STATESMAN LIQUIDATION PLAN & ASSUMPTION AGREEMENTS
EXHIBIT 2.1 - DEFINITIONS
The following defined terms are used in the Liquidation Plan,
the American Capitol Assumption Agreement and the Texas Imperial
Assumption Agreement and other exhibits to the Liquidation Plan.
2 DEFINITIONS
2.1 "Affected Association" means each life and health insurance
guaranty association which, in accordance with its respective state
governing laws, and as a result of the Receivership Proceedings,
insolvency and liquidation of Statesman, have obligations to
policyholders of Statesman.
2.2 "American Capitol" means American Capitol Insurance Company, a
Texas-domiciled life insurance company that is the sole stockholder
of Texas Imperial.
2.3 "American Capitol Assumed Policies" means the Medicare
Supplement Attained Age policies, the Hospital Indemnity policies
and the Companion Life policies.
2.4 "American Capitol Assumption Agreement" means the assumption
agreement entered into as part of this Liquidation Plan in which
American Capitol assumes and reinsures the American Capitol Assumed
Policies covered by Participating Guaranty Associations and
attached to the Liquidation Plan as an exhibit.
2.5 "Accounting Procedures" means the procedures for resolving any
dispute between or among the Parties related to calculations
contemplated by the Liquidation Plan and Assumption Agreements,
including but not limited to the accounting and audit process
contemplated in Article VI of each Assumption Agreement which
procedures are set forth in Article 8 of the Liquidation Plan.
2.6 "Association Liability" means the amount which each
Participating Guaranty Association owes to the Assuming Insurer
(whether Texas Imperial or American Capitol) for assuming the
applicable Covered Obligations as set forth in the Assumption
Agreements.
2.7 "Assumption Agreements" means the American Capitol
Assumption Agreement and the Texas Imperial Assumption Agreement.
2.8 "Association Notes" means the promissory notes, if any,
issued by any Participating Guaranty Association in compliance
with its respective enabling statute and National Association of
Insurance Commissioners guidelines, as a means for funding some
or all of its Association Liability as set forth in the
Assumption Agreements.
2.9 "Assumed Policies" means the Medicare Supplement Attained
Age policies, the Hospital Indemnity policies, the Companion Life
policies and the Medicare Supplement Issue Age policies.
2.10 "Assuming Insurer" means American Capitol and/or Texas
Imperial and includes their agents, successors and assigns.
2.11 "Class 1" and "Class 2" claims mean those level of claims in
the Priority Statute.
2.12 "Closing" means the consummation of the transactions
provided for in the Liquidation Plan to occur on the Closing Date
and does not include the consummation or completion of the
Enhancement or the accounting and audit process in Section VI. of
each Assumption Agreement.
2.13 "Closing Date" means the date on which the Closing
occurs and shall take place no later than the date the
Liquidation Plan is approved or twenty (20) days after the date
the Permanent Injunction is entered. For accounting purposes,
the Closing Date shall be deemed to be June 1, 1999.
2.14 "Coinsurance Agreement" means the coinsurance agreement made
and entered into by Statesman and American Capitol on November
17, 1998.
2.15 "Commissioner" means ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Commissioner of
Insurance, Texas Department of Insurance ("TDI") in his capacity
as Commissioner and his successor.
2.16 "Companion Life" means the life policies consisting of
approximately 1,300 policies in force as of March 31, 1999 which
appear to have been sold as companions to the Medicare Supplement
Attained Age policies issued by Statesman which are also Covered
Obligations and are the subject of the American Capitol
Assumption Agreement and the Companion Life policies include all
claims outstanding and unpaid regardless of the date incurred.
2.17 "Court" means the court in the District Court of ▇▇▇▇▇▇
County, Texas, 250th Judicial District, with jurisdiction over
the Receivership Proceedings that enters the Permanent Injunction
and includes any Special Master to which referrals are made.
2.18 "Covered Obligation" means the obligation of a Participating
Guaranty Association to Statesman policyholders or beneficiaries
which, pursuant to each Participating Guaranty Association's
enabling act, and as a result of the insolvency and liquidation
of Statesman, have arisen or will arise on or after entry of the
Permanent Injunction.
2.19 "Early Access Distribution" means a disbursal of assets out
of Statesman's marshaled assets made by the Receiver to the
Participating Guaranty Associations pursuant to TEX. INS. CODE
▇▇▇. art. 21.28, ' 7A(a) after reserving amounts sufficient to
allow the payment of Class 1 claims and to the extent the assets
of Statesman will allow any payment to be made on Class 2 claims,
reserving amounts sufficient to provide equal pro rata
distributions to the Class 2 claimants other than the
Participating Guaranty Associations.
2.20 "Enhancement" means the amount contributed by American
Capitol and Texas Imperial on the Plan Termination Date as set
forth in the Assumption Agreements.
2.21 "Hospital Indemnity" means the hospital indemnity policies
consisting of approximately 962 hospital confinement coverage
policies issued by Statesman which are also Covered Obligations
and are subject to the American Capitol Assumption Agreement and
the Hospital Indemnity policies include all claims outstanding
and unpaid regardless of the date incurred.
2.22 "Included Treaties" mean the reinsurance treaties to which
Statesman is a party related to the American Capitol Assumed
Policies and/or the Medicare Supplement Issue Age policies.
2.23 "Liquidation Plan" means this agreement and any amendments
hereto, including the Assumption Agreements and all other
exhibits.
2.24 "Major Medical" means the major medical policies consisting
of approximately 100 in-hospital and comprehensive coverage
policies outside of Louisiana and 33 such policies in Louisiana
issued by Statesman which are also Covered Obligations.
2.25 "Medicare Supplement Attained Age" means the attained age
Medicare supplement policies issued by Statesman which are also
Covered Obligations and are the subject of the American Capitol
Assumption Agreement and the Attained Age policies include all
claims outstanding and unpaid regardless of the date incurred.
2.26 "Medicare Supplement Issue Age" means the issue age Medicare
supplement policies issued by Statesman which are also Covered
Obligations and are the subject of the Texas Imperial Assumption
Agreement and the Medicare Supplement Issue Age policies include
all claims outstanding and unpaid regardless of the date
incurred.
2.27 "Medicare Supplement Pre-Standard" or "Pre-Standard Medicare
Supplement" means the pre-standard Medicare supplement policies
issued by Statesman which are the subject of the Coinsurance
Agreement and the Medicare Supplement Pre-Standard policies
include all claims outstanding and unpaid regardless of the date
incurred.
2.28 "Participating Guaranty Association" means each Affected
Association that agrees to participate in this Liquidation Plan.
2.29 "Parties" mean the parties whose representatives have
executed this Liquidation Plan and are limited to Statesman, the
Commissioner, the Receiver, the TDI, NOLHGA, Participating
Guaranty Associations, Texas Imperial and American Capitol.
2.30 "Permanent Injunction" means the Permanent Injunction and
Order Appointing Permanent Receiver in the Receivership
Proceedings.
2.31 "Plan Termination Date" means the date on which the
Liquidation Plan terminates and is the first business day after
December 1, 2002.
2.32 "Pre-Standard Assumption Agreement" means the agreement
whereby American Capitol assumed the Medicare Supplement Pre-
Standard policies without Participating Guaranty Association
funding.
2.33 "Priority Statute" means article 21.28, Section 8 of
the TEX. INS. CODE ▇▇▇.
2.34 "Receiver" means the Commissioner or his designee serving in
the capacity of Receiver of Statesman pursuant to TEX. INS. CODE
▇▇▇. 21.28 '2(a).
2.35 "Receivership Proceedings" means the proceedings initiated
by the Commissioner pursuant to TEX. INS. CODE ▇▇▇. art. 21.28
against Statesman currently pending in the District Court of
▇▇▇▇▇▇ County, Texas, 250th Judicial District, styled Permanent
Injunction and Order Appointing Permanent Receiver, Action No. 99-
02772.
2.36 "Reserve Adjustment" means the amount necessary to provide
continuing coverage for the Covered Obligations in the amounts
set forth in Exhibit IV.A and includes a reduction of $50,000 for
the Companion Life policies and a reduction of $187,500 for the
Hospital Indemnity policies.
2.37 "Reserves" means the reserves required to be maintained
consistent with the laws of all jurisdictions having regulatory
authority over American Capitol and/or Texas Imperial solely as
related to the Covered Obligations as reflected in the financial
statements of Statesman as of January 1, 1999.
2.38 "Settlement Agreement" means the settlement of intercompany
accounts between American Capitol and Statesman representing a
settlement of various matters and attached as Exhibit 10.6 to the
Liquidation Plan.
2.39 "Southern Financial" means Southern Financial Life Insurance
Company located in Lafayette, Louisiana, which is a party to the
Southern Financial Reinsurance Agreement.
2.40 "Southern Financial Reinsurance Agreement" means the
reinsurance agreement between Statesman and Southern Financial
with an effective date of 11:59 P.M. central daylight savings
time, September 30, 1998.
2.41 "Statesman" means Statesman National Life Insurance Company,
which is the subject of the Permanent Injunction and these
Receivership Proceedings.
2.42 "Statesman Estate" means the estate of Statesman established
in accordance with the Receivership Proceedings.
2.43 "TDI" means the Texas Department of Insurance.
2.44 "Texas Imperial" means Texas Imperial Life Insurance
Company, a Texas domiciled life insurance company, which is the
sole shareholder of Statesman.
2.45 "Texas Imperial Assumption Agreement" means the assumption
agreement entered into as part of this Liquidation Plan in which
Texas Imperial assumes and reinsures the Medicare Supplement
Issue Age policies covered by Participating Guaranty Associations
and attached to the Liquidation Plan as an exhibit.