UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 12, 2019
SECURITY NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in this Charter)
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Utah
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000-09341
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87-0345941
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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IRS Employer Identification No.)
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5300 South 360 West, Salt Lake City, Utah
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84123
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(Address of principal executive offices)
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(Zip Code)
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Registrant's Telephone Number, Including Area Code: (801) 264-1060
Does Not Apply
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 1.01. Entry into a Material Definitive Agreement
Execution of Stock Purchase Agreement to Acquire Kilpatrick Life Insurance Company
On October 11, 2019, Security National Financial Corporation, through its wholly owned subsidiary, Security National Life Insurance Company (“Security Life”) entered into a stock
purchase agreement (the “Stock Purchase Agreement”), with Kilpatrick Life Insurance Company, a Louisiana domiciled life insurance company (“Kilpatrick Life”) and its shareholders to purchase all of the outstanding shares of common stock of Kilpatrick
Life. The closing of the transaction is subject to approval by the Louisiana Department of Insurance of the change of control of Kilpatrick Life. Closing will occur after approval by the Louisiana Department of Insurance.
Under the terms of the Stock Purchase Agreement, the aggregate purchase price for all the shares held by the Kilpatrick Life shareholders is $22,000,000 plus either (i) in
the event that gains from the sale of bonds of Kilpatrick Life (“Bond Gains”) are equal or greater than $15,000,000, 50% of that amount by which the total amount of the Bond Gains exceeds $15,000,000, which amount, if any, shall be paid to the
shareholders of Kilpatrick Life in addition to the $22,000,000 payment; or (ii) in the event the Bond Gains are less than $15,000,000, 100% of that amount by which $15,000,000 exceeds the total amount of the Bond Gains will be deducted from
the $22,000,000 payment (collectively, the “Purchase Price”), allocable among the Kilpatrick Life shareholders on a pro rata basis. From the Purchase Price, an indemnification amount of $1,400,000 will be deducted and deposited into an
indemnification escrow fund to be held for the purpose of securing the indemnification obligations of the Kilpatrick Life shareholders pursuant to the terms of the Stock Purchase Agreement.
It should be noted that Kilpatrick Life has never prepared financial statements in accordance with accounting principles generally accepted in the United States (GAAP). Instead,
Kilpatrick Life only has audited statutory financial statements filed with insurance regulators prepared in accordance with statutory accounting principles. The estimated GAAP financial information (unaudited) of Kilpatrick Life for the year ended
December 31, 2018 is as follows: (i) revenues – $21,062,000; (ii) pre-tax income (loss) from continuing operations – ($2,514,000); and (iii) net income (loss) – ($1,994,000). Additionally, as of December 31, 2018, the estimated total amount of assets
of Kilpatrick Life on a GAAP basis was between approximately $207,000,000 and approximately $217,000,000. Moreover, as of December 31, 2018, Kilpatrick Life had approximately 142,000 policies in force.
In addition to Security Life’s payment of the Purchase Price, and subject to approval by the Louisiana Department of Insurance, Security Life has agreed to cause Kilpatrick Life to
satisfy the total amount that is owed by Kilpatrick Life to Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. (“Rose-Neath”) pursuant to a surplus note by first offsetting the surplus note, plus accrued interest thereon, against certain
amounts owed by Rose-Neath to Kilpatrick Life, and second by paying any remaining amounts owed on the surplus note, including the accrued interest thereon, in the total amount of approximately $3,400,000.
Pursuant to the Stock Purchase Agreement, Security Life and Kilpatrick Life have also entered into a coinsurance agreement (the “Coinsurance Agreement”), effective October 1, 2019,
which was approved by the Louisiana Department of Insurance. Subject to the terms and conditions of the Coinsurance Agreement, Security Life, as coinsurer, has agreed to coinsure all of the life insurance policies of Kilpatrick Life in exchange for
receipt of a settlement amount equal to the reserves associated with the coinsured insurance policies. The settlement agreement, which is estimated to be approximately $166,453,000, also includes an additional transfer of assets sufficient to return
the ratio of the reinsurer’s adjusted capital and surplus divided by its risk-based capital factor after the application of the Coinsurance Agreement to that ratio which existed prior to the application of the Coinsurance Agreement.
Thus, as of October 1, 2019, Kilpatrick Life has ceded to Security Life, as coinsurer, and Security Life has accepted and coinsured 100% of Kilpatrick Life’s contractual
liabilities under Kilpatrick Life’s life insurance policies by means of indemnity reinsurance. Also as of October 1, 2019, Security Life, as coinsurer, is entitled to exercise all contractual rights and privileges of Kilpatrick Life under its life
insurance policies in accordance with the terms and provisions of such policies and applicable law. After the closing date, Security Life, as coinsurer, agreed to be responsible for and will be obligated with respect to 100% of the contractual
liabilities under the life insurance policies in accordance with the terms and conditions of the policies and applicable law. Unless otherwise directed by Security Life, as coinsurer, Kilpatrick Life will administer the policies on behalf of Security
Life, as coinsurer, for the duration of the Coinsurance Agreement.
With limited exceptions, the coinsurance provided under the Coinsurance Agreement will remain continuously in force. Both Kilpatrick Life and Security Life, as coinsurer, have the
right to require the recapture of the insurance policies by Kilpatrick Life upon written notice of either party to the other party and the Louisiana Department of Insurance. The recapture will be effective immediately upon delivery of such notice,
unless otherwise mutually agreed to in writing. Unless otherwise mutually agreed to in writing, any recapture will apply to 100% of all of the policies.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits
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Stock Purchase Agreement dated October 11, 2019, with Kilpatrick Life Insurance Company, excluding exhibits
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10.2
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Coinsurance Agreement dated October 11, 2019 with Kilpatrick Life Insurance Company, excluding exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SECURITY NATIONAL FINANCIAL CORPORATION
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(Registrant)
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Date: November 12, 2019
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By: /s/ Scott M. Quist
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Scott M. Quist, Chairman, President and
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Chief Executive Officer
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Exhibit 10.1
This Stock Purchase Agreement (this “Agreement”),
dated as of October 11, 2019, is entered into between the Persons identified on Exhibit A (together, “Seller” or “Shareholders”), Kilpatrick Life Insurance Company, a Louisiana corporation (the “Company”), Security National Life Insurance Company, a Utah corporation (“Buyer”), and Jerome J. Reso, Jr., an individual and resident of Louisiana, solely in
his capacity as Shareholder representative (the “Shareholder Representative”).
RECITALS
WHEREAS, Seller collectively owns all of the issued
and outstanding shares of common stock, par value $1.00 per share (the “Shares”), of the Company;
WHEREAS, Seller wishes to sell to Buyer, and Buyer
wishes to purchase from Seller, the Shares, subject to the terms and conditions set forth herein;
WHEREAS, a portion of the purchase price payable by Buyer to Seller shall be placed in escrow by Buyer, the release of which shall be contingent upon certain events and
conditions, all as set forth in this Agreement and the Escrow Agreement (as defined herein); and
WHEREAS, this Agreement is contingent upon the contemporaneous execution of the Coinsurance Agreement (as defined herein) and approval of
this Agreement and the Coinsurance Agreement by the Louisiana Department of Insurance.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
“Action” means any claim, action,
cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in equity.
“Affiliate” of a Person means
any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. International Star shall not be deemed an Affiliate. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Bonds” means debt securities
held by the Company as set forth in Schedule 8.1A to the Coinsurance Agreement.
“Bond Gains” has the same meaning as defined in the Coinsurance Agreement.
“Business Day” means any day except Saturday, Sunday
or any other day on which commercial banks located in Salt Lake City, Utah are authorized or required by Law to be closed for
business.
“CERCLA” means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601-9675.
“Closing Indebtedness Certificate” means a certificate executed by the Chief Financial Officer of the Company certifying on behalf of the Company an itemized list of all outstanding Indebtedness
of the Company Group as of the open of business on the Closing Date and the Person to whom such outstanding Indebtedness is owed and an aggregate total of such outstanding Indebtedness.
“Coinsurance Agreement” means that certain Coinsurance Agreement entered into
contemporaneously with the execution of this Agreement, by and between the Company and Buyer, attached hereto as Exhibit E.
“Company Group” means the Company and the Company Subsidiaries.
“Company Intellectual Property” means all Intellectual
Property that is owned by the Company.
“Company IP Agreements” means
all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, waivers, releases, permissions and other Contracts, whether written or oral, relating to Intellectual Property to which the Company is a party, beneficiary or otherwise bound.
“Company IP Registrations” means
all Company Intellectual Property that is subject to any issuance, registration or application by or with any Governmental
Authority or authorized private registrar in any jurisdiction, including issued patents, registered trademarks, domain names and copyrights, and pending applications for any of the foregoing.
“Company IT Systems” means all software, computer hardware, servers, networks, platforms, peripherals, and similar or related items of automated,
computerized, or other information technology (IT) networks and systems (including telecommunications networks and systems for
voice, data, and video) owned, leased, licensed, or used (including through cloud-based or other third-party service providers) by
the Company.
“Company Subsidiaries” means
Kilpatrick Financial, Inc. (a Louisiana corporation), Care Management Group LLC (a Louisiana limited liability company), KLIC Properties Texas, LLC (a Texas limited liability company) and Bluebonnet Properties, LLC (a Louisiana limited liability company).
“Contracts” means all contracts, leases, deeds,
mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.
“Disclosure Schedules” means the
Disclosure Schedules delivered by Seller and Buyer concurrently with the execution and delivery of this Agreement.
“Encumbrance” means any charge,
claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or
restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of
ownership.
“Environmental Claim” means any
Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement, other resolution, or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation,
natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the
presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or
alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.
“Environmental Law” means any
applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened
species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture,
use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including amendments, their
implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675; the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901-6987; Subtitle I of RCRA, 42 U.S.C. §§6991-6991m; the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq.; the Safe
Drinking Water Act, 42 U.S.C. §§300f et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §136 et seq.; the Endangered Species Act, 16 U.S.C.
§§1531-1544; the National Environmental Policy Act, 42 U.S.C. §§ 4321-4347; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and
Health Act, 29 U.S.C. §§ 651 et seq.
“Environmental Notice” means any
written or oral directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental
Permit.
“Environmental Permit” means
any Permit, notice of coverage, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or
issued, granted, given, authorized by or made pursuant to Environmental Law.
“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“ERISA Affiliate” means all
employers (whether or not incorporated) that would be treated together with the Company or any of its Affiliates as a “single
employer” within the meaning of Section 414 of the Code or Section 4001 of ERISA.
“Escrow Agreement” means the Escrow
Agreement to be entered into by Buyer, Seller and Escrow Agent at the Closing, substantially in the form of Exhibit B.
“Executrix” means Karen G. Mabry, as Independent
Executrix for the Estate.
“GAAP” means United States generally accepted
accounting principles in effect from time to time.
“Governmental Authority” means
any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.
“Governmental Order” means any
order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“Hazardous Materials” means: (a)
any material, pollutant, contaminant, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, mold, pesticide, urea formaldehyde foam insulation, and polychlorinated biphenyls.
“Indebtedness” means, without duplication and with respect to any Person, all (a) indebtedness for borrowed money; (b) obligations for the deferred purchase
price of property or services, (c) long or short-term obligations evidenced by notes, bonds,
debentures or other similar instruments; (d) obligations under any interest rate, currency swap or other hedging agreement
or arrangement; (e) capital lease obligations; (f) reimbursement obligations under any letter of credit, banker's acceptance or similar credit transactions; (g) guarantees made by the Person on behalf of any third party in respect of obligations of the kind referred to in
the foregoing clauses (a) through (f); and (h) any unpaid interest, prepayment penalties, premiums, costs and fees that would arise or become due as a result of the
prepayment of any of the obligations referred to in the foregoing clauses (a) through (g).
“Indemnification Escrow Amount”
means $1,400,000.00 provided that, notwithstanding the forgoing, an amount equal to the Reserve Amount shall be withheld from the Indemnification Escrow Amount and paid to the Shareholder Representative in accordance with Section 10.13.
“Intellectual Property” means
any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout the world: (a) issued patents and patent applications
(whether provisional or non-provisional), including divisionals, continuations, continuations-in-part, substitutions, reissues, reexaminations, extensions, or restorations of any of the foregoing, and other Governmental Authority-issued indicia of invention ownership (including certificates of
invention, petty patents, and patent utility models) (“Patents”); (b) trademarks, service
marks, brands, certification marks, logos, trade dress, trade names, and other similar indicia of source or origin, together with the goodwill connected with the use of and symbolized by, and all
registrations, applications for registration, and renewals of, any of the foregoing (“Trademarks”); (c) copyrights and works of
authorship, whether or not copyrightable, and all registrations, applications for registration, and renewals of any of the foregoing (“Copyrights”); (d) internet domain names and social media account or user names (including “handles”), whether or
not Trademarks, all associated web addresses, URLs, websites and web pages, social media sites and pages, and all content and data thereon or
relating thereto, whether or not Copyrights; (e) industrial designs, and all Patents, registrations, applications for registration, and
renewals thereof; (f) trade secrets, know-how, inventions (whether or not patentable), discoveries, improvements, technology, business and technical information,
databases, data compilations and collections, tools, methods, processes, techniques, and other confidential and proprietary information and all rights therein (“Trade Secrets”); (g) computer programs, operating systems, applications, firmware, and other code, including all source code, object code, application programming interfaces, data files, databases, protocols, specifications, and other documentation thereof; and (h) all other intellectual or industrial property and proprietary rights.
“International Star” means International Star, Inc., a Nevada corporation.
“Key Employees” means each of Ken Phillips, Pamela E. Mosley, Lynn Hooper, Linda McGarry, Jo Clark, Autry Brown, Roy Noble, and Peggy Irby.
“Law” means any statute, law, ordinance, regulation,
rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
“Licensed Intellectual Property”
means all Intellectual Property in which the Company Group holds any rights or interests granted by other Persons, including Seller or any of its Affiliates.
“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys' fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; provided, however, that “Losses” shall not include punitive damages, except
to the extent actually awarded to a Governmental Authority or other third party, and any indirect, incidental, consequential, special, punitive, or exemplary losses or damages, including any loss of income,
profits or opportunities (collectively, the “Consequential Losses”).
“Louisiana Insurance Department” or “LDI”
means the Department of Insurance of the State of Louisiana.
“Material Adverse Effect” means any event, occurrence,
fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse
to (a) the business, results of operations, condition (financial or otherwise), prospects or assets of the Company Group, or
(b) the ability of Seller to consummate the transactions contemplated hereby on a timely basis; provided, however, that any such effect
resulting from (a) any change in economic conditions generally or in the industries in which the Company Group operates, (b) national or international political or social conditions, (c) any change in law, rule or regulation or GAAP or statutory
accounting rules prescribed by the Louisiana Insurance Department or interpretations thereof applicable to any member of the Company Group or (d) any actions required to be taken pursuant to this Agreement or any agreement contemplated herein,
shall not be considered when determining whether a Material Adverse Effect has occurred.
“Permits” means all permits,
licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.
“Person” means an individual,
corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
“Pre-Closing Taxes” means Taxes
of the Company for any Pre-Closing Tax Period plus Taxes of the Company for any Straddle Period that are treated as Pre-Closing Taxes in accordance with Section 6.04.
“Pro Rata Share” means, with respect to each Seller, the percentage set forth in the column entitled “Pro
Rata Share” across from such Seller’s name on Schedule A hereto.
“Real Property” means the real property owned, leased
or subleased by the Company Group, or used in the business of the Company Group, together with all buildings, structures and facilities located thereon.
“Release” means any actual or
threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or
migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor),
surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
“Representative” means, with
respect to any Person, any and all directors, managers, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person whether serving in such capacities
before or after the Closing.
“Restricted Business” means providing or
offering insurance products, including whole and term life, fire, insurance policies to cover burial expenses, mortgage insurance, hospital indemnity, and ambulance policies.
“Seller's Knowledge” or any other similar knowledge
qualification, means the actual knowledge of Seller, any director, manager, trustee or officer of Seller, or of any director, manager, trustee or officer of any member of the Company Group or what such Person could reasonably be expected to discover or otherwise become aware of in the
course of conducting a reasonable investigation concerning the existence of such fact, event, or matter.
“Shareholder” means each holder of capital stock of
the Company.
“Surplus Note” means that debenture in the aggregate principal amount of
$4,000,000.00, plus interest, in favor of Rose-Neath, as evidenced by that Surplus Debenture executed by the Company, dated April 9, 2009.
“Tax Return” means any return, declaration, report,
claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Taxes” means all federal,
state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise,
severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and
any interest in respect of such additions or penalties.
“Transaction Documents” means this Agreement, the
Escrow Agreement and the Coinsurance Agreement.
Section 2.01 Purchase and Sale. Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the Shares, free and clear of all Encumbrances, for the consideration specified in Section
2.02.
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(a)
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$22,000,000.00 to be paid to Sellers in cash; and
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(b)
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either:
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(i)
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in the event the Bond Gains are equal to or greater than $15,000,000.00, one-half (50%) of that amount by which the total amount
of the Bond Gains exceeds $15,000,000.00, which amount, if any, shall be paid to Sellers in cash in addition to the amount set forth in Section 2.02(a); or
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(ii)
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in the event the Bond Gains are less than $15,000,000.00, all (100%) of that amount by which $15,000,000.00 exceeds the total
amount of the Bond Gains shall be deducted from the amount set forth in Section 2.02(a).
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(collectively, the “Purchase Price”), allocable among the Shareholders as set forth on Schedule A.
In addition to Buyer’s payment of the Purchase Price, and subject to the approval of the the LDI, Seller shall cause the Company to satisfy the
total amount owed by the Company to Rose-Neath pursuant to the Surplus Note (the “Surplus Note Payment”), by (i) first offsetting the Surplus Note (plus any accrued interest thereon) against the amounts owed
by Rose-Neath to the Company pursuant to the Company’s loan number 180017, which loan was made by the Company to Rose-Neath and is evidenced by that Commercial Promissory Note dated April 9, 2009, executed by Rose-Neath in the original principal
amount of $4,000,000.00 (the “Rose-Neath Note”), and (ii) second, by paying any remaining amounts owed on the Surplus Note (plus any accrued interest thereon) to Rose-Neath in cash.
Section 2.04 Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Shares contemplated hereby shall take place at a closing (the “Closing”) to be held at 9:00 a.m., Central time, no later than two (2) Business Days after the last of the conditions to Closing set forth in ARTICLE VII have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the
Closing Date), at the offices of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, New Orleans, Louisiana, or at such other time or on such other date or at such other place as Seller and Buyer may mutually agree
upon in writing (the day on which the Closing takes place being the “Closing Date”).
Section 2.05 Withholding Tax. Buyer and the Company shall be entitled to deduct and withhold from the Purchase Price all Taxes
that Buyer and the Company may be required to deduct and withhold under any provision of Tax Law. All such withheld amounts shall be treated as delivered to Seller hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY
REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, each Seller and the Company, jointly and severally, represent and warrant to Buyer that the statements contained in this ARTICLE III are true and correct as of the date hereof.
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(a)
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If Seller is not a natural person, Seller
is a corporation, trust, limited liability or partnership duly organized, validly existing and in good standing under the Laws of
the state of its organization (as applicable). Seller has full power and authority to enter into the Transaction Documents, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of the Transaction
Documents, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the
transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of Seller.
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(b)
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If Seller is a natural person, Seller
has full legal capacity to enter into the Transaction Documents, to carry out his or her obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby.
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(c)
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The Transaction Documents have been duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery by the other parties thereto) the Transaction Documents constitute a legal, valid and binding obligation of Seller enforceable against
Seller in accordance with its terms.
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Section 3.02 Organization, Authority and Qualification of the Company Group. Each member of the Company Group is a company duly organized, validly existing and in good
standing under the Laws of the state of its organization and has full power and authority to own, operate or lease the properties and assets now owned,
operated or leased by it and to carry on its business as it has been and is currently conducted. Section
3.02 of the Disclosure Schedules sets forth each jurisdiction in which each member of the Company Group is licensed or
qualified to do business, and each member of the Company Group is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or
qualification necessary. All corporate or limited liability company, as applicable, actions taken by each member of the Company
Group in connection with the Transaction Documents will be duly authorized on or prior to the Closing.
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(d)
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(i) The Surplus Note is the only debenture owed by the Company; (ii) that % Surplus Debenture executed by the Company, dated December
3, 2008, was never consummated and is null and void; and (iii) the total amount of the Company’s obligations on all debentures as of the date hereof is $6,411,506.00.
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(a)
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The Company owns 100% of the issued and outstanding common stock or limited liability company interests of the Company Subsidiaries (the “Subsidiary Equity”). All of the Subsidiary Equity has been duly authorized, are validly issued, fully paid and non-assessable, and are owned of record and beneficially by the Company, free and clear of all Encumbrances.
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(b)
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Other than the Company Subsidiaries and International Star, neither the Company
nor any Company Subsidiary owns or has any interest in any shares or have an ownership
interest in any other Person.
|
|
(c)
|
Upon consummation of the transactions contemplated by this Agreement, the Company
shall own all of the Subsidiary Equity, free and clear of all Encumbrances.
|
|
(d)
|
All of the Subsidiary Equity was issued in compliance with applicable Laws. None of the Subsidiary Equity were issued in violation of any agreement, arrangement or commitment
to which Seller or the Company is a party or is subject to or in violation of
any preemptive or similar rights of any Person.
|
|
(e)
|
There are no outstanding or authorized options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character relating to the Subsidiary Equity or obligating any Company
Subsidiary or the Company to issue or sell any shares of capital stock or membership interest of, or any other interest in, any Company Subsidiary. No Company Subsidiary has
any outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of
the Subsidiary Equity.
|
Section 3.05 No Conflicts; Consents. Except as set forth on Schedule 3.05, the execution, delivery and performance by Seller of the Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of
any member of the Company Group; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Seller or any member of the Company Group; (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to
accelerate, terminate, modify or cancel any Contract to which Seller or any member of the Company Group
is a party or by which Seller or any member of the Company Group is bound or
to which any of their respective properties and assets are subject (including any Material Contract) or any Permit affecting the properties, assets or business of the Company; or (d) result in the
creation or imposition of any Encumbrance other than Permitted Encumbrances on any properties or assets of any member of the Company Group or Seller. Except as set forth on Schedule 3.05, no consent, approval, Permit, Governmental
Order, declaration or filing with, or notice to, any Governmental Authority is
required by or with respect to Seller or any member of the Company Group in connection with the execution and
delivery of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except for consent of the Louisiana Insurance Department and filing of the
required Form A.
|
(a)
|
Complete copies of the Company Group's audited financial statements consisting of the balance sheet of each member of the Company Group
as of December 31 in each of the years 2016, 2017 and 2018 and the related statements of income and retained earnings, stockholders' equity and cash flow for the years then ended (the “Audited Financial
Statements”), and unaudited financial statements consisting of the balance sheet of each member of the Company Group as of June 30, 2019 and the related statements of income and retained earnings, stockholders' equity and cash
flow for the six-month period then ended (the “Interim Financial Statements” and together with the Audited Financial Statements, “Financial Statements”) are
included in the Disclosure Schedules. The Financial Statements have been prepared have been prepared in accordance with the statutory accounting rules prescribed or permitted by the Louisiana Insurance Department, applied on a consistent
basis throughout the periods indicated. The Financial Statements are based on the books and records of the relevant member of the Company Group, and fairly present the financial condition of such member of the Company Group as of the
respective dates they were prepared and the results of the operations of such member of the Company Group for the periods indicated. The balance sheet of the Company as of December 31, 2018 is referred to herein as the “Balance Sheet” and the date thereof as the “Balance Sheet Date” and the balance sheet of the Company as of June 30, 2019 is referred to herein as the “Interim Balance Sheet” and the date thereof as the “Interim Balance Sheet Date”. The Company Group maintains a standard system of accounting established and
administered in accordance with the statutory accounting rules prescribed by the Louisiana Insurance Department.
|
|
(b)
|
For the last three (3) calendar years and 2019 year to date, the Company (and each
Company Subsidiary, if applicable) has filed all required Financial Statements, together with all exhibits, interrogatories,
notes, actuarial opinions, affirmations, certifications, schedules or other material supporting documents in connection therewith, required to be filed with the Louisiana Insurance Department on
forms prescribed or permitted by the Louisiana Insurance Department.
|
|
(c)
|
Except as set forth in Schedule 3.06(c) or in the notes to the Financial Statements, no material weakness or significant
deficiency with respect to any of the Financial Statements has been asserted in writing or otherwise communicated to any member of the Company Group.
|
|
(d)
|
The Company has delivered to Buyer copies
of all material actuarial reports prepared by appointed actuaries with respect to any member of the Company Group and the business of the Company Group for
the last three (3) calendar years and 2019 year to date, and all attachments, opinions, certifications, addenda, supplements and modifications thereto.
|
|
(e)
|
The Company has delivered to Buyer true and
complete copies of all risk-based capital calculations and accompanying analyses and reports submitted by the Company (or any other Company Subsidiary)
to the Louisiana Insurance Department for the last three (3) calendar years. Except as indicated in the Financial Statements or in any amended calculations submitted to the Louisiana Insurance Department as
reflected in Schedule 3.06(e), such calculations were true and accurate, in all material respects, as of the respective dates as of which such calculations were prepared.
|
|
(f)
|
Except for the Financial Statements, and except for monthly internal income
statements and balance sheets prepared by the Company Group, copies of which have previously been delivered to Buyer, and except as set forth in Section 3.06(f)
of the Disclosure Schedules, no other financial statements have been prepared by or with respect to any member of the Company Group (whether on a GAAP, statutory, consolidated, hybrid or other basis).
|
|
(g)
|
Except as set forth in the Financial Statements or Schedule 3.06(g), (a) there are no Liabilities between a member of
Company Group, on the one hand, and Seller or any of its Affiliates (other than a member of the Company Group), on the other hand, and (b) neither Seller nor any of its Affiliates (other than a member of the Company Group) provide or
cause to be provided to the Company Group any products, services, equipment, facilities, or similar items that, in the case of this clause (b), individually or in the aggregate are material to the business or condition of the Company
Group.
|
Section 3.07 Liabilities. The Company Group has no liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent,
accrued or unaccrued, matured or unmatured or otherwise (“Liabilities”), except (a) those which are adequately reflected or reserved against in the Interim Balance Sheet or Financial
Statements as of the Interim Balance Sheet Date, (b) those which have been incurred in the ordinary course of business consistent with past practice since the Interim Balance Sheet Date and that are not reasonably likely to have a Material Adverse Effect, (c) in the case of the Financial Statements, liabilities and obligations of a type or nature not required under statutory accounting principles to be reflected in the Financial
Statements or (d) liabilities set forth in the Closing Indebtedness Certificate.
Section 3.08 Absence of Certain Changes, Events and Conditions. Except as set forth on Schedule 3.08, since the Balance Sheet
Date, and other than in the ordinary course of business consistent with past practice, there has not been, with respect to the Company Group, any:
|
(a)
|
event, occurrence or development that has had, or
could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
|
|
(e)
|
declaration or payment of any dividends or distributions on or in respect of any of its capital stock or redemption, purchase or acquisition
of its capital stock;
|
|
(f)
|
material change in any method of accounting or accounting
practice of the Company Group, except as required by statuary accounting or as disclosed in the notes to the Financial Statements;
|
|
(h)
|
entry into any Contract that would constitute a Material
Contract or amend or terminate any Material Contract;
|
|
(j)
|
transfer, assignment, sale or other disposition of any of
the assets shown or reflected in the Financial Statements or cancellation of any debts or entitlements;
|
|
(k)
|
transfer or assignment of or grant of any license or sublicense under or with respect to any Company Intellectual Property or Company IP Agreements;
|
|
(l)
|
abandonment or lapse of or failure to maintain in full force and effect any Company IP Registration;
|
|
(q)
|
imposition of any Encumbrance upon any of the Company Group
properties, capital stock or assets, tangible or intangible, except for Permitted Encumbrances;
|
|
(s)
|
hiring or promoting any person as or to (as the case may be) an officer or hiring or promoting any employee below officer except to fill a
vacancy in the ordinary course of business;
|
|
(u)
|
any loan to (or forgiveness of any loan to), or entry into any other transaction with, any of its stockholders or current or former directors, managers, officers and employees;
|
|
(v)
|
|
|
(y)
|
acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any other manner, any business or any Person or any division thereof;
|
|
(aa)
|
action by any member of the Company Group to amend the
employment relationship with any Key Employee; or
|
|
(bb)
|
any Contract to do any of the foregoing, or any
action or omission that would result in any of the foregoing.
|
|
(ii)
|
all Contracts that require the Company Group to purchase its total requirements of any product or service from a third party or that contain “take or pay” provisions;
|
|
(iii)
|
all Contracts that provide for the indemnification by the
Company Group of any Person or the assumption of any Tax, environmental or other liability of any Person;
|
|
(vi)
|
all Contracts or arrangements with employees, independent
contractors, Producers or consultants (or similar arrangements) to which any member of the Company Group is a party;
|
|
(viii)
|
all reinsurance, coinsurance or other similar Contracts;
|
|
(ix)
|
except for Contracts relating to trade receivables, all Contracts relating to indebtedness (including, without limitation, guarantees) of the Company Group;
|
|
(x)
|
all Contracts with any Governmental Authority to which any member of the Company Group is a party (“Government Contracts”);
|
|
(xii)
|
any Contracts to which any member of the Company
Group is a party that provide for any joint venture, partnership or similar arrangement by the Company Group;
|
|
(xiii)
|
all Contracts between or among any member of the Company Group on the one hand and any Affiliate of any member of the Company Group (which shall be also identified on Schedule 3.23(n));
|
|
(xiv)
|
all Contracts between or among any member
of the Company Group on the one hand and Seller or any Affiliate of Seller (other
than any member of the Company Group) on the other hand (other than those set forth in the immediately preceding subparagraph);
|
|
(xv)
|
all Contracts between any member of the Company Group, on the one hand, and International Star, on the other hand;
|
|
(xvi)
|
all collective bargaining agreements or Contracts with any Union
to which any member of the Company Group is a party; and
|
|
(xvii)
|
any other Contract that is material to any member of the Company
Group and not previously disclosed pursuant to this Section 3.09.
|
|
(c)
|
The Lease, by and between the Company, as lessor, and A & M Shehee Interests, LLC, as lessee, dated as of April 16, 2014 (the “A&M Shehee Lease”) is still in effect as a reconducted lease on a “month to month” basis;
|
|
(d)
|
The option to purchase referenced in the A&M Shehee Lease has not been exercised, and Seller has received no communications
related to the exercise of such option.
|
Section 3.11 Condition and Sufficiency of Assets. Except as set forth on Schedule 3.11, to Seller’s Knowledge, the
buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property of the Company Group are in all material respects, in good condition and
fit for use in the ordinary course of business consistent with past practices (in all cases, giving due account to the
age and length of use of such assets and normal wear and tear excepted).
Section 3.13 Insurance. Section 3.13 of the Disclosure Schedules
sets forth a true and complete list of all current policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers'
compensation, vehicular, directors' and officers' liability, fiduciary liability and other casualty and property insurance maintained by Seller or its Affiliates (including the Company Group) relating to the assets, business, operations, employees, officers, managers and directors of the Company Group (collectively, the “Insurance Policies”) and true and complete copies of such Insurance Policies have been delivered to Buyer. Such Insurance Policies are in full force and effect and shall remain in full force and effect following the
consummation of the transactions contemplated by the Transaction Documents. Neither Seller nor any of its Affiliates (including the Company Group) has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any
of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if due and
payable prior to Closing, will be paid prior to Closing in accordance with the payment terms of each Insurance Policy. The Insurance Policies do not provide for any retrospective premium adjustment or other experience-based liability on the part of the Company
Group. All such Insurance Policies (a) are valid and binding in accordance with their terms; (b) to Seller’s Knowledge, are
provided by carriers who are financially solvent; and (c) have not been subject to any lapse in coverage. There are no claims related to the business of the
Company Group pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed
or in respect of which there is an outstanding reservation of rights. None of Seller or any of its Affiliates (including
the Company Group) is in default under, or has otherwise failed to comply with any provision contained in any such Insurance
Policy. To Seller’s Knowledge, the Insurance Policies are of the type and in the amounts customarily carried by Persons
conducting a business similar to the Company Group and are sufficient, in all material respects, for compliance with all applicable Laws and Contracts to which any member of the Company Group is a party or by which it is bound.
|
(e)
|
Neither the Company Group nor Seller has allowed or created a condition likely to result in a violation of Environmental Law.
|
|
(f)
|
Section 3.16(f) of the Disclosure Schedules contains a complete and accurate list
of all active, inactive, or abandoned aboveground or underground storage tanks owned or operated by the Company
Group.
|
|
(h)
|
Neither Seller nor the Company Group has retained or assumed, by contract or operation of Law, any liabilities or obligations of third parties under Environmental Law.
|
No pension plan (other than a Multiemployer Plan)
which is subject to minimum funding requirements, including any multiple employer plan, (each, a “Single Employer Plan”) in which
employees of the Company Group or any ERISA Affiliate participate or have participated has an “accumulated funding deficiency”,
whether or not waived, or is subject to a lien for unpaid contributions under Section 303(k) of ERISA or Section 430(k) of the Code. No Single Employer Plan covering employees of the Company Group which is a defined benefit plan has an
“adjusted funding target attainment percentage,” as defined in Section 436 of the Code, less than 80%. Except as set forth in Section 3.17(c) of the Disclosure
Schedules, all benefits, contributions and premiums relating to each Benefit Plan have been timely paid in accordance with the terms of such Benefit Plan and all applicable Laws and accounting principles, and all benefits accrued under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with, GAAP. All Non-U.S. Benefit Plans that are intended to be funded
and/or book-reserved are funded and/or book-reserved, as appropriate, based upon reasonable actuarial assumptions.
|
(j)
|
Each Benefit Plan that is subject to Section 409A of the Code has been administered in compliance with its terms and the operational and documentary requirements of Section 409A of the Code and all applicable regulatory guidance (including
notices, rulings and proposed and final regulations) thereunder. The Company Group does not have any obligation to gross up, indemnify or otherwise reimburse any individual for any excise taxes, interest or penalties incurred pursuant to Section 409A of the Code.
|
|
(k)
|
Each individual who is classified by the Company Group as an
independent contractor has been properly classified for purposes of participation and benefit accrual under each Benefit Plan.
|
|
(m)
|
Except as set forth in Section 3.17(m) of the Disclosure Schedules, no service
provider to the Company Group or any ERISA Affiliate provides such services under any form of leasing agreement.
|
|
(n)
|
Except as set forth in Section 3.17(n) of the Disclosure Schedules, no Producer
who is not an employee of the Company Group or an ERISA Affiliate, nor any independent contractor, consultant or other individual who is not an employee of the Company Group or an ERISA Affiliate, is eligible for coverage under any Benefit
Plan.
|
|
(d)
|
Except as set forth on Schedule 3.18(d), no director, manager, officer, employee, agent, Producer, consultant, or contractor of the
Company Group, or any other Person, has any rights under, or is a party to, any agreement to receive payment in connection with the change of control of a member of the Company Group.
|
|
(b)
|
The Company Group has withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder or other party, and complied with all information reporting and backup withholding provisions of applicable Law.
|
|
(c)
|
The Company Group has properly collected and remitted all sales, use, value added,
and similar Taxes with respect to sales or leases made to, purchases made from, or services provided to, as applicable,
its customers or has properly received and retained any appropriate Tax exemption certificates and other documentation for all sales, leases, or purchases made, or services provided, without charging or remitting sales, use, value added, and similar Taxes.
|
|
(d)
|
No claim has been made by any taxing authority in any jurisdiction where the Company Group does not file Tax Returns that it is, or may be, subject to Tax by
that jurisdiction.
|
|
(e)
|
No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of the Company Group.
|
|
(f)
|
The amount of the Company Group's Liability for
unpaid Taxes for all periods ending on or before Interim Balance Sheet Date does not, in the aggregate, exceed the
amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected on the Interim Balance Sheet. The amount
of the Company Group's Liability for unpaid Taxes for all periods following the Interim Balance Sheet Date shall not, in the aggregate, exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) as adjusted for the
passage of time in accordance with the past custom and practice of the Company Group (and which accruals shall not exceed comparable amounts incurred in similar periods in prior years). Since the
Interim Balance Sheet Date, the Company Group has not incurred any liability for Taxes arising from gains or losses
from unusual or infrequent events, which events would necessitate a separate disclosure under GAAP.
|
|
(g)
|
Section 3.19(g) of the Disclosure Schedules sets forth:
|
|
(i)
|
the taxable years of the Company Group as to which the
applicable statutes of limitations on the assessment and collection of Taxes have not expired; and
|
|
(ii)
|
those years, if any, in past five (5) tax years for which examinations by the taxing authorities have been completed or those taxable
years for which examinations are presently being conducted.
|
|
(h)
|
All deficiencies asserted, or assessments made, against the
Company Group as a result of any examinations by any taxing authority have been fully paid.
|
|
(i)
|
The Company Group is not a party to any Action by any taxing authority. There are no pending or, threatened Actions by any taxing authority, and the Company Group has not received from any taxing authority any request for information related to Tax matters.
|
|
(j)
|
Seller has delivered to Buyer copies of all federal, state, local and foreign
income, franchise and similar Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by, the Company Group for all Tax periods ending on or after December 31, 2014.
|
|
(k)
|
There are no Encumbrances for Taxes (other
than for current Taxes not yet due and payable) upon the assets of the Company Group.
|
|
(l)
|
The Company Group is not a party to, or bound
by, any Tax indemnity, Tax sharing or Tax allocation agreement.
|
|
(m)
|
No private letter rulings, technical advice memoranda or similar agreement
or rulings have been requested, entered into or issued by any taxing authority with respect to the Company Group.
|
|
(n)
|
The Company Group has not been a member of an affiliated, combined, consolidated or
unitary Tax group for Tax purposes. The Company Group has no Liability for Taxes of any Person (other than the Company Group) under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law), as transferee or successor, by contract or otherwise.
|
|
(o)
|
The Company Group will not be required to include any item of income in, or exclude any item or deduction from, taxable income for any taxable period or portion
thereof ending after the Closing Date as a result of:
|
|
(ii)
|
an installment sale or open transaction occurring on or prior to the Closing Date;
|
|
(iii)
|
any intercompany transaction or excess loss account described in Treasury
Regulations under Section 1502 of the Code, or similar provision of state, local or foreign
law;
|
|
(iv)
|
a prepaid amount received or deferred revenue accrued on or before the Closing Date;
|
|
(v)
|
any closing agreement under Section 7121 of the Code, or similar provision of state, local or foreign Law; or
|
|
(vi)
|
any election under Section 108(i) of the Code.
|
|
(p)
|
Seller is not a “foreign person” as that term is used in Treasury
Regulations Section 1.1445-2. The Company Group is not, nor has it been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(a) of the Code.
|
|
(q)
|
The Company Group has not (i) been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code or (ii) otherwise distributed stock of another Person, or had its stock distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Sections 355 and/or 361 of the Code.
|
|
(r)
|
The Company Group is not, and has not been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011 4(b).
|
|
(s)
|
The Company Group is not, and has not been, a party to any Contract, agreement, plan or arrangement, including the Transaction Documents, which could give rise to the payment of any amount that would not be
deductible or on which a penalty or excise tax could be imposed, either on the payor or payee, pursuant to Sections
404, 409A or 4999 of the Code;
|
|
(t)
|
The Company Group is not subject to any applicable Tax holidays or other similar preferential programs that could terminate as a result of the transactions contemplated by the Transaction Documents;
|
|
(u)
|
The Company Group is not, and has not been, a party to any Contract, agreement, plan or arrangement, including the Transaction Documents, that has resulted or could result
in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code, or similar provision of state, local or foreign Law;
|
|
(v)
|
The Company Group does not have, and has not had, a permanent establishment
(within the meaning of an applicable Tax treaty) or otherwise have, or had, an office or fixed place of business in a country other than the United States of America; or
|
|
(w)
|
Each Company Subsidiary (other than Kilpatrick Financial, Inc.) is and has been since its formation treated
as a partnership or entity disregarded as an entity separate from its owner for Tax purposes and (ii) no Governmental Authority responsible for the assessment or collection of Tax has challenged the treatment described in clause (i).
|
|
(x)
|
No Company Group member has ever been an "S" corporation and no "S" election has ever been filed with respect to a Company Subsidiary.
|
|
(a)
|
The minute books and stock record books of the Company Group, all of which have been delivered to Buyer, are complete and correct and
have been maintained in accordance with sound business practices. At the Closing, all of those books and records will be in the possession of the Company.
|
|
(b)
|
To Seller’s Knowledge, the minute books of the Company Group from January 1, 1999 through the Closing Date contain, in all material
respects, accurate and complete records of all meetings, and actions taken by written consent of, the stockholders, the board of directors and any committees of the board of directors or board of managers, as applicable, of each member of
the Company Group, and no meeting, or action taken by written consent, of any such stockholders, board of directors, board of managers, or committee has been held for which minutes have not been prepared and are not contained in such
minute books.
|
Section 3.21 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements
made by or on behalf of Seller.
Section 3.22 Data Privacy. In connection with its collection, storage, transfer (including, without limitation,
any transfer across national borders) and/or use of any personally identifiable information from any individuals, including, without limitation, any customers, prospective customers, employees and/or other third parties (collectively “Personal Information”), each member of the Company Group is and has been in compliance with all applicable Laws in all relevant jurisdictions, the Company Group’s privacy policies and the requirements of any
contract or codes of conduct to which any member of the Company Group is a party, except to the extent such noncompliance would not have, and would not reasonably be expected to have, a Material Adverse Effect. Each member of the Company Group
has commercially reasonable physical, technical, organizational and administrative security measures and policies in place to protect all Personal Information collected by it or on its behalf from and against unauthorized access, use and/or
disclosure. Each member of the Company Group is and has been in compliance with all Laws relating to data loss, theft and breach of security notification obligations except to the extent such noncompliance would not have, and would not
reasonably be expected to have, a Material Adverse Effect.
Section 3.23 Regulatory.
|
(a)
|
Each member of the Company Group has timely filed (taking into account permitted
extensions timely obtained, if any) all material regulatory reports, schedules, statements, documents, filings, submissions, forms, registrations and other documents, together with any amendments required to be made with respect
thereto, that each was required to file with any Governmental Authority, including state health and insurance regulatory authorities (“Regulatory Filings”) and any applicable federal regulatory authorities. All such Regulatory Filings complied with applicable Law.
To the extent required by applicable law, all premium rates, rating plans, policy forms and terms established or used by the Company Group that are required to be filed with and/or approved by a governmental authority have been so filed
and/or approved, the premiums charged by the Company Group conform to the premiums so filed and/or approved, and comply with the laws applicable thereto, and no such premiums are subject to any investigation by any governmental authority.
|
|
(b)
|
The Company Group’s licenses are valid and in full force and effect, and no member
of the Company Group is in material default under any license or accreditation, none of the licenses or accreditations
will be terminated as a result of the transactions contemplated hereby and no member of the Company Group has received notice that the Company Group is in violation of any of the terms or conditions of any license or accreditation.
|
|
(c)
|
All insurance Contract benefits, growth and interest payable by the Company
Group to any other Person that is a party to or bound by any insurance, reinsurance, coinsurance, or other similar
Contract with the Company Group have been paid in accordance with the terms of the insurance, reinsurance, coinsurance and other Contracts under which they arose, except for such benefits, growth and interest for which the Company Group reasonably believes there is a reasonable basis to contest payment.
|
|
(d)
|
No outstanding insurance Contract issued, reinsured, or underwritten by any member of the Company Group entitles the holder thereof or any other Person to
receive dividends, distributions, or to share in the income of any member of the Company Group or to receive any other benefits based on the revenues or
earnings of any member of the Company Group or any other Person.
|
|
(e)
|
The underwriting standards utilized and ratings applied by the Company Group and,
as of the date of this Agreement, by any other Person that is a party to or bound by any reinsurance,
coinsurance, or other similar Contract with any member of the Company Group conform to industry accepted underwriting standards, and to the standards and ratings
required pursuant to the terms of the respective reinsurance, coinsurance, or other similar Contracts.
|
|
(f)
|
All of the Company Group’s liability under insurance Contracts issued, reinsured, or underwritten by the Company Group which is beyond the Company Group’s
normal retention is fully reinsured under valid reinsurance Contracts with reinsurers which (i) are solvent, and (ii) all amounts to which any member of the Company Group is entitled under reinsurance, coinsurance, or other similar Contracts (including without limitation amounts based on paid and unpaid losses) as of the date of this Agreement are fully collectible.
|
|
(g)
|
Each Producer, at the time such Producer wrote,
sold, or produced business for the Company Group, was duly licensed as an insurance agent (for the type of business written, sold, or produced by such Producer) in the particular jurisdiction in which such Producer wrote, sold, or produced
such business for the Company Group.
|
|
(h)
|
No such Producer violated (or with or without notice or lapse of time or both, would have violated) any term or provision of any Law or
any writ, judgment, decree, injunction, or similar order applicable to the writing, sale, or production of business for the Company Group.
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(i)
|
As of the date hereof, there is no investigation, audit, examination or inquiry relating to any member of the Company Group or its respective business in progress or contemplated by any Governmental
Authority.
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(j)
|
No claim or assessment is pending or, to Seller’s Knowledge, threatened against any member of the Company Group by action of any state insurance guaranty association in connection with that
association’s fund relating to insolvent insurers.
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(n)
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Other than as set forth on Schedule 3.23(n), there are no agreements between any
member of the Company Group and any Affiliate of the Company Group that are currently in force and effect, or which previously were in force and effect at any
time since January 1, 2018. All regulatory notices and approvals required for or in respect of such affiliated interest agreements have been given and/or obtained,
as applicable, in accordance with applicable legal requirements and no notice of objection, violation or disapproval has been received by any member of the Company Group relative to any such affiliated interest agreement.
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(o)
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All compensation, including wages, commissions, bonuses, fees and other
compensation, payable to all Producers, agents or representatives of the Company Group for services performed have been
paid in full and there are no outstanding agreements, understandings or commitments of any member of the Company Group with respect to any compensation,
commissions, bonuses or fees.
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Section 3.24 Insurance Products; Reserves.
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(a)
|
Except as disclosed in Schedule 3.24(a), (i) each of the insurance plan products of the Company Group, including the benefit design and structure, administration, bid submission and pricing and calculation of pricing thereof, comply, in all material respects, with all
applicable Laws and contractual requirements, the Company Group’s internal policies and the applicable insurance policies or plans under which they arose and (ii) all insurance claims paid or benefits
provided by the Company Group have been paid or provided, in all material respects, in accordance with the terms of the applicable insurance policies
or plans under which they arose.
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(b)
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All reserves and other similar amounts with respect to insurance as established or reflected
in the Financial Statements as of and for the period ended June 30, 2019 were computed in accordance with commonly accepted actuarial standards consistently applied, were fairly stated in
accordance with the benefits specified by the provisions of the related insurance Contracts and in the related reinsurance, coinsurance, and other similar Contracts of the Company Group and meet the requirements of the insurance Laws of the State of Louisiana and of the states in which such insurance Contracts
were issued or delivered and when considered in light of the assets held by the Company Group with respect to the reserves and
related actuarial items, including without limitation then current assumptions concerning investment earnings on the assets and considerations anticipated to be received and retained under the
insurance Contracts, mortality and morbidity experience, persistency and expenses, all such reserves and related actuarial items held in support of the insurance Contracts of the Company Group, were good, sufficient and adequate as of June 30, 2019 (under commonly accepted actuarial standards consistently applied and fairly stated in accordance
with sound actuarial principles), to cover, in all material respects, the amount of all reasonably anticipated matured and unmatured benefits, dividends, claims, expenses and other Liabilities of
the Company Group under all insurance Contracts under which the Company Group has or will have any liability (including, without limitation, any liability arising under or as a result of any reinsurance, coinsurance, or other similar Contract).
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(c)
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The Company Group owns assets that qualify as legal reserve assets under
applicable insurance Laws in an amount at least equal to all such statutory reserves and other similar amounts.
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Section 3.25 Affiliate Transactions. Except as set forth in Schedule 3.09(a)(xiii) and (xiv) of the Disclosure
Schedules, no Company Group member is a party to any transaction (including any loan or other credit accommodation) with another Company Group member or one of its Affiliates (each an “Affiliate
Transaction”). All Affiliate Transactions over $10,000 (i) were made in the ordinary course of business, and (ii) were made on substantially the same terms as those prevailing at the time for comparable transactions with Persons who are
not related to or Affiliates of the Company Group, and each are set forth on Schedule 3.25.
Section 3.26 Unclaimed Property. No member of the Company Group is (or will be as of the Closing
Date) subject to levies or assessments for unclaimed property under applicable unclaimed property, escheat or similar Laws. None of the assets of the Company Group constitute unclaimed property under Law. Except as set forth in Schedule 3.26, there is no abandoned or unclaimed property reportable under any state or local unclaimed property, escheat or similar Law related to the Company Group. Without limiting the generality of the foregoing, the Company Group has established
and followed procedures to identify any unclaimed property and, to the extent required by applicable Law, remit such unclaimed property to the applicable Governmental Authority. The Company Group’s records are adequate to permit a Governmental
Authority or outside auditor to confirm the foregoing representations.
Section 3.27 Market Practices. Each member of the Company Group, as applicable, have, in all
material respects, marketed, sold and issued the insurance policies and plans written by, and other products of, the Company Group in compliance with all
applicable Laws in the respective jurisdictions in which such insurance policies and plans have been marketed, sold or issued. All advertising, promotional and sales materials and other marketing practices used by the Company Group or any agents and
representatives thereof, have, in all material respects, complied and are currently in compliance with all applicable Laws in jurisdictions in which the marketing and sales materials are disbursed, and neither the manner in which the Company
Group compensates any Person involved in the sale or servicing of insurance products that is not an insurance agent, nor,
to Seller’s Knowledge, the conduct of any such Person, renders such Person an insurance agent under any applicable
Laws, and the manner in which the Company Group compensates each Person involved in the sale or servicing of
insurance or specialized health care service plan products on behalf of the Company Group is in compliance, in all material respects, with all applicable Laws.
Section 3.28 Full Disclosure. No representation or warranty by Seller or the Company in the Transaction Documents and no statement contained in the
Disclosure Schedules to this Agreement or any certificate or other document furnished or to be furnished to Buyer pursuant to the Transaction Documents contains any untrue statement of a material fact, or omits to state a material fact necessary
to make the statements contained therein, in light of the circumstances in which they are made, not misleading. Notwithstanding the foregoing, nothing in this Section 3.28 shall limit the knowledge or materiality qualifiers set forth in the
above representations.
Buyer represents and warrants to Seller that the statements contained
in this ARTICLE IV are true and correct as of the date hereof.
Section 4.01 Organization and Authority of
Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of
Utah. Buyer has full corporate power and authority to enter into the Transaction Documents, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of the Transaction Documents, the performance by Buyer
of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer. The Transaction Documents have
been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by the other parties thereto) the Transaction Documents constitute a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms.
Section 4.02 No Conflicts; Consents. The execution, delivery and performance by Buyer of the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, do not and will not conflict with or result in a violation or breach of, or default
under, any provision of the certificate of incorporation, by-laws or other organizational documents of Buyer. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental
Authority is required by or with respect to Buyer in connection with the execution and delivery of the Transaction
Documents and the consummation of the transactions contemplated hereby and thereby, except for consent of the Louisiana Insurance Department, and
filing of the required Form A.
Section 4.03 Investment Purpose. Buyer is acquiring the Shares solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Shares are not registered under the Securities Act of 1933, as amended, or any state securities Laws, and that the Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant
to an applicable exemption therefrom and subject to state securities Laws and regulations, as applicable.
Section 4.04 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements made by or on behalf of Buyer.
Section 4.05 Operations of the Company Group. Buyer shall
engage at least the minimum number of employees necessary to avoid creating any obligation under the WARN Act on the part of Seller, and Buyer shall continue to employ at least the minimum number of employees for the minimum duration necessary to
avoid creating any obligation under the WARN Act on the part of Seller. Except as caused by Seller’s breach of Section 5.01(m), Buyer shall bear any and all obligations and liability under the WARN Act resulting from employment losses relating to
the sale of the Company Group.
Section 4.06 No Current Obligation to Sell. As of the date hereof and the Closing Date, Buyer has no binding obligation, offer or commitment, whether oral or written, to sell
the Company or any member of the Company Group.
Section 4.07 Acknowledgment. Buyer has no actual knowledge of the inaccuracy or incompleteness of any representation or warranty made herein by Seller.
Section 5.01 Conduct of Business Prior to the Closing. From the date hereof until the Closing, except as otherwise provided in this Agreement or the Coinsurance Agreement or consented to in writing by Buyer, Seller shall, and shall cause the Company
Group to, (x) conduct the business of the Company Group in the ordinary course of business consistent with past practice (including
collecting receivables and paying payables as they become due and in compliance with all applicable Laws); and (y) use best efforts to maintain and preserve intact the
current organization, business and franchise of the Company Group and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and
others having business relationships with the Company Group. Without limiting the foregoing, from the date hereof until the Closing Date, Seller shall:
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(a)
|
not adopt, modify or propose any material change in the
governance or other organizational documents of the Company Group;
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(b)
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cause the Company Group to preserve and maintain all of its material Permits;
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(c)
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cause the Company Group to pay its debts, Taxes and other obligations when due unless validly contested;
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(e)
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cause the Company Group to continue in full force and effect
without modification all Insurance Policies, except as required by applicable Law;
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(f)
|
cause the Company Group to take commercially reasonable
actions to defend and protect its properties and assets from infringement or usurpation;
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(g)
|
cause the Company Group to perform all of its material
obligations under all Contracts relating to or affecting its properties, assets or business;
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(i)
|
cause the Company Group to not materially change the employment relationship with
any Key Employee;
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(k)
|
cause the Company Group not to take or permit any action that would cause any of the changes, events or conditions described in Section 3.08 to occur;
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(l)
|
cause the Company Group to take commercially reasonable actions to maintain in
full force and effect any Company IP Registration; and
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(m)
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not implement any facility closings or employee layoffs that could implicate the WARN Act.
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Section 5.02 Access to Information. From the date hereof until the Closing, Seller shall, and shall cause the Company Group to, (a) afford Buyer and its Representatives full access to and the right to inspect all of the Real Property, properties, assets, premises, books
and records, Contracts and other documents and data related to the Company Group at Buyer’s cost; (b) furnish Buyer
and its Representatives with such financial, operating and other data and information related to the Company Group as Buyer
or any of its Representatives may request; and (c) instruct the Representatives of Seller and the Company Group to cooperate with Buyer in its investigation of the Company Group. Buyer and its Representatives shall not, without the advance written consent of Seller conduct environmental due diligence of
the Company Group and the Real Property, including the collecting and analysis of samples of indoor or outdoor air, surface water, groundwater or surface or subsurface land on, at, in, under or from the Company Group and the Real Property. Notwithstanding anything herein to the contrary, any investigation pursuant to this Section
5.02 shall be conducted in such manner as not to unreasonably interfere with the conduct of the business of Seller or the Company Group. No investigation by Buyer or other information received by Buyer shall operate as a waiver or otherwise
affect any representation, warranty or agreement given or made by Seller in this Agreement. Buyer shall not contact any employee or representative of Seller other than those specifically designated by Seller.
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(ii)
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any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
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(iii)
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any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement; and
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Section 5.05 Resignations. Seller shall deliver to Buyer written resignations, effective as of the Closing Date, of the officers, managers, and directors of the Company Group.
Section 5.06 Confidentiality. From and after the Closing, Seller
shall, and shall cause its Affiliates to, hold, and shall use its best efforts to cause its or their respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Company
Group, except to the extent that Seller can show that such information (a) is generally available to and known by the
public through no fault of Seller, any of its Affiliates or their respective Representatives; or (b) is lawfully acquired by Seller, any of its Affiliates or their respective Representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Seller
or any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or
administrative process or by other requirements of Law, Seller shall promptly
notify Buyer in writing and shall disclose only that portion of such information which Seller is advised by its counsel in writing is legally required to be
disclosed, provided that Seller shall use commercially reasonable efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.
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(c)
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During the Restricted Period, in the Territory, Seller shall not, and shall not permit any of its Affiliates to, directly or
indirectly, hire, associate with, or solicit any Producer that has a then current business relationship with any member of the Company Group, or that has had a business relationship with any member of the Company Group in the preceding
twelve (12) month period, or encourage any such Producer to cease working or associating with the Company Group, except pursuant to a general solicitation which is not directed specifically to any such Producer.
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(b)
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Seller and Buyer shall use reasonable best efforts
to give all notices to, and obtain all consents from, all third parties that are described in Section 3.05 of the Disclosure Schedules.
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|
(c)
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Without limiting the generality of the parties' undertakings pursuant to subsections (a) and (b) above, each of the parties hereto shall use all reasonable best efforts to:
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|
(i)
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respond to any inquiries by any Governmental Authority regarding
antitrust or other matters with respect to the transactions contemplated by the Transaction Documents;
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(ii)
|
avoid the imposition of any order or the taking of any action
that would restrain, alter or enjoin the transactions contemplated by the Transaction Documents; and
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Section 5.09 Maintenance of Benefits.
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(a)
|
Prior to or on the Closing Date, as determined by Buyer in its sole discretion, Seller shall cause each Benefit Plan set forth on
Schedule 5.09(a) to be separated, divided, or spun off as necessary so that each member of the Company Group is either a sponsor of or participant in Benefit Plans applicable to only members of the Company Group. Buyer shall not have
responsibility or liability with respect to any Benefit Plan not expressly assumed at Closing or with respect to any asserted or unasserted claims under any Benefit Plan which exists at Closing except with respect to those claims related
to Persons, and their dependents, covered by the Benefit Plans expressly assumed by the Company Group at Closing.
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(b)
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At the written request of Buyer provided no later than fifteen (15) days prior to the Closing Date, each of member of the Company Group
shall, at least one (1) Business Day prior to the Closing Date, adopt written resolutions (or take other necessary and appropriate action) to terminate certain Benefit Plans of the Company Group member, or participation in and sponsorship
of such Benefit Plan, and to fully vest all participants under such Benefit Plan, such termination and vesting to be effective no later than the Business Day preceding the Closing Date. The Company Group shall provide Buyer with an
advance copy of such proposed resolutions (and any related documents) and a reasonable opportunity to comment thereon prior to adoption or execution.
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(c)
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Seller will comply with the provisions in Section 5.09(a) and 5.09(b) to Buyer’s satisfaction and provide Buyer all documentation
necessary to give effect to the provisions in Section 5.09(a) and 5.09(b) at least ten (10) days prior to the Closing Date.
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Section 5.10 Closing Conditions. From the date hereof until the Closing, each party hereto shall, and Seller shall cause the Company Group to, use
best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in ARTICLE VII hereof.
Section 5.11 Public Announcements. Unless otherwise required by applicable Law (based upon the reasonable advice of counsel), no party shall make any public announcements in respect of the Transaction Documents or the
transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed),
and the parties shall cooperate as to the timing and contents of any such announcement.
Section 5.12 Further Assurances. Following the Closing, each of the
parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances
and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by the Transaction Documents (including, without
limitation, to effect the transfer of any Real Property to Buyer).
Section 5.13 Security Interests. No Seller or Affiliate of a Seller shall take any action affecting any member of the Company Group’s position as a lender or mortgagee
under any mortgage loan secured by the real (immovable) property of any Seller or any Affiliate of any Seller. For the avoidance of doubt, Seller shall maintain and preserve the Company Group’s interests under such mortgages, including the
priorities thereof, and shall take no action that would cause or allow any of such mortgages to be junior to or subordinate to another creditor.
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(c)
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All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with the Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid by Seller when due. Seller
shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).
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Section 6.02 Termination of Existing Tax
Sharing Agreements. Any and all existing Tax sharing agreements (whether written or not) binding upon the Company
Group shall be terminated as of the Closing Date. After such date none of the Company Group, Seller nor any of Seller's Affiliates and their respective Representatives shall have any
further rights or liabilities thereunder or under any payables or receivables arising thereunder.
Section 6.03 Tax Indemnification. Each Seller, severally (each for such Seller’s Pro Rata Share), and not jointly nor solidarily, shall indemnify the Company
Group, Buyer, and each Buyer Indemnitee and hold them harmless from and against (a) any Loss attributable to any breach of or inaccuracy in any representation or warranty made in Section 3.19; (b) any Loss attributable to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in this ARTICLE VI; (c) all Pre-Closing Taxes of the Company Group or otherwise relating to the business of the Company
Group prior to Closing; (d) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company Group (or any predecessor of the Company Group) is
or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section
1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any
and all Taxes of any person imposed on the Company Group arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date. In each of the above cases, together with any out-of-pocket fees and expenses (including attorneys' and accountants' fees) incurred in connection therewith. Seller
shall reimburse Buyer for any Taxes and/or related expenses of the Company
Group that are the responsibility of Seller pursuant to this Section 6.03 within ten (10) Business Days after payment of or notice of demand and payment for, whichever is sooner, such Taxes and/or related expenses by Buyer or the Company Group. Notwithstanding subpart (c) above, no Seller shall be liable for any Pre-Closing Taxes of the Company
Group attributed to the first fifteen million dollars ($15,000,000.00) realized on the Bond Gains and 50% of that portion of the Bond Gains in excess of fifteen million dollars ($15,000,000.00) attributable to
the Company Group.
Section 6.04 Straddle Period. Unless otherwise required by law, in the case
of Taxes that are payable with respect to a taxable period that begins before and ends after the Closing Date (each such period, a “Straddle Period”), the portion of any such Taxes that are treated as Pre-Closing Taxes for purposes of this Agreement shall be:
Notwithstanding the foregoing, in the event the Bond Gains (as defined in the Coinsurance Agreement) exceed fifteen million dollars ($15,000,000.00), (i) the
Company and Seller shall share equally (50%/50%) the Company’s additional tax expense attributed to that portion of the Bond Gains in excess of fifteen million dollars ($15,000,000.00), (ii) Buyer shall give Seller an estimate of the expected
amount to be shared by the Company and Seller as soon as practicable, (iii) any amounts available in the Indemnification Escrow Fund shall be applied toward satisfaction of Seller’s share of said tax expense and shall be delivered to Buyer, (iv)
any remaining amount owed by Seller shall, upon demand, be paid to Buyer by Seller.
Section 6.05 Section 280G.
Prior to the Closing, the Company Group shall seek the necessary approval from Seller of any payments or
benefits, if any, under any Contract, plan, or agreement which, separately or in the aggregate, would be an “excess
parachute payment” under Section 280G of the Code as a result of the transactions contemplated by this Agreement; provided that any communications to Seller
regarding such approval (including the computations of parachute payments, the identification of the “disqualified individuals” who are potential recipients of
parachute payments, and the waivers of payments and/or benefits executed by the affected individuals) shall be delivered within ten (10) Business Days following
the date hereof to Buyer and Buyer shall have the right to review and approve (which approval shall not be
unreasonably conditioned, withheld or delayed) such communications before they are distributed to Seller. The Company shall deliver to Buyer prior to the Closing reasonable evidence either (i)(a) that the shareholder approval
was solicited in conformity with Section 280G of the Code and the regulations promulgated thereunder and the necessary shareholder approval was obtained with respect to any payments and/or benefits that were subject to the shareholder vote (the “280G Approval”), or (b) that the
280G Approval was not obtained and, as a consequence, that such “excess parachute payments,” shall not be made or provided, as authorized under the waivers of
those payments and/or benefits which were executed by all of the affected individuals or (ii) that computations of parachute payments have been complete, and
“disqualified individuals” who are potential recipients of parachute payments have been identified, if any, and that pursuant to such calculations, there are no “excess parachute payments” to be made to any “disqualified individual.”
Section 6.07 Contests. Buyer agrees to give written notice to Seller
of the receipt of any written notice by the Company Group, Buyer or any of Buyer's
Affiliates which involves the assertion of any claim, or the commencement of any Action, in respect of which an
indemnity may be sought by Buyer pursuant to this ARTICLE VI (a “Tax Claim”);
provided, that failure to comply with this provision shall not affect Buyer's right to
indemnification hereunder. Buyer shall control the contest or resolution
of any Tax Claim; provided, however, that Buyer shall
obtain the prior written consent of Seller before entering into any settlement of a claim or ceasing to defend such claim, which consent shall not be
unreasonably withheld, conditioned or delayed; and, provided further, that Seller shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose, the fees and expenses of which separate counsel shall be borne solely by Seller.
Section 6.08 Cooperation and Exchange of Information. Seller and Buyer
shall provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return pursuant to this ARTICLE
VI or in connection with any audit or other proceeding in respect of Taxes of the Company Group. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying
schedules, related work papers and documents relating to rulings or other determinations by tax authorities.
Section 6.09 Tax Treatment of Indemnification Payments. Any indemnification
payments pursuant to this ARTICLE VI shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law.
Section 6.10 Payments to Buyer. Any amounts payable to Buyer pursuant to this ARTICLE VI shall be satisfied: (i) from
the Indemnification Escrow Fund; and (ii) to the extent such amounts exceed the amount available to Buyer in the
Indemnification Escrow Fund, from each Seller severally (each for such Seller’s Pro Rata Share), and not jointly nor solidarily.
Section 6.11 Survival. Notwithstanding anything in this Agreement to the contrary, the
provisions of Section 3.19 and this ARTICLE VI shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or
extension thereof) plus sixty (60) days.
Section 6.12 Overlap. To the extent that any obligation or responsibility pursuant to ARTICLE
VIII may overlap with an obligation or responsibility pursuant to this ARTICLE VI, the provisions of this ARTICLE VI shall govern.
Section 7.01 Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
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(b)
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Buyer shall have received all consents, authorizations, orders and approvals from the Governmental Authorities referred to in Section 3.05 in form and substance reasonably satisfactory to Buyer and Seller,
and no such consent, authorization, order and approval shall have been revoked.
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Section 7.02 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer's waiver, at or prior to the Closing, of each of the following conditions:
|
(d)
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No Action shall have been commenced against Buyer, Seller or the Company Group, which would prevent the Closing. No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any transaction contemplated hereby.
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(e)
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The Company Group shall have fully satisfied (including with respect to rights of timely notification) or obtained enforceable waivers in respect of any preemptive or similar rights directly
or indirectly affecting any shares of capital stock or other equity interests of the Company Group.
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(h)
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Written confirmation from the Executrix, that other than the Estate Pledge Agreements, the Estate has no other rights to or liens on the Shares.
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(i)
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Completion of all curative title work as more particularly set forth on Schedule 7.02(i).
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(j)
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From the date of this Agreement, there shall not have occurred any Material
Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect.
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(k)
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The Company shall have delivered a legal opinion of Baldwin
Haspel Burke & Mayer, LLC, counsel to the Company, in form and substance reasonably satisfactory to Buyer, as set forth on Exhibit D.
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(l)
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The Escrow Agreement and Coinsurance Agreement shall have been executed and
delivered by the parties thereto and true and complete copies thereof shall have been delivered to Buyer.
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(m)
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At least three (3) Business Days before Closing,
Seller shall have delivered to Buyer the Closing Indebtedness Certificate.
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(o)
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Seller shall have delivered to Buyer a certificate pursuant
to Treasury Regulations Section 1.1445-2(b) that Seller is not a foreign person within the meaning of Section 1445 of the Code.
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(t)
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Seller shall have delivered to Buyer such other documents or
instruments as Buyer reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.
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(u)
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Seller shall have amended and restated the Human Resource Service Agreement, dated as of June 27, 2013, between the Company and
Rose-Neath, and related provider agreements, to the satisfaction of Buyer.
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(v)
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Buyer shall have received the necessary documentation as required in Section 5.09(c).
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(w)
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Buyer shall have received a waiver and release of the option to purchase in the A&M Shehee Lease and necessary documentation as
required to extend the term of the A&M Shehee Lease through April 30, 2022.
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(x)
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Buyer shall have received all necessary documentation as required to extend the term of that certain Lease, by and between the Company,
as lessor, and Care Management Group, LLC, as lessee, dated as of September 30, 2016, through September 30, 2022.
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(y)
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The Coinsurance Agreement shall be in full force and effect and the insurance business subject thereto shall not have been recaptured
by the Company; provided, that, Buyer shall have waived this condition should the recapture occur due to Buyer’s election to cause the recapture in accordance with the Coinsurance Agreement.
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Section 7.03 Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Seller's waiver, at or prior to the Closing, of each of the following conditions:
|
(c)
|
No injunction or restraining order shall have been issued by
any Governmental Authority, and be in effect, which restrains or prohibits any material transaction contemplated hereby.
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(d)
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The Escrow Agreement and Coinsurance Agreement shall have
been executed and delivered by the parties thereto and true and complete copies thereof shall have been delivered to Seller.
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(f)
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Buyer shall have delivered to the Escrow Agent by wire transfer of immediately available
funds the Indemnification Escrow Amount.
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(g)
|
The LDI shall have approved for payment the total amount owed by the Company to Rose-Neath pursuant to the Surplus Note.
|
|
(h)
|
The Company shall have paid the Surplus Note Payment.
|
Section 8.01 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein (other
than any representations or warranties contained in Section 3.19 which are subject to ARTICLE VI) shall survive
the Closing and shall remain in full force and effect until the date that is eighteen (18) months from the Closing Date; provided, that the representations and warranties in (a) Section 3.01, Section 3.02, Section 3.03, Section 3.04, Section 4.01 and Section 4.04 shall survive indefinitely and (b) Section 3.12(i), Section 3.12(j), Section 3.16,
Section 3.17, and 3.22 shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus
sixty (60) days. All covenants and agreements of the parties contained herein (other than any covenants or agreements contained in ARTICLE VI which are subject to ARTICLE VI) shall survive the Closing eighteen (18) months or for the period
explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to
the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.
Section 8.02 Indemnification By Seller. Subject to the other terms and conditions of this ARTICLE VIII,
each Seller severally (each for such Seller’s Pro Rata Share), and not jointly nor solidarily, shall indemnify and defend each of Buyer and its Affiliates
(including the Company Group) and their respective Representatives (collectively,
the “Buyer Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses
incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon,
arising out of, with respect to or by reason of:
|
(c)
|
any data or cyber privacy, security, or security breach notification incidents that resulted in the unauthorized access, collection,
use, processing, storage, sharing, distribution, transfer, disclosure, security, destruction or disposal of any personal, financial, sensitive or confidential information or data (whether in electronic or any other form or medium);
|
|
(d)
|
the failure to properly and timely record reinscriptions regarding any mortgages in favor of any member of the Company Group that
encumber real (immovable) property owned by any Seller or any Affiliate of any Seller, or any member of the Company Group;
|
|
(e)
|
any liabilities arising under the agreements set forth on Schedule 3.18(d); or
|
|
(f)
|
any liabilities arising from the Company’s acquisition of directors and officers liability insurance policy for the transactions
contemplated under this Agreement.
|
Section 8.03 Indemnification By Buyer. Subject to the other terms and conditions of this ARTICLE VIII, Buyer shall indemnify and defend each Seller and its Affiliates and their respective Representatives (collectively, the “Seller
Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or
sustained by, or imposed upon, the Seller Indemnitees based upon, arising out of, with respect to or by reason of:
Section 8.04 Certain Limitations. The indemnification provided for in Section 8.02 and Section
8.03 shall be subject to the following limitations:
|
(d)
|
Notwithstanding the foregoing, (i) in no event shall indemnified Persons be entitled to indemnification for the aggregate amount of any
Losses under this Agreement (including under Article VI) in excess of the sum of the Purchase Price plus the amount of the Surplus Note Payment, unless due to fraud or intentional misrepresentation. Notwithstanding anything herein to the
contrary and (ii) no party will be liable in respect of any Consequential Losses.
|
Section 8.05 Indemnification Procedures. The party making a claim under this ARTICLE VIII is referred to as the “Indemnified Party”, and the party against whom such claims are asserted under this ARTICLE VIII is
referred to as the “Indemnifying Party”.
|
(b)
|
Any Losses payable to a Buyer Indemnitee pursuant to this ARTICLE VIII shall be satisfied: (i) first from the Indemnification Escrow
Fund; and (ii) to the extent the amount of Losses exceeds the amounts available to the Buyer Indemnitee in the Indemnification Escrow Fund, from each Seller severally (each for such Seller’s Pro Rata Share), and not jointly nor
solidarily.
|
Section 8.07 Tax Treatment of Indemnification Payments. All indemnification
payments made under this Article VIII shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.
Section 8.08 Effect of Investigation. Except as to Buyer’s representation in Section 4.07, the representations, warranties and covenants of the Indemnifying Party, and
the Indemnified Party's right to indemnification with respect thereto, shall not be affected or deemed waived by reason of any investigation made by or on behalf of the Indemnified Party (including by any of its Representatives) or by reason of
the fact that the Indemnified Party or any of its Representatives knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of the Indemnified Party's waiver of any condition set forth in
ARTICLE VII.
Section 8.09 Exclusive Remedies. Subject to Section 5.07 and Section
10.11, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud, criminal activity or willful misconduct on the part of a party hereto in connection with the transactions contemplated by the Transaction Documents) for any breach of any representation, warranty, covenant, agreement
or obligation set forth herein or otherwise relating to the subject matter of the Transaction Documents, shall be pursuant to the indemnification provisions set forth
in ARTICLE VI and this ARTICLE VIII. In furtherance of the foregoing, each party hereby waives, to the fullest
extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of the Transaction Documents it may have against the
other parties hereto, their Representatives, and their Affiliates and each of their respective Representatives arising
under or based upon any Law, except pursuant to the indemnification provisions set forth in ARTICLE VI and this ARTICLE
VIII. Nothing in this Section 8.09 shall limit any Person's right to seek and obtain any equitable relief to which any Person
shall be entitled or to seek any remedy on account of any party's fraudulent, criminal or intentional misconduct.
Section 8.10 Insurance Recoveries. Any amount of Losses for which indemnification is provided under this ARTICLE VIII shall be reduced by an amount equal to any related
recoveries actually received by Buyer Indemnitee or Seller Indemnitee, as applicable, under any insurance policy; provided that the amount of such reduction shall in all cases be offset by the amount of all premiums and deductibles related
thereto, plus costs incurred by such Buyer Indemnitee or Seller Indemnitee, as applicable, in connection with the recovery of such amount under such insurance policy.
Section 8.11 Tax Benefits. Notwithstanding anything contained herein to the contrary, the amount of any Losses incurred or suffered by Buyer shall be calculated net of any
Tax benefit that Buyer actually realizes in the year the Losses are incurred as a result of being able to currently deduct the Losses for Tax purposes.
Section 9.02 Effect of Termination. In the event of the termination of this Agreement in accordance with this Article, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:
|
(b)
|
that nothing herein shall relieve any party hereto from liability for any willful breach of any provision hereof.
|
Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the Transaction
Documents and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.
Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of
receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal
business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.
Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section
10.02):
|
If to Seller Representative:
|
Jerome J. Reso, Jr.
1100 Poydras Street, Suite 3600
New Orleans, LA 70163
Facsimile:504-569-2099
E-mail: reso@bhbmlaw.com
|
|
with a copy (which shall not constitute notice) to:
|
Baldwin Haspel Burke & Mayer, LLC
1100 Poydras Street, Suite 3600
New Orleans, LA 70163
Facsimile:504-569-2099
E-mail: reso@bhbmlaw.com;
asullivan@bhbmlaw.com
Attention:Jerome J. Reso, Jr., Esq.
Andrew T. Sullivan, Esq.
|
|
If to Buyer:
|
P.O Box 57220
Salt Lake City, Utah 84157-0220
Attn: Jeffrey R. Stephens
E-mail: Jeff.Stephens@securitynational.com
and
P.O Box 57220
Salt Lake City, Utah 84157-0220
Attn: Garrett S. Sill
E-mail: Garrett.Sill@securitynational.com
|
|
with a copy (which shall not constitute notice) to:
|
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC 201 St. Charles Avenue, Suite 3600 New Orleans, LA 70170 Facsimile:504-586-6707
E-mail:nkressler@bakerdonelson.com
Attention:Noah B. Kressler, Esq.
|
Section 10.03 Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure
Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means
such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and
(z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an
instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein
shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.
Section 10.04 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section 10.05 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render
unenforceable such term or provision in any other jurisdiction. Except as provided in Section 5.07(f), upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.
Section 10.06 Entire Agreement. The Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with
respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In
the event of any inconsistency between the statements in the body of this Agreement, the Coinsurance Agreement and those in the Escrow Agreement, the
Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.
Section 10.07 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that prior to the Closing Date, Buyer may, without the prior written consent of Seller, assign all or any portion of its rights under this Agreement to one or more of its direct or
indirect wholly-owned subsidiaries. No assignment shall relieve the assigning party of any of its obligations hereunder.
Section 10.08 No Third-party Beneficiaries. Except as provided in Section
6.03 and ARTICLE VIII, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
Section 10.09 Amendment and Modification;
Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth
in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default
not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure
to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall
operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
Section 10.11 Specific Performance. The parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.
Section 10.12 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section 10.13 Shareholder Representative.
|
(a)
|
By the execution and delivery of this Agreement or any letter of transmittal, including
counterparts thereof, each of the Shareholders of the Company Group will irrevocably constitute and appoint the Shareholder
Representative as the true and lawful agent and attorney-in-fact of such Shareholder with full powers of substitution to act in the name, place and stead of such Shareholder
with respect to the performance on behalf of such Shareholder under the terms and provisions hereof and to do or refrain from doing all such further acts and things, and to execute all such documents, as the Shareholder Representative shall deem necessary or appropriate in connection with any transaction contemplated hereunder, including the power to: (i) act for such Shareholder with respect to the Indemnification Escrow Amount; (ii) amend, modify or waive any provision of the Transaction Documents in any
manner; (iii) employ, obtain and rely upon the advice of legal counsel, accountants and other professional advisors as the Shareholder Representative, in the sole discretion thereof, deems necessary
or advisable in the performance of the duties of the Shareholder Representative; (iv) act for such Shareholder with respect
to all Purchase Price matters referred to herein; (v) incur any expenses, liquidate and withhold assets received on behalf of such Shareholder prior to their distribution to such Shareholder to the extent of any amount that the Shareholder Representative deems necessary for
payment of or as a reserve against expenses, and pay such expenses or deposit the same in an interest-bearing bank account established for such purpose, with
all such expenses reimbursed to the Shareholder Representative out of amounts received out of the Indemnification Escrow Amount, or if no amounts are received, by reimbursement from the Shareholders in accordance with their pro rata percentage ownership; (vi) receive all notices, communications and
deliveries hereunder on behalf of such Shareholder; (vii) do or refrain from doing any further act or deed on behalf of such Shareholder that the Shareholder Representative deems necessary or appropriate, in the sole discretion of the Shareholder
Representative, relating to the subject matter hereof as fully and completely as such Shareholder could do if personally present
and acting and as though any reference to such Shareholder herein was a reference to the Shareholder Representative; or (viii)
direct, authorize or permit any third party paying agent, if applicable, to take any of the foregoing actions; provided, however, that the Shareholder Representative shall have no obligation to act, except as expressly provided herein.
|
|
(b)
|
The appointment of the Shareholder Representative shall be deemed coupled with an
interest and shall be irrevocable, and any other Person may conclusively and absolutely rely, without inquiry, upon any action of the Shareholder
Representative as the act of each Shareholder in all matters referred to herein.
|
|
(c)
|
In the event the Shareholder Representative resigns or ceases to function in such capacity for any reason whatsoever, then the successor Shareholder Representative shall be the Person appointed by the Shareholders holding a majority of the pro rata percentages held by all Shareholders.
|
|
(d)
|
The Reserve Amount shall be used by the Shareholder Representative to satisfy the obligations of the Shareholder Representative set forth herein and to otherwise permit the Shareholder
Representative to perform its obligations set forth herein. As soon as practicable after the date on which the final obligation of the Shareholder
Representative under this Agreement has been discharged, the Shareholder Representative shall pay the Escrow Agent any amounts remaining in the Reserve Amount to be paid by Escrow Agent in accordance with the Escrow Agreement.
|
|
(e)
|
In furtherance of its role, the Shareholder Representative shall be entitled to
incur such reasonable costs and expenses as the Shareholder Representative may deem appropriate under the circumstances, which expenses may include hiring
attorneys, accountants, appraisers and other professional advisors. Such expenses shall be reimbursed from the Reserve Amount from time to time upon demand by the Shareholder
Representative.
|
|
(f)
|
Nothing in the Transaction Documents is intended, and nothing in the Transaction Documents shall be interpreted as,
imposing upon the Shareholder Representative, solely in its capacity as the agent and attorney-in fact for the Shareholders, any personal liability, personal
economic obligation or personal guarantee in favor of any party to this Agreement or any third party. The Shareholder Representative shall have no liability to the Shareholders with respect to actions taken or omitted to be taken in its capacity as the Shareholder
Representative. The Shareholders hereby agree to defend, indemnify, and hold the Shareholder Representative harmless from and against any and all liability, damages, costs, and expenses, including attorneys’
fees and court costs, that the Shareholder Representative may incur as a result of this Agreement or in the course of performance of its services hereunder, other than for such liability as the Shareholder Representative may incur
because of his (or his representatives) gross negligence, fraud or intentional misconduct
|
Section 10.14 Escrowed Funds. Subject to such deductions from
the Escrow Amount as are required pursuant to this Agreement (including any amounts that Buyer reasonably believes will be subject to claims for indemnification pursuant to any claim that has not been finally resolved) and the Escrow Agreement,
within five (5) Business Days after the eighteen (18) month anniversary of the Closing Date, the Parties shall instruct the Escrow Agent to release from escrow and deliver to the Shareholders the remaining balance of the Escrow Amount, plus any
interest accumulated thereon, in accordance with each Shareholder’s Pro Rata Share.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed, in multiple
counterpart originals, as of the date first written above by their respective officers thereunto duly authorized.
|
BUYER:
SECURITY NATIONAL LIFE INSURANCE COMPAN
|
|
|
By: /s/ Scott M. Quist
Name:Scott M. Quist
Title:CEO and President
SHAREHOLDER REPRESENTATIVE:
|
|
|
By: /s/Jerome J. Reso, Jr.
|
|
|
Name: Jerome J. Reso, Jr.
Title: Shareholder Representative
|
|
|
SELLERS:
|
| /s/Andrew M. Shehee |
|
|
Andrew M. Shehee
|
|
|
|
|
|
/s/ Margaret S. Shehee
|
|
|
Margaret S. Shehee
|
|
|
|
|
|
/s/ Nell Shehee
|
|
|
Nell Shehee
|
|
|
|
|
|
/s/ Ann Shane Shehee
|
|
|
Ann Shane Shehee
|
|
|
|
/s/ Harvey W. Rubin
|
|
Harvey W. Rubin
|
|
|
SELLERS (CONT.):
|
|
/s/ Christopher L. Martin
|
|
|
|
Christopher L. Martin
|
|
|
Virginia K. Shehee Inter Vivos Trust
|
|
|
By: /s/ John A. Hensarling
|
|
John A. Hensarling, Trustee
|
|
|
|
By: /s/ Andrew M. Shehee
|
|
Andrew M. Shehee, Trustee
|
|
|
|
By: /s/ Margaret S. Shehee
|
|
Margaret S. Shehee, Trustee
|
|
|
|
THE SHEHEE LIMITED PARTNERSHIP:
|
|
By:Virginia K. Shehee Inter Vivos Trust, General Partner
|
|
|
/s/ John A. Hensarling
|
|
|
|
John A. Hensarling, Co-Trustee of the Virginia K. Shehee Inter Vivos Trust
|
| /s/Andrew M. Shehee | |
|
|
Andrew M. Shehee, Co-Trustee of the Virginia K. Shehee Inter Vivos Trust
|
| /s/ Margaret S. Shehee | |
|
|
Margaret S. Shehee, Co-Trustee of the Virginia K. Shehee Inter Vivos Trust
|
|
By:Virginia K. Shehee Management Trust, General Partner
|
|
| /s/ John A. Hensarling | |
|
|
John A. Hensarling, Co-Trustee of the Virginia K. Shehee Management Trust
|
|
|
Andrew M. Shehee, Co-Trustee of the Virginia K. Shehee Management Trust
|
| /s/ Margaret S. Shehee | |
|
|
Margaret S. Shehee, Co-Trustee of the Virginia K. Shehee Management Trust
|
|
|
COMPANY:
|
|
|
KILPATRICK LIFE INSURANCE COMPANY
|
| By: /s/ Kenneth W. Phillips | |
|
|
Name: Kenneth W. Phillips |
|
|
|
|
|
Title: President and Chief Executive Officer
|
EXHIBIT A
SHAREHOLDER LIST
|
Shareholder
|
Number of Shares Owned
|
Pro Rata Share
|
||||||
|
Andrew Michael Shehee
|
152,018.5
|
19.0018
|
%
|
|||||
|
Ann Shane Shehee
|
344.5
|
0.0431
|
%
|
|||||
|
Margaret Scott Shehee
|
152,018.5
|
19.0018
|
%
|
|||||
|
Nell Elizabeth Shehee
|
152,018.5
|
19.0018
|
%
|
|||||
|
Trustees of the Virginia K. Shehee Inter Vivos Trust
|
33,250.0
|
4.1561
|
%
|
|||||
|
The Shehee Limited Partnership
|
310,350.0
|
38.7928
|
%
|
|||||
|
Harvey W. Rubin
|
10.0
|
0.0013
|
%
|
|||||
|
Christopher L. Martin
|
10.0
|
0.0013
|
%
|
|||||
|
Total
|
800,020.0
|
100.0000
|
%
|
|||||
EXHIBIT B
FORM OF ESCROW AGREEMENT
[ATTACHED]
EXHIBIT C
TERRITORIES
|
TEXAS
Anderson
Andrews
Angelina
Aransas
Archer
Armstrong
Atascosa
Austin
Bailey
Bandera
Bastrop
Baylor
Bee
Bell
Bexar
Blanco
Borden
Bosque
Bowie
Brazoria
Brazos
Brewster
Briscoe
Brooks
Brown
Burleson
Burnet
Caldwell
Calhoun
Callahan
Cameron
Camp
Carson
Cass
Castro
Chambers
Cherokee
Childress
Clay
Cochran
Coke
Shelby
Sherman
Smith
Somervell
Starr
Stephens
Sterling
Stonewall
Sutton
Swisher
Tarrant
Taylor
Terrell
Terry
Throckmorton
Titus
Tom Green
Travis
Trinity
Tyler
Upshur
Upton
Uvalde
Val Verde
Van Zandt
Victoria
Walker
Waller
Ward
Washington
Webb
Wharton
Wheeler
Wichita
Wilbarger
Willacy
Williamson
Wilson
Winkler
Wise
Wood
Yoakum
Young
Zapata
Zavala
Howard
Independence
Izard
Jackson
Jefferson
Johnson
Lafayette
Lawrence
Lee
Lincoln
Little River
Logan
Lonoke
Madison
Marion
Miller
Mississippi
Monroe
Montgomery
Nevada
Newton
Ouachita
Perry
Phillips
Pike
Poinsett
Polk
Pope
Prairie
Pulaski
Randolph
St. Francis
Saline
Scott
Searcy
Sebastian
Sevier
Sharp
Stone
Union
Van Buren
Washington
White
Woodruff
Yell
|
Coleman
Collin
Collingsworth
Colorado
Comal
Comanche
Concho
Cooke
Coryell
Cottle
Crane
Crockett
Crosby
Culberson
Dallam
Dallas
Dawson
Deaf Smith
Delta
Denton
DeWitt
Dickens
Dimmit
Donley
Duval
Eastland
Ector
Edwards
Ellis
El Paso
Erath
Falls
Fannin
Fayette
Fisher
Floyd
Foard
Fort Bend
Franklin
Freestone
Frio
Gaines
LOUISIANA
Acadia
Allen
Ascension
Assumption
Avoyelles
Beauregard
Bienville
Bossier
Caddo
Calcasieu
Caldwell
Cameron
Catahoula
Claiborne
Concordia
De Soto
East Baton Rouge
East Carroll
East Feliciana
Evangeline
Franklin
Grant
Iberia
Iberville
Jackson
Jefferson
Jefferson Davis
La Salle
Lafayette
Lafourche
Lincoln
Livingston
Madison
Morehouse
Natchitoches
Orleans
Ouachita
Plaquemines
Pointe Coupee
Rapides
Red River
Richland
Sabine
St. Bernard
|
Galveston
Garza
Gillespie
Glasscock
Goliad
Gonzales
Gray
Grayson
Gregg
Grimes
Guadalupe
Hale
Hall
Hamilton
Hansford
Hardeman
Hardin
Harris
Harrison
Hartley
Haskell
Hays
Hemphill
Henderson
Hidalgo
Hill
Hockley
Hood
Hopkins
Houston
Howard
Hudspeth
Hunt
Hutchinson
Irion
Jack
Jackson
Jasper
Jeff Davis
Jefferson
Jim Hogg
Jim Wells
St. Charles
St. Helena
St. James
St. John The Baptist
St. Landry
St. Martin
St. Mary
St. Tammany
Tangipahoa
Tensas
Terrebonne
Union
Vermilion
Vernon
Washington
Webster
West Baton Rouge
West Carroll
West Feliciana
Winn
MISSISSIPPI
Adams
Alcorn
Amite
Attala
Benton
Bolivar
Calhoun
Carroll
Chickasaw
Choctaw
Claiborne
Clarke
Clay
Coahoma
Copiah
Covington
De Soto
Forrest
Franklin
George
Greene
Grenada
|
Johnson
Jones
Karnes
Kaufman
Kendall
Kenedy
Kent
Kerr
Kimble
King
Kinney
Kleberg
Knox
Lamar
Lamb
Lampasas
La Salle
Lavaca
Lee
Leon
Liberty
Limestone
Lipscomb
Live Oak
Llano
Loving
Lubbock
Lynn
McCulloch
McLennan
McMullen
Madison
Marion
Martin
Mason
Matagorda
Maverick
Medina
Menard
Midland
Milam
Mills
Hancock
Harrison
Hinds
Holmes
Humphreys
Issaquena
Itawamba
Jackson
Jasper
Jefferson
Jefferson Davis
Jones
Kemper
Lafayette
Lamar
Lauderdale
Lawrence
Leake
Lee
Leflore
Lincoln
Lowndes
Madison
Marion
Marshall
Monroe
Montgomery
Neshoba
Newton
Noxubee
Oktibbeha
Panola
Pearl River
Perry
Pike
Pontotoc
Prentiss
Quitman
Rankin
Scott
Sharkey
Simpson
Smith
Stone
Sunflower
Tallahatchie
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Mitchell
Montague
Montgomery
Moore
Morris
Motley
Nacogdoches
Navarro
Newton
Nolan
Nueces
Ochiltree
Oldham
Orange
Palo Pinto
Panola
Parker
Parmer
Pecos
Polk
Potter
Presidio
Rains
Randall
Reagan
Real
Red River
Reeves
Refugio
Roberts
Robertson
Rockwall
Runnels
Rusk
Sabine
San Augustine
San Jacinto
San Patricio
San Saba
Schleicher
Scurry
Shackelford
Tate
Tippah
Tishomingo
Tunica
Union
Walthall
Warren
Washington
Wayne
Webster
Wilkinson
Winston
Yalobusha
Yazoo
ARKANSAS
Arkansas
Ashley
Baxter
Benton
Boone
Bradley
Calhoun
Carroll
Chicot
Clark
Clay
Cleburne
Cleveland
Columbia
Conway
Craighead
Crawford
Crittenden
Cross
Dallas
Desha
Drew
Faulkner
Franklin
Fulton
Garland
Grant
Greene
Hempstead
Hot Spring
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EXHIBIT D
FORM OF LEGAL OPINION
[ATTACHED]
EXHIBIT E
COINSURANCE AGREEMENT
[ATTACHED]
Exhibit 10.2
KILPATRICK LIFE INSURANCE COMPANY
Shreveport, Louisiana
Salt Lake City, Utah
COINSURANCE AGREEMENT
Between
KILPATRICK LIFE INSURANCE COMPANY
Shreveport, Louisiana
and
SECURITY NATIONAL LIFE INSURANCE COMPANY
Salt Lake City, Utah
COINSURANCE AGREEMENT
THIS COINSURANCE AGREEMENT ("Agreement") is entered into by and between KILPATRICK LIFE
INSURANCE COMPANY, a Louisiana life insurance company ("Company"), and SECURITY NATIONAL LIFE INSURANCE COMPANY, a Utah life insurance company ("Coinsurer").
WHEREAS, the Company has issued, assumed or coinsured certain insurance Policies (as defined herein); and
WHEREAS, the Company desires the Coinsurer to acquire contractual rights, obligations and risks under the Policies, and Coinsurer desires
to acquire, such contractual rights, obligations and risks as coinsurance; and
WHEREAS, this Agreement is contingent upon the contemporaneous execution of the Stock Purchase Agreement (as defined herein) and the approval of this Agreement by the Louisiana Department of Insurance.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, and in reliance upon the representations,
warranties, conditions and covenants herein contained, and intending to be legally bound hereby, the Company and the Coinsurer do hereby agree as follows:
ARTICLE 1
DEFINITIONS
The following capitalized words and terms shall have the following meanings when used in this Agreement:
1.1 Bond Gains. The total
amount of the net proceeds realized upon the completion of the sale of the Bonds (pursuant to Section 8.2) minus the Company’s book value of the Bonds on the date of the sale of those Bonds, plus [One Million Thirty-Six Thousand Two Hundred
Eleven Dollars ($1,036,211.00)] (which is the amount agreed to by the Parties as set forth in Section 8.2.1).
1.2 Bonds. The debt
securities held by the Company set forth in Schedule 8.1A.
1.3 Books and Records. All
original files and records, in whatever form, in the possession or under the control of the Company related to the Policies and useful or necessary in their underwriting, reserving, or administration, including, but not limited to, policy files,
claims files and underwriting files, policy form files (including all files relating to the filing and approval of policy forms, applications and riders with insurance regulatory authorities); rate filings and actuarial data developed or utilized
by the Company or on its behalf in support of premium rates charged under the Policies; and premium tax records and reports for the Policies now in the hands of the Company.
1.4 Closing. The closing of
the coinsurance transactions contemplated in this Agreement pursuant to ARTICLE 8 of this Agreement.
1.5 Closing Date. The date
upon which the Closing shall take place, which shall be the later of (i) the day immediately following the date on which the Louisiana Department of Insurance approves the coinsurance of the Policies by the Coinsurer, or (ii) the day on which the
last Bond is sold.
1.6 Coinsurance Effective Date.
October 1, 2019.
1.7 Company. Kilpatrick
Life Insurance Company.
1.8 Excluded Liabilities.
Any claims or liability under, in connection with or with respect to the Policies (a) for Taxes payable with respect to premiums collected on Policies in force in all periods prior to the Coinsurance Effective Date; (b) arising from participation
in any guaranty fund, insolvency fund, plan, pool, association or other similar organization and which is based on premiums collected on Policies in force in any period on or prior to the Coinsurance Effective Date or (c) any liability not
arising from the terms and conditions of the Policies, including any liability arising under agreements with third parties, Policyholders or agents.
1.9 Existing Reinsurance
Coverage. All contracts, agreements and treaties of reinsurance between the Company and any third-party reinsurer that (a) are in force and effect as of the Coinsurance Effective Date and (b) cover any risks associated with the Polices.
(All Existing Reinsurance Coverage shall be disclosed by the Company in Schedule 1.9).
1.10 Loss. All costs and expenses (including interest, penalties, reasonable attorneys', accountants' and actuaries' fees, and any other costs and expenses incident to any suit, action or proceeding), damages, charges,
deficiencies, liabilities, obligations, claims and judgments sustained or incurred by, or asserted against, a party entitled to indemnity hereunder.
1.11 Policy
or Policies. Each or all of those insurance policies, including any endorsements, riders or schedules, issued, coinsured or assumed by the Company that are (a) identified on Schedule 1.11 delivered at Closing, as may be revised from
time to time by mutual agreement of the parties, and (b) in force and effect in accordance with the terms of the Policy as of the Coinsurance Effective Date or reinstated in accordance with the terms of the Policy on or after the Coinsurance
Effective Date. (The Policies shall be identified on Schedule 1.11 by policy number and Policyholder name).
1.12 Policyholder. Any
individual or entity who is the owner of a Policy or who has the right to terminate or lapse the Policy, effect changes of beneficiary, coverage limits, add or terminate persons covered under such Policy or direct any other policy changes in such
Policy.
1.13 Required Closing Date
Approvals. The authorization and/or approval of the Louisiana Department of Insurance of the execution, delivery and performance of this Agreement by Company and the approval of the execution, delivery and performance of this Agreement by
the Board of Directors of Company and Coinsurer.
1.15 Shareholders. The
shareholders of the Company.
1.16 Statutes. The
Louisiana Uniform Unclaimed Property Act, or similar unclaimed property laws from any other relevant state.
1.17 Stock Purchase Agreement.
That Stock Purchase Agreement entered into by and between the Shareholders and the Coinsurer simultaneously with the execution of this Agreement, wherein the Coinsurer agrees to purchase from Shareholders and Shareholders agree to sell to
Coinsurer all of the issued and outstanding shares of the Company, a copy of which is attached hereto as Exhibit “A”.
1.18 Support Services. The
administrative and support services to be provided in connection with the Policies.
ARTICLE 2
COINSURANCE
2.1 Coinsurance of Policies.
Subject to the terms and conditions of this Agreement, Coinsurer shall coinsure the Policies as of the Coinsurance Effective Date, in exchange for receipt of the Settlement Amount from the Company.
2.2 Administration and Support
Services. Unless otherwise directed by the Coinsurer, the Company shall administer the Policies on behalf of the Coinsurer for the duration of the Coinsurance Agreement. The Coinsurer shall pay the Company the prorated rate of ZERO
($0.00) per Policy per year for administration and the Support Services. The Company shall continue to perform all Support Services with respect to all Policies in the same manner as they are currently performed.
2.3 Regulatory Approvals.
The Company, at its sole expense, shall be responsible for obtaining any Required Closing Date Approvals (other than approval of the execution, delivery and performance of this Agreement by the Board of Directors of Coinsurer) from the insurance
regulatory authorities in its state of domicile on or before the Closing Date. However, if requested by the Company the Coinsurer shall assist the Company in obtaining the required approval from the Louisiana Department of Insurance.
ARTICLE 3
COINSURANCE
3.1 Coinsurance. Subject to
the terms and conditions of this Agreement, effective as of the Coinsurance Effective Date, the Company hereby cedes to Coinsurer and Coinsurer hereby accepts and coinsures one hundred percent (100%) of the Company’s contractual liabilities under
the Policies (other than Excluded Liabilities), by means of indemnity reinsurance. On and after the Coinsurance Effective Date, Coinsurer shall be entitled to exercise all contractual rights and privileges of the Company under the Policies in
accordance with the terms and provisions of such Policies. After the Closing Date, Coinsurer agrees to be responsible for and shall be obligated with respect to one hundred percent (100%) of the contractual liabilities under the Policies (other
than Excluded Liabilities) in accordance with the terms and conditions of the Policies and applicable law.
3.2 Ceding Allowance. The
Coinsurer agrees to pay the Company, on the Coinsurance Effective Date, a ceding allowance equal to one dollar ($1.00).
3.3 Lapse, Reinstatement.
In no event shall such coinsurance with respect to a particular Policy be in force and binding unless such underlying Policy is in force and binding or has lapsed but would be entitled to reinstatement by its terms of the Policy as of the
Coinsurance Effective Date.
3.4 Reduction. With respect
to each of the Policies, the amount of reinsurance hereunder shall be maintained in force without reduction so long as the Policy remains in force without reduction. If there is a reduction with respect to a Policy, Coinsurer’s liability with
respect thereto shall be equally reduced. All coinsurance for which Coinsurer is liable hereunder shall be subject to the same rates, terms, conditions, limitations and restrictions as are contained in the Policy.
3.5 Reimbursement. On and
after the Coinsurance Effective Date, except as otherwise provided in this Agreement, Coinsurer shall bear and shall have responsibility for promptly reimbursing the Company for all payments the Company makes (or since the Coinsurance Effective
Date, has made) in satisfaction of contractual liabilities in accordance with the terms of the Policies.
3.6 Coinsurer Directions.
The Company shall comply with all reasonable legal directions from the Coinsurer on all matters affecting the Coinsurer’s obligations with respect to the Policies; provided that the Coinsurer shall indemnify and defend the Company in connection
therewith pursuant to the terms of this Agreement. The Coinsurer shall be entitled to the right to review and audit any claims administered by the Company. The Company shall exercise reasonable care to ensure that all
claims are properly administered pursuant to the terms and conditions of the Policy language and applicable state statutes and other applicable guidance.
3.7 Duration of Coinsurance;
Recapture; Breakup Fee. Except as otherwise provided herein, the coinsurance provided under this Agreement shall remain continuously in force. All of the Policies are eligible for recapture, subject to written notice by either party to
the other party and the Louisiana Department of Insurance. The recapture shall be effective immediately upon delivery of such notice, unless otherwise mutually agreed to in writing. Both the Company and the Coinsurer shall have the right to
require the recapture of the Policies by the Company. Unless otherwise mutually agreed to in writing, any recapture shall apply to 100% of all of the Policies. If the Company elects to recapture the Policies, the Company shall pay the Coinsurer
a breakup fee of five million dollars ($5,000,000.00) (the “Break Up Fee”) within fifteen days (15) of the effective date of the recapture; provided, however, if the Shareholders terminate the Stock Purchase Agreement
pursuant to (a) Section 9.01(c)(i), or (b) Section 9.01(c)(ii), and in the case of this clause (b), all of the conditions to Coinsurer’s obligations to consummate the transactions under Section 7.02 of the Stock Purchase Agreement have been
satisfied (other than: (i) breaches of any representation, warranty, covenant or other agreement by any Shareholder or the Company that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect; (ii) the
failure of the Louisiana Department of Insurance to approve the transaction contemplated pursuant to this Agreement or the Stock Purchase Agreement where such failure was not due to any material action, inaction, or omission by or on behalf of
the Shareholders or the Company or (iii) any such conditions which by their nature are to be satisfied by the date of Closing (as such term is defined in the Stock Purchase Agreement)), then the Company shall not be responsible for paying the
Break Up Fee. Notwithstanding the foregoing, if the Stock Purchase Agreement has been approved by the Louisiana Department of Insurance and the closing of the Stock Purchase Agreement has occurred in accordance with Section 2.04 of the Stock
Purchase Agreement, the Policies may be recaptured by the Company, in whole or in part, at any time and without payment of the Break Up Fee.
3.8 Experience Refund. If
the calculations set forth in Section 3.8.1 of this Article produce a positive amount, the Coinsurer will pay to the Company a certain experience refund (each, an “Experience Refund”). If the operation of the formula described in Section
3.8.1 of this Article should produce a loss for any accounting period after the Coinsurance Effective Date, such amount will be carried forward with interest at the rate of six percent (6%) per annum and charged against future gains. If the
cumulative sum of gains and losses is negative, the Company will pay to the Coinsurer, on demand, an amount equal to the sum of (i) the absolute value of such cumulative sum of gains and losses, plus (ii) the accrued interest thereon, plus (iii)
the total amount of all Experience Refunds.
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3.8.1
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Experience Refund Formula. The Experience Refund gain (or loss, if negative) for the then current accounting period will be calculated as
follows (all amounts shall be net of the amounts allocated to Existing Reinsurance Coverage):
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(i)
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the premiums earned on the Policies for the period in question; plus
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(ii)
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the investment income earned by the assets held in trust in relation to the Policies for the period in question; plus
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(iii)
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the total amount of the reserves on the last day of the preceding accounting period on the Policies reinsured hereunder and then in
force under this Agreement; minus
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(iv)
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the total amount of reserves on the last day of the current accounting period on the Policies reinsured hereunder and then in force under this Agreement; minus
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(v)
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the actual commission and administrative and support service expenses incurred in relation to the Policies for the period in question; minus
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(vi)
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the premium tax incurred on the Policies for the period in question; minus
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(vii)
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any benefits incurred on the Policies for the period in question, in accordance with the applicable terms of the Policies.
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3.8.2
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The Experience Refund for each accounting period shall equal 97% of the gain so calculated pursuant to Section 3.8.1.
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3.9 Parties to Coinsurance.
This Agreement provides for indemnity reinsurance solely between the Company and Coinsurer. The acceptance of reinsurance under this Agreement shall not create any right or legal relation between the Coinsurer and any Policyholder under a
Policy, and the Company shall be and remain solely liable to such Policyholder under the Policy.
ARTICLE 4
COMPANY REPRESENTATIONS AND WARRANTIES
4.1 The representations and warranties of the Company enumerated in Article III of the Stock Purchase Agreement are incorporated herein as part of this Agreement. The defined terms therein shall have the same meanings as
defined in the Stock Purchase Agreement.
4.2 The Company adopts and
restates, as part of this Agreement, the Company’s representations and warranties set forth in the Stock Purchase Agreement.
ARTICLE 5
COINSURER REPRESENTATIONS AND WARRANTIES
5.1 The
representations and warranties of the Coinsurer enumerated in Article IV of the Stock Purchase Agreement are incorporated herein as part of this Agreement. The defined terms therein shall have the same meanings as defined in the Stock Purchase
Agreement.
5.2 The
Coinsurer adopts and restates, as part of this Agreement, the Coinsurer’s representations and warranties set forth in the Stock Purchase Agreement.
ARTICLE 6
COVENANTS OF THE PARTIES
The Company and Coinsurer hereby covenant and agree as follows:
6.1 Maintenance of Business by
the Company. From the date of this Agreement, the Company shall, to the extent reasonably possible,
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6.1.1
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carry on its business in the ordinary course and consistent with past practice, using reasonable efforts, equivalent in all material respects to
those business methods and practices historically followed by the Company, to maintain its relationships with those customers, Policyholders, and others with whom it has business relationships with respect to the Policies;
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6.1.2
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preserve intact the Company's present business organization, reputation and Policyholder relations;
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6.1.3
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maintain all licenses, qualifications and authorizations of the Company to do business in each jurisdiction in which it is presently licensed,
qualified or authorized; and
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6.1.4
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use reasonable efforts, equivalent in all material respects to the business methods and practices the Company uses with respect to its direct
policyholders and insureds, to service and conserve the Policies and maintain them in full force and effect.
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6.2.1
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Except as required by applicable law, the Company shall make no material change in its underwriting or reserving policies, practices or procedures
applicable to the Policies.
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6.3 Continued Access to Books
and Records Retained by the Company. The Company shall retain historical Books and Records relating to the Policies in accordance with the Company's generally applicable records retention policies, as in effect at the date hereof,
including, without limitation, advertising materials, complaint files, loss ratio data, closed claims files, and other records relating to the Policies or representing compilations of data with respect thereto. The Company shall provide Coinsurer
with access to all non-privileged information in the possession or control of the Company which pertains to, and which Coinsurer reasonably requests in connection with, any claim, loss or obligation arising out of any of the Policies. Such access
shall be provided by the Company during normal business hours of the Company upon advance notice or as otherwise reasonably requested by Coinsurer or its employees, accountants, actuaries, attorneys and other agents for any reasonable purpose
including, without limitation, the preparation or examination of tax returns and financial statements, the review of payment and claims procedures, the adequacy of established reserves, efforts to seek and obtain rate increases, the compliance by
the Company with any obligations it has under this Agreement, and the conduct of any litigation or regulatory dispute resolution, whether pending or threatened, concerning the sale of Policies or the servicing of the Policies.
6.4 Compliance with Privacy
Laws. The Company and Coinsurer shall comply with all applicable privacy and data security laws and regulations with respect to the use and disclosure of information regarding the Policies and the Policyholders which is private or
confidential. The Company and Coinsurer shall notify in writing the other within five (5) calendar days upon discovery of any breach or other noncompliance with any applicable privacy and data security laws.
6.5 Notice of Actions. From
the date hereof, the Company and Coinsurer shall, within ten (10) days of receipt, provide each other with written notice of the receipt of (a) any inquiry, complaint, notice or other communication, whether oral or written, from any insurance
regulatory authority that is related to the Policies or to this Agreement, including, without limitation, an alleged violation of any law, rule, regulation, bulletin or order, or a threat of any other action or proceeding against the Company or
the Coinsurer, and (b) any notice, including service of process, summons or other litigation document, indicating the commencement or threatened commencement of any litigation or arbitration proceeding against the Company or Coinsurer related to
any loss arising under the Policies or any matter contemplated under this Agreement.
6.6 Continued Access to Books
and Records. The Company agrees to provide the Coinsurer with access to all information which the Coinsurer reasonably requests in connection with the Policies. Such access shall be provided during normal business hours or as otherwise
reasonably requested by the Company or its employees, accountants, actuaries, attorneys or other agents for any reasonable purpose including, without limitation, the preparation or examination of tax returns and financial statements, the review
of payment and claims procedures, the adequacy of established reserves, the compliance by the Coinsurer with any obligations it has under this Agreement and the conduct of any litigation or regulatory dispute resolution, whether pending or
threatened, concerning the sale of the Policies or the servicing of the Policies. The Company shall maintain all books, records, files and other information related to the Policies for such period of time as specified by applicable state laws and
regulations regulating the preservation of books and records or such longer period of time as agreed by the parties hereto. This Section 6.6 shall in no way limit the Louisiana Department of Insurance’s statutory right to access all information
in the possession or control of the Company or the Coinsurer related to the Policies.
6.7 Unfair
Practices. The Company shall cooperate with the Coinsurer in preserving and exercising all legal and contractual rights that may be available to the Company against any person who shall "twist," rewrite, or solicit the lapse or termination
of, any of the Policies, or who shall otherwise engage in any unfair or deceptive acts or practices in connection with the Policies, which acts or practices have caused or may result in deterioration of the block of Policies reinsured by the
Coinsurer or in injury to the Coinsurer’s commercial interests. The Company shall have the right to approve any action proposed to be taken by, on behalf of, or in the name of, the Company under this Section 6.7, which approval shall not be
unreasonably withheld. Coinsurer shall indemnify, defend and hold the Company harmless from and against any Loss incurred by the Company as a result of actions taken by or at request of Coinsurer under this Section.
6.8 Filings, Consents and
Approvals. The parties will take all commercially reasonable steps necessary or desirable, and shall proceed diligently and in good faith, to obtain as promptly as practicable all approvals, authorizations and clearances of governmental and
regulatory authorities and any consents of Policyholders required of the Company and Coinsurer to consummate the transactions contemplated in this Agreement including, without limitation, the Required Closing Date Approvals, and shall cooperate
with each other and provide such information and communications to such governmental and regulatory authorities as the party responsible for obtaining such approvals may reasonably request.
6.9 Conduct Pending Closing.
From the date of this Agreement to the Closing Date;
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6.9.1
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the Company shall use its best efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this
Agreement, the representations and warranties of the Company contained in ARTICLE 4 hereof shall continue to be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date;
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6.9.2
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the Coinsurer shall use its best efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this
Agreement, the representations and warranties of Coinsurer contained in ARTICLE 5 hereof shall continue to be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date;
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6.9.3
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the Company shall notify the Coinsurer promptly of any event, condition or circumstance occurring from the date hereof through the Closing Date that
would constitute a material violation or breach of this Agreement by the Company; and
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6.9.4
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Coinsurer shall notify the Company promptly of any event, condition or circumstance occurring from the date hereof through the Closing Date that
would constitute a material violation or breach of this Agreement by the Coinsurer.
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6.10 Further Assurances.
Subject to the terms and conditions of this Agreement, the Company and Coinsurer will use their best efforts (a) to take, or cause to be taken, all actions, (b) to do, or cause to be done, all things, or (c) to execute any documents, reasonably
necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. On and after the Closing Date, the Company and Coinsurer will take all appropriate action and execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry out any of the provisions hereof.
6.11 Use by the Coinsurer of
the Company's Name, Logo or Service Marks. As necessary to implement and effectuate the intent of this Agreement or as otherwise agreed upon in writing, Coinsurer shall have a limited right to use the name, “Kilpatrick Life Insurance
Company” or “KLIC” or any of the Company's service marks, trademarks, designs or logos related to that name. Coinsurer may only use the Company’s name, logo, or service marks by clearly designating in any communication with a Policyholder that
Coinsurer is acting in the capacity of a coinsurer of the Company, and that Coinsurer is in no way acting on behalf of the Company, acting as the Company’s agent, or representing the Company. Prior to sending any communication to a Policyholder
in which the Company’s name, logo, or service mark is used, Coinsurer shall provide the Company with a copy of the form of the communication and obtain consent from the Company to send the communication, which consent shall not unreasonably be
withheld. If the Company has not denied consent within five (5) business days after receipt of the form of communication, consent shall be deemed to have been granted to Coinsurer.
6.12 Communications with
Policyholders. On or after the Coinsurance Effective Date any written communications with Policyholders in connection with the coinsurance of the Policies by Coinsurer under this Agreement, or the servicing of the Policies shall be prepared
and transmitted by the Company with a copy to Coinsurer; no written communications shall be made by Coinsurer with Policyholders absent the prior written consent of the Company.
6.13 Unclaimed
Property. If any state agency, department or division, or audit firm (or similar organization) acting on behalf of a state agency, department or division, determines that the Company did not report and remit all unclaimed proceeds
associated with the Policies in accordance with the state's Statutes, or that additional proceeds must be remitted for any reason, Coinsurer shall return to the Company the reserves associated with the Policies that must be remitted. The Company
shall also be responsible for the payment of any interest, penalty, or fine in its entirety associated with a determination that unclaimed proceeds associated with the Polices prior to the Coinsurance Effective Date were not reported and remitted
in full accordance with the Statutes.
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6.13.1
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Location of Insured/Beneficiary. The Company and Coinsurer both covenant and agree that in the event any state agency, department or
division, or audit firm (or similar organization) acting on behalf of a state agency, department or division asserts that unclaimed proceeds associated with the Polices prior to the Coinsurance Effective Date were not reported and
remitted in accordance with the Statutes, any cost or effort to rebut that assertion or any cost or effort to identify, locate, and contact the insured(s) and/or beneficiary(ies) associated with the Policies in question shall be the sole
responsibility of the Company.
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6.14 Expenses. Except as
otherwise specifically provided in this Agreement, the parties hereto shall each bear their own respective expenses incurred in connection with the preparation, execution and performance of this Agreement, including without limitation all fees
and expenses of counsel, actuaries and accountants.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Coinsurer’s Obligations to Close.
The obligation of Coinsurer to close the transactions contemplated under this Agreement shall be subject to the fulfillment of the following conditions, any one or more of which may be waived by Coinsurer to the extent permitted by law:
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7.1.1
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Receipt of All Required Closing Date Approvals. All Required Closing Date Approvals, if any, shall have been received, and the Company shall
have delivered to the Coinsurer a copy of any Required Closing Date Approval issued by the insurance regulatory authorities in its State of domicile.
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7.1.2
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Truth of Representations and Warranties of Company. The representations and warranties of the Company contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date.
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7.1.3
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Performance of Covenants and Obligations of Company. The Company shall have performed and complied with all agreements, covenants, obligations
and conditions required by this Agreement to be so performed or complied with by the Company at or before the Closing.
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7.1.4
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Receipt of the Settlement Amount. The Settlement Amount shall have been paid to the Coinsurer.
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7.1.5
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Execution and Delivery of Agreements. The Stock Purchase Agreement shall have been executed by duly authorized executive officers of the
Company and by the Shareholders and delivered to the Coinsurer.
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7.1.6
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Delivery of Listing of Policies. The Company shall have delivered to the Coinsurer a final listing of the Policies to be reinsured by the
Coinsurer under this Agreement.
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7.1.7
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Assignment or Bill of Sale. The Company shall assign, transfer and convey all assets included in the Settlement Amount by assignment, bill of
sale or other appropriate instrument acceptable to Coinsurer, free and clear of any lien, claim or other encumbrances.
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7.1.8
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Certificate. A certificate executed by an officer of the Company certifying that (i) the representations and warranties of the Company
contained in ARTICLE 4 are true and correct in all material respects as of the Closing Date; and (ii) all covenants to be performed, and other conditions to Closing required to be satisfied, by the Company have been duly performed or
satisfied, as applicable, in all material respects, shall have been delivered to Coinsurer.
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7.2 Conditions to the Company's
Obligations to Close. The obligation of the Company to close the transactions contemplated under this Agreement shall be subject to the fulfillment of the following conditions, any one or more of which may be waived by the Company to the
extent permitted by law:
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7.2.1
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Receipt of All Required Closing Date Approvals. All Required Closing Date Approvals, if any, shall have been obtained.
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7.2.2
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Truth of Representations and Warranties of Coinsurer. The representations and warranties of the Coinsurer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date.
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7.2.3
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Performance of Covenants and Obligations of Coinsurer. The Coinsurer shall have performed and complied with all agreements, covenants,
obligations and conditions required by this Agreement to be so performed or complied with by Coinsurer at or before the Closing.
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7.2.4
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Execution and Delivery of Agreements. The Stock Purchase Agreement shall have been executed by duly authorized executive officers of Coinsurer
and delivered to Company.
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7.2.5
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Certificate. A certificate executed by an officer of the Coinsurer certifying that (i) the representations and warranties of the Coinsurer
contained in ARTICLE 5 are true and correct in all material respects as of the Closing Date; and (ii) all covenants to be performed, and other conditions to Closing required to be satisfied, by the Coinsurer have been duly performed or
satisfied, as applicable, in all material respects, shall have been delivered to the Company.
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ARTICLE 8
CLOSING AND CONSIDERATION
8.1 Settlement
Amount. On the Closing Date, the Company will pay the Coinsurer an amount equal to the Settlement Amount. Coinsurer shall provide the Company with wire transfer instructions and bank routing numbers for the payment of the Settlement
Amount prior to the Closing Date. The Settlement Amount shall include an amount equal to the reserves associated with the Policies as of the Coinsurance Effective Date and as set forth on Schedule 8.1.1 and shall be paid in cash from the
proceeds of the Bonds identified on Schedule 8.1A, or otherwise, and by the transfer of those certain assets identified in Schedule 8.1B. The Settlement Amount shall also include an additional transfer of assets sufficient to return the
ratio of the Reinsurer’s adjusted capital and surplus divided by its risk-based capital factor after the application of this Agreement to that ratio which existed prior to the application of this Agreement (“RBC Transfer Amount”). The
Company and the Coinsurer shall establish, maintain, and place the assets held in relation to the reserves (but not any real estate, mortgage loans, or any other non-cash or non-Bond assets) in trust in accordance with the terms of, that certain
Trust Agreement, a copy of which is attached hereto as Exhibit “B” and by this reference is made a part hereof.
8.2 Bond
Gains. Upon execution of this Agreement, the Company shall sell the Bonds identified in Schedule 8.1A and transfer the cash proceeds of those Bonds to Coinsurer on the Closing Date.
|
8.2.1
|
The Company and the Coinsurer agree that the unrealized gains from bonds that remain assets of the Company and are not sold and transferred as part
of this Agreement (“Retained Bonds”) shall be included in the calculation of Bond Gains. The Company and the Coinsurer agree that the amount of such unrealized gains to be included in the Bond Gains is [One Million Thirty-Six Thousand
Two Hundred Eleven Dollars ($1,036,211.00)] (“Agreed Retained Bond Gain”), based on the fair market value of the Retained Bonds provided by Asset Allocation and Management, LLC as of October 4, 2019. The Company and the Coinsurer
acknowledge and agree that the Agreed Retained Bond Gain shall be the amount added to the total amount of the net proceeds realized upon the completion of the sale of the Bonds (pursuant to Section 8.2) notwithstanding the actual gains
realized in the event any of the Retained Bonds are eventually sold, or any other unrealized gain or fair market valuation of the Retained Bonds.
|
8.3 Intentionally Deleted.
8.4 Closing.
|
8.4.1
|
At the Closing, the Company shall:
|
|
8.4.1.1
|
Transfer the cash portion of Settlement Amount to Coinsurer by wire transfer of immediately available funds;
|
|
8.4.1.2
|
Deliver to Coinsurer an executed Trust Agreement attached hereto as Exhibit 1 (the “Trust Agreement”).
|
|
8.4.1.3
|
Deliver to Coinsurer the assets identified in Schedule 8.1B, free and clear of any lien or encumbrance and in a form acceptable to Coinsurer;
|
|
8.4.1.4
|
Deliver to Coinsurer a complete listing of the Policies reinsured under this Agreement.
|
|
8.4.2
|
At the Closing, the Coinsurer shall:
|
|
8.4.2.1
|
Deliver to the Company an executed Trust Agreement.
|
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 The representations and warranties of the Company enumerated
in Article III of the Stock Purchase Agreement and the representations and warranties of the Coinsurer enumerated in Article IV of the Stock Purchase Agreement shall be subject to the time restrictions on survival set forth in Section 8.01 of the
Stock Purchase Agreement. The defined terms in Section 8.01 of the Stock Purchase Agreement shall have the same meanings as defined in the Stock Purchase Agreement.
ARTICLE 10
UNDERTAKINGS OF COMPANY AND COINSURER FOLLOWING CLOSING
10.1 Premium Payments,
Negotiation of Checks. Upon and after the Coinsurance Effective Date, all premium payments under the Policies shall be the sole property of Coinsurer. The Company hereby assigns, to the extent permitted by law, to Coinsurer all of its
rights and privileges to draft or debit the accounts of any Policyholders for premiums due under the Policies pursuant to existing pre-authorized bank draft or electronic fund transfer arrangements between the Company and such Policyholders.
10.2 Records. The Company
shall maintain true and accurate books, records, files and other information related to the Policies for such period of time as specified by applicable state laws and regulations regulating the preservation of books and records or such longer
period of time as reasonably determined by Coinsurer. Without in any way limiting the foregoing, and in order to assist the Coinsurer in satisfying its financial reporting requirements, The Company shall promptly (and in no event later than
twenty (20) business days following the end of the relevant monthly period), provide the Coinsurer with all such information reasonably necessary for the Company to determine the appropriate financial reporting treatment applicable to the
Policies, prepare its financial statement filings and satisfy its other financial reporting and regulatory obligations. So long as any Policies are in force and subject to coinsurance hereunder, the Company shall make available for inspection and
copying by the Coinsurer any financial or other records pertaining to the Policies that may reasonably be required by the Coinsurer for financial statement preparation or any other reasonable business purpose. This Section 10.5 shall in no way
limit the Louisiana Department of Insurance’s statutory right to access all information in the possession or control of the Coinsurer or the Company related to the Policies.
10.3 Reports. The Company shall provide the Coinsurer the
reports detailed hereunder.
|
10.3.1
|
Agreement Accounting Period. This Agreement shall be on a monthly accounting period for all accounting settlements.
|
|
10.3.2
|
Monthly Accounting Reports. Accounting reports, as required under this Agreement, shall be submitted to the Coinsurer by the Company and by
the Coinsurer to the Company, not later than 20 calendar days after the end of each calendar month. Such reports shall include information on the amount of reinsurance premiums, policy loans and policy loan interest, the commission and
expense allowance, claims, and reserves on the contracts reinsured for the preceding calendar quarter.
|
|
10.3.3
|
Monthly Accounting Period. The monthly accounting shall be on a calendar-month basis, except that the initial monthly accounting period shall
run from the Coinsurance Effective Date through the last day of the calendar month in which the Coinsurance Effective Date falls.
|
|
10.3.4
|
Accounting Reports. Annual reports shall be submitted to the Coinsurer by the Company not later than 45 calendar days after the end of each
calendar year. Such reports shall include information necessary for the NAIC Convention Blank based on the contracts reinsured hereunder. Monthly and quarterly accounting reports shall be submitted to the Coinsurer by the Company not
later than 20 calendar days after the end of each calendar month and quarter and shall include any information necessary for the NAIC Quarterly Blank. Each party shall be responsible for preparing and filing their respective financial
statements as required.
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10.4 Audit. Each party
shall have the right to audit, at its sole expense, at the office of the other during regular business hours and upon at least forty-eight hours prior written notice, all records and procedures relating to the Policies in the hands of the other
party.
10.5 Support Services. The
Company shall provide Support Services in connection with the Policies in a manner consistent with the administration of the Policies prior to the Closing Date.
ARTICLE 11
[RESERVED]
ARTICLE 12
[RESERVED]
ARTICLE 13
INDEMNIFICATION
13.1 Indemnification By Company.
The Company shall indemnify and defend Coinsurer and hold it harmless from and against Loss based upon, resulting from or arising out of the Company's material breach of any representation, warranty, covenant or agreement under this Agreement.
Notwithstanding anything in this Agreement to the contrary, the indemnification obligations herein shall be subject to limitations on indemnification set forth in the Stock Purchase Agreement, including the limitations set forth in Section 8.04
thereof.
13.2 Indemnification
By Coinsurer. The Coinsurer shall indemnify and defend the Company and hold it harmless from and against Loss based upon, resulting from or arising out of the Coinsurer’s material breach of any representation, warranty, covenant or
agreement under this Agreement. Notwithstanding anything in this Agreement to the contrary, the indemnification obligations herein shall be subject to limitations on indemnification set forth in the Stock Purchase Agreement, including the
limitations set forth in Section 8.04 thereof
13.3 Indemnification Procedures. The indemnification procedures set forth in Article VIII of the Stock Purchase Agreement are incorporated herein as part of this Agreement. The defined
terms therein shall have the same meanings as defined in the Stock Purchase Agreement.
.
ARTICLE 14
INSOLVENCY
14.1 Payment of Benefits under
Insolvency. The obligations of the Coinsurer under this Agreement shall be without diminution or in any way affected or diminished because of the insolvency of the Company. In the event of the insolvency of the Company and the appointment
of a conservator, liquidator, receiver or statutory successor of the Company while coinsurance under this Agreement is in effect as to any Policy, all coinsurance made, ceded, renewed or otherwise becoming effective shall be payable directly to
such conservator, liquidator, receiver or statutory successor immediately upon demand, with reasonable provision for verification, on the basis of claims allowed against the Company by any court of competent jurisdiction or by any conservator,
liquidator, receiver or statutory successor of the Company having authority to allow such claims, without diminution because of such insolvency or because such conservator, liquidator, receiver or statutory successor has failed to pay all or a
portion of any claims.
14.2 Required Notice of and
Defense against Claims. In the event of the insolvency of the Company while coinsurance as to any Policy is in effect under this Agreement, the conservator, liquidator, receiver or statutory successor of the Company shall give the Coinsurer
written notice of the pendency of a claim against the Company on a Policy within a reasonable time after such claim is filed in the insolvency proceeding. During the pendency of any such claim, the Coinsurer may, at its own expense, investigate
such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that the Coinsurer may deem available to the Company or its conservator, liquidator, receiver or statutory successor.
The expense thus incurred by the Coinsurer shall be payable, subject to court approval, out of the estate of the Company as a part of the expense of conservation or liquidation to the extent of a proportionate share of the benefit which may
accrue to the Company in conservation or liquidation solely as a result of the defense undertaken by the Coinsurer.
ARTICLE 15
TERMINATION
15.1 This Agreement may be terminated at any time before the
Closing, by mutual written agreement of the Company and the Coinsurer.
15.2 The Coinsurer may terminate
this Agreement at any time prior to Closing for material breach by the Company of any of the terms or conditions of this Agreement or for failure of any condition to Closing, the satisfaction of which is solely within the Company's control;
provided, however, that the Company shall have five (5) days to cure such breach or satisfy such condition after receipt of proper notice by the Company from the Coinsurer.
15.3 The Company may terminate this Agreement at any time prior
to Closing for material breach by Coinsurer of any of the terms or conditions of this Agreement or for failure of any condition to Closing, the satisfaction of which is solely within the Coinsurer's control; provided, however, that the reinsurer
shall have five (5) days to cure such breach or satisfy such condition after receipt of proper notice by the Coinsurer from the Company.
15.4 Either the Company or the Coinsurer may terminate this
Agreement at any time prior to Closing for failure of any condition to Closing, the satisfaction of which is not within either the Company or the Coinsurer’s control, or otherwise chargeable to any act or omission to act on the part of either
party.
ARTICLE 16
TAX PROVISION
16.1 The parties hereby agree to
make the election in accordance with Internal Revenue Regulation Section 1.848-2(g)(8) (the “Regulation”) under Section 848 of the Internal Revenue Code of 1986 (the “Code”), as amended, to comply with all of the requirements of such Regulation
regarding such election, including, without limitation, the election statement and Tax return reporting requirements of Regulation Sections 1.848-2(g)(8)(ii) and 1.848-2(G)(8)(iii), and further agree:
|
16.1.1
|
To exchange information pertaining to the amount of “net consideration” under this Agreement as defined in the Regulation;
|
|
16.1.2
|
That the Company shall submit its calculation of the "net consideration" for purposes of that Regulation to the Coinsurer not later than May 1st for
each and every taxable year for which this Agreement is in effect;
|
|
16.1.3
|
That the Coinsurer may challenge such calculation within ten (10) business days of its receipt of the Company's calculation;
|
|
16.1.4
|
That should the Coinsurer challenge the Company's calculation of the "net consideration" and the parties be unable to agree as to the appropriate
methodology to determine the "net consideration" for purposes of the Regulation, they shall refer such dispute to an outside Tax consultant unrelated to either of the parties, and the parties agree to be bound by the decision of that
consultant;
|
|
16.1.5
|
That, pursuant to such election, the party with net positive consideration with respect to this Agreement for each taxable year will capitalize
specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1) of the Code; and
|
|
16.1.6
|
That the first taxable year for which such election shall be effective is taxable year 2019.
|
16.2 The Company shall cause the Stock Purchase Agreement to provide that, upon a closing of the transactions contemplated pursuant to the Stock Purchase Agreement, (i) in the event the Bond Gains exceed fifteen million dollars
($15,000.000.00), the Company and the Shareholders shall share equally (50%/50%) the Company’s additional tax expense attributed to that portion of the Bond Gains in excess of fifteen million dollars ($15,000,000.00), (ii) the Coinsurer shall
give the Shareholders an estimate of the expected amount to be shared by the Company and the Shareholders as soon as practicable, (iii) any amounts available in the “Indemnification Escrow Fund” (as defined in the Stock Purchase Agreement) shall
be applied toward satisfaction of the Shareholders’ share of said tax expense and shall be delivered to Coinsurer, (iv) any remaining amount owed by the Shareholders shall, upon demand, be paid to Coinsurer by the Shareholders.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Notice. Any and all
notices and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given when (a) received by the receiving party if mailed via United States registered or certified mail, return
receipt requested, (b) mailed by United States overnight express mail, (c) sent by facsimile or telecopy machine or email, followed by confirmation mailed by United States first-class mail or overnight express mail, or (d) delivered in person or
by commercial courier to the parties at the following addresses, provided written acknowledgment of receipt is obtained:
If to the Company, to:
Kilpatrick Life Insurance Company
1801 Marshall Street Shreveport , LA 71101
Attention: Ken Phillips
Email: ken.phillips@klic.com
If to Coinsurer, to:
Security National Life Insurance Company
P.O Box 57220
Salt Lake City UT 84157-0220
Attention: Jeffrey Stephens
E-mail: Jeff.Stephens@securitynational.com
and
P.O Box 57220
Salt Lake City, Utah 84157-0220
Salt Lake City, Utah 84157-0220
Attn: Garrett S. Sill
E-mail: Garrett.Sill@securitynational.com
Either party may change the names or addresses where notice is to be given by providing written notice to the other party of such change in accordance with
this Section 17.1.
17.2 Entire Agreement. The
Stock Purchase Agreement and this Agreement, including the Exhibits and Schedules and the other written agreements and documents required to be executed in conjunction with the Stock Purchase Agreement and this Agreement, constitute the sole and
entire agreement between the parties hereto with respect to the subject matter hereof, and supersede all prior discussions and agreements between the parties with respect to the subject matter hereof, which are merged with and into this Agreement
and the Stock Purchase Agreement.
17.3 Assignment. This
Agreement shall not be assigned by either of the parties hereto without the prior written approval of the other party.
17.4 Waivers and Amendments.
Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof. Such waiver must be in writing and must be executed by an officer or officers of such party duly authorized by such party. A
waiver on one occasion will not be deemed to be a waiver of the same or any other term or condition on a future occasion. This Agreement may be modified or amended only by a writing duly executed by the duly authorized officer or officers of each
party.
17.5 No Third-Party
Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of the Company and the Coinsurer and their permitted successors and assigns, and it is not the intention of the parties to confer rights as a
third-party beneficiary to this Agreement upon any other person, except as may be contemplated in this Agreement.
17.6 Offset. Any debts or
credits, matured or unmatured, liquidated or unliquidated, regardless of when they arose or were incurred, in favor of or against either Company or Coinsurer with respect to this Agreement are deemed mutual debts or credits, as the case may be,
and shall be set off, and only the balance shall be allowed or paid.
17.7 Public Announcements.
At all times at or before the Closing, the Company and the Coinsurer will consult with each other before issuing or making any reports, statements or releases to the public with respect to this Agreement or the transactions contemplated hereby
and will use good faith efforts to obtain the other party's approval of the form, content and timing of such report, statement or release. If the Company and the Coinsurer are unable to agree upon or approve the form, content and timing of any
such public report, statement or release and such report, statement or release is, in the opinion of legal counsel to the party, required by law or by legal disclosure obligations, then such party may make or issue the legally required report,
statement or release.
17.8 Confidentiality.
|
17.8.1
|
The Company and the Coinsurer each will hold, and will cause its respective officers, directors, employees, agents, consultants, attorneys and other
representatives to hold, in strict confidence, unless compelled to disclose by judicial or administrative process (including, without limitation, in connection with obtaining any Required Closing Date Approval) or by other requirements of
law, all confidential documents and confidential information concerning the other party furnished to it by the other party or such other party's officers, directors, employees, agents, consultants, attorneys or representatives in
connection with this Agreement or the transactions contemplated hereby, except to the extent that such documents or information can be shown to have been (a) previously lawfully known by the party receiving such documents or information,
(b) in the public domain through no fault of the receiving party, or (c) later acquired by the receiving party from other sources not themselves bound by, and in breach of, a confidentiality agreement.
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|
17.8.2
|
Neither the Company nor the Coinsurer will disclose or otherwise provide any such confidential information to any other person, except to that
party's respective auditors, actuaries, attorneys, financial advisors and other consultants who need access to such confidential information in connection with this Agreement and the transactions contemplated herein, or, in confidence, to
regulatory authorities or rating agencies such as A.M. Best.
|
|
17.8.3
|
If this Agreement is terminated, each of the parties will return to the other party all confidential information furnished to that party by the other
party, and retrieve and destroy all copies of such confidential information distributed to any other person.
|
17.9 Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Louisiana, without regard to its conflicts of law doctrine.
17.10 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original, but all of which shall constitute one and the same instrument.
17.11 Headings. The headings in this Agreement have been
inserted for convenience and do not constitute matter to be construed or interpreted in connection with this Agreement.
17.12 Severability. If any
provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law or if determined by a court of competent jurisdiction to be unenforceable, and if the rights or obligations of the Company or the
Coinsurer under this Agreement will not be materially and adversely affected thereby, such provision shall be fully severable, and this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this Agreement.
| KILPATRICK LIFE INSURANCE COMPANY | |
|
Date:10/11/2019
|
By: /s/ Kenneth W. Phillips
|
|
Name:Kenneth W. Phillips
|
|
|
Title: President and Chief Executive Officer
|
COINSURER SIGNATURE PAGE
IN WITNESS WHEREOF, the Coinsurer has executed this Agreement.
|
|
SECURITY NATIONAL LIFE INSURANCE COMPANY
|
|
Date:2019-10-11
|
By:/s/ Scott M. Quist
|
|
Name:Scott M. Quist
|
|
|
Title:CEO and President
|
SCHEDULE 1.9
Existing Reinsurance Coverage
SCHEDULE 1.11
Policies
SCHEDULE 8.1A
Bonds
SCHEDULE 8.1B
Other Assets
SCHEDULE 8.1.1
Settlement Amount
|
Net Reserves (Liabilities)
|
Total
|
|||
|
Reserves (Life and All Annuities)
|
$
|
.00
|
||
|
Advance Premiums
|
$
|
.00
|
||
|
Claims Liability In course of Settlement
|
$
|
.00
|
||
|
Claims Liability Incurred but Unreported
|
$
|
.00
|
||
|
Less (Annuities Not Coinsured)
|
$
|
.00
|
||
|
Less Net Due Premiums
|
$
|
.00
|
||
|
Less Net Deferred Premiums
|
$
|
.00
|
||
|
Total Net Reserves
|
$
|
.00
|
||
|
RBC Transfer Amount
|
$
|
.00
|
||
|
Settlement Amount
|
$
|
.00
|
||
|
Ceding Commission paid by Coinsurer ($1.00)
|
$
|
1.00
|
||
|
Assets
|
||||
|
Cash
|
$
|
.00
|
||
|
Other Assets (Listed in Schedule 8.1B)
|
$
|
.00
|
||
|
Total
|
$
|
.00
|
||
|
Cash wire from Company
|
$
|
.00
|
||
|
Settlement Amount
|
$
|
.00
|
||