
"1998 STATUTORY NET INCOME" has the meaning set forth in SECTION 3.2.
"1998 REQUIRED RETURN" has the meaning set forth in SECTION 3.2.
"1998 PERFORMANCE PREMIUM" has the meaning set forth in SECTION 3.2.
EXHIBIT B
FORMULA FOR DETERMINING
ADJUSTED CAPITAL AND SURPLUS OF COMPANY
AS OF THE EFFECTIVE TIME
The Adjusted Capital and Surplus of Savers on the Effective Time shall
be determined as follows (the "Formula"):
1. SAP Capital and Surplus as of the month end prior to the Effective
Time, PLUS:
2. The AVR held by Savers as of the month end prior to the Effective
Time.
EXHIBIT C
FORM OF CERTIFICATE OF OFFICER OF SAVERS
At the Effective Time, Savers shall deliver to SMC a certificate,
dated the Effective Time, executed by the Chief Executive Officer or Chief
Financial Officer of Savers, to the following effect:
Pursuant to the provisions of SECTION 11.3 of that certain Merger
Agreement dated December ___, 1996 (the "Agreement") by and among Savers
Life Insurance Company ( "Savers"), Standard Acquisition Corporation
("SAC") and Standard Management Corporation ("SMC"), I, the undersigned
[Chief Executive Officer/Chief Financial Officer] of Savers do hereby
certify to SMC as follows:
1. That I am the duly elected [Chief Executive Officer/Chief
Financial Officer] of Savers, and in that capacity have the requisite power
and authority to execute and deliver this certificate on behalf of Savers;
2. That the representations and warranties of Savers made in
connection with the Agreement and contained in Article IV thereof and in
the Disclosure Schedule attached to the Agreement and the certifications
given pursuant to SECTION 7.2(C) of the Agreement are true and correct as
of the date of this certificate as though made by Savers on and as of this
date, whether or not they were untrue or incorrect prior to such date;
3. That Savers has performed and complied with all agreements,
covenants, obligations and conditions required by the Agreement to be so
performed or complied with by Savers at or before the Effective Time; and
4. That all of the conditions to the obligations of SMC under the
Agreement have been fulfilled.
EXHIBIT D
FORM OF SAVERS' COUNSEL'S OPINION
At the Closing, Savers shall deliver to SMC the opinion of its
counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, to the following effect:
1. Savers is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina and has full
corporate power and authority to enter into the Merger Agreement and
perform its obligations thereunder.
2. Savers is an insurance company duly organized, validly existing
and in good standing under the laws of the State of North Carolina, and is
duly licensed, qualified or admitted to do business and is in good standing
in all jurisdictions listed on SECTION 4.1 of the Disclosure Schedule.
3. Savers has full corporate power and authority to enter into the
Merger Agreement and to consummate the transactions contemplated hereby and
thereby and to comply with the terms, conditions and provisions thereof.
The execution, delivery and performance by Savers of the Merger Agreement
and the actions to be taken by Savers contemplated thereby have been duly
and validly authorized by all necessary corporate action on the part of
Savers. Pursuant to the Savers' Articles of Incorporation and Bylaws of
Savers, the affirmative vote of a majority of the votes that holders of the
outstanding shares of Savers Common Stock are entitled to cast is the only
vote of the holders of any class or series of Savers' capital stock
necessary to approve the Merger Agreement and the transactions contemplated
thereby. The Merger Agreement has been duly executed and delivered by
Savers and constitutes the valid and binding obligation of Savers, and is
enforceable against Savers in accordance with its terms, except to the
extent that (a) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or
hereafter in effect relating to or limiting creditors' rights generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court or other Person before which any such proceeding
therefor may be brought. Upon the filing of the Articles of Merger with
the Secretary of State of North Carolina, the merger will become effective
under North Carolina law in accordance with the Merger Agreement.
4. (i) the authorized capital stock of Savers consists of 20,000,000
shares of Common Stock, __________ of which are outstanding, ___________ of
which were reacquired by Savers and not subsequently reissued and the
remainder of which have never been issued by Savers;
(ii) all of the outstanding shares of Savers Common Stock are duly
and validly issued and outstanding fully paid and nonassessable;
(iii) none of the issued and outstanding shares of Savers Common
Stock has been issued in violation of the preemptive rights of any person;
(iv) except for the Merger Agreement and as disclosed in the
Schedules and Exhibits thereto, there are no agreements, arrangements,
warrants, options, puts, calls, rights or other commitments, plans or
understandings of any character relating to the issuance, sale, purchase,
redemption, conversion, exchange, registration, voting, or transfer of any
shares of Savers Common Stock or any other securities of Savers; and
(v) except pursuant to applicable laws, there are no restrictions,
including but not limited to self-imposed restrictions, on the retained
earnings of Savers or on the ability of Savers to declare and pay
dividends.
5. The execution and delivery of the Merger Agreement by Savers does
not, and the performance by Savers of its obligations under the Merger
Agreement will not, subject to obtaining the approvals contemplated by
ARTICLES IX, X and XI of the Merger Agreement, (a) violate any term or
provisions of any Law or any writ, judgment, decree, injunction or similar
order applicable to Savers; (b) conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both)
a default under, any of the terms, conditions, or provisions of the
articles or certificate of incorporation or Bylaws of Savers; (c) result in
the creation or imposition of any Lien upon Savers, or any of its Assets
and Properties that individually or in the aggregate with any other Liens
has or may reasonably be expected to have a material adverse effect on the
validity or enforceability of the Merger Agreement, on the ability of
Savers to perform its obligations under the Merger Agreement, or on the
Business or Condition of Savers; of (d) conflict with or result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default under, or give to any Person any right of
termination, cancellation, acceleration, or modification in or with respect
to, any Contract to which Savers is a party or by which any of its Assets
or Properties may be bound and as to which any such conflicts, violations,
breaches, defaults or rights individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the validity or
enforceability of the Merger Agreement, on the ability of Savers to perform
its obligations under the Merger Agreement, or on the Business or Condition
of Savers.
6. Any consent, approval, order or authorization of, or any waiting
period imposed by any regulatory authority under federal or state law,
including the laws of the State of North Carolina and the State of Indiana,
which require Savers to obtain any consent, approval, or action of, or make
any filing with or give any notice to, any person except those which the
failure to obtain, make, or give individually or in the aggregate with any
other such failures has or may reasonably be expected to have no material
adverse effect on the validity or enforceability of the Merger Agreement,
or in the Business or Condition of Savers, in connection with the execution
and delivery of the Merger Agreement and the performance by Savers of its
obligations under the Merger Agreement has been obtained or, in the case of
any such waiting period, has expired.
7. The Proxy Statement prepared by Savers in accordance with SECTION
9.2 of the Merger Agreement and used in connection with the Savers
Stockholders Meeting, and the delivery of such Proxy Statement, complied in
all respects with the provisions of NCBCA. In the course of our
participation in the preparation of the Proxy Statement, we discussed the
disclosure and other requirements applicable to the Proxy Statement with
responsible officers of Savers, and have advised them as to the materiality
of certain statements of fact. We do not, however, make any representation
or express any opinion as to the accuracy of completeness of any factual
matters described in the Proxy Statement. However, in the course of our
preparation and review of the Proxy Statement, nothing came to our
attention to indicate that the description of factual matters therein was
inaccurate or incomplete in any material respect.
8. To such counsel's actual knowledge, except as disclosed in SECTION
4.13 of the Disclosure Schedule: (a) there are no actions, suits
investigations or proceedings pending or threatened against Savers or any
of Assets and properties, at law or in equity, in, before, or by any Person
that individually or in the aggregate have or may reasonably be expected to
have a material adverse effect on the validity or enforceability of the
Merger Agreement, on the ability of Savers to perform its obligations under
the Merger Agreement, or on the Business or Condition of Savers; and (b)
there are no writs, judgments, decrees or similar orders of any Person
restraining, enjoining or otherwise preventing consummation of the
transactions contemplated by the Merger Agreement.
9. Savers does not have any security (i) required to be registered
pursuant to the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act") or (ii)
registered on a national securities exchange as contemplated by Section 12
(b) of the Exchange Act. In particular, the securities of Savers are
exempt from the requirements of Section 12(q) of the Exchange Act by virtue
of Section 12(g) (2) (G) of the Exchange Act.
10. Each holder of 5% or more of Savers Common Stock and each officer
of Savers (the "Principal Stockholders") has, to our knowledge, the
capacity to enter into the Lockup Agreements, to consummate the
transactions contemplated thereby and to comply with the terms, conditions
and provisions thereof. Each Lockup Agreement has been duly executed and
delivered by each Principal Stockholder and, upon execution and delivery by
the other parties thereto, the Lockup Agreements will constitute the valid
and binding obligation of such Principal Stockholders, enforceable in
accordance with its terms, subject to (a) general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at
law, and (b) bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws now or hereafter in effect
relating to or affecting creditors' rights or remedies generally; and, to
our knowledge, the execution, delivery and performance of the Lockup
Agreements by such Principal Stockholders will not result in a breach of or
loss of rights under or constitute a default under or a violation of any
trust (constructive or other), agreement, judgment, decree, order or other
instrument to which he is a party or by which he or his properties or
assets may be bound.
11. Except for those stockholders listed on Schedule ____ attached
hereto, each of the Savers stockholders has effectively waived such
stockholder's rights of appraisal under the NCBCA, with respect to the
Merger, subject to judicial power of reinstatement.
EXHIBIT E
FORM OF CERTIFICATE OF OFFICER OF SMC
At the Effective Time, SMC shall deliver to Savers a certificate,
dated the Effective Time, executed by the Chief Executive Officer or Chief
Financial Officer of SMC, to the following effect:
Pursuant to the provisions of SECTION 12.3 of that certain Merger
Agreement dated December ___, 1996 (the "Agreement") by and among Savers
Life Insurance Company ("Savers"), Standard Acquisition Corporation ("SAC")
and Standard Management Corporation ("SMC"), I, the undersigned [Chief
Executive Officer/Chief Financial Officer] of SMC do hereby certify to
Savers as follows:
1. That I am the duly elected [Chief Executive Officer/Chief
Financial Officer] of SMC, and in that capacity have the requisite power
and authority to execute and deliver this certificate on behalf of SMC;
2. That the representations and warranties of SMC in connection
with the Agreement and contained in Article V thereof are true and correct
as of the date of this certificate as though made by SMC on and as of this
date, whether or not they were untrue or incorrect prior to such date;
3. That SMC has performed and complied with all agreements,
covenants, obligations and conditions required by the Agreement to be so
performed or complied with by SMC at or before the Effective Time; and
4. That all of the conditions to the obligations of Savers under
the Agreement have been fulfilled.
EXHIBIT F
FORM OF SMC'S COUNSEL'S OPINION
At the Closing, SMC shall deliver to Savers the opinion of its
counsel, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, to the following effect:
1. SMC is a life insurance holding company duly organized, validly
existing and in good standing under the laws of the State of Indiana and
has full corporate power and authority to enter into the Merger Agreement
and perform its obligations thereunder.
2. The execution and delivery of the Merger Agreement by SMC and the
performance of its obligations thereunder have been duly and validly
authorized by all necessary corporate action on the part of SMC, and the
Merger Agreement constitutes the legal, valid, and binding obligation of
SMC and is enforceable against SMC in accordance with the terms, except to
the extent that (a) enforcement may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium, or similar Laws now or
hereafter in effect relating to or limiting creditors' rights generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court or other similar Person before which any such
proceeding therefor may be brought.
3. The execution and delivery of the Merger Agreement by SMC does
not, and the performance by SMC of its obligations under the Merger
Agreement will not, subject to obtaining the approvals contemplated by
Articles IX, X and XI of the Merger Agreement, (a) violate any term or
provisions of any Law or any writ, judgment, decree, injunction or similar
order applicable to SMC; (b) conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both)
a default under, any of the terms, conditions, or provisions of the
articles or certificate of incorporation or Bylaws of SMC; (c) result in
the creation or imposition of any Lien upon SMC or any of its Assets and
Properties that individually or in the aggregate with any other Liens has
or may reasonably be expected to have a material adverse effect on the
validity or enforceability of the Merger Agreement or on the ability of SMC
to perform its obligations thereunder; or (d) conflict with or result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default under, or give any Person any right of termination,
cancellation, acceleration, or modification in or with respect to, any
Contract to which SMC is a party or by which any of its Assets or
Properties may be bound and as to which any such conflicts, violations,
breaches, defaults or rights individually or in the aggregate have or may
reasonably be expected to have a material adverse effect on the validity or
enforceability of the Merger Agreement or on the ability of SMC to perform
its obligations under the Merger Agreement.
4. Any consent, approval, order or authorization of, or any waiting
period imposed by any regulatory authority under federal or state law,
including the laws of the State of North Carolina and the State of Indiana,
which require SMC to obtain any consent, approval or action of, or make any
filing with or give any notice to, any Person except those which the
failure to obtain, make, or give individually or in the aggregate with any
other such failures has or may be expected to have no material adverse
effect on the validity or enforceability of the Merger Agreement or on the
ability of SMC to perform its obligations thereunder in connection with the
execution and delivery of the Merger Agreement and the performance by SMC
of its obligations thereunder has been obtained or, in the case of any such
waiting period, has expired.
EXHIBIT G
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of _______________, 1997, by
and between STANDARD MANAGEMENT COMPANY, an Indiana corporation, having its
principal office in Indianapolis, Indiana ("SMC") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the
"Executive").
1. PURPOSE AND INTENT. The SMC Board of Directors has
determined that it is in the best interests of SMC and its stockholders for
SMC to enter into this Employment Agreement (the "Agreement") with the
Executive stating the terms and conditions of the Executive's obligations
to and benefits from SMC.
2. PRINCIPAL EMPLOYMENT. SMC hereby agrees to continue to
employ the Executive on a full-time basis as Vice-Chairman of Savers Life
Insurance Company ("Savers"), a wholly-owned subsidiary of SMC, at its
corporate facilities in Winston-Salem, North Carolina, as directed by SMC's
Board of Directors. The Executive hereby agrees to accept such employment
and shall diligently perform such duties as may be assigned to him by the
Board of Directors.
The Executive will diligently devote his entire business
skill, time and effort to his employment with SMC and will not directly or
indirectly, alone or as a member of a partnership, or as an officer,
director, employee or agent of any other person, firm or business
organization, engage in any other business activities or pursuits requiring
his personal services which might conflict with his duties hereunder. The
foregoing shall not be construed as preventing the Executive from making
investments in other businesses or enterprises which are not competitive
with SMC or Savers, provided such investments do not require the provision
of other than incidental services by the Executive to the operation of such
businesses or enterprises and provided that the provision thereof will not
interfere with the performance of the Executive's duties hereunder.
3. TERM OF AGREEMENT. Subject to the provisions for
termination set forth below, this Agreement will begin on ______________,
1997 and end _____________, 1999. The Employment Term shall be extended
each year thereafter for an additional one year period unless either party
gives the other written notice at least 90 days before such extension of
its intention not to renew the Employment Agreement.
4. COMPENSATION
4.1 SALARY: During the term of his employment, the
Executive will be compensated at the initial annual rate of
$109,000 per year, payable in equal installments not less often
than semi-monthly. The Executive's salary will be reviewed at
least annually and adjusted based on his job-related performance
as determined by the Board of Directors of SMC in its sole
discretion. Thereafter during the Employment Term, Executive's
salary shall be increased each year by an amount equal to
Executive's salary for the previous year multiplied by the
percent change of the Consumer Price Index for all Urban
Consumers (the "CPI") (published by the Bureau of Labor
Statistics, United Stated Department of Labor) during the
immediate preceding calendar year.
4.2 INCENTIVE COMPENSATION AWARDS: The Executive will be
entitled to receive such incentive compensation awards as may be
determined by the Board of Directors of SMC in the form of cash
bonus, stock options or other bonus plan opportunities.
4.3 EMPLOYEE BENEFITS: The Executive shall be entitled
to participate in and receive the benefits of any and all
pension, profit sharing, health, disability and insurance plans
which may be maintained by SMC from time to time during the term
of this Agreement.
4.4 EXECUTIVE BENEFITS: In addition to the employee
benefits indicated above, the Executive shall be entitled to the
benefits set forth below:
(a) Life insurance - An amount equal to $_________;
(b) Disability Income - Full salary for up to one year from
the date of disability, then 60% of salary thereafter until
the earlier of age sixty-five or the cessation of disability
in the form of a disability income policy. For this purpose
"disability" shall mean the complete inability of the
Executive to perform his duties under this Agreement as
determined by any independent physician selected with the
approval of the Executive and SMC; and
4.5 AUTOMOBILE: SMC shall provide the Executive with a
$500.00 per month automobile allowance.
4.6 BOARD OF DIRECTORS. The Executive shall be appointed to
the Board of Directors of SMC at the Effective Time. The term shall
be as long as the Executive serves as Vice-Chairman of Savers.
5. TERMINATION WITHOUT CAUSE: SMC may terminate, without
cause, the Executive's employment during the term of this Agreement for
reasons other than those set forth in Paragraph 6 hereof upon thirty days'
written notice to the Executive. In such event, the Executive will
continue to be paid his regular salary up to the date of termination
contained in the written notice. In addition, SMC will pay the Executive
within thirty days of the date of termination a lump sum severance payment,
less taxes and other required deductions, equal to the following:
5.1 If the termination occurs within the first year of
the term of this Agreement, the balance of the salary for that
year plus one years additional salary;
5.2 If the termination occurs within the second year of
the term of this Agreement, the balance of the salary for that
year plus one year's additional salary;
The Executive shall continue his participation under the employee and
executive benefit plan(s) in which he is enrolled during the time that he
receives severance payments.
6. TERMINATION FOR CAUSE. SMC may terminate the Executive's
employment under this Agreement for "cause". Termination of the
Executive's employment by SMC for "cause" shall mean termination upon (a)
the willful and continued failure by the Executive to substantially perform
his duties with SMC (other than any such failure resulting from his
incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to the Executive by SMC, which demand
specifically identifies the manner in which SMC believes that the Executive
has not substantially performed his duties or (b) the willful engaging by
the Executive in conduct which is demonstrably and materially injurious to
SMC, monetarily or otherwise, such as (but not limited to) dishonesty,
conviction of a felony, or unauthorized disclosure of SMC trade secrets
and/or other confidential information. For purposes of this Paragraph 6,
no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that the action or omission was in the
best interest of SMC. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for "cause" unless and until there
shall have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths of the entire membership of
SMC's Board of Directors at a meeting called and held for such purpose
(after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel, to be heard before the Board of
Directors) finding that in the good faith opinion of the Board of Directors
the Executive is guilty of conduct set forth above in clauses (a) or (b)
and specifying the particulars thereof in detail. Termination of
employment under this Paragraph 6 shall be effective as of the date the act
which gives rise to the termination under this Paragraph 6 was committed.
The Executive's rights under this Agreement shall terminate as of the
effective date of termination set forth immediately above. SMC shall not
be obligated to make any payments under Paragraph 5 of this Agreement, and
SMC shall be relieved of any and all of its obligations under this
Agreement.
7. COVENANT NOT TO COMPETE. In consideration for his
employment hereunder, the Executive agrees that for a period of the greater
of (a) one year after the termination of his employment with SMC or (b) two
years after the termination of his employment with SMC, if severance pay is
due to him under Section 5.1 of this Agreement, he shall not, either
directly or indirectly, communicate with any customer of SMC or Savers
regarding any business matter or activity that would involve competing with
any business or activity engaged in by SMC or Savers.
8. DISCLOSURE OF INFORMATION. The Executive recognizes that
as an officer of Savers he will occupy a position of trust with respect to
business information of a secret or confidential nature and, in
consideration of his employment hereunder, he agrees to treat all such
information as confidential and not to disclose such information or any
portion thereof to any person except in the curse of executing the normal
duties of his employment with SMC or Savers and to return to SMC and Savers
any copies, abstracts or summaries of such information upon the termination
of his employment with SMC or Savers.
9. LOCATION. Savers principal office is in Winston-Salem,
North Carolina, where the Executive maintains his office. During the term
of this Agreement, should Savers or any successor of Savers move its
principal office to a location more than 50 miles from Winston-Salem, North
Carolina, and request the Executive to move his office to the new location,
the Executive may decline to move. Such refusal to move by the Executive
shall not constitute "cause" for termination of employment under this
Agreement. Should termination of employment occur as a result of such a
change of location and refusal to move, absent other events or
circumstances requiring otherwise, the termination shall be deemed to have
been without cause, entitling the Executive to severance compensation under
Paragraph 5 hereof.
10. REIMBURSEMENT FOR EXPENSES. SMC shall reimburse Executive
for all travel, entertainment and other business expenses which are
incurred by the Executive in the conduct of the business of SMC upon
receipt of itemized expense reports approved in accordance with SMC's
customary procedure.
11. NOTICES: All notices hereunder shall be in writing and
shall be deemed to have been given if delivered or mailed registered or
certified mail, postage prepaid, to the following addresses, or to such
other addresses as either party may designate in writing:
(a) If to SMC:
Standard Management Corporation
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
with a required copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
General Counsel
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
(b) If to the Executive, at his address as shown on Savers'
records.
12. MISCELLANEOUS. This Agreement:
12.1 constitutes the entire understanding between SMC and
the Executive relating to the subject matter hereof and
supersedes all prior agreements or understandings, including
but not limited to an Employment Agreement effective January
1, 1991 by and between Savers and the Executive;
12.2 may not be modified or varied except by an agreement
in writing signed by the party against whom enforcement of
such modification is sought;
12.3 will bind and inure to the benefit of the successors
and assigns of SMC and the heirs, executors or personal
representatives of the Executive;
12.4 is not assignable by the Executive;
12.5 may not be assigned by SMC except to a successor,
parent or subsidiary corporation which assumes all of SMC's
obligations hereunder; and
12.6 shall be governed by the laws of the State of North
Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
STANDARD MANAGEMENT CORPORATION
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman & CEO
ATTEST:
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ [Corporate Seal]
Secretary
EXECUTIVE:
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ [Seal]
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT H
__________________, 1997
Standard Management Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Agreement and Plan of Merger (the "Merger Agreement") among Standard
Management Corporation, an Indiana corporation ("SMC"), Standard
Acquisition Corporation ("SAC") and Savers Life Insurance Company
("Savers") in connection with the issuance of SMC Common Stock, no par
value (the "SMC Common Stock"), to shareholders of Savers.
In order to induce SMC and SAC to close the Merger Agreement, the
undersigned agrees not to offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce an offering of, any shares
of SMC Common Stock beneficially owned by the undersigned or any securities
convertible into, or exchangeable or exercisable for, shares of SMC Common
Stock for a period of one (1) year following the day which is the Effective
Time of the Merger without your prior written consent, other than shares of
SMC Common Stock disposed of as bona fide gifts, so long as any recipient
of such bona fide gifts agrees in writing (delivered to SMC) to be bound by
the restrictions set forth herein.
If for any reason the Merger Agreement shall be terminated prior to the
Effective Time (as defined in such Merger Agreement), the agreement set
forth above shall likewise be terminated.
Sincerely,
SMC SCHEDULE 5.6
Certain of the outstanding options or warrants to purchase
capital stock of SMC contain cashless exercise provision.