EXHIBIT 2
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
UNITRIN, INC.,
UNITRIN ACQUISITION CORPORATION
AND
THE RELIABLE LIFE INSURANCE COMPANY
AS OF JUNE 20, 1997
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 The Merger.......................................................... A-1
1.2 Effective Time...................................................... A-1
1.3 Effects of the Merger............................................... A-2
1.4 Articles of Incorporation........................................... A-2
1.5 By-Laws............................................................. A-2
1.6 Directors and Officers.............................................. A-2
1.7 Conversion of Company B Stock....................................... A-2
1.8 Conversion of Shares................................................ A-2
1.9 Election Procedures................................................. A-3
1.10 Allocation Procedures............................................... A-3
1.11 Designation of Exchange Agent....................................... A-4
1.12 Transmittal Materials; Surrender of Shares.......................... A-4
1.13 Termination of Exchange Agent's Duties.............................. A-5
1.14 Issuance, Voting and Dividends...................................... A-5
1.15 Dissenting Reliable Shares.......................................... A-5
1.16 Adjustments......................................................... A-6
1.17 Fractional Shares................................................... A-6
1.18 Closing of Company's Transfer Books................................. A-6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Standing and Qualification of Company................. A-6
2.2 Company Subsidiaries................................................ A-6
2.3 Capital Stock....................................................... A-7
2.4 Authorization....................................................... A-7
2.5 Articles of Incorporation and By-laws............................... A-7
2.6 Consents and Approvals.............................................. A-8
2.7 Defaults and Conflicts.............................................. A-8
2.8 GAAP Financial Statements........................................... A-8
2.9 Statutory Financial Statements...................................... A-8
2.10 Changes Since December 31, 1996..................................... A-9
2.11 Real Estate and Mortgages........................................... A-9
2.12 Title to Property................................................... A-9
2.13 Investment Securities............................................... A-10
2.14 Environmental Laws.................................................. A-10
2.15 Proprietary Rights.................................................. A-11
2.16 [Intention.......................................................... A-11
2.17 Agreements.......................................................... A-11
2.18 Litigation.......................................................... A-11
2.19 Compliance with Laws................................................ A-12
2.20 Taxes............................................................... A-12
2.21 Related Party Transactions.......................................... A-13
2.22 Employee Benefit Plans.............................................. A-13
2.23 Insurance Protection................................................ A-14
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2.24 Insurance Business.................................................. A-14
2.24.1 Policies and Rates........................................... A-14
2.24.2 Producers.................................................... A-14
2.24.3 Assessments.................................................. A-14
2.24.4 Regulatory Matters........................................... A-14
2.25 Regulatory Filings and Reports...................................... A-15
2.26 Agents.............................................................. A-15
2.27 Reserves and Reinsurance............................................ A-15
2.28 Information in Proxy Statement...................................... A-15
2.29 Information in Registration Statement............................... A-16
2.30 Other Filings....................................................... A-16
2.31 Third Party Discussions............................................. A-16
2.32 Disclosure.......................................................... A-16
2.33 Fairness Opinion.................................................... A-16
2.34 Finder and Investment Bankers....................................... A-16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UNITRIN
3.1 Organization of Unitrin and Acquisition Sub......................... A-16
3.2 Capital Stock....................................................... A-17
3.3 Authorization....................................................... A-17
3.4 Consents and Approvals.............................................. A-17
3.5 Defaults and Conflicts.............................................. A-17
3.6 SEC Reports; Financial Statements................................... A-17
3.7 Changes Since March 31, 1997........................................ A-18
3.8 Registration Statement.............................................. A-18
3.9 Information in Proxy Statement...................................... A-18
3.10 Litigation.......................................................... A-18
3.11 Compliance with Laws................................................ A-18
3.12 Disclosure.......................................................... A-19
3.13 Unitrin Rights Plan................................................. A-19
ARTICLE IV
RIGHT TO INVESTIGATE
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of Business Pending the Merger.............................. A-19
5.2 Consents............................................................ A-20
5.3 Notice.............................................................. A-21
5.4 Shareholder Meeting................................................. A-21
5.5 Conversion of Company B Stock....................................... A-21
5.6 No Solicitation of Acquisition Proposals............................ A-21
5.7 Affiliates.......................................................... A-21
5.8 Phantom Stock Plan.................................................. A-22
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5.9 Cooperation......................................................... A-22
5.10 Comfort Letters..................................................... A-22
5.11 Conditions Precedent................................................ A-22
ARTICLE VI
COVENANTS OF UNITRIN
6.1 Consents............................................................ A-22
6.2 Cooperation......................................................... A-22
6.3 Conditions Precedent................................................ A-22
6.4 Director and Officer Liability...................................... A-22
6.5 Registration Statement.............................................. A-23
6.6 Inclusion on Nasdaq................................................. A-23
6.7 Notice.............................................................. A-23
6.8 Comfort Letters..................................................... A-23
ARTICLE VII
CLOSING AND CLOSING DOCUMENTS
7.1 Closing............................................................. A-23
7.2 Company Closing Documents........................................... A-23
7.3 Unitrin Closing Documents........................................... A-24
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF UNITRIN
8.1 Validity of Representation and Warranties........................... A-24
8.2 Performance of Obligations.......................................... A-24
8.3 Consents............................................................ A-24
8.4 Material Adverse Change............................................. A-24
8.5 Company Closing Documents........................................... A-24
8.6 Approval of Company Shareholders.................................... A-24
8.7 Resignations........................................................ A-25
8.8 Affiliates.......................................................... A-25
8.9 Licenses............................................................ A-25
8.10 Private Placement Securities........................................ A-25
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
9.1 Validity of Representations and Warranties.......................... A-25
9.2 Performance of Obligations.......................................... A-25
9.3 Tax Opinion......................................................... A-25
9.4 Consents............................................................ A-25
9.5 Unitrin Closing Documents........................................... A-25
9.6 Material Adverse Change............................................. A-26
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9.7 Fairness Opinion.................................................... A-26
9.8 Inclusion on Nasdaq................................................. A-26
9.9 No Change of Control................................................ A-26
ARTICLE X
CONDITIONS APPLICABLE TO UNITRIN AND THE COMPANY
10.1 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act............................................... A-26
10.2 Governmental Approvals.............................................. A-26
10.3 Injunction.......................................................... A-26
10.4 Shareholder Approval................................................ A-26
10.5 Conversion of Company B Stock....................................... A-26
10.6 Registration Statement; Blue Sky.................................... A-26
10.7 Dissenting Reliable Shares.......................................... A-27
10.8 Effective Time...................................................... A-27
ARTICLE XI
TERMINATION AND TERMINATION FEE
11.1 Termination......................................................... A-27
11.2 Termination Fee..................................................... A-27
11.3 Survival of Rights.................................................. A-27
ARTICLE XII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
ARTICLE XIII
MISCELLANEOUS
13.1 Payment of Expenses................................................. A-28
13.2 Entire Agreement.................................................... A-28
13.3 Modifications, Amendments and Waivers............................... A-28
13.4 Assignment; Governing Law........................................... A-28
13.5 Schedules........................................................... A-28
13.6 Press Releases...................................................... A-28
13.7 Notices............................................................. A-28
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 20, 1997 (the
"Agreement"), by and among The Reliable Life Insurance Company, a Missouri
life insurance company (the "Company"), Unitrin Acquisition Corporation, a
Missouri corporation ("Acquisition Sub"), said two corporations referred to
herein as the "Constituent Corporations", and Unitrin, Inc., a Delaware
corporation ("Unitrin").
The authorized common stock of the Company consists of 6,000,000 shares of
Class A Common Stock, $1.00 par value ("Company A Stock"), of which 1,111,845
are outstanding as of the date hereof, and 15,000,000 shares of Class B Common
Stock, $1.00 par value ("Company B Stock"), of which 5,705,580 shares are
outstanding as of the date hereof (Company B Stock and Company A Stock are
hereinafter collectively referred to as "Company Common Stock");
The authorized common stock of Unitrin consists of 100,000,000 shares of
common stock, par value $.10 per share ("Unitrin Common Stock"), of which
37,335,245 shares were outstanding as of March 31, 1997;
The authorized capital stock of Acquisition Sub consists of 1,000 shares of
Common Stock, par value $1.00 per share, all of which shares are issued and
outstanding and are owned by Unitrin;
The respective Boards of Directors of the Company, Unitrin and Acquisition
Sub deem the merger provided for herein (the "Merger") desirable and in the
best interests of their respective shareholders;
It is the intent of the parties that the merger and reorganization provided
for herein shall be pursuant to the applicable laws of the State of Missouri
and shall qualify as a reorganization as defined in Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code");
and
The respective Boards of Directors of the Company, Unitrin and Acquisition
Sub have duly adopted resolutions approving the Agreement, and the Board of
Directors of the Company has directed that the Agreement be submitted for
approval by the Company's shareholders.
In consideration of the premises and the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the receipt of all regulatory approvals listed on
the Company Consent Schedule and the Unitrin Consent Schedule (as each term is
defined below) and in accordance with the provisions of this Agreement, the
Amended and Restated Articles of Incorporation of the Company (the "Company
Articles") and Chapters 351 and 382 of the Revised Statutes of Missouri (the
"Missouri Laws"), at the Effective Time (as herein defined), Acquisition Sub
shall be merged with and into the Company and the separate existence of
Acquisition Sub shall thereupon cease, and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation").
1.2 Effective Time. The Merger shall become effective upon the issuance of a
Certificate of Merger by the Secretary of State of Missouri after properly
executed Articles of Merger have been filed with the Secretary of State of
Missouri, which filing shall be made upon the closing of the transactions
contemplated by this Agreement in accordance with Article VII hereof. As used
herein, the term "Effective Time" shall mean the date and time at which such
Certificate of Merger is so issued.
1.3 Effects of the Merger. At the Effective Time the Surviving Corporation
shall possess all the rights, privileges, immunities and franchises, of a
public as well as of a private nature, of both of the Constituent
Corporations; and all property, real, personal and mixed, and all debts due on
whatever account; including subscriptions to shares, and all other choses in
action, and all and every other interest, of or belonging to or due to either
of the Constituent Corporations, shall be taken and deemed to be transferred
to and vested in the Surviving Corporation without further act or deed; and
the title to any real estate, or any interest therein, under the laws of
Missouri vested in either of the Constituent Corporations shall not revert or
be impaired in any way by reason of the Merger. After the Effective Time, the
Surviving Corporation shall be responsible and liable for all the liabilities
and obligations of each of the Constituent Corporations; and any claim
existing or action or proceeding pending by or against any of such
corporations may be prosecuted to judgment as if the Merger had not taken
place, or the Surviving Corporation may be substituted in its place. Neither
the rights of creditors nor any liens upon the property of either of the
Constituent Corporations shall be impaired by the Merger.
1.4 Articles of Incorporation. The Articles of Incorporation of the Company
in effect at the time of the Merger shall be the Articles of Incorporation of
the Surviving Corporation until amended in accordance with applicable law.
1.5 By-Laws. The By-Laws of Acquisition Sub in effect at the time of the
Merger shall be the By-Laws of the Surviving Corporation until amended in
accordance with applicable law.
1.6 Directors and Officers. The directors of the Surviving Corporation at
the Effective Time shall be individuals designated by Unitrin to serve, in
each case, until their successors shall have been elected and shall qualify.
The officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation at the Effective Time. If at the
Effective Time a vacancy shall exist on the Board of Directors or in any of
the offices of the Surviving Corporation, such vacancy may thereafter be
filled in the manner provided by the By-Laws of the Surviving Corporation.
1.7 Conversion of Company B Stock. Subject to approval by a majority of the
holders of Company B Stock, immediately prior to the Effective Time each
issued and outstanding share of Company B Stock shall be converted into one-
tenth ( 1/10) of a share of Company A Stock in accordance with the provisions
of the Company's Articles of Incorporation and applicable law (the shares of
Company A Stock, including those shares of Company A Stock issued upon
conversion of the Company B Stock, are referred to hereinafter collectively as
the "Shares" and individually as a "Share"). No fractional shares of Company A
Stock shall be issued upon such conversion. In lieu of any fractional share of
Company A Stock that a holder of Company B Stock would otherwise be entitled
to receive as a result of such conversion, such holder shall be entitled to
receive from the Company, upon surrender of stock certificates for exchange
pursuant to the Merger as provided in this Article I, an amount in cash
determined by multiplying the fraction of a share of Company A Stock to which
such holder would otherwise have been entitled by $119.00. No interest shall
be paid with respect to such cash payment. Upon conversion of the Company B
Stock to Company A Stock, certificates representing outstanding shares of
Company B Stock shall thereafter be deemed to represent the number of shares
of Company A Stock into which such shares of Company B Stock have been
converted.
1.8 Conversion of Shares. At the Effective Time, by virtue of the Merger and
without any action on the part of any of the parties hereto or any shareholder
of the Constituent Corporations:
(i) each Share held by the Company as treasury stock or owned by Unitrin
or any subsidiary of Unitrin immediately prior to the Effective Time shall
be canceled, retired, and shall be deemed to be authorized but unissued
shares of the Company, and no payment shall be made with respect thereto;
(ii) all shares of common stock of Acquisition Sub issued and outstanding
at the Effective Time shall be converted into and exchanged for 4,000,000
shares of Class A common stock of the Surviving Corporation which shall
constitute all the outstanding shares of capital stock of the Surviving
Corporation; and
A-2
(iii) each Share which is issued and outstanding immediately prior to the
Effective Time, except as otherwise provided in Section 1.8(i) above and
other than Dissenting Reliable Shares (as defined below), shall be
converted into the right to receive, subject to the election and allocation
procedures set forth in Sections 1.9 and 1.10 below, either (i) $119.00 in
cash without interest (the "Per Share Cash Amount"), or (ii) 2.235 shares
of Unitrin Common Stock (the "Per Share Stock Amount", which, together with
the Per Share Cash Amount, is hereinafter referred to as the "Merger
Consideration"), together with the associated preferred share purchase
rights issued under the Rights Agreement between Unitrin and First Chicago
Trust Company of New York, as Rights Agent, dated as of August 3, 1994 (the
"Unitrin Rights Agreement").
1.9 Election Procedures. Unitrin and the Company shall prepare a form (the
"Election Form") pursuant to which each record holder of Shares may elect in
accordance with the provisions of this Section 1.9 (hereinafter called an
"Election"), and subject to the allocation provisions of Section 1.10, to
receive for each Share owned by such holder (i) the Per Share Cash Amount (a
"Cash Election") or (ii) the Per Share Stock Amount (a "Stock Election"). A
holder of shares of Company B Stock shall be entitled to make Elections, with
respect to the number of shares of Company B Stock owned by such holder, for
the number of Shares equal to the number of shares of Company A Stock into
which such shares of Company B Stock are to be converted as provided in
Section 1.7 above. The Company shall mail the Election Form to each of its
shareholders of record as of the record date for the Company Shareholder
Meeting (as defined in Section 2.4 herein). A shareholder's Election shall
have been properly made only if the Exchange Agent (as defined in Section 1.11
below) shall have received, by 5:00 p.m., Central Time, on the date of the
Company Shareholders' Meeting (the "Election Date"), an Election Form properly
completed and signed. Any shareholder of the Company who fails to properly
make the required election shall be deemed to have made a Stock Election with
respect to all Shares (other than Dissenting Reliable Shares) owned by such
holder. Dissenting Reliable Shares shall not be converted into the Merger
Consideration and shall be treated as provided in Section 1.15 below.
Any shareholder may at any time prior to the Election Date change his
Election by written notice received by the Exchange Agent at or prior to the
Election Date accompanied by a properly completed, later dated Election Form.
Any shareholder may at any time prior to the Election Date revoke his Election
by written notice received by the Exchange Agent at or prior to the Election
Date. Any Election relating to Shares which become Dissenting Reliable Shares
shall be deemed automatically revoked as of the Election Date. Any Election
that has been revoked and not otherwise replaced by a later dated Election
Form prior to the Election Date (other than an Election relating to Shares
which become Reliable Dissenting Shares) shall be deemed to be a Stock
Election. Any such revoked Election, together with all other Elections that
are deemed to be Stock Elections as provided in the penultimate sentence in
the immediately preceding paragraph, are hereinafter referred to as "Default
Stock Elections."
Unitrin will have the reasonable discretion, which it may delegate in whole
or in part to the Exchange Agent, (i) to determine whether any Election Form
has been properly completed, signed and submitted or revoked and (ii) to
disregard immaterial defects in any Election Form. The decision of Unitrin (or
the Exchange Agent) in such matters shall be conclusive and binding. Neither
Unitrin nor the Exchange Agent will be under any obligation to notify any
person of any defect in an Election Form submitted to the Exchange Agent. The
Exchange Agent shall also make all computations under the allocation
procedures described below to determine any allocation of the Merger
Consideration under this Agreement and all such computations shall be
conclusive and binding on the Company and its shareholders.
1.10 Allocation Procedures. If the number of Shares covered by Stock
Elections and Default Stock Elections is equal to or greater than 81% of the
number of Shares outstanding immediately prior to the Merger (after giving
effect to the conversion of the Company B Stock as provided in Section 1.7
above and before payment in cash for any fractional shares in connection
therewith), then all Shares covered by Stock Elections and Default Stock
Elections shall be converted into the right to receive shares of Unitrin
Common Stock, and all Shares covered by Cash Elections shall be converted into
the right to receive cash.
A-3
If the number of Shares covered by Stock Elections and Default Stock
Elections is less than 81% of the number of Shares outstanding immediately
prior to the Effective Time (after giving effect to the conversion of the
Company B Stock as provided in Section 1.7 above and before payment in cash
for any fractional shares in connection therewith), then all Shares covered by
Stock Elections and Default Stock Elections shall be converted into the right
to receive shares of Unitrin Common Stock, and the Shares covered by Cash
Elections shall be allocated by the Exchange Agent for conversion into the
right to receive either cash or Unitrin Common Stock in the following manner:
the Exchange Agent shall select by lot (or by such other method as is deemed
reasonable by Unitrin and the Company) from among such Shares a sufficient
number of Shares to be converted into the right to receive Unitrin Common
Stock so that the number of Shares so selected, together with the Shares
already covered by Stock Elections and Default Stock Elections, are sufficient
to cause the total number of Shares to be converted into the right to receive
Unitrin Common Stock to be equal to or greater than 81% of the number of
Shares outstanding immediately prior to the Effective Time (after giving
effect to the conversion of the Company B Stock as provided in Section 1.7
above and before payment in cash for any fractional shares in connection
therewith); any such Shares not so selected by the Exchange Agent shall be
converted into the right to receive cash.
After giving effect to the foregoing allocations, if the payment of cash in
lieu of fractional shares of Unitrin Common Stock pursuant to Section 1.17
would result in fewer than 81% of the number of Shares outstanding immediately
prior to the Effective Time being converted into whole shares of Unitrin
Common Stock, then the Exchange Agent shall select by lot (or such other
method as is deemed reasonable by Unitrin and the Company) additional Shares
covered by Cash Elections for conversion into the right to receive Unitrin
Common Stock in order to ensure that not less than 81% of the number of Shares
outstanding immediately prior to the Effective Time is converted into whole
shares of Unitrin Common Stock.
1.11 Designation of Exchange Agent. Not more than three business days
following the Effective Time, Unitrin shall make available to First Chicago
Trust Company of New York as exchange agent (the "Exchange Agent") (i) the
number of shares of Unitrin Common Stock issuable in respect of Shares that
have been converted into the right to receive the Per Share Stock Amount and
(ii) an amount in cash equal to the sum of (A) the amount of cash payable in
respect of Shares that have been converted into the right to receive the Per
Share Cash Amount and (B) the amount of cash payable in respect of fractional
Shares as provided in Sections 1.7 and 1.17 hereof. The Exchange Agent shall
not be entitled to vote or exercise any rights of ownership with respect to
Unitrin Common Stock held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or
distributed with respect to such shares for the account of the persons
entitled thereto.
1.12 Transmittal Materials; Surrender of Shares. As promptly as practicable
following the Effective Time, Unitrin shall cause the Exchange Agent to mail
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing Shares shall pass, only upon proper delivery of such
certificates to the Exchange Agent) to the former holders of Shares for use in
surrendering their certificate or certificates in exchange for the Merger
Consideration. Each holder of a certificate formerly representing Shares who
surrenders or has surrendered such certificate (or customary affidavits and
indemnification regarding the loss or destruction of such certificate),
together with duly executed transmittal materials, to the Exchange Agent
shall, upon acceptance thereof, be entitled to a certificate representing the
Unitrin Common Stock or cash into which the Shares shall have been converted
pursuant hereto. Each certificate which represented Shares immediately prior
to the Effective Time (other than Dissenting Reliable Shares) shall be deemed
canceled at the Effective Time and shall represent only the right to receive
the Merger Consideration for each Share represented by such certificate. In no
event shall the holder of any such surrendered certificates be entitled to
receive interest on the Per Share Cash Amount to be received in the Merger.
To the extent provided by Section 1.17 of this Agreement, each holder of
Shares also shall receive, upon surrender of the certificate or certificates
representing such Shares, cash in lieu of any fractional shares of Unitrin
Common Stock to which such holder would otherwise be entitled. Unitrin shall
not be obligated to deliver the consideration to which any former holder of
Shares is entitled as a result of the Merger until such holder surrenders the
certificate or certificates representing such Shares for exchange as provided
in this Section
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1.12. In addition, certificates surrendered for exchange by any person
identified on the letter delivered by the Company to Unitrin pursuant to
Section 5.7 hereof shall not be exchanged for certificates representing whole
shares of Unitrin Common Stock until Unitrin has received a written agreement
from such person as provided in Section 5.7.
1.13 Termination of Exchange Agent's Duties. Promptly following the date
which is one hundred and eighty days after the Effective Time, the Exchange
Agent shall deliver to Unitrin all cash and other documents in its possession
relating to the transactions described in this Agreement, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a certificate
formerly representing Shares who has not previously surrendered such
certificate may surrender such certificate to Unitrin and (subject to
applicable abandoned property, escheat and similar laws and Sections 1.09 and
1.10 hereof) receive in exchange therefor the Merger Consideration.
Notwithstanding anything in this Agreement to the contrary, neither Unitrin,
Acquisition Sub, the Surviving Corporation nor the Exchange Agent shall be
liable to a holder of Shares, for Unitrin Common Stock, dividends or
distributions thereon, the Cash Amount Per Share, or cash in lieu of
fractional Shares, delivered to a public official pursuant to applicable
escheat laws.
1.14 Issuance, Voting and Dividends. The shares of Unitrin Common Stock
constituting the Merger Consideration shall be deemed to have been issued at
the Effective Time. No holder of any unsurrendered certificates representing
Shares shall have the right to vote the Unitrin Common Stock receivable in
exchange for such certificates until such certificates are surrendered as
provided in Sections 1.12 and 1.13. Following such surrender, such holder
shall have the right to vote the Unitrin Common Stock at any meeting the
record date of which is after the date of such surrender. No dividends or
other distributions with respect to the Unitrin Common Stock constituting part
of the Merger Consideration shall be paid to the holder of any unsurrendered
certificates representing Shares until such certificates are surrendered as
provided in Sections 1.12 and 1.13. Upon such surrender, there shall be paid,
without interest, to the person in whose name the certificates representing
the shares of Unitrin Common Stock into which such Shares were converted are
registered, all dividends and other distributions payable in respect of such
shares of Unitrin Common Stock on a date subsequent to, and in respect of a
record date after, the Effective Time and prior to such surrender. Such holder
shall be also entitled to receive, on the payment date therefor, any dividend
or distribution the record date for which occurs prior to such surrender and
the payment date for which occurs following such surrender. In no event shall
any holder be entitled to receive interest on the Cash Amount Per Share to be
received in the Merger.
1.15 Dissenting Reliable Shares. Each outstanding share of Company Common
Stock for which written notice of intent to demand payment therefor is
delivered in accordance with Article XIV of the Company Articles and is not
voted in favor of the Merger shall not be converted into or represent a right
to receive the Merger Consideration hereunder unless and until the holder
thereof shall have failed to perfect or shall have withdrawn or otherwise lost
his right to demand payment under Article XIV of the Company Articles, at
which time his shares shall be converted into the right to receive the Merger
Consideration in the same manner and subject to the same conditions as
provided for other outstanding Shares in this Article I. All such Shares for
which such a written notice of intent to demand payment is so delivered and
which are not voted in favor of the Merger, and for which a demand for payment
is perfected in accordance with Article XIV of the Company Articles and not
withdrawn or waived, are herein called "Dissenting Reliable Shares." The
Company shall give Unitrin and Acquisition Sub prompt notice upon receipt by
the Company of any such written notice of intent to demand payment for Shares.
The Company agrees that prior to the Effective Time it will not, except with
the prior written consent of Unitrin, voluntarily make any payment with
respect to, or settle or offer to settle, any such demand for payment. Each
holder of Shares who demands payment in accordance with Article XIV of the
Company Articles shall retain all other rights as a shareholder of the Company
until the Effective Time whereupon such shares shall be canceled and represent
only the right to receive the payment provided for under Article XIV of the
Company Articles. Each holder of Dissenting Reliable Shares who becomes
entitled, pursuant to Article XIV of the Company Articles, to receive payment
for the fair value of his shares shall receive payment therefor from the
Company as the Surviving Corporation (but only after the amount thereof shall
have been agreed upon or finally determined pursuant to such provisions).
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1.16 Adjustments. If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of Unitrin shall occur by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any dividend (whether in cash, stock or other property) to
shareholders of Unitrin as to which the record date is before the Effective
Time (other than (i) Unitrin's regular quarterly dividends in an amount
consistent with prior practice, and (ii) the Unitrin Fourth Quarter Dividend
as described in Section 5.1(ii), regardless of amount), the Per Share Stock
Amount shall be appropriately adjusted.
1.17 Fractional Shares. No fractional shares of Unitrin Common Stock shall
be issued in the Merger. All fractional shares of Unitrin Common Stock that a
holder of Shares would otherwise be entitled to receive as a result of the
Merger shall be aggregated and if a fractional share results from such
aggregation, such holder shall be entitled to receive from Unitrin, in lieu
thereof, upon surrender of stock certificates for exchange pursuant to this
Article I, an amount in cash determined by multiplying $119.00 (subject to
appropriate adjustment by reason of an occurrence as cited in Section 1.16) by
the fraction of a share of Unitrin Common Stock to which such holder would
otherwise have been entitled. No interest shall be paid with respect to such
cash payment.
1.18 Closing of Company's Transfer Books. At the Effective Time, the stock
transfer records of the Company shall be closed and no transfer of Shares
shall thereafter be made or recognized.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Unitrin and Acquisition Sub as
follows:
2.1 Organization, Standing and Qualification of Company. The Company is an
insurance company duly organized, validly existing and in good standing under
the laws of the State of Missouri and has the corporate power to own or lease
its properties and to carry on its business as now being conducted. The
Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
individually or in the aggregate have a material adverse effect on the
business, prospects, assets, liabilities, results of operations or financial
condition of the Company and the Company Subsidiaries (as hereinafter
defined), taken as a whole, or adversely affect the ability of the Company to
consummate the transactions contemplated by this Agreement in any material
respect (a "Company Material Adverse Effect"). The Company has all requisite
power and authority to carry on an insurance business pursuant to and to the
extent of the certificates of authority issued under the laws of the states
listed in Section 2.1 of a schedule delivered by the Company to Unitrin
concurrently with the execution of this Agreement (the "Company Disclosure
Schedule"). The Company Disclosure Schedule specifies the line or lines of
insurance which is permitted to be written with respect to each certificate of
authority listed. No certificate of authority identified on such Schedule has
been revoked, restricted, suspended, limited or modified nor is any
certificate of authority the subject of, nor to the knowledge of the Company
is there a basis for, a proceeding for revocation, restriction, suspension,
limitation or modification, nor is the Company operating under any formal or
informal agreement or understanding with the licensing authority of any state
which restricts its authority to do business or requires the Company to take,
or refrain from taking, any action. Except as set forth on such Schedule, the
Company has not issued any surplus notes or similar instruments.
2.2 Company Subsidiaries. Section 2.2 of the Company Disclosure Schedule
sets forth a list of all of the Company's subsidiaries (hereinafter separately
called a "Company Subsidiary" and collectively called the "Company
Subsidiaries"). Such Schedule sets forth the authorized capital stock, the
number of shares duly issued and outstanding, the number so owned by the
Company and the jurisdiction of incorporation of each Company Subsidiary. The
shares of capital stock of the Company Subsidiaries owned directly or
indirectly by the Company are validly issued, fully paid and non-assessable,
and are owned free and clear of any liens, claims,
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charges or encumbrances except as set forth on the Company Disclosure
Schedule. Except as set forth on such Schedule, neither the Company nor any of
the Company Subsidiaries has any investment in any subsidiary or any
investment in any partnership, joint venture, limited liability company or
similar entity, all of which investments are owned free and clear of any
liens, claims, charges or encumbrances except as set forth thereon. Each of
the Company Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has the corporate power to own or lease its properties and carry on its
business as now being conducted. Each of the Company Subsidiaries is duly
qualified or otherwise authorized to transact business as a foreign
corporation and is in good standing in every jurisdiction in which such
qualification or authorization is required by law to carry on its business as
now being conducted, except where the failure to qualify or to be authorized
would not have a Company Material Adverse Effect. Each of the Company
Subsidiaries which is an insurance company as specified on the Company
Disclosure Schedule (hereinafter separately called an "Insurance Subsidiary"
and collectively called the "Insurance Subsidiaries"), has all requisite power
and authority to carry on an insurance business pursuant to and to the extent
of the certificates of authority issued under the laws of the states listed in
such Schedule. The Company Disclosure Schedule specifies the line or lines of
insurance which is permitted to be written with respect to each certificate of
authority listed. No certificate of authority identified on such Schedule has
been revoked, restricted, suspended, limited or modified nor is any
certificate of authority the subject of, nor to the knowledge of the Company
is there a basis for, a proceeding for revocation, restriction, suspension,
limitation or modification, nor is any Insurance Subsidiary operating under
any formal or informal agreement or understanding with the licensing authority
of any state which restricts its authority to do business or requires such
Insurance Subsidiary to take, or refrain from taking, any action. Except as
set forth on such Schedule, none of the Insurance Subsidiaries has issued any
surplus notes or similar instruments.
2.3 Capital Stock. The authorized capital stock of the Company consists of
3,000,000 shares of Voting Preferred Stock, $1.00 par value, none of which
have been issued, 3,000,000 shares of Nonvoting Preferred Stock, $1.00 par
value, none of which have been issued, 6,000,000 shares of Company A Stock, of
which 1,111,845 shares are issued and outstanding as of the date hereof, and
15,000,000 shares of Company B Stock, of which 5,705,580 shares are issued and
outstanding as of the date hereof. All of the issued and outstanding shares of
Company Common Stock have been validly issued and are fully paid and non-
assessable and free of preemptive rights. Except for shares specified above
and as reflected in Section 2.3 of the Company Disclosure Schedule, the
Company is not a party to any contract, understanding, restriction or
agreement, including any voting trust or other agreement or understanding with
respect to the voting of any of the capital stock of the Company or any
Company Subsidiary, or any convertible, exchangeable or exercisable security,
option, warrant, call, or commitment on the part of the Company or any Company
Subsidiary of any character relating to issued or unissued shares of the
capital stock of the Company or any Company Subsidiary.
2.4 Authorization. The Board of Directors of the Company has adopted
resolutions approving the Agreement and the transactions contemplated hereby,
including without limitation the conversion of the Company B Stock to Company
A Stock to be effective immediately preceding the Merger, and has authorized
the execution and delivery of the Agreement and has directed by resolution
that the Agreement be submitted to a vote of the shareholders of the Company
taken at a meeting called for the purpose of considering and acting upon this
Agreement (the "Company Shareholder Meeting"). The Company has full power and
authority to enter into this Agreement and, upon appropriate consent of its
shareholders in accordance with law, subject to obtaining all required
regulatory approvals, to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and legally binding obligation of the Company, enforceable against
it in accordance with its terms, subject to bankruptcy, receivership,
insolvency, reorganization, moratorium or similar laws affecting or relating
to creditors rights generally and subject to general principles of equity.
Other than the approval by a majority of the holders of Company B Stock, in
accordance with the Company's Articles of Incorporation and applicable law, no
other action or authorization is required to effect such conversion of Company
B Stock to Company A Stock.
2.5 Articles of Incorporation and By-laws. The Company has delivered to
Unitrin true and complete copies of its and each of the Company Subsidiaries'
Articles of Incorporation and By-Laws as in effect as of the date
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hereof. Neither the Company nor any Company Subsidiary is or immediately prior
to the Effective Time will be in default under its Articles of Incorporation
or By-Laws.
2.6 Consents and Approvals. Except for the consents and approvals listed on
the schedule attached hereto (the "Company Consent Schedule"), no filing with,
and no permit, authorization, consent or approval of, any public body or
authority is necessary for the consummation by the Company of the transactions
contemplated by this Agreement.
2.7 Defaults and Conflicts. Subject to the receipt of all consents and
approvals contemplated by this Agreement, neither the execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby or
the fulfillment of and compliance with the terms and provisions hereof, will
(i) violate any judicial, administrative or arbitral order, writ, award,
judgment, injunction or decree involving the Company or any of the Company
Subsidiaries, (ii) conflict with the terms, conditions or provisions of the
Articles of Incorporation or By-Laws of the Company or any Company Subsidiary,
(iii) conflict with, result in a breach of, constitute a default under or
accelerate or permit the acceleration of the performance required by, any
indenture or any agreement or other instrument to which the Company or any
Company Subsidiary is a party or by which the Company or any Company
Subsidiary is bound, including without limitation any agreement listed in
Section 2.17 of the Company Disclosure Schedule, (iv) result in the creation
of any lien, charge or encumbrance upon any of the assets of the Company or
any Company Subsidiary under any such agreement or instrument, or (v)
terminate or give any party thereto the right to terminate any such indenture,
agreement or instrument, other than, with respect to (iii), (iv) and (v)
above, any such conflict, lien or termination that would not result in a
Company Material Adverse Effect. Except as set forth in Section 2.7 of the
Company Disclosure Schedule, no consent of any third party to any indenture,
agreement or other instrument to which the Company or any Company Subsidiary
is a party is required in connection with the Merger, except for such consent
or consents that, if not obtained, would not result in a Company Material
Adverse Effect.
2.8 GAAP Financial Statements. The Company has delivered to Unitrin (i)
audited consolidated balance sheets of the Company and the Company
Subsidiaries as of December 31, 1992, 1993, 1994, 1995 and 1996, and the
related audited consolidated statements of income, cash flows and
stockholders' equity and the notes thereto for the years ended on each of
those dates, and (ii) an unaudited consolidated balance sheet of the Company
and the Company Subsidiaries as of March 31, 1997 and the related statements
of income, cash flows and stockholders' equity and any notes thereto for the
period then ended (hereinafter referred to as the "Company March 31, 1997
Financial Statements"). All such financial statements, together with the notes
thereto, present fairly, in all material respects, the consolidated financial
position of the Company and the Company Subsidiaries as of the dates thereof,
and its consolidated results of operations and cash flows for the periods then
ended, in conformity with generally accepted accounting principles ("GAAP")
applied on a basis consistent with prior periods (except as may be indicated
therein or in the notes thereto, and, in the case of any unaudited interim
financial statements, subject to (i) normal year-end adjustments and (ii)
standard limitations on the application of GAAP), provided that financial
statements for ▇▇▇▇▇▇▇ Reinsurance Ltd. (Bermuda) are prepared in accordance
with Canadian generally accepted accounting principles.
Except as and to the extent reflected in the Company March 31, 1997
Financial Statements or in Section 2.8 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary had as of March 31, 1997 any
liability or obligation (absolute, contingent or otherwise) except for
liabilities arising in the ordinary course, none of which, individually or in
the aggregate, would have a Company Material Adverse Effect. Except as and to
the extent set forth in Section 2.8 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary has incurred any liability or
obligation (absolute, contingent or otherwise) since March 31, 1997 other than
liabilities incurred in the ordinary course of business, none of which,
individually or in the aggregate, would have a Company Material Adverse
Effect.
2.9 Statutory Financial Statements. The Company has furnished to Unitrin
copies of the statutory financial statements and the annual audited financial
reports (collectively, the "Statutory Financial Statements") for the Company
and each of the Insurance Subsidiaries (provided that such financial reports
for The Reliable Life
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Insurance Company of Texas and ▇▇▇▇▇▇▇ Reinsurance Ltd. (Missouri) are not
audited) for the years ended December 31, 1992, 1993, 1994, 1995 and 1996 and
the quarter ended March 31, 1997 as filed with the Missouri Director of
Insurance and the applicable insurance department or comparable regulatory
authority of each of such Insurance Subsidiaries' jurisdiction of organization
(each such department or authority, as applicable, is hereinafter referred to
as the "Insurance Department"), provided that the Statutory Financial
Statements of ▇▇▇▇▇▇▇ Reinsurance Ltd. (Bermuda) are not filed with the
Missouri Director of Insurance and have not been audited as of the date hereof
with respect to 1996 and the quarter ended March 31, 1997. The Statutory
Financial Statements, including, without limitation, the provisions made
therein for investments and the valuation thereof, reserves, policy and
contract claims, together with the notes, exhibits and schedules thereto,
fairly present the statement of admitted assets, liabilities and capital and
surplus of the Company and each of the Insurance Subsidiaries as of the dates
thereof and the related statutory basis statements of income, changes in
capital and surplus, and cash flows for the periods indicated in conformity
with the statutory accounting practices prescribed or permitted by the
applicable Insurance Department or by the National Association of Insurance
Commissioners ("SAP"), applied on a basis consistent with prior periods,
except as set forth therein. Section 2.9 of the Company Disclosure Schedule
describes each such permitted statutory accounting practice and the effect
such practice has on the surplus of the Company and each of the Insurance
Subsidiaries. Each such Statutory Financial Statement was in compliance with
applicable law and correct in every material respect when filed and there were
no material omissions therefrom. Except for liabilities and obligations
disclosed or provided for in the Statutory Financial Statements, neither the
Company nor any of the Insurance Subsidiaries had, as of the respective dates
of each such Statutory Financial Statements, any liabilities or obligations
(whether absolute or contingent and whether due or to become due) except for
liabilities arising in the ordinary course which are not required to be
reflected in statutory financial statements prepared in accordance with SAP,
none of which, individually or in the aggregate, would have a Company Material
Adverse Effect. All books of account of the Company and such Insurance
Subsidiary fully and fairly disclose all the transactions, properties, assets,
investments, liabilities and obligations of the Company and such Insurance
Subsidiary and all such books of account are in the possession of the Company
or such Insurance Subsidiary and are complete in all material respects.
2.10 Changes Since December 31, 1996. Since December 31, 1996 there has been
no event or condition which has had (or is reasonably likely to result in) a
Company Material Adverse Effect, and except as set forth in Section 2.10 of
the Company Disclosure Schedule, the Company and the Company Subsidiaries have
conducted their businesses in the ordinary course consistent with past
practices and have not taken any action which, if taken after the date hereof,
would violate Section 5.1 hereof.
2.11 Real Estate and Mortgages. Section 2.11 of the Company Disclosure
Schedule sets forth a list and summary description of (i) all real property
currently owned or sold or disposed of within the past three (3) years by the
Company or any Company Subsidiary and all buildings and other structures
located on such real property, (ii) all leases, subleases or other agreements
under which the Company or any Company Subsidiary is or was within the past
three (3) years the lessor or lessee of any real property (such list being
current as of June 1, 1997 with respect to properties where the Company is the
lessor, and such list being current as of June 10, 1997 with respect to
properties where the Company is the lessee), (iii) all unexpired options held
by the Company or any Company Subsidiary or contractual obligations on its
part to purchase or acquire any interest in real property, (iv) all unexpired
options granted by the Company or any Company Subsidiary or contractual
obligations on its part to sell or dispose of any interest in real property,
(v) all mortgages (other than mortgages which are Company Investments, as
defined in Section 2.13) held by the Company or any Company Subsidiary,
identifying all such mortgages, if any, for which deficiency notices have been
issued or that are otherwise not current. Except as set forth in Section 2.11
of the Company Disclosure Schedule, as of the date hereof such leases,
subleases and other agreements are in full force and effect and neither the
Company nor any Company Subsidiary has received any notice of any default
thereunder. Each of the options set forth in Section 2.11 of the Company
Disclosure Schedule is in full force and effect.
2.12 Title to Property. Except as set forth in Section 2.12 of the Company
Disclosure Schedule, the Company and each Company Subsidiary has good and
marketable title to all assets and properties shown as
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owned by it on the Company March 31, 1997 Financial Statements or acquired
since that date (except properties disposed of in the ordinary course of
business subsequent to said date), in each case free of all mortgages, liens,
charges and encumbrances of any nature whatsoever, other than (i) liens for
Taxes (as defined below) not yet due and payable and (ii) such minor liens,
charges and encumbrances as, in the aggregate, do not and would not if
asserted have a Company Material Adverse Effect ("Permitted Company Liens").
2.13 Investment Securities.
(i) The Company has provided to Unitrin a list of all securities,
mortgages and other investments owned by the Company, the Insurance
Subsidiaries and The Reliable Life Insurance Company and Associates
Retirement Plan (the "Plan") (all such investments collectively are
hereinafter referred to as the "Company Investments"), together with the
cost basis book or amortized value, as the case may be, as of March 31,
1997. Section 2.13 of the Company Disclosure Schedule sets forth a list of
all acquisitions and dispositions of the Company Investments by the
Company, the Insurance Subsidiaries and the Plan from March 31, 1997 to May
31, 1997. All acquisitions and dispositions of Company Investments by the
Company, the Insurance Subsidiaries and the Plan from May 31, 1997 to the
date hereof have complied with the investment policies of the Company, such
Insurance Subsidiaries and the Plan and all applicable insurance laws and
regulations.
(ii) Section 2.13 of the Company Disclosure Schedule separately
identifies all of the Company Investments that are securities or interests
therein acquired in private placement transactions by the Company, each
Insurance Subsidiary and the Plan and are owned by the Company, each
Insurance Subsidiary and the Plan as of the date hereof (such Schedule may
omit principal payments or prepayments made in respect of such Company
Investments after March 31, 1997).
(iii) Except as set forth in Section 2.13 of the Company Disclosure
Schedule, the Company, the Insurance Subsidiaries and the Plan have good
and marketable title to the Company Investments other than with respect to
those Company Investments which have been disposed of in the ordinary
course of business or as contemplated by this Agreement or redeemed in
accordance with their terms since such date and other than Permitted
Company Liens or with respect to statutory deposits which are subject to
certain restrictions on transfer.
(iv) Section 2.13 of the Company Disclosure Schedule identifies the
Company Investments which to the best knowledge of the Company, are in
default in the payment of principal or interest as of May 31, 1997.
(v) Except as set forth in Section 2.13 of the Company Disclosure
Schedule, there are no liens, claims or encumbrances on any of the Company
Investments, other than Permitted Company Liens, and none of the Company
Investments consist of securities loaned to third parties.
2.14 Environmental Laws. Except as set forth in Section 2.14 of the Company
Disclosure Schedule, the Company and each Company Subsidiary has conducted and
is conducting its business in compliance in all material respects with all
applicable federal, state, and local laws, regulations and requirements
currently in force relating to the protection of the environment
("Environmental Laws"). Except as set forth in Section 2.14 of the Company
Disclosure Schedule, there is no pending, or to the knowledge of the Company
or any Company Subsidiary, threatened, civil or criminal litigation, written
notice of violation, or administrative proceeding relating to such
Environmental Laws involving the Company or any Company Subsidiary or any
previously or presently owned property or asset of the Company or any Company
Subsidiary, including without limitation any insurance policy assumed,
reinsured or issued by the Company or any Insurance Subsidiary that asserts
coverage for any alleged violation of Environmental Laws. There are no
conditions existing with respect to the release, emission, discharge or
presence of hazardous substances in connection with the business of the
Company or any Company Subsidiary which conditions could, individually or in
the aggregate, have a Company Material Adverse Effect. The Company and each
Company Subsidiary has received all approvals, consents, licenses, and permits
with respect to environmental matters necessary to carry on its business as
currently conducted, the failure of which to obtain could, individually or in
the aggregate, have a Company Material Adverse Effect.
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2.15 Proprietary Rights. Section 2.15 of the Company Disclosure Schedule
sets forth all the trademarks, trade names, service marks (and all
registrations and applications with respect thereto), computer software,
programs and similar systems (other than "off-the-shelf" software programs)
(collectively the "Proprietary Rights") owned or used by the Company or any
Company Subsidiary. Except as otherwise set forth in such Schedule, each of
the Company and the Company Subsidiaries owns or is duly authorized to use all
of its Proprietary Rights, including "off-the-shelf" software programs. The
Proprietary Rights owned by the Company or a Company Subsidiary do not violate
or infringe upon the proprietary rights of any third party, and there is no
claim, action, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against the Company or any of the Company
Subsidiaries with respect to any of the Proprietary Rights.
2.16 [Intentionally left blank].
2.17 Agreements. Except as set forth in Section 2.17 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to nor is the Company or any Company Subsidiary bound by any oral or written
(i) contract for the employment of any officer or employee which pursuant to
its terms is not terminable without liability on 30 days' (or less) notice or
which provides for any further payments following such termination, or
contract with a former officer or employee pursuant to which payments are
required to be made at any time following the date hereof, or contract with
any labor union or association representing any employee, (ii) stock
ownership, profit-sharing, bonus, deferred compensation, phantom stock, stock
option, severance pay, pension, retirement or similar plan or agreement, (iii)
mortgage, indenture, note or installment obligation the unpaid balance of
which exceeds $50,000, or other instrument for or relating to any borrowing of
money by the Company or any of the Company Subsidiaries, the unpaid balance of
which exceeds $50,000, (iv) guaranty of any obligation for borrowings or
otherwise which in the aggregate exceed $50,000, (v) agreement or arrangement
for the sale or lease of any material amount of its assets or part of its
business other than in the ordinary course of business or for the grant of
preferential rights to purchase or lease any material amount of its assets or
part of its business, (vi) agreement or arrangement obligating it to register
any of its outstanding shares or other securities with the Securities and
Exchange Commission (the "SEC"), (vii) agreement or arrangement with any
officer or director of the Company, any Company Subsidiary, or any other
affiliate of the Company, (viii) reinsurance or retrocession treaty or
agreement (including terminated treaties or agreements containing residual or
unexpired liabilities), (ix) agreement or contract with any insurance agent or
producer other than pursuant to the forms of agreement included in such
Schedule, (x) agreement or arrangement with any investment advisor, (xi)
agreement or arrangement pursuant to which the Company or any Company
Subsidiary has agreed to acquire or dispose of any Company Investments or
(xii) contract, agreement or other instrument which is material to the
business, prospects, assets, liabilities, results of operations or financial
condition of the Company and the Company Subsidiaries taken as a whole. All
contracts, plans, mortgages, indentures, guaranties and other agreements set
forth in Section 2.17 of the Company Disclosure Schedule are in full force and
effect as of the date hereof, neither the Company nor any Company Subsidiary
or to the knowledge of the Company or any Company Subsidiary any other party
thereto is in default as to any provision thereof, except for defaults which
individually or in the aggregate would not have a Company Material Adverse
Effect, and no party thereto may terminate any of such agreements by reason of
the transactions contemplated by this Agreement.
2.18 Litigation. Section 2.18 of the Company Disclosure Schedule sets forth
a description of (i) each lawsuit in which punitive, exemplary or other extra-
contractual damages are sought against Company or any Company Subsidiary, (ii)
each lawsuit not involving insurance policies issued by the Company or any
Insurance Subsidiary in which the Company or any Company Subsidiary is a
party, (iii) each lawsuit involving a life or health insurance policy issued
by the Company or any Insurance Subsidiary, and (iv) each lawsuit involving a
property or casualty insurance policy issued or reinsured by the Company or
any Insurance Subsidiary where the reserve established by the Company or such
Insurance Subsidiary exceeds $50,000. Except as set forth in Section 2.18 of
the Company Disclosure Schedule, and except for insurance claims litigation
arising in the ordinary course of business for which reserves have been
established in accordance with Section 2.27 hereof, there is no action, suit,
arbitration, mediation, investigation or proceeding pending against, or to the
knowledge of the Company or any Company Subsidiary threatened against or
affecting the Company or any Company Subsidiary or its
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properties or businesses, at law or in equity, or before any governmental or
administrative body or agency or before any arbitrator which, alone or in the
aggregate, could have a Company Material Adverse Effect or which challenges
the validity of this Agreement or any action taken or to be taken by the
Company pursuant to this Agreement in connection with the Merger. Except as
may be set forth on such Schedule, there are no unresolved disputes under any
contract to which the Company or any Company Subsidiary is a party or by which
the Company or any Company Subsidiary is bound involving in the aggregate an
amount in excess of $50,000. Neither the Company nor any Company Subsidiary is
in default with respect to any order, writ, award, judgment, injunction or
decree of any court, governmental or administrative body or agency, or
arbitrator applicable to it.
2.19 Compliance with Laws. The Company and each of the Company Subsidiaries
has complied with all laws, regulations, orders, ordinances, judgments or
decrees of all governmental authorities (federal, state, local, foreign or
otherwise) applicable to its businesses, except where the failure to have so
complied would not, individually or in the aggregate, have a Company Material
Adverse Effect. Except as set forth in Section 2.19 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has received any
notification of any asserted failure by it to comply with any of such laws.
2.20 Taxes.
2.20.1 Except as set forth in Section 2.20.1 of the Company Disclosure
Schedule: (i) all Tax Returns (as defined below) required to be filed with
the appropriate taxing authorities have been filed by or on behalf of the
Company or any Company Subsidiary and all Taxes (as defined below) shown to
be due on such Tax Returns have been paid or provided for in full; (ii)
there are no liens for Taxes upon the assets of the Company or any Company
Subsidiaries except statutory liens for Taxes not yet due; (iii) there are
no outstanding deficiencies in respect of Taxes asserted or threatened or
assessments of Taxes made or threatened, nor any administrative or judicial
proceedings pending or threatened concerning Taxes, with respect to the
Company or any Company Subsidiary and any deficiencies, assessments or
proceedings shown in the Company Disclosure Schedule are being contested in
good faith through appropriate proceedings; (iv) the Company has
established on the financial statements described in Section 2.8 of this
Agreement reserves and accruals adequate for the payment of all Taxes
accruing with respect to or payable by Company and each Company Subsidiary
for all periods reflected therein; (v) there are no outstanding agreements
or waivers extending the statutory period of limitations applicable to any
Tax Returns required to be filed with respect to the Company or any Company
Subsidiary; and (vi) neither the Company nor any Company Subsidiary has
requested any extension of time within which to file any Tax Return, which
Tax Return has not been filed.
2.20.2 The appropriate income Tax Returns of the Company and each Company
Subsidiary have been examined by (i) the Internal Revenue Service or the
statute of limitations has expired for all periods up to and including
December 31, 1988 and (ii) the taxing authorities of all of the states set
forth in Section 2.2 of the Company Disclosure Schedule or the statute of
limitations has expired for all periods up to and including December 31,
1988, respectively, and there are no outstanding or unresolved proposed
adjustments.
2.20.3 The consummation of the transactions contemplated by this
Agreement will not give rise to any payment by the Company or any Company
Subsidiary which payment will not be deductible (in whole or in part) by
reason of Section 280G of the Code, as amended, and the regulations
promulgated thereunder.
2.20.4 Except as set forth in Section 2.20.4 of the Company Disclosure
Schedule, no power of attorney has been granted by the Company or any
Company Subsidiary with respect to any matter relating to Taxes which is
currently in force.
For purposes of this Agreement, the term "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including without limitation, all
net income, gross income, premium or privilege, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs duties, fees or assessments, together with any interest and any
penalties, additions to tax or additional amounts imposed by any governmental
authority
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(domestic or foreign) upon the Company or any Company Subsidiary and the term
"Tax Returns" shall mean all returns, declarations, reports, estimates, and
statements, regarding Taxes, required to be filed under United States federal,
state, local or any foreign laws.
2.21 Related Party Transactions. Except as set forth in Section 2.21 of the
Company Disclosure Schedule and other than transactions exclusively between or
among the Company and/or any of the Company Subsidiaries, neither the Company
nor any Company Subsidiary has made any loan to any director, officer or other
affiliate of the Company or a Company Subsidiary which remains outstanding nor
has the Company or any Company Subsidiary entered into any agreement, other
than an agreement referred to in Section 2.17 hereof, for the purchase or sale
of any property or services from or to any director, officer or other
affiliate of the Company or a Company Subsidiary.
2.22 Employee Benefit Plans.
2.22.1 Section 2.22.1 of the Company Disclosure Schedule sets forth a
true and complete list of each employee benefit plan, as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and each other plan, arrangement and agreement providing employee
benefits (collectively the "Plans"), that covers current or former
employees of the Company or any Company Subsidiary or affiliate and is
presently maintained by the Company or any Company Subsidiary or any
affiliate thereof or by any trade or business, whether or not incorporated
(an "ERISA Affiliate"), which together with the Company would be deemed a
"single employer" within the meaning of Section 4001 of ERISA. None of the
Plans is a "multi-employer plan," as defined in Section 3(37) of ERISA. The
Company has delivered or made available to Unitrin copies of all such
Plans; any related trust agreements, group annuity contracts, insurance
policies or other funding agreements or arrangements relating thereto; the
most recent determination letter, if any, from the Internal Revenue Service
with respect to each of the Plans which is subject to ERISA ("ERISA
Plans"); actuarial valuations, if applicable, for the most recent plan year
for which such valuations are available; the current summary plan
descriptions; and the annual return/report on Form 5500 and summary annual
reports for each of the Plans for each of the last three years.
2.22.2 Each of the ERISA Plans is in substantial compliance with all
applicable provisions of law, including the Code and ERISA. Except as set
forth in Section 2.22.2 of the Company Disclosure Schedule, neither the
Company nor any ERISA Affiliate currently maintains or sponsors a defined
benefit pension plan as defined in Section 414(j) of the Code and neither
the Company nor any ERISA Affiliate has ever maintained or sponsored any
such plan that could give rise to a liability against the Company or any
Company Subsidiary.
2.22.3 The written terms of each of the Plans, and any related trust
agreement, group annuity contract, insurance policy or other funding
arrangement are in substantial compliance with all applicable laws
including ERISA, the Code, and the Age Discrimination in Employment Act, as
applicable, and each of such Plans has been administered in substantial
compliance with such requirements.
2.22.4 Except with respect to income taxes on benefits paid or provided,
no income, excise or other tax or penalty (federal or state) has been
waived or excused, has been paid or is owed by any person (including, but
not limited to, any Plan, any Plan fiduciary, the Company and ERISA
Affiliates) with respect to the operations of, or any transactions with
respect to, any Plan. No action has been taken, nor has there been any
failure to take any action, nor is any action or failure to take action
contemplated, that would subject any person or entity to any liability for
any tax or penalty in connection with any Plan. No reserve for any taxes or
penalties has been established with respect to any Plan, nor has any advice
been given to any person with respect to the need to establish such a
reserve.
2.22.5 There are no (i) actions, suits, arbitrations or claims (other
than routine claims for benefits), (ii) legal, administrative or other
proceedings or governmental investigations or audits, or (iii) complaints
to or by any governmental entity, which are pending, anticipated or
threatened, against the Plans or their assets.
2.22.6 The present value of the future cost to the Company and ERISA
Affiliates of post-retirement medical benefits that the Company or any
ERISA Affiliate is obligated to provide, calculated on the basis
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of actuarial assumptions the Company considers reasonable estimates of
future experience and which have been provided to Unitrin, does not exceed
the amount specified in Section 2.22.6 of the Company Disclosure Schedule.
2.22.7 Neither the Company nor any ERISA Affiliate, nor any of the ERISA
Plans, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in a transaction in connection with which the Company
or any ERISA Affiliate, any of the ERISA Plans, any such trust, or any
trustee or administrator thereof, or any party dealing with the ERISA Plans
or any such trust could be subject to either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to
Section 4975 or 4976 of the Code, which civil penalty or tax would,
individually or in the aggregate, have a Company Material Adverse Effect.
Neither the Company nor any ERISA Affiliate is, or, as a result of any
actions, omissions, occurrences or state of facts existing prior to the
Effective Time, may become liable for any tax imposed under Section 4978 of
the Code, which tax would, individually or in the aggregate, have a Company
Material Adverse Effect.
2.23 Insurance Protection. All material tangible and real properties of the
Company and each Company Subsidiary are covered by valid and currently
effective insurance policies issued in favor of the Company or a Company
Subsidiary. Set forth in Section 2.23 of the Company Disclosure Schedule is a
list of all insurance policies covering the Company and the Company
Subsidiaries. The Company or a Company Subsidiary is included as an insured
party under all such policies or has full rights as a loss payee. No notice of
cancellation or termination has been received with respect to any such policy.
Such policies will not be terminable or cancelable by reason of this Agreement
and the consummation of the transactions contemplated hereby.
2.24 Insurance Business.
2.24.1 Policies and Rates. Except as set forth in Section 2.24.1 of the
Company Disclosure Schedule, all policies of insurance issued by the
Company or any of the Insurance Subsidiaries as now in force are, to the
extent required under applicable law, on forms approved by applicable
insurance regulatory authorities or which have been filed and not objected
to by such authorities within the period provided for objection. Any
premium rates required to be filed with or approved by insurance regulatory
authorities have been so filed or approved and premiums charged conform
thereto and to any related actuarial memoranda and documents required to be
filed with such authorities. Any such actuarial memoranda comply in all
material respects with applicable standard valuation and non-forfeiture
laws.
2.24.2. Producers. Each of the contracts between the Company or any of
the Insurance Subsidiaries and its agents, managers, brokers or producers
is in full force and effect. Neither the Company nor any of the Insurance
Subsidiaries is and to the knowledge of the Company none of the agents are
in default in any material respect thereunder, and no such party thereto
may terminate any such agreements by reason of the transactions
contemplated by this Agreement.
2.24.3 Assessments. The Company and each of the Insurance Subsidiaries
has paid in full or properly reserved for all guaranty fund and residual
market assessments required by any regulatory authority to be paid by the
Company or such Insurance Subsidiary.
2.24.4 Regulatory Matters. All life insurance policies issued by the
Company or any Insurance Subsidiary which is a life insurance company (a
"Life Company") satisfy the tax definition of life insurance policies in
Section 7702 or 101(f) of the Code. All annuity contracts issued by a Life
Subsidiary satisfy the provisions of Sections 817(h) and 72(s) of the Code,
as applicable, and amounts credited to such contracts are not subject to
current taxation under Section 72(a) of the Code. Except as set forth in
Section 72(a) of the Company Disclosure Schedule, none of the policies or
contracts offered or sold by a Life Company (i) has been registered under
any Federal or state (including blue sky and insurance) securities laws,
and such policies and contracts were not, when offered or sold, required to
be registered or qualified under such laws; and (ii) has been issued in
connection with any separate account established and maintained by a Life
Company.
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2.25 Regulatory Filings and Reports. The Company has made available for
inspection by Unitrin all registrations, filings or submissions made by the
Company and all Company Subsidiaries with any Insurance Department since 1992,
including without limitation all annual and quarterly statutory financial
statements filed with or submitted to any Insurance Department, and any state
insurance reports of examination issued by any such Insurance Department or
other state insurance governmental or regulatory body since December 31, 1992.
The Company and each Company Subsidiary has filed all reports, statements,
documents, registrations, filings or submissions required to be filed by it
with any governmental or regulatory body, except (i) those with respect to
which the imposition, levy or collection of all fines, penalties, assessments,
taxes, forfeitures, money judgments or sanctions of any type are barred by
statute of limitations, (ii) with respect to which the failure to so file
individually and in the aggregate would not cause a Company Material Adverse
Effect, (iii) except as may be required for the transactions contemplated by
this Agreement, and (iv) as otherwise agreed to in writing by the applicable
governmental or regulatory body. Except as set forth in Section 2.25 of the
Company Disclosure Schedule, (A) all such registrations, filings and
submissions were in material compliance with applicable law when filed, and
(B) no material deficiencies have been asserted by any such governmental or
regulatory body with respect to such registrations, filings and submissions
that have not been satisfied. Except as may be required for the transactions
contemplated by this Agreement, the Company and each of the Insurance
Subsidiaries has duly filed with appropriate insurance authorities, to the
extent that filing of the same is required by laws, rules or regulations, all
annual and quarterly statements and other statements, documents and reports
(including, without limitation, any filings required under applicable state
insurance holding company systems acts) required by the insurance and other
laws of its state of domicile and in each of the states in which it is
licensed to conduct an insurance business. All such statements and filings are
substantially correct as filed, and there are no material omissions therefrom,
except as set forth in Section 2.25 of the Company Disclosure Schedule.
Section 2.25 of the Company Disclosure Schedule sets forth all financial,
market conduct or other reports of examination issued by any department of
insurance or regulatory body with respect to the Company or any of its
Insurance Subsidiaries since December 31, 1992. Except as set forth in Section
2.25 of the Company Disclosure Schedule, the Company and its Insurance
Subsidiaries have resolved all issues raised in such reports to the
satisfaction of the issuer of such reports.
2.26 Agents. Set forth in Section 2.26 of the Company Disclosure Schedule is
a true and correct summary description of the compensation arrangements of the
Company and each Insurance Subsidiary with its agents and general agents.
2.27 Reserves and Reinsurance. Except as set forth in Section 2.27 of the
Company Disclosure Schedule, the insurance reserves and liabilities reflected
in the Company's and each of the Insurance Subsidiaries' Statutory Financial
Statements and established on the books of the Company or such Insurance
Subsidiary for all future insurance policy benefits, dividends, losses, claims
and expenses make a sufficient provision for all reasonably anticipated
matured and unmatured liabilities and obligations of the Company and such
Insurance Subsidiary, under all insurance policies and reinsurance and
coinsurance agreements or other similar contracts pursuant to which the
Company or such Insurance Subsidiary had or has any liability or obligation.
All such reserves are computed in accordance with applicable SAP loss
reserving practices, consistently applied, are fairly stated in accordance
with sound loss reserving and actuarial principles, are based on factors and
assumptions relevant to the provisions in the related insurance contracts, and
are in compliance with the requirements of the insurance laws of the
applicable jurisdiction. Except as set forth in Section 2.27 of the Company
Disclosure Schedule, neither the Company nor any of the Insurance Subsidiaries
is involved in any dispute with or inquiry initiated by its outside
accountants or any Insurance Department with respect to its actuarial or
reserving practices. The Company and each Insurance Subsidiary owns assets
which qualify as admitted assets under applicable state insurance laws in an
amount at least equal to all of its required insurance reserves. All
reinsurance recoverables reflected or otherwise included, either as assets or
contra-liabilities, in the Statutory Financial Statements are fairly stated in
accordance with applicable SAP.
2.28 Information in Proxy Statement. The proxy statement required to be
filed by the Company with the Missouri Department of Insurance in connection
with the transactions contemplated by this Agreement (the
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"Company Proxy Statement"), and any amendments or supplements thereto will,
when filed, comply in all material respects with the applicable requirements
of the Missouri Insurance Code. The Company Proxy Statement and amendments
thereof or supplements thereto will not, at the time of (i) the first mailing
thereof to the shareholders of the Company and (ii) the meeting of
shareholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 2.28 will not apply
to statements in, or omissions from, the Company Proxy Statement based upon
information furnished to the Company by Unitrin specifically for use therein.
2.29 Information in Registration Statement. The information with respect to
the Company and the Merger that the Company furnishes to Unitrin in writing
expressly for inclusion in the Registration Statement (as defined in Section
3.8) will not contain at the time the Registration Statement becomes effective
or at the Effective Time any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein not misleading.
2.30 Other Filings. The Company and each Company Subsidiary has made all
required filings with the SEC, the National Association of Securities Dealers,
Inc., the Nasdaq Stock Market, any state securities commission and all other
governmental or regulatory filings required to be made by the Company or any
Company Subsidiary.
2.31 Third Party Discussions. Other than pursuant to this Agreement, the
Company is not currently entertaining discussions with any third party
regarding a possible sale or merger of the Company or any Company Subsidiary
or a substantial portion of their assets or business.
2.32 Disclosure. No representation or warranty of the Company and no
statement or information relating to the Company or any Company Subsidiary or
their respective businesses or properties contained in (i) this Agreement,
(ii) the Company Disclosure Schedule, or (iii) in any certificate furnished to
Unitrin or Acquisition Sub pursuant to this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements made herein or therein not misleading.
2.33 Fairness Opinion. The Company's Board of Directors has received from
Societe Generale Securities Corporation, a written opinion (the "Fairness
Opinion") to the effect that the consideration to be paid by Unitrin in the
Merger is fair to the shareholders of the Company from a financial point of
view.
2.34 Finder and Investment Bankers. Except as set forth in Section 2.34 of
the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary has retained any broker, finder or other agent or incurred any
liability for any brokerage fees, commissions or finders' fees with respect to
the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UNITRIN
Unitrin represents and warrants to the Company as follows:
3.1 Organization of Unitrin and Acquisition Sub. Unitrin is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Acquisition Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Missouri. Acquisition Sub
is a wholly-owned subsidiary of Unitrin. Unitrin is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease
or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not individually or in the
aggregate have a material adverse effect on the business, prospects, assets,
liabilities, results of operations or financial condition of Unitrin and its
subsidiaries, taken as a whole, or adversely affect the ability of Unitrin to
consummate the transactions contemplated by this Agreement in any material
respect (a "Unitrin Material
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Adverse Effect"). Unitrin's insurance subsidiaries (the "Unitrin
Subsidiaries") have all requisite power and authority to carry on an insurance
business pursuant to and to the extent of the certificates of authority issued
under the laws of all applicable states. No such certificate of authority has
been revoked, restricted, suspended, limited or modified nor is any
certificate of authority the subject of a proceeding for revocation,
restriction, suspension, limitation or modification, except where such
revocation, restriction, suspension, limitation or modification would not
result in a Unitrin Material Adverse Effect. Neither Unitrin nor any Unitrin
Subsidiary is operating under any formal or informal agreement or
understanding with the licensing authority of any state which restricts its
authority to do business or requires the Unitrin Subsidiaries to take, or
refrain from taking, any action, except where such restriction or requirement
would not result in a Unitrin Material Adverse Effect.
3.2 Capital Stock. The authorized capital stock of Unitrin consists of
20,000,000 shares of Preferred Stock, par value $.10 per share, none of which
is issued and outstanding, and 100,000,000 shares of Unitrin Common Stock, of
which 37,335,245 shares were issued and outstanding as of March 31, 1997. All
of the shares of Unitrin Common Stock issuable at the Effective Time in
exchange for Shares covered by Stock Elections or Default Stock Elections in
accordance with this Agreement, when so issued, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights.
3.3 Authorization. The Board of Directors of each of Unitrin and Acquisition
Sub has adopted resolutions approving the transactions contemplated by this
Agreement and has authorized the execution and delivery of this Agreement by
Unitrin and Acquisition Sub, respectively. Unitrin and Acquisition Sub each
has full power and authority to enter into this Agreement and subject to
obtaining all required regulatory approvals, to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Unitrin and Acquisition Sub and constitutes the valid and legally binding
obligation of each of them, enforceable against them in accordance with its
terms, subject to bankruptcy, receivership, insolvency, reorganization,
moratorium or similar laws affecting or relating to creditors rights generally
and subject to general principles of equity.
3.4 Consents and Approvals. Except for consents and approvals listed in the
schedule attached hereto (the "Unitrin Consent Schedule"), no filing with, and
no permit, authorization, consent or approval of, any public body or authority
is necessary for the consummation by Unitrin or Acquisition Sub of the
transactions contemplated by this Agreement.
3.5 Defaults and Conflicts. Subject to the receipt of all consents and
approvals contemplated by this Agreement, neither the execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby or
the fulfillment of and compliance with the terms and provisions hereof will
(i) violate any judicial, administrative or arbitral order, writ, award,
judgment, injunction or decree involving Unitrin, (ii) conflict with the
terms, conditions or provisions of the Certificate of Incorporation or By-Laws
of Unitrin, (iii) conflict with, result in a breach of, constitute a default
under or accelerate or permit the acceleration of the performance required by,
any indenture or any agreement or other instrument to which Unitrin is a party
or by which Unitrin is bound, (iv) result in the creation of any lien, charge
or encumbrance upon any of the assets of Unitrin under any such agreement or
instrument, or (v) terminate or give any party thereto the right to terminate
any such indenture, agreement or instrument, other than, with respect to
(iii), (iv) and (v) above, any such conflict, lien or termination that would
not result in a Unitrin Material Adverse Effect. Except as set forth in
Section 3.5 of the schedule delivered by Unitrin to the Company concurrently
with the execution of this Agreement (the "Unitrin Disclosure Schedule"), no
consent of any third party to any indenture, agreement or other instrument to
which Unitrin is a party is required in connection with the execution and
delivery of this Agreement, except for such consent or consents that, if not
obtained, would not result in a Unitrin Material Adverse Effect.
3.6 SEC Reports; Financial Statements. Unitrin has filed all reports
required to be filed with the SEC pursuant to the Securities Exchange Act of
1934, as amended, since December 31, 1993 (collectively, the "SEC Reports").
As of their respective dates, none of the SEC Reports, including, without
limitation, any financial statements or schedules included therein, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the
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circumstances under which they were made, not misleading. The audited
consolidated financial statements of Unitrin and its subsidiaries included in
its Annual Report on Form 10-K for the years ended December 31, 1994, 1995 and
1996, and the unaudited consolidated interim financial statements included in
its Quarterly Report on Form 10-Q for its quarter ended March 31, 1997,
present fairly in all material respects in conformity with generally accepted
accounting principles (except as may be indicated therein or in the notes
thereto) the consolidated financial position of Unitrin and its subsidiaries
as of the dates thereof and its consolidated statements of operations,
shareholders' equity, and cash flows for the periods then ended (in the case
of any unaudited interim financial statements, subject to (i) normal year-end
adjustments and (ii) standard limitations on the application of generally
accepted accounting principles).
Except as and to the extent reflected in the interim consolidated statement
of financial position of Unitrin and its subsidiaries as of March 31, 1997,
and notes thereto included in its Quarterly Report on Form 10-Q for its
quarter ended March 31, 1997, neither Unitrin nor any of its subsidiaries had
as of March 31, 1997 any liability or obligation (absolute, contingent or
otherwise) other than liabilities incurred in the ordinary course of business,
none of which, individually or in the aggregate, would have a Unitrin Material
Adverse Effect. Except as and to the extent set forth in Section 3.6 of the
Unitrin Disclosure Schedule, neither Unitrin nor any of its subsidiaries has
incurred any liability or obligation (absolute, contingent or otherwise) since
March 31, 1997 other than liabilities incurred in the ordinary course of
business, none of which, individually or in the aggregate, would have a
Unitrin Material Adverse Effect.
3.7 Changes Since March 31, 1997. Since March 31, 1997, there has been no
event or condition which has had (or is reasonably likely to result in) a
Unitrin Material Adverse Effect, and except as set forth in Section 3.7 of the
Unitrin Disclosure Schedule, Unitrin and its subsidiaries have conducted their
businesses in the ordinary course consistent with past practices.
3.8 Registration Statement. The registration statement on Form S-4 to be
filed by Unitrin with the SEC with respect to the offering of Unitrin Common
Stock in connection with the transactions contemplated by this Agreement (the
"Registration Statement") and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and will not
contain, at the time the Registration Statement becomes effective or at the
Effective Time, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements contained therein, not misleading; provided that the foregoing
representation shall not apply to statements or omissions in the Registration
Statement based upon information furnished to Unitrin or Acquisition Sub by
the Company specifically for use therein.
3.9 Information in Proxy Statement. None of the information supplied or to
be supplied by Unitrin or Acquisition Sub in writing expressly for inclusion
in the Company Proxy Statement to be mailed to the shareholders of the Company
in connection with the Merger or in any amendments thereof or supplements
thereto will, at the time of (i) the first mailing thereof and (ii) the
meeting of shareholders to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.10 Litigation. There is no action, suit, arbitration, mediation,
investigation or proceeding pending against, or to the knowledge of Unitrin
threatened against or affecting, Unitrin or any of the Unitrin Subsidiaries or
its properties or businesses, at law or in equity, or before any governmental
or administrative body or agency or before any arbitrator, which (i)
challenges the validity of this Agreement or any action taken or to be taken
by Unitrin or Acquisition Sub pursuant to this Agreement in connection with
the Merger, or (ii) except as set forth in Section 3.10 of the Unitrin
Disclosure Schedule, would result in a Unitrin Material Adverse Effect.
3.11 Compliance with Laws. Unitrin and each of its subsidiaries has complied
with all laws, regulations, orders, ordinances, judgments or decrees of all
governmental authorities (federal, state, local, foreign or otherwise)
applicable to its businesses, except where the failure to have so complied
would not, individually or in the aggregate, have a Unitrin Material Adverse
Effect.
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3.12 Disclosure. No representation or warranty of Unitrin and no statement
or information relating to Unitrin or any of the Unitrin Subsidiaries or their
respective businesses or properties contained in (i) this Agreement, (ii) the
Unitrin Disclosure Schedule, or (iii) in any certificate furnished to the
Company pursuant to this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements made herein or therein not misleading.
3.13 Unitrin Rights Plan. Neither the approval, execution or delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will cause the rights outstanding under the Unitrin Rights Plan to become
exercisable provided that the Company's shareholders do not, either
individually or in the aggregate, own a sufficient number of shares of Unitrin
Common Stock which, when added to the number of shares Unitrin Common Stock
issuable to such shareholders in the Merger, would cause any such shareholders
or group thereof to become an Acquiring Person within the meaning of the
Unitrin Rights Plan.
ARTICLE IV
RIGHT TO INVESTIGATE
The Company shall afford to the officers and authorized representatives of
Unitrin reasonable access to the offices, properties, books and records of the
Company in order that Unitrin may have full opportunity to make such
investigations as it shall desire of the affairs of the Company and the
Company Subsidiaries, and the officers of the Company shall furnish Unitrin
with such additional financial, actuarial and operating data and other
information as to the assets, properties, liabilities and business of the
Company and the Company Subsidiaries as Unitrin shall from time to time
reasonably request. The Company and the Company Subsidiaries shall consent to
the review by the officers and authorized representatives of Unitrin of the
reports and working papers of the Company's independent auditors and actuarial
consultants and to discussions by the officers and authorized representatives
of Unitrin with parties with which Company and the Company Subsidiaries have
business relationships. All such information shall be held confidential in
accordance with the Confidentiality Agreement delivered by Unitrin to the
Company dated March 31, 1997.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of Business Pending the Merger. From the date hereof until the
Effective Time, unless Unitrin shall otherwise agree in writing, or except as
set forth in Section 5.1 of the Company Disclosure Schedule or as otherwise
contemplated by this Agreement, the Company and the Company Subsidiaries shall
conduct their respective businesses in the ordinary course consistent with
past practice and shall use all reasonable efforts to preserve intact their
licenses, permits and certificates of authority, business organizations and
relationships with third parties (including but not limited to their
respective relationships with policyholders and agents) and to keep available
the services of their officers and key employees. Except as set forth in
Section 5.1 of the Company Disclosure Schedule or as otherwise provided in
this Agreement, from the date hereof until the Effective Time, without the
prior written consent of Unitrin, the Company shall not, and shall not permit
any Company Subsidiary to:
(i) adopt or propose any change in its Articles of Incorporation or By-
Laws;
(ii) (A) make any change in its authorized capital stock, (B) issue any
stock options, or issue any warrants, or other rights calling for the
issue, transfer, sale or delivery of its capital stock or other securities,
(C) pay any stock dividend or split, combine or reclassify its outstanding
shares of capital stock, (D) other than the conversion of Company B Stock
into Company A Stock, issue, sell, exchange or deliver any shares of its
capital stock (or securities convertible into or exchangeable, with or
without additional consideration, for such capital stock), (E) purchase or
otherwise acquire for a consideration any outstanding shares of its capital
stock, or (F) declare, set aside or pay any dividend or other distribution
with respect to any shares of
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its capital stock except for regular quarterly dividends with respect to
Company A Stock in an amount not greater than $.35 per share and regular
quarterly dividends with respect to Company B Stock in an amount not
greater than $.03181 per share, provided that, in the event the record date
(the "Unitrin Record Date") for the regular quarterly dividend for the
fourth quarter of 1997 payable to holders of Unitrin Common Stock (the
"Unitrin Fourth Quarter Dividend") which has historically been declared on
or about November 1 of each year is established to be a date prior to the
Effective Time, then the Company shall be entitled to pay, in lieu of the
Company's own regular quarterly dividend for the fourth quarter of 1997
(the "Reliable Fourth Quarter Dividend"), a special dividend to the holders
of the Company Common Stock in an amount not to exceed the amount such
holders would have received in connection with the Unitrin Fourth Quarter
Dividend on the shares of Unitrin Common Stock such holders would have
received in the Merger had the Effective Time occurred prior to the Unitrin
Record Date and assuming such holders had made Stock Elections, and
provided further, that the Company shall not declare or pay the Reliable
Fourth Quarter Dividend to holders of Company Common Stock if the Effective
Time occurs prior to the Unitrin Record Date;
(iii) merge or consolidate with any other person or acquire a material
amount of assets of any other person;
(iv) except pursuant to existing contracts or commitments identified in
Section 2.17 of the Company Disclosure Schedule, or in the ordinary course
of business consistent with past practice, sell, lease, license or
otherwise surrender, relinquish or dispose of (A) any material facility
owned or leased by the Company or any Company Subsidiary or (B) any assets
or property which are material to the Company and the Company Subsidiaries,
taken as a whole;
(v) settle any material audit, make or change any material Tax election
or file amended tax returns;
(vi) except in the ordinary course of business consistent with past
practice or as otherwise permitted by this Agreement, (A) incur any
material indebtedness except in the ordinary course of business pursuant to
existing credit facilities or arrangements, (B) amend or otherwise
increase, accelerate the payment or vesting of the amounts payable or to
become payable under or fail to make any required contribution to, or
withdraw any amounts from, any employee benefit plan maintained by the
Company or any Company Subsidiary, or (C) materially increase any non-
salary benefits payable to any employee or former employee;
(vii) grant any increase in the compensation of any director, officer,
employee, consultant or agent of the Company or any Company Subsidiary,
except in the ordinary course of business consistent with past practice, or
enter into any Indemnity Agreements as defined in Section 6.4(i) with any
such person;
(viii) except, in any case, in the ordinary course of business consistent
with past practice, enter into, terminate or amend any (A) employment
agreement or other employment arrangement with any employee of the Company
or any Company Subsidiary, (B) any reinsurance or retrocession agreement or
treaty, or (C) any other contract or agreement of the Company or any
Company Subsidiary of the type described in Section 2.17 hereof, including
without limitation any employee benefit plan;
(ix) change any method of accounting or accounting practice by the
Company or any Company Subsidiary, except for any such change required by
GAAP or SAP;
(x) conduct transactions in Company Investments except in compliance with
the investment policies of the Company or such Company Subsidiary and all
applicable insurance laws and regulations, provided that neither the
Company nor any Company Subsidiary shall acquire any securities or other
investments other than investments in U.S. Treasury bonds with maturities
of five years or less except pursuant to existing contracts or commitments
identified in Section 2.17(xi) of the Company Disclosure Schedule; or
(xi) agree or commit to do any of the foregoing.
5.2 Consents. The Company shall, as soon as reasonably practicable, prepare
or cause to be prepared and made all necessary filings with all governmental
or regulatory bodies or other entities and shall use its best efforts to
obtain all consents, waivers, approvals, authorizations, rulings or orders
from all governmental or regulatory bodies or other entities listed on the
Company Consent Schedule and furnish true, correct and complete copies of each
to Unitrin. The Company agrees that prior to the Effective Time it will use
its best efforts to obtain all
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required consents of parties to any indenture, agreement or other instrument
referred to in Section 2.7 of the Company Disclosure Schedule.
5.3 Notice. The Company shall give prompt notice to Unitrin of (i) any
notice of, or other communication relating to, a default or event which with
notice or lapse of time or both would become a default, received by the
Company or any Company Subsidiary subsequent to the date of this Agreement and
prior to the Effective Time, under its Articles of Incorporation or By-laws or
any indenture, or material instrument or agreement, to which the Company or
any Company Subsidiary is a party, by which it or any of its properties is
bound or to which it or any of its properties is subject, (ii) any notice or
other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated hereby and (iii) any matter which, if it had occurred prior to
the date hereof, would have been required to be included in the Company
Disclosure Schedule.
5.4 Shareholder Meeting. The Company shall duly call the Company Shareholder
Meeting to be held at the earliest practicable date for the purpose of voting
on the Agreement and the conversion of the Company B Stock, and in connection
therewith, Company shall prepare and file with the Missouri Department of
Insurance, as soon as is reasonably practicable, the required proxy materials
with respect thereto and shall use its best efforts to obtain clearance by the
Missouri Department of Insurance of the mailing of such material to the
Company shareholders. Unless otherwise required in connection with the
exercise of its fiduciary duties to the Company's shareholders under
applicable law, the Board of Directors of the Company shall recommend the
approval of this Agreement and the conversion of the Company B Stock to
Company A Stock as contemplated hereby to the Company shareholders.
5.5 Conversion of Company B Stock. Subject to approval by a majority of the
holders of Company B Stock, the Company shall take all necessary actions to
cause the Company B Stock to be converted into Company A Stock in accordance
with the provisions of the Company's Articles of Incorporation and applicable
law, such conversion to be effective immediately prior to the Effective Time.
5.6 No Solicitation of Acquisition Proposals. The Company shall not, nor
shall it permit any of the Company Subsidiaries, or authorize or permit any of
their officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative or agent retained by the
Company or any Company Subsidiary, to, directly or indirectly, make, solicit,
initiate, encourage or take any other action to facilitate any inquiry or
proposal, or, subject to the provisos to this sentence, provide any
information to or participate in any negotiations with, any corporation,
partnership, agent, attorney, financial advisor, person, or other entity or
group (other than Unitrin and its affiliates) ("Third Parties") relating to
any (i) merger or consolidation or other business combination of the Company
or any of the Company Subsidiaries, (ii) sale of a significant amount of
assets of the Company or any of its Subsidiaries outside the ordinary course
of business, (iii) purchase or sale of shares of capital stock of the Company
or any of its Subsidiaries or (iv) any similar action or transaction involving
the Company or any of its Subsidiaries other than the transactions
contemplated by this Agreement ("Extraordinary Transaction"), or, subject to
the provisos to this sentence, agree to or consummate any Extraordinary
Transaction; provided, however, that the Company may provide information at
the request of, or enter into negotiations with a, third party or agree to or
consummate any Extraordinary Transaction if the Board of Directors of the
Company determines, in good faith, at a meeting of the Board of Directors,
that the exercise of its fiduciary duties to the Company's shareholders under
applicable law, as advised in writing by ▇▇▇▇▇ ▇▇▇▇ LLP (or other firm with a
national reputation in transactions of this nature), requires it to take any
such action, and, provided further, that the Company may not, in any event,
provide to such third party any information which it has not provided to
Unitrin. The Company shall immediately inform Unitrin in writing of any
inquiry, proposal or request for information (including the terms thereof and
the person making such inquiry) which it may receive in respect of such a
transaction and provide Unitrin with a copy of any such written inquiries,
proposals and offers, including without limitation any Acquisition Proposal.
5.7 Affiliates. At least 30 days prior to the Closing, the Company shall
deliver to Unitrin a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the shareholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use all
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reasonable efforts to cause each person named in such letter to deliver to
Unitrin prior to the Closing a written "Affiliates" agreement, in the form
previously agreed to by the parties, providing that such person shall dispose
of the Unitrin Common Stock to be received by such person in the Merger only
in accordance with applicable law.
5.8 Phantom Stock Plan. The Company shall take all actions necessary to
terminate The Reliable Life Insurance Company Phantom Stock Bonus Plan at or
prior to the Effective Time so that the Company has no liability following the
Effective Time to any participant thereunder.
5.9 Cooperation. The Company shall, and shall cause each of the Company
Subsidiaries to, execute such documents and other papers, provide such
information, and take such further actions as may be reasonably requested by
Unitrin to carry out the provisions hereof and to consummate the transactions
contemplated hereby.
5.10 Comfort Letters. Upon the request of Unitrin, the Company shall use all
reasonable efforts to provide to Unitrin "comfort letters" from the
independent certified public accountants for the Company and the Company
Subsidiaries, dated the date on which the Registration Statement, or last
amendment thereto, shall become effective, and dated the date of the Closing,
addressed to the Board of Directors of each of Unitrin and the Company,
covering such matters as Unitrin shall reasonably request with respect to
facts concerning the financial condition of the Company and the Company
Subsidiaries and customary for such certified public accountants to deliver in
connection with a transaction similar to the Merger.
5.11 Conditions Precedent. The Company shall, and shall cause each of the
Company Subsidiaries to, use its best efforts to cause all of the conditions
precedent to the consummation of the Merger applicable to them to be met.
ARTICLE VI
COVENANTS OF UNITRIN
6.1 Consents. Unitrin shall, and shall cause Acquisition Sub to, as soon as
practicable, prepare and make all necessary filings with all governmental or
regulatory bodies or other entities and shall use its best efforts to obtain
all consents, waivers, approvals, authorizations, rulings or orders from all
governmental or regulatory bodies or other entities listed on the Unitrin
Consent Schedule and furnish true, correct and complete copies of each to the
Company.
6.2 Cooperation. Unitrin shall, and shall cause Acquisition Sub to, execute
such documents and other papers, provide such information, and take such
further actions as may be reasonably requested by the Company to carry out the
provisions hereof and to consummate the transactions contemplated hereby.
6.3 Conditions Precedent. Unitrin shall, and shall cause Acquisition Sub to,
use its best efforts to cause all of the conditions precedent to the
consummation of the Merger applicable to it to be met.
6.4 Director and Officer Liability.
(i) For six years after the Effective Time, Unitrin shall cause the
Company to indemnify and hold harmless each person who is or has been at
any time prior to the date hereof or who becomes prior to the Effective
Time, an officer or director of the Company, in respect of acts or
omissions occurring prior to the Effective Time (the "Indemnified Parties")
(including but not limited to the transactions contemplated by this
Agreement) to the extent provided under the Company Articles and the Bylaws
of the Company and indemnity agreements between the Company and any of its
officers or directors ("Indemnity Agreements") in effect on the date
hereof, provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law.
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(ii) For six years after the Effective time, Unitrin shall or shall cause
the Company to provide, if available, officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective
Time, including but not limited to the transactions contemplated by this
Agreement, covering each such person currently covered by the Company's
officers' and directors' liability insurance policy, or who becomes covered
by such policy prior to the Effective Time, on terms with respect to
coverage and amount comparable to those of such policy in effect on the
date hereof, provided that such coverage may be obtained by Unitrin at a
cost that does not exceed the current cost of the Company's insurance.
6.5 Registration Statement. Unitrin will file the Registration Statement
with the SEC and, if required, appropriate materials with applicable state
securities agencies as promptly as practicable and will use all reasonable
efforts to cause the Registration Statement to become effective under the
Securities Act and all such state filed materials to comply with applicable
state securities laws. The Company authorizes Unitrin to utilize in the
Registration Statement and in all such state filed materials the information
concerning the Company and its subsidiaries provided to Unitrin in connection
with, or contained in, the Registration Statement. Unitrin will advise the
Company promptly when the Registration Statement has become effective and of
any supplements or amendments thereto, and Unitrin will furnish the Company
with copies of all such documents. Except for the Company Proxy Statement and
related prospectus of Unitrin, Unitrin shall not distribute any written
material that would constitute a "prospectus" relating to the Merger other
than in compliance with the Securities Act or any applicable state securities
law.
6.6 Inclusion on Nasdaq. Unitrin shall use its best efforts to cause the
shares of Unitrin Common Stock issuable in exchange for Shares to be included
on the National Market Tier of the Nasdaq Stock Market prior to the Effective
Time.
6.7 Notice. Unitrin shall give prompt notice to the Company of (i) any
notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated hereby and (ii) any matter which, if it had occurred prior to the
date hereof, would have been required to be included in the Unitrin Disclosure
Schedule.
6.8 Comfort Letters. Upon the request of the Company, Unitrin shall use all
reasonable efforts to provide to the Company "comfort letters" from the
independent certified public accountants for Unitrin and its subsidiaries,
dated the date on which the Registration Statement, or last amendment thereto,
shall become effective, and dated the date of the Closing, addressed to the
Board of Directors of each of the Company and Unitrin, covering such matters
as the Company shall reasonably request with respect to facts concerning the
financial condition of Unitrin and its subsidiaries and customary for such
certified public accountants to deliver in connection with a transaction
similar to the Merger.
ARTICLE VII
CLOSING AND CLOSING DOCUMENTS
7.1 Closing. The closing (the "Closing") under this Agreement shall be held
at the offices of Lord, Bissell & Brook, ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ at 10:00 a.m., Central Time, as promptly as practicable after the
fulfillment or waiver of all the terms and conditions contained in Articles
VII, VIII, IX and X of this Agreement, or at such other place and time as
shall be mutually agreeable to the parties. The Articles of Merger shall be
filed upon the Closing with the Secretary of State of Missouri.
7.2 Company Closing Documents. At the Closing, the Company shall deliver, or
cause to be delivered, to Unitrin:
(i) a certificate of the Company, signed by its Chief Executive Officer,
which shall confirm that the conditions to Unitrin's obligations set forth
in Sections 8.1 and 8.2 have been satisfied;
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(ii) the opinion of ▇▇▇▇▇ ▇▇▇▇ LLP, counsel for the Company, dated the
Effective Time, and in form and substance satisfactory to Unitrin, covering
the matters set forth in Exhibit 7.2 hereto;
(iii) a certificate of the Company's inspector of elections as to the
vote taken at the Company Shareholders' Meeting with respect to the Merger
and the conversion of Company B Stock into Company A Stock to be effective
immediately prior to the Merger;
(iv) written resignations, effective the Effective Time, of those
directors of the Company and the Company Subsidiaries specified on a
schedule to be delivered by Unitrin to the Company prior to the Closing
(the "Directors Schedule");
(v) Articles of Incorporation of the Company and each of the Company
Subsidiaries certified by the Secretary of State or Insurance Department of
their respective States of incorporation dated as of a date within five (5)
days prior to the Closing; and
(vi) certificates of Good Standing of the Company and each of the Company
Subsidiaries certified by the Secretary of State or Insurance Department of
their respective States of incorporation and qualification dated the date
of the Closing or as close thereto as practicable.
7.3 Unitrin Closing Documents. At the Closing, Unitrin and Acquisition Sub
shall deliver, or cause to be delivered, to the Company:
(i) a certificate of Unitrin, signed by its President or a Vice
President, which shall confirm that the conditions to the Company's
obligations set forth in Sections 9.1 and 9.2 have been satisfied; and
(ii) the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., counsel of Unitrin, dated the
Effective Time, and in form and substance satisfactory to the Company,
covering the matters set forth in Exhibit 7.3 hereto.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF UNITRIN
The obligations of Unitrin under this Agreement to cause this Agreement to
become effective and have the transactions contemplated hereby be consummated
are, at its option, subject to the conditions that:
8.1 Validity of Representation and Warranties. The representations and
warranties of the Company herein contained that are qualified as to
materiality shall be true and correct, and the representations and warranties
of the Company herein contained that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Effective Time as though made on and at the Effective
Time, except as contemplated or permitted by this Agreement.
8.2 Performance of Obligations. The Company shall have performed in all
material respects all obligations and agreements and complied with all
covenants and conditions contained in this Agreement to be performed and
complied with by it at or prior to the Effective Time.
8.3 Consents. All consents, waivers, approvals, authorizations or orders
listed on the Company Consent Schedule shall have been obtained by the Company
in form and substance reasonably acceptable to Unitrin and copies of the same
shall have been delivered to Unitrin.
8.4 Material Adverse Change. Since the date of this Agreement, no facts,
events or circumstances shall have occurred which, in the reasonable judgment
of Unitrin, could have a Company Material Adverse Effect.
8.5 Company Closing Documents. The Company shall have delivered or caused to
be delivered to Unitrin at the Closing all of the documents listed in Section
7.2 hereof.
8.6 Approval of Company Shareholders. This Agreement, and the conversion of
the Company B Stock to Company A Stock to be effective immediately prior to
the Merger, shall have been approved and adopted by the requisite votes of the
shareholders of the Company in accordance with the provisions of the Articles
of Incorporation of the Company and applicable law.
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8.7 Resignations. The directors of the Company and the Company Subsidiaries
as specified in the Directors Schedule shall have tendered their resignations
in writing, effective at the Effective Time.
8.8 Affiliates. Unitrin shall have received a signed "affiliates letter"
from each of the persons named in the letter delivered by the Company to
Unitrin pursuant to Section 5.7 hereof.
8.9 Licenses. The Company shall have delivered to Unitrin evidence
reasonably satisfactory to Unitrin that the Company's and the Company
Subsidiaries' existing licenses and governmental authorizations necessary for
them to conduct business remain in full force and effect and are not subject
to any restriction.
8.10 Private Placement Securities. Unitrin shall have received evidence
reasonably satisfactory to Unitrin demonstrating that:
(i) the Company Investments identified in Section 2.13(ii) of the Company
Disclosure Schedule as of March 31, 1997 (adjusted for subsequent
acquisitions, dispositions and principal payments) have an aggregate value
(assuming sale or other disposition of all such investments within twenty-
four months) in excess of 95% of the carrying value of such investments
(adjusted for subsequent acquisitions, dispositions and principal payments)
as reflected in the Statutory Financial Statements for the quarter ended
March 31, 1997; and
(ii) the Company has in its possession at its principal place of business
all documentation with respect to the acquisition of such investments which
would be customary to be delivered by the seller thereof to an unrelated
purchaser, including, without limitation, any original note purchase
agreements, indentures, guarantees, security agreements, legal opinions and
officer certificates.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement to cause this Agreement
to become effective and have the transactions contemplated hereby be
consummated are, at its option, subject to the conditions that:
9.1 Validity of Representations and Warranties. The representations and
warranties of Unitrin herein contained that are qualified as to materiality
shall be true and correct, and the representations and warranties of Unitrin
herein contained that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Effective Time as though made on and at the Effective Time, except as
contemplated or permitted by this Agreement.
9.2 Performance of Obligations. Unitrin shall have performed in all material
respects all obligations and agreements and complied with all covenants and
conditions contained in this Agreement to be performed and complied with by
them at or prior to the Effective Time.
9.3 Tax Opinion. The Company shall have received from ▇▇▇▇▇ ▇▇▇▇ LLP an
opinion to the effect that the Merger when consummated in accordance with the
terms hereof will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, ▇▇▇▇▇ ▇▇▇▇ LLP may rely
upon representations contained in certificates of Unitrin and the Company in
the form previously agreed to by the parties.
9.4 Consents. All consents, waivers, approvals, authorizations or orders
listed on the Unitrin Consent Schedule shall have been obtained by Unitrin in
form and substance reasonably acceptable to the Company and copies of the same
shall have been delivered to the Company.
9.5 Unitrin Closing Documents. Unitrin shall have delivered or cause to be
delivered to the Company at the Closing all of the documents listed in Section
7.3 hereof.
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9.6 Material Adverse Change. Since the date of this Agreement, no facts,
events or circumstances shall have occurred which, in the reasonable judgment
of the Company, could have a Unitrin Material Adverse Effect.
9.7 Fairness Opinion. The Fairness Opinion shall not have been rescinded or
amended in any material respect.
9.8 Inclusion on Nasdaq. The shares of Unitrin Common Stock issuable in
exchange for the Stock Election Shares shall have been included on the
National Market Tier of the Nasdaq Stock Market.
9.9 No Change of Control. Unitrin shall not have effected or entered into an
agreement providing for a change of control of Unitrin. As used herein,
"change of control" shall mean: (a) the acquisition of the beneficial
ownership of more than 40% of outstanding shares of Unitrin Common Stock by a
single person or entity or a group of affiliated persons or entities, (b) the
merger, consolidation or combination of Unitrin with an unaffiliated
corporation in which the Directors of Unitrin immediately prior to such
merger, consolidation or combination constitute less than a majority of the
Board of Directors of the surviving, new or combined entity or (c) the sale of
all or substantially all of the assets of Unitrin.
ARTICLE X
CONDITIONS APPLICABLE TO UNITRIN AND THE COMPANY
The obligations of Unitrin and the Company under this Agreement to cause
this Agreement to become effective and have the transactions contemplated
hereby be consummated are subject to the following terms and conditions:
10.1 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Any waiting period applicable to the
consummation of the Merger under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
10.2 Governmental Approvals. A written order approving the Merger and the
transactions contemplated thereby from the Missouri Director of Insurance and
the Texas Commissioner of Insurance and any approvals of the Merger and the
transactions contemplated thereby as may be required by other Insurance
Departments shall have been obtained at or prior to the Effective Time in form
and substance reasonably acceptable to Unitrin and Company.
10.3 Injunction. The consummation of the Merger shall not have been
restrained, enjoined or prohibited by any court or governmental authority of
competent jurisdiction. No material litigation or administrative proceeding
shall be pending as of the Effective Time seeking to restrain, enjoin or
prohibit the consummation of this Agreement or the Merger which, in the
reasonable good faith determination of any party, is likely to render it
impossible or unlawful to consummate such transactions; provided, however,
that the provisions of this Section 10.3 shall not apply to any party that has
directly or indirectly solicited or encouraged any such action.
10.4 Shareholder Approval. This Agreement shall have been approved and
adopted at a duly called meeting of the shareholders of the Company by at
least two-thirds of the issued and outstanding shares entitled to vote
thereon.
10.5 Conversion of Company B Stock. All of the issued and outstanding shares
of Company B Stock shall have been converted, effective immediately prior to
the Effective Time, into shares of Company A Stock in accordance with the
Company's Articles of Incorporation and applicable law.
10.6 Registration Statement; Blue Sky. The Registration Statement shall have
been declared effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no action, suit, proceeding
or investigation for that purpose shall have been initiated or threatened by
any governmental authority. Unitrin shall have received all state securities
law authorizations necessary to consummate the transactions contemplated
hereby.
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10.7 Dissenting Reliable Shares. The holders of not more than 150,000 of the
issued and outstanding Shares at the Effective Time shall have delivered
written notice of intent to demand payment of the fair value of their Shares
pursuant to Article XIV of the Articles of the Company.
10.8 Effective Time. The Effective Time shall be no later than 5:00 P.M.
Central Time on October 31, 1997.
ARTICLE XI
TERMINATION AND TERMINATION FEE
11.1 Termination. This Agreement and the transactions contemplated hereby
may be terminated at any time prior to the Closing (i) by mutual written
consent of the Board of Directors of Unitrin and the Board of Directors of the
Company, (ii) by action of the Board of Directors of Unitrin or the Board of
Directors of the Company, if a material breach of any provision of this
Agreement has been committed by the non-terminating party, and such breach has
not been waived, (iii) by action of the Board of Directors of Unitrin, in the
event a condition set forth in Article VIII of this Agreement has not been
satisfied as of the time such condition is required hereunder to be satisfied,
or such condition is or becomes impossible (other than through the failure of
Unitrin to comply with its obligations under this Agreement), (iv) by action
of the Board of Directors of the Company, in the event a condition set forth
in Article IX of this Agreement has not been satisfied as of the time such
condition is required hereunder to be satisfied, or such condition is or
becomes impossible (other than through the failure of the Company to comply
with its obligations under this Agreement), or (v) by action of the Board of
Directors of Unitrin or the Board of Directors of the Company in the event a
condition set forth in Article X of this Agreement has not been satisfied as
of the time such condition is required hereunder to be satisfied, or such
condition is or becomes impossible (other than through the failure of the
terminating party to comply with its obligations under this Agreement).
11.2 Termination Fee. If Unitrin and the Company fail to consummate the
Merger and the Company enters into a binding commitment or agreement regarding
an Extraordinary Transaction with any Third Party (as such terms are defined
in Section 5.6 above), on or prior to January 1, 1998, then the Company shall
promptly pay to Unitrin in cash the sum of ten million dollars ($10,000,000)
contemporaneously with (and subject to) consummation of such Extraordinary
Transaction; provided, however, that such amount shall not be payable by the
Company (i) if the Company was entitled not to consummate the Merger with
Unitrin due to a failure of one or more of the conditions set forth in
Articles IX and X (other than the conditions contained in Sections 9.3, 9.7,
10.4, 10.5 or 10.7) to be satisfied, or (ii) if Unitrin fails to consummate
the Merger based upon a failure of a condition to closing set forth in Article
VIII to be satisfied, unless in the case of either (i) or (ii) above, the
failure of such condition to be satisfied is caused by any action or failure
to act on the part of the Company. Notwithstanding the foregoing, such fee
shall not be payable if the Company was entitled not to consummate the Merger
due to the failure of ▇▇▇▇▇ ▇▇▇▇ LLP to issue its tax opinion specified in
Section 9.3 if such failure resulted from a change in applicable tax laws or
regulations after the date hereof or the failure of Unitrin to deliver its
certificate referred to in Section 9.3.
11.3 Survival of Rights. The payment described in Section 11.2 above shall
be in addition to, and not in limitation of, any right or remedy that any
party hereunder may have in the event of a breach by any party of this
Agreement.
ARTICLE XII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All of the representations, warranties and covenants of the parties
hereunder shall be deemed to be conditions of the Merger and shall not survive
the Closing, provided that the covenants of Unitrin set forth in Section 6.4
shall survive the Closing.
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ARTICLE XIII
MISCELLANEOUS
13.1 Payment of Expenses. Except as provided in Article XI, whether or not
the Merger shall be consummated, each party hereto shall pay its own expenses
incident to preparing for, entering and carrying out this Agreement and to the
consummation of the Merger.
13.2 Entire Agreement. This Agreement (together with the Schedules and
Exhibits hereto and the documents referred to herein) contains, and is
intended as, a complete statement of all of the terms of the arrangements
between the parties with respect to the matters provided for herein, and
supersedes any previous agreements and understandings between the parties with
respect to those matters, including, without limitation, the agreement in
principle between Unitrin and Company dated May 7, 1997. There are no third
party beneficiaries to this Agreement, provided that the Indemnified Parties
and their heirs, executors and personal representatives shall be third party
beneficiaries of the covenants of Unitrin set forth in Section 6.4.
13.3 Modifications, Amendments and Waivers. At any time prior to the
Effective Time, the parties hereto may, by written agreement, (i) extend the
time for the performance of any of the obligations or other acts of the
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant
hereto, (iii) waive compliance with any of the covenants or agreements
contained in this Agreement, or (iv) make any other modification of this
Agreement approved by the respective Boards of Directors of the parties
hereto. This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing executed and delivered on behalf of each
of the parties hereto. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
13.4 Assignment; Governing Law. Neither this Agreement nor any right,
obligation or interest herein shall be assignable by any of the parties
hereto, and any attempted assignment without each of the other parties'
consent shall be void. This agreement shall be construed in accordance with
the laws of the State of Missouri.
13.5 Schedules. All information set forth in the Company Disclosure Schedule
and the Unitrin Disclosure Schedule shall be deemed a representation and
warranty of the Company and Unitrin, respectively, as to the accuracy of such
information.
13.6 Press Releases. Except as may otherwise be required by law, no
publicity release or announcement concerning this Agreement or the
transactions contemplated hereby shall be made prior to the Effective Time
without advance approval thereof by the Company and Unitrin. The Company and
Unitrin will cooperate with each other in the development and distribution of
all news releases and other public information disclosures with respect to
this Agreement or any of the transactions contemplated hereby.
13.7 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, overnight
express service or confirmed facsimile transmission, if to Unitrin, addressed
to Unitrin, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. Vie, facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ (with a copy to Unitrin,
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., facsimile: (▇▇▇) ▇▇▇-▇▇▇▇); and if to the
Company addressed to The Reliable Life Insurance Company, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇, (with a copy to ▇▇▇▇▇ ▇▇▇▇ LLP, One Metropolitan Square, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, Esq., facsimile: (▇▇▇) ▇▇▇-▇▇▇▇), or to such other persons as may
be designated in writing by the parties.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above written.
Attest: Unitrin, Inc.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. Vie
--------------------------------- By: _________________________________
Attest: Unitrin Acquisition Corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. Vie
--------------------------------- By: _________________________________
Attest: The Reliable Life Insurance Company
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------- By: _________________________________
A-29