exv10w2





EXHIBIT
10.2




Execution Copy




STOCK PURCHASE AGREEMENT




BY AND AMONG




WILTON REASSURANCE COMPANY




AND




HEALTHMARKETS, LLC




 






Dated as of June 12, 2008




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	1.1 Certain Definitions
	 	 	1	 
	1.2 Terms Defined Elsewhere in this Agreement
	 	 	5	 
	1.3 Other Definitional and Interpretive Matters
	 	 	6	 
	 
	 	 	 	 
	ARTICLE II SALE AND PURCHASE OF EQUITY INTERESTS
	 	 	8	 
	 
	 	 	 	 
	2.1 Sale and Purchase of Equity Interests
	 	 	8	 
	 
	 	 	 	 
	ARTICLE III PURCHASE PRICE
	 	 	8	 
	 
	 	 	 	 
	3.1 Purchase Price
	 	 	8	 
	3.2 Closing Date Payment
	 	 	8	 
	3.3 Purchase Price Adjustment
	 	 	8	 
	 
	 	 	 	 
	ARTICLE IV CLOSING AND TERMINATION
	 	 	10	 
	 
	 	 	 	 
	4.1 Closing Date
	 	 	10	 
	4.2 Termination of Agreement
	 	 	10	 
	4.3 Procedure Upon Termination
	 	 	11	 
	4.4 Effect of Termination
	 	 	11	 
	 
	 	 	 	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER
	 	 	11	 
	 
	 	 	 	 
	5.1 Seller Existence and Authority
	 	 	11	 
	5.2 Taxes
	 	 	12	 
	5.3 Companies
	 	 	15	 
	5.4 Accuracy of Books and Records
	 	 	15	 
	5.5 Compliance with Applicable Law
	 	 	15	 
	5.6 Litigation
	 	 	16	 
	5.7 Title to Assets
	 	 	16	 
	5.8 Real Property
	 	 	16	 
	5.9 Financial Statements
	 	 	16	 
	5.10 Absence of Certain Changes
	 	 	16	 
	5.11 Company Contracts
	 	 	17	 
	5.12 Employees
	 	 	17	 
	5.13 Seller’s Brokers
	 	 	17	 






i









 






TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	17	 
	 
	 	 	 	 
	6.1 Purchaser’s Corporate Existence and Authority
	 	 	17	 
	6.2 Availability of Funds; Financial Impact
	 	 	18	 
	6.3 Absence of Certain Changes
	 	 	18	 
	6.4 Compliance with Applicable Law
	 	 	18	 
	6.5 Litigation Against Purchaser
	 	 	19	 
	6.6 Purchaser’s Brokers
	 	 	19	 
	6.7 Non-Reliance
	 	 	19	 
	6.8 Investment Intent
	 	 	19	 
	6.9 No Knowledge of Material Adverse Effect
	 	 	19	 
	 
	 	 	 	 
	ARTICLE VII COVENANTS
	 	 	19	 
	 
	 	 	 	 
	7.1 Maintenance of Business by the Companies
	 	 	19	 
	7.2 Continued Access to Information by Seller
	 	 	21	 
	7.3 Access Prior to Closing
	 	 	21	 
	7.4 Filings, Consents and Approvals
	 	 	21	 
	7.5 Conduct Pending Closing
	 	 	22	 
	7.6 Further Assurances
	 	 	22	 
	7.7 Expenses
	 	 	23	 
	7.8 Assignment of Assigned Contracts; Modification
	 	 	23	 
	7.9 Notice Contracts
	 	 	23	 
	7.10 Intercompany Balances, Accounts and Agreements
	 	 	24	 
	7.11 Quarterly Financial Information
	 	 	24	 
	 
	 	 	 	 
	ARTICLE VIII CONDITIONS TO CLOSING
	 	 	24	 
	 
	 	 	 	 
	8.1 Conditions to Purchaser’s Obligations to Close
	 	 	24	 
	8.2 Conditions to Seller’s Obligations to Close
	 	 	25	 
	 
	 	 	 	 
	ARTICLE IX INDEMNIFICATION
	 	 	26	 
	 
	 	 	 	 
	9.1 Survival of Representations and Warranties; Covenants
	 	 	26	 
	9.2 Indemnification by Seller
	 	 	26	 
	9.3 Indemnification by Purchaser
	 	 	27	 






ii









 






TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	9.4 Notice of Claim
	 	 	27	 
	9.5 Opportunity to Defend
	 	 	27	 
	9.6 Limitation on Indemnification
	 	 	28	 
	9.7 Certain Limitations on Indemnification
	 	 	28	 
	9.8 Exclusive Remedy
	 	 	28	 
	 
	 	 	 	 
	ARTICLE X TAX MATTERS
	 	 	29	 
	 
	 	 	 	 
	10.1 Access to Tax Records; Cooperation
	 	 	29	 
	10.2 Liability for Taxes and Related Matters
	 	 	29	 
	10.3 Survival of Obligations
	 	 	32	 
	10.4 Tax Sharing Agreement
	 	 	32	 
	10.5 Certain Taxes
	 	 	32	 
	10.6 Allocation
	 	 	32	 
	10.7 Tax Treatment of Payments
	 	 	32	 
	10.8 FIRPTA Affidavit
	 	 	32	 
	10.9 Refunds
	 	 	32	 
	10.10 Election under Section 338(h)(10)
	 	 	33	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS
	 	 	34	 
	 
	 	 	 	 
	11.1 Notice
	 	 	34	 
	11.2 Entire Agreement
	 	 	35	 
	11.3 Assignment
	 	 	35	 
	11.4 Waivers and Amendments
	 	 	35	 
	11.5 No Third Party Beneficiaries
	 	 	35	 
	11.6 Public Announcements
	 	 	35	 
	11.7 Confidentiality
	 	 	35	 
	11.8 Governing Law
	 	 	36	 
	11.9 Counterparts
	 	 	36	 
	11.10 Headings
	 	 	36	 
	11.11 Severability
	 	 	36	 
	11.12 Arbitration
	 	 	37	 






iii









 






	 	 	 
	 
	 	 
	Schedules
	 	 
	 
	 	 
	Schedule 1.1(a)
	 	Assigned Contracts
	Schedule 1.1(b)
	 	Knowledge of Seller
	Schedule 1.1(c)
	 	Securitization Documents
	Schedule 5.1(c)
	 	No Seller Conflicts
	Schedule 5.2
	 	Taxes
	Schedule 5.6
	 	Litigation
	Schedule 5.7
	 	Transferred Company Assets
	Schedule 5.9
	 	Financial Statements
	Schedule 5.10
	 	Seller Absence of Certain Changes
	Schedule 5.11
	 	Company Contracts
	Schedule 5.13
	 	Seller’s Brokers
	Schedule 7.1
	 	Maintenance of the Business
	Schedule 7.9
	 	Notice Contracts
	Schedule 7.10
	 	Intercompany Agreements
	 
	 	 
	Exhibits
	 	 
	 
	 	 
	Exhibit A
	 	Assignment and Assumption Agreement
	 
	 	 
	Exhibit B
	 	Form of Release







 









 








STOCK PURCHASE AGREEMENT




     This STOCK PURCHASE AGREEMENT, (the “Agreement”), dated as of June 12, 2008, by and
among Wilton Reassurance Company, a Minnesota stock life insurance company (“Purchaser”)
and HealthMarkets, LLC, a Delaware limited liability company (“Seller”).



W I T N
E S S E T H:




     WHEREAS, Seller owns an aggregate of (a) one thousand (1,000) shares of CFLD’s common stock,
$0.01 par value per share, (b) ten (10) shares of UFC2’s common stock, $0.01 par value per share
and (c) limited liability company interests in NSA (collectively, the “Equity Interests”),
which constitute all of the issued and outstanding equity interests of the Companies;



     WHEREAS, Seller desire to sell to Purchaser, and Purchaser desires to purchase from Seller,
the Equity Interests for the purchase price and upon the terms and conditions hereinafter set
forth;



     WHEREAS, concurrently with the execution of this Agreement, Seller and Purchaser, along with
the other parties thereto, are entering into the Master Agreement (as defined below); and



     WHEREAS, certain terms used in this Agreement are defined in Section 1.1.



     NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements
hereinafter contained, the parties hereby agree as follows:



ARTICLE I




DEFINITIONS




     1.1 Certain Definitions.



     (a) For purposes of this Agreement, the following terms shall have the meanings specified in
this Section 1.1:



     “Affiliate” means, with respect to any Person, any other Person that, directly or
indirectly through one or more intermediaries, controls, or is controlled by, or is under common
control with, such Person, and 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 such Person, whether through ownership of voting
securities, by contract or otherwise.



     “Applicable Law” means any domestic or foreign federal, state or local statute, law,
ordinance, code or common law or any rules, regulations, publicly available administrative
interpretations, or orders issued by any Governmental Authority pursuant



1









 




to any of the foregoing, and any order, writ, injunction, directive, administrative
interpretation, judgment or decree applicable to a Person or such Person’s business, subsidiaries,
properties, assets, officers, directors, employees or agents.




     “Assigned Contracts” means those contracts set forth on Schedule 1.1(a).



     “Assignment and Assumption Agreement” means the Assignment and Assumption Agreement
between Seller and Purchaser, related to the Assigned Contracts, in substantially the form attached
hereto as Exhibit A.



     “Business Day” means any day of the year on which national banking institutions in New
York are open to the public for conducting business and are not required or authorized to close.



     “Cash” means cash and Cash Equivalents, including restricted cash.



     “Cash Equivalents” means treasury bills, money market holdings and certificates of
deposit.



     “CFLD” means CFLD-I, Inc., a Delaware corporation.



     “Closing Date” means the date upon which the Closing shall take place, which shall be
the first business day of the month immediately following the month in which the last of the
conditions to Closing set forth in this Agreement is satisfied or waived; provided, however, that
if such conditions are satisfied or waived less than five Business Days before the end of such
month, the Closing Date shall be the first Business Day of the second month immediately following
such month, and provided further, that the Closing may occur on such other date as the parties may
agree to in writing.



     “Code” means the Internal Revenue Code of 1986, as amended.



     “Coinsurance Agreement” means each Coinsurance Agreement as defined in the Master
Agreement.



     “Companies” means CFLD, UFC2 and NSA.



     “Excess Liabilities” means the liabilities of UFC2 as of the Closing Date, of a nature
required to be reflected on a balance sheet prepared in accordance with GAAP, that in the aggregate
exceed $75,000 and determined without regard to any deferred revenues, deferred tax payables or any
liabilities to Seller or any of its Affiliates.



     “GAAP” means generally accepted accounting principles, consistently applied throughout
the specified period and in the immediately prior comparable period.



     “Governmental Authority” means any federal, state, local or foreign governmental or
regulatory authority, agency, commission, court or other legislative, executive or judicial
governmental authority.



2









 





     “Independent Accountant” means an accounting or actuarial firm of national standing
selected as follows: No later than sixty (60) days after the delivery by Purchaser of a Dispute
Notice, if no agreement between the parties has been reached in connection with such Dispute
Notice, each of the parties will distribute to the other party a list of three (3) accounting firms
or actuarial firms of national standing. If there is a match on the lists exchanged by the
parties, the firm so identified will be the Independent Accountant. If more than one name on each
list matches, the Independent Accountant shall be chosen by lot from the matching names. If no
names on the list match, the parties will exchange a new list consisting of three (3) additional
accounting firms or actuarial firms within ten (10) Business Days (of which at least two selections
shall not be any of the firms identified on the first list), and repeat the process set forth above
until a match is made, which shall be the Independent Accountant.



     “IRS” means the United States Internal Revenue Service and, to the extent relevant,
the United States Department of Treasury.



     “Knowledge of Seller” means the actual knowledge of those Persons identified on
Schedule 1.1(b) after reasonable inquiry.



     “Legal Proceeding” means any judicial, administrative or arbitral actions, suits or
proceedings (public or private) by or before a Governmental Authority.



     “Losses” means 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, losses, deficiencies, liabilities, obligations,
claims and judgments sustained by any Person who is a party to or entitled to indemnification under
this Agreement.



     “Master Agreement” means that certain Agreement for Reinsurance and Purchase and Sale
of Assets by and among Seller, The Chesapeake Life Insurance Company, Mid-West National Life
Insurance Company of Tennessee, The Mega Life and Insurance Company and Purchaser, dated as of the
date hereof.



     “Material Adverse Effect” means any change, event or effect that is materially adverse
to the Business (as defined in the Master Agreement) and the business or operations of the
Companies, taken as a whole, or any change, event or effect that is materially adverse to the
ability of the Companies or Seller to consummate the transactions contemplated by this Agreement
and the agreements contemplated hereby, or to perform their obligations hereunder, in each case
excluding any such change, event or effect to the extent resulting from the following:



     (b) general political, economic or business conditions or changes therein;



     (c) financial and capital market conditions, including interest rates, or changes therein;



3









 





     (d) general industry conditions affecting the health and life insurance industry generally
(including changes in Applicable Law, GAAP or SAP (as defined in the Master Agreement), or
authoritative interpretations thereof, after the date of this Agreement) to the extent not having a
disproportionate effect on the Business and the business of the Companies relative to other
competitors of the Ceding Companies, the Transferred Companies or the Companies, respectively;



     (e) any action, change or effect attributable to the announcement of this Agreement, the
Master Agreement or the Coinsurance Agreement or the transactions contemplated hereby or thereby,
or the identity of Purchaser; or



     (f) any change, effect or event to the extent affecting solely the Excluded Liabilities (as
defined in the Master Agreement) or policies and assets retained by the Ceding Companies or Seller
pursuant to the Master Agreement;



provided, however, that if the Closing takes place on a date that is after the date
of the closing of the transactions contemplated by the Master Agreement, Material Adverse Effect
with respect to the Business (other than with respect to the Companies) shall be measured as of the
date of the closing of the transactions contemplated by the Master Agreement and Material Adverse
Effect with respect to the Companies shall be measured as of the Closing Date.



     “NSA” means The National Student Association, LLC, a Texas limited liability company.



     “Order” means any order, injunction, judgment, decree, ruling, writ, assessment or
arbitration award of a Governmental Authority.



     “Permitted Exceptions” means (i) statutory liens for current Taxes, assessments or
other governmental charges not yet delinquent or the amount or validity of which is being contested
in good faith by appropriate proceedings, (ii) mechanics’, carriers’, workers’, repairers’ and
similar liens arising or incurred in the ordinary course of business, (iii) title of a lessor under
a capital or operating lease and (iv) any liens arising under the Securitization Documents.



     “Person” means any natural person, corporation, limited liability company, general
partnership, limited partnership, proprietorship, trust, union, association, court, tribunal,
agency, government, department, commission, self-regulatory
organization, arbitrator, board, bureau, instrumentality, or other entity, enterprise,
authority or business organization.



     “Post-Closing Period” means the portion of any Straddle Period that begins after the
Closing Date.



     “Pre-Closing Period” means the portion of any Straddle Period that ends on the Closing
Date.



4









 





     “Richland” means Richland State Bank and Richland Loan Processing Center, Inc.



     “Richland Agreement” means that certain Private Loan Program Loan Origination and Sale
Agreement by and among Richland State Bank, Richland Loan Processing Center, Inc., Seller (formerly
known as UICI), and UCF2, dated July 28, 2005.



     “Securitization Documents” means those documents set forth on Schedule 1.1(c).



     “Straddle Period” means any taxable period that begins on or before the Closing Date
and ends after the Closing Date.



     “Tax” or “Taxes” means all taxes, whether imposed in the United States or
elsewhere and whether imposed by a local, municipal, state, federal, foreign or other body or
instrumentality, including, without limitation, income, sales, use, gross receipts, excise,
payroll, withholding, unemployment, social security, stock, franchise, stamp, minimum, estimated,
value added and premium taxes, together with any related interest, penalties and additional amounts
imposed by any Taxing Authority.



     “Taxing Authority” means the IRS and any other Governmental Authority responsible for
the administration of any Tax.



     “Tax Return” means any report, return, declaration, claim for refund or other
statement or filing, including any schedule or attachment thereto, and any amendment thereof, filed
or required to be filed with any Taxing Authority in connection with the determination, assessment
or collection of any Tax or any Tax information report or statement.



     “UFC2” means UICI Funding Corp. 2, a Delaware corporation.



     “UFC2 Loans” means all of the student loans held by UFC2 on the Closing Date.



     1.2 Terms Defined Elsewhere in this Agreement. For purposes of this Agreement, the
following terms have meanings set forth in the sections indicated:



	 	 	 
	Term	 	Section
	Agreement
	 	Preamble
	Allocation Statement
	 	10.6
	Alternative Arrangements
	 	7.8(b)
	Arrangement Notice
	 	7.8(b)
	CFLD Common Stock
	 	5.3(a)
	Claim
	 	9.4
	Claims Notice
	 	9.4
	Closing
	 	4.1






5









 






	 	 	 
	Term	 	Section
	Company Contracts
	 	5.11
	Confidential Information
	 	11.7
	Controlling Party
	 	10.2(d)
	Dispute Notice
	 	3.3(a)
	Election Request
	 	10.10(a)
	Enforceability Exception
	 	5.1(b)
	Equity Interests
	 	Recitals
	Excess Program Loans
	 	7.8(b)
	Estimated Closing Amount
	 	3.1
	Estimated Closing Amount Statement
	 	3.1
	Final Closing Amount
	 	3.3(c)
	Final Closing Amount Statement
	 	3.3(a)
	Financial Statements
	 	5.9
	FIRPTA Affidavit
	 	10.8
	Modified Richland Arrangements
	 	7.8(b)
	Non-Controlling Party
	 	10.2(d)
	Notice Contracts
	 	7.9
	Purchase Price
	 	3.1
	Purchaser
	 	Preamble
	Quarterly Financial Statements
	 	7.11(a)
	Section 338 Allocation Schedule
	 	10.10(b)
	Section 338(h)(10) Elections
	 	10.10(a)
	Seller
	 	Preamble
	Survival Period
	 	9.1(a)
	Transferred Company Assets
	 	5.7
	UFC2 50% Loan Amount
	 	3.1
	UFC2 100% Loan Amount
	 	3.1
	UFC2 Common Stock
	 	5.3(a)
	UFC2 Loan Amount
	 	3.1






     1.3 Other Definitional and Interpretive Matters. Unless otherwise expressly provided,
for purposes of this Agreement, the following rules of interpretation shall apply:



     (a) Calculation of Time Period. When calculating the period of time before which,
within which or following which any act is to be done or step taken pursuant to this Agreement, the
date that is the reference date in calculating such period shall be excluded. If the last day of
such period is a non-Business Day, the period in question shall end on the next succeeding Business
Day.



     (b) Dollars. Any reference in this Agreement to $ shall mean U.S. dollars.



6









 





     (c) Exhibits/Schedules. The Exhibits and Schedules to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this Agreement. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any matter or item disclosed on one Schedule shall be
deemed to have been disclosed on each other Schedule for which it is readily apparent that the
information in such Schedule is responsive notwithstanding any reference to a specific Schedule.
Disclosure of any item on any Schedule shall not constitute an admission or indication that such
item or matter is material or would have a Material Adverse Effect. No disclosure on a Schedule
relating to (i) a possible breach or violation of any contract, Applicable Law or Order shall be
construed as an admission or indication that breach or violation exists or has actually occurred or
(ii) a required consent shall be construed as an admission or indication that such consent is
required in connection with the transactions contemplated hereby. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this
Agreement.



     (d) Gender and Number. Any reference in this Agreement to gender shall include all
genders, and words imparting the singular number only shall include the plural and vice versa.



     (e) Headings. The provision of a Table of Contents, the division of this Agreement
into Articles, Sections and other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in construing or interpreting this Agreement.
All references in this Agreement to any “Section” are to the corresponding Section of this
Agreement unless otherwise specified.



     (f) Herein. The words such as “herein,” “hereinafter,”
“hereof,” and “hereunder” refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.



     (g) Including. The word “including” or any variation thereof means (unless
the context of its usage otherwise requires) “including, without limitation” and shall not
be construed to limit any general statement that it follows to the specific or similar items or
matters immediately following it.



     (h) Reflected On or Set Forth In. An item arising with respect to a specific
representation or warranty shall be deemed to be “reflected on” or “set forth in” a
balance sheet or financial statements, to the extent any such phrase appears in such representation
or warranty, if (a) there is a reserve, accrual or other similar item underlying a number on such
balance sheet or financial statements that is specifically related to the subject matter of such
representation, (b) such item is otherwise specifically set forth on the balance sheet or financial
statements or (c) such item is reflected on the balance sheet or financial statements and is
specifically set forth in the notes thereto.



     (i) Jointly Drafted. The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as jointly drafted by the



7









 




parties hereto
and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any provision of this Agreement.




ARTICLE II




SALE AND PURCHASE OF EQUITY INTERESTS




     2.1 Sale and Purchase of Equity Interests. Upon the terms and subject to the
conditions contained herein, on the Closing Date, Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase from Seller, the Equity Interests.



ARTICLE III




PURCHASE PRICE




     3.1 Purchase Price. The aggregate consideration for the Equity Interests shall be an
amount equal to (a) the aggregate amount of all Cash held by UFC2 as of the Closing, plus (b) 50%
of the aggregate amount of outstanding principal and accrued and unpaid interest under (i) the UFC2
Loans reflected on the June 30, 2008 balance sheet of UFC2 and (ii) any UFC2 Loans not reflected on
the June 30, 2008 balance sheet of UFC2 that were issued by Richland under the Richland Agreement
on or before May 31, 2008 (the amount described in clauses (a) and (b) being
referred to herein as the “UFC2 50% Loan Amount”), plus (c) 100% of the aggregate amount of
outstanding principal and accrued and unpaid interest under the UFC2 Loans not reflected on the
June 30, 2008 balance sheet of UFC2, excluding any UFC2 Loans included in (b)(ii) above
(the “UFC2 100% Loan Amount”, together with the UFC2 50% Loan Amount, the “UFC2 Loan
Amount”), minus (d) the Excess Liabilities, if any (collectively, the “Purchase
Price”). Seller shall deliver a statement (the “Estimated 
Closing Amount Statement”), which shall set forth in reasonable detail its calculation
of the Purchase Price (the “Estimated Closing Amount”) to Purchaser no later than three (3)
Business Days prior to the Closing Date.



     3.2 Closing Date Payment. On the Closing Date, Purchaser shall pay to Seller the
Estimated Closing Amount, which shall be paid by wire transfer of immediately available United
States funds into an account designated by Seller at least three (3) Business Days prior to the
Closing Date.



     3.3 Purchase Price Adjustment.



     (a) No later than sixty (60) days following the Closing Date, Seller shall prepare and deliver
to Purchaser a statement (the “Final Closing Amount Statement”) setting forth Seller’s good
faith calculation of the final Purchase Price, together with a certification of the chief
accounting officer of Seller certifying that the Final Closing Amount Statement was prepared (i)
based on the books and records of the Companies and (ii) in a manner consistent with GAAP and the
methodologies utilized in preparing the Estimated Closing Amount Statement. If Purchaser disagrees
with Seller’s Final Closing Amount Statement, Purchaser may, within sixty (60) days after the



8









 




Closing, deliver a notice to Seller stating that Purchaser disagrees with such calculation and
specifying in reasonable detail those items or amounts as to which Purchaser disagrees and the
reasons therefor in reasonable detail (a “Dispute Notice”). In connection with Purchaser’s
review of the Final Closing Amount Statement and preparation of the Dispute Notice, Seller shall
provide Purchaser and its representatives with reasonable access, during normal business hours and
upon reasonable notice, to all relevant work papers, schedules, memoranda and other financial
information prepared by Seller or its representatives in connection with its preparation of the
Final Closing Amount Statement, and Seller shall, and shall cause any of its representatives to,
cooperate reasonably with Purchaser and its representatives in connection therewith and provide
timely responses to requests for information from Purchaser and its representatives.




     (b) If Purchaser delivers a Dispute Notice to Seller, Purchaser and Seller shall cooperate in
good faith to resolve such dispute as promptly as practicable and, upon such resolution, any
adjustments to the calculation of any amount contained in the Final Closing Amount Statement shall
be made in accordance with the agreement of Purchaser and Seller. If Purchaser and Seller are
unable to resolve any such dispute within sixty (60) days (or such longer period as Purchaser and
Seller shall mutually agree in writing) of Purchaser’s delivery of such Dispute Notice, such
dispute shall be resolved by the Independent Accountant, and such determination by the Independent
Accountant shall be final and binding on the parties; provided that Purchaser and Seller
shall submit to the Independent Accountant statements with respect to their respective positions on
disputed issues and will cooperate with the Independent Accountant by promptly providing any
requested information. Any expenses relating to the engagement of the Independent Accountant in
respect of its services pursuant to this Section 3.3(b) shall be
shared fifty percent (50%) by Purchaser and fifty percent (50%) by Seller. The Independent
Accountant shall be instructed to use reasonable best efforts to perform its services within thirty
(30) days of submission by Purchaser and Seller of their respective statements with respect to the
disputes and, in any case, as promptly as practicable after such submission.



     (c) If the Final Closing Amount exceeds the Estimated Closing Amount, Purchaser shall pay to
Seller the amount of such excess, as an adjustment to the Purchase Price, in the manner provided in
Section 3.3(d). If the Estimated Closing Amount exceeds the Final Closing Amount, Seller
shall pay to Purchaser the amount of such excess, as an adjustment to the Purchase Price, in the
manner provided in Section 3.3(d). “Final Closing Amount”, for purposes of this
Section 3.3, shall mean the Purchase Price (i) set forth in the Final Closing Amount
Statement if no Dispute Notice is delivered by Purchaser pursuant to Section 3.3(a), (ii)
as agreed by Seller and Purchaser pursuant to Section 3.3(b) or (iii) in the absence of
such agreement, as shown in the Independent Accountant’s calculation delivered pursuant to
Section 3.3(b).



     (d) Any payment pursuant to Section 3.3(c) shall be made within five (5) Business Days
after the Final Closing Amount has been determined pursuant to Section 3.3(c) by wire
transfer of immediately available funds to the account of Seller or Purchaser, as applicable, as
may be designated in writing by such party.



9









 





ARTICLE IV




CLOSING AND TERMINATION




     4.1 Closing Date. The closing of the sale and purchase of the Equity Interests
provided for in Section 2.1 (the “Closing”) shall take place at the offices of
Seller located in North Richland Hills, Texas, unless the parties agree to close by facsimile or
electronic transmission and wire transfer on the Closing Date; provided, that the
satisfaction or waiver of the conditions set forth in Article VIII (other than conditions
that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver
of those conditions at such time) has occurred, unless another time, date or place is agreed to in
writing by the parties hereto.



     4.2 Termination of Agreement. This Agreement may be terminated prior to the Closing
as follows:



     (a) at the election of Seller or Purchaser upon the termination of the Master Agreement;
provided, however, that the right to terminate this Agreement under this
Section 4.2(a) shall not be available to a party if the termination of the Master Agreement
was primarily due to the failure of such party to perform any of its obligations under the Master
Agreement;



     (b) by mutual written consent of Seller and Purchaser; or



     (c) by Seller or Purchaser if there shall be in effect a final nonappealable Order of a
Governmental Authority of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby; it being agreed that the parties hereto
shall promptly appeal any adverse determination which is not nonappealable (and pursue such appeal
with reasonable diligence); provided, however, that the right to terminate this
Agreement under this Section 4.2(c) shall not be available to a party if such Order was
primarily due to the failure of such party to perform any of its obligations under this Agreement;



     (d) at the election of Seller or Purchaser if the Closing has not occurred by March 31, 2009,
unless the failure of the Closing to occur by such date arises out of, or results from, a material
breach of this Agreement by the party seeking to terminate this Agreement;



     (e) by Purchaser at any time prior to Closing for material breach by Seller 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 control of Seller; provided, however, that Seller
shall have twenty (20) Business Days to cure such breach or satisfy such condition after receipt of
proper written notice by Seller from Purchaser;



     (f) by Seller at any time prior to Closing for material breach by Purchaser 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 Purchaser’s control; provided, however, that Purchaser
shall have twenty (20) Business Days to cure such



10









 




breach or satisfy such condition after receipt of
proper written notice by Purchaser from Seller; or




     (g) by Purchaser at least two (2) Business Days prior to Closing and after delivery by Seller
to Purchaser of an Arrangement Notice which states that the parties were unable to either (i)
obtain Richland’s consent to the Modified Richland Arrangements or (ii) enter into an Alternative
Arrangement effective on or prior to the Closing Date; provided, however, that if
Purchaser terminates this Agreement pursuant to this Section 4.2(g), Purchaser shall still
be obligated to fund student loans in accordance with the terms of the Policies (as defined in the
Coinsurance Agreement) and pursuant to the terms of Sections 1.22 and 9.18 of the Coinsurance
Agreement (as limited by Section 1.16(h) of the Coinsurance Agreement).



     4.3 Procedure Upon Termination. In the event of termination and abandonment by
Purchaser or Seller, or both, pursuant to Section 4.2 hereof, written notice thereof shall
forthwith be given to the other party or parties, and this Agreement shall terminate, and the
purchase of the Equity Interests and assignment and assumption of the Assigned Contracts hereunder
shall be abandoned, without further action by Purchaser or Seller.



     4.4 Effect of Termination. In the event that this Agreement is validly terminated in
accordance with Section 4.2(a), (b), (c), (d), or (g), this
Agreement will forthwith become null and void, and there will be no liability on the part of
Purchaser or Seller to the other hereunder; provided, however, that in the event
that this Agreement is validly terminated in accordance with Section 4.2(g), Purchaser
shall be obligated to fund student loans issued in accordance with the terms of the Policies as set
forth in such subsection. In the event of termination under Section 4.2(e) or (f),
the parties shall be deemed to have reserved all of their respective rights and remedies hereunder
and at law or in equity.



ARTICLE V




REPRESENTATIONS AND WARRANTIES OF SELLER




     Seller hereby represents and warrants to Purchaser that:



     5.1 Seller Existence and Authority.



     (a) Seller is a single member limited liability company duly formed, existing and in good
standing under the laws of the State of Delaware, whose sole member is HealthMarkets, Inc., a
Delaware corporation, and has all requisite limited liability company power and authority to own
lease and operate its assets, properties and business and to carry on the operation of its business
as it is now being conducted. Seller is duly qualified to do business as a foreign limited
liability company and is in good standing in each jurisdiction where such qualification is
necessary for its conduct of its business, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material Adverse Effect.



11









 





          (b) Seller has all requisite limited liability company power and authority to execute, deliver
and perform its obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Seller of this Agreement and the consummation
by Seller of the transactions contemplated to be performed by Seller hereby have been duly
authorized by all necessary limited liability company action on the part of Seller. This Agreement
has been duly and validly executed and delivered to Purchaser by Seller and assuming due
authorization, execution, delivery and performance by the other parties hereto, constitutes, when
executed and delivered by Seller (assuming due authorization, execution and delivery by the other
parties thereto) shall constitute, solely to the extent of Seller’s obligations set forth herein,
the valid and legally binding obligation of Seller, enforceable against Seller in accordance with
its terms except (i) as the same may be limited by applicable bankruptcy, insolvency,
rehabilitation, moratorium or similar laws of general application relating to or affecting
creditors’ rights, including, without limitation, the effect of statutory or other laws regarding
fraudulent conveyances and preferential transfers, and (ii) for the limitations imposed by general
principles of equity (the “Enforceability Exception”).



          (c) The execution, delivery and performance by Seller of this Agreement and the consummation
by Seller of the transactions contemplated hereby do not and will not (1) subject to obtaining the
consents, approvals and authorizations set forth in Schedule 5.1(c), conflict with or
result in any breach or violation of or any default under (or give rise to any right of
termination, cancellation or acceleration under) (i) the bylaws or certificate of incorporation,
memorandum of association or similar organizational documents of Seller or any Company or (ii) any
note, bond, mortgage, indenture, lease, license, permit, agreement or other instrument or
obligation to which Seller or any Company is a party or by which Seller or any Company is or may be
bound, excluding from the foregoing immaterial breaches, violations or defaults; and (2) violate
any Applicable Law to which Seller or any Company is subject.



          (d) Except as set forth in Schedule 5.1(c), no consent, approval, non-disapproval,
authorization, ruling, order of, notice to, or registration with, any Governmental Authority or any
other Person is required on the part of Seller or any Company in connection with the execution and
delivery of this Agreement or the consummation by Seller, of the transactions contemplated hereby.



          5.2 Taxes. Except as set forth in Schedule 5.2:



          (a) Taxes and Tax Returns.




     (i) All Tax Returns required to be filed on or before the Closing Date by or on behalf
of any Company have been or will be timely filed with the appropriate Taxing Authority or
appropriate requests for extensions have been timely filed and any such extensions have
been granted and have not expired.




     (ii) Each such Tax Return was or will be when filed true, accurate and complete in all
material respects.



12









 







     (iii) All Taxes (including estimated Taxes) of each of the Companies that have or will
become due before the Closing Date (after giving effect to applicable extensions) have been
or will be timely paid in full on or before the Closing Date or are properly reflected on
the Financial Statements.




     (iv) Each of the Companies has withheld and timely paid to the appropriate Taxing
Authority all Taxes required to be withheld and paid in connection with amounts due or
owing to any Person.



     (b) Audits.




     (i) All Taxes due with respect to any completed and settled audit, examination or
deficiency action with any Taxing Authority for which any of the Companies are or might
otherwise be liable have been paid in full.




     (ii) There is no audit, examination, deficiency or refund action pending with respect
to any Taxes for which any of the Companies are or might otherwise be liable, and no Taxing
Authority has given written notice of the commencement of any audit, examination or
deficiency action with respect to any such Taxes.



     (c) Procedural Issues.




     (i) There are no liens for Taxes upon the assets of any of the Companies other than
for Taxes not yet due and payable.




     (ii) No written claim has been made by any Taxing Authority in the last three years in
a jurisdiction where any of the Companies does not file Tax Returns that it is or may be
subject to taxation in that jurisdiction.




     (iii) There are no outstanding commitments or agreements with any Taxing Authority
extending or waiving the statutory period of limitations applicable to any claim for, or
the period for the collection or assessment of, Taxes of any Company due for any taxable
period and no power of attorney is currently in force or has been requested with respect to
any matter relating to Taxes that could affect such Company following the Closing.



     (d) Additional Tax Representations.




     (i) None of the Companies is party to any formal or informal Tax-sharing, allocation,
indemnity or similar agreement or arrangement (whether written or unwritten) that will be
in effect following the Closing; and each Company is in compliance in all material respects
with respect to all backup withholding and information reporting requirements in the Code
and the regulations thereunder, including, but not limited to, the proper and timely filing
of all Internal Revenue Service forms.




     (ii) None of the Companies (A) is required to include in income any adjustment
pursuant to Section 481(a) of the Code (or analogous provisions of



13









 






state or local laws) in
its current or any future taxable period by reason of a change in accounting method, (B)
has knowledge that the Internal Revenue Service (or any other Taxing Authority) has
proposed in writing any such change in accounting method, or (C) has an application pending
with any Taxing Authority requesting permission for any change in accounting method.




     (iii) Each of the Companies has disclosed, or has had disclosed on its behalf, in its
federal income Tax Returns, all positions required by law to be disclosed therein by or on
behalf of such Company.




     (iv) None of the Companies has constituted a “distributing corporation” or a
“controlled corporation” (within the meaning of Section 355(a)(1)(A) of the
Code) in a distribution of shares qualifying for Tax-free treatment under Section 355
of the Code (A) in the two (2) years prior to the date of this Agreement or (B) in a
distribution that could otherwise constitute part of a “plan” or “series of related
transactions” (within the meaning of Section 355(e) of the Code), in conjunction with this
Agreement.




     (v) Since January 1, 2006, none of the Companies has agreed to, and is required to
make, any adjustment under Section 446(e) of the Code (or any analogous provisions of state
or local laws), has entered into any closing agreement pursuant to Section 7121 of the Code
or any other agreement with similar Tax effect, has requests for rulings, determinations or
advice pending with or before any Governmental Authority, or has received any such rulings
or determinations.




     (vi) Seller is not a foreign person within the meaning of Section 1445 of the Code.




     (vii) None of the Companies was a member of any consolidated, affiliated, combined or
unitary group for Tax purposes other than the current group or has any liability for the
Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or operation of law or
otherwise, other than with respect to the current consolidated group.




     (viii) As of the date hereof, (A) none of the assets of any Company is “tax exempt use
property” within the meaning of Section 168(h) of the Code, (B) none of the Companies has
filed a consent under Section 341(f) of the Code (or corresponding provision of state,
local or foreign law) concerning collapsible corporations and (C) the sale of any Company
will not trigger deferred intercompany gains in such Company.




     (ix) NSA is disregarded as an entity separate from its owner for federal income tax
purposes.



14









 





     5.3 Companies.



     (a) CFLD is a Delaware corporation duly organized, existing and in good standing under the
laws of the State of Delaware and has all requisite power and authority to own, lease and operate
its assets, properties and business and to carry on the operation of its business as it is now
being conducted. The authorized capital stock of CFLD consists of one thousand (1,000) shares of
common stock, $0.01 par value per share (the “CFLD Common Stock”), of which one thousand
(1,000) shares of CFLD Common Stock are validly issued and outstanding, fully paid and
non-assessable, all of which are held by Seller, free and clear of all liens. UFC2 is a Delaware
corporation duly organized, existing and in good standing under the laws of the State of Delaware
and has
all requisite power and authority to own, lease and operate its assets, properties and
business and to carry on the operation of its business as it is now being conducted. The
authorized capital stock of UFC2 consists of one hundred (100) shares of common stock, $0.01 par
value per share (the “UFC2 Common Stock”), of which ten (10) shares of UFC2 Common Stock
are validly issued and outstanding, fully paid and non-assessable, all of which are held by Seller,
free and clear of all liens. NSA is a Texas limited liability company duly organized, existing and
in good standing under the laws of the State of Texas and has all requisite power and authority to
own, lease and operate its assets, properties and business and to carry on the operation of its
business as it is now being conducted. All of the outstanding equity interests in NSA are held by
Seller free and clear of all liens.



     (b) There are no outstanding securities, obligations, rights, subscriptions, warrants,
options, phantom stock rights, or (except for this Agreement) other contracts or agreements of any
kind that give any Person the right to (a) purchase or otherwise receive or be issued any equity
interest in any of the Companies or any security or liability of any kind convertible into or
exchangeable for any equity interest in any of the Companies, or (b) receive any benefits or rights
similar to any rights enjoyed by or accruing to a holder of any equity interest in any of the
Companies, or any rights to participate in the equity, income, or election of directors or officers
of any of the Companies.



     5.4 Accuracy of Books and Records. The books and records of the Companies have been
maintained in accordance with Applicable Law and Seller’s and the Companies’ customary business
practices, including the maintenance of a commercially reasonable system of internal control. All
of the books and records of each Company are current, complete and accurate in all material
respects.



     5.5 Compliance with Applicable Law. (a) Each of the Companies is conducting, and
since January 1, 2006, has conducted its business in compliance in all material respects with
Applicable Law applicable to such Company; (b) no Company has committed any breach of any
Applicable Law that may reasonably be expected to result in a Material Adverse Effect; and (c)
since January 1, 2006, each Company has complied in all material respects with all requirements to
file reports with Governmental Bodies required to be filed by such Company under Applicable Law.



15









 





     5.6 Litigation. Except as set forth on Schedule 5.6, there are no actions,
suits, investigations, arbitrations or proceedings pending or, to the Knowledge of Seller,
threatened against any of the Companies or any properties or rights thereof, by or before any
court, arbitrator or administrative or Governmental Authority. Except as set forth on
Schedule 5.6, since January 1, 2006, there has not been any action, suit, investigation,
arbitration or proceeding pending or, to the Knowledge of Seller, threatened against any Company or
any properties or rights thereof, by or before any court, arbitrator or administrative or
Governmental Authority.



     5.7 Title to Assets. Except as set forth on Schedule 5.7, each Company has
good and marketable title to all of the assets shown on the most recent balance sheet of such
Company included in the Financial Statements (the “Transferred Company Assets”), except for
assets disposed of in the ordinary course of business between the date hereof and the Closing Date.
Except as set forth on Schedule 5.7, none of the Transferred Company Assets is subject to
any lien. Except as set forth on Schedule 5.7, as of the Closing Date Purchaser and the
Companies, taken together and assuming the receipt of all of the consents set forth on Schedule
5.1(c), will own, possess, license, lease or have control of all tangible and intangible assets
and contractual rights necessary to conduct the business and operations of each of the Companies in
a manner consistent with the conduct of such business and operations as of the date hereof.



     5.8 Real Property. None of the Companies own or lease any real property.



     5.9 Financial Statements. Seller has made available to Purchaser copies of (i) the
unaudited consolidated balance sheets of CFLD, UFC2 and NSA as at December 31, 2007, and March 31,
2008, and the related unaudited consolidated statements of income of CFLD, UFC2 and NSA for the
periods then ended (such unaudited statements are referred to herein as the “Financial
Statements”). Except for the absence of footnote disclosures and as set forth on Schedule
5.9, the Financial Statements have been prepared in accordance with GAAP consistently applied
and present fairly in all material respects the financial position and results of operations of
CFLD, UFC2 and NSA as at the dates and for the periods indicated therein. Since December 31, 2007,
none of the Companies has made any distribution to Seller nor has any Company disposed of or
acquired any assets other than investment assets disposed of or acquired in the ordinary course of
business. Except as set forth in Schedule 5.9, none of the Companies has liabilities
that should be reflected in the Financial Statements, including, without limitation, contingent
liabilities required to be disclosed under GAAP, except for liabilities that were incurred after
March 31, 2008, in the ordinary course of business.



     5.10 Absence of Certain Changes. Except as set forth in Schedule 5.10, since
December 31, 2007, there has not been any event, occurrence or development which has had, or would
be reasonably expected to have, a Material Adverse Effect on any of the Companies. Except as set
forth in Schedule 5.10 and as otherwise contemplated hereby, since December 31, 2007, the
Companies have conducted their business in the ordinary course of business consistent with past
practice and have not taken any action that, if taken during the period from the date of this
Agreement through



16









 




the Closing without Purchaser’s consent, would be prohibited under Section
7.1(b) of this Agreement.




     5.11 Company Contracts. Schedule 5.11 contains an accurate and complete list
of each contract or agreement (a) to which any Company is a party, (b) by which any of the
Companies’ assets are bound or (c) to which Seller or any of its Affiliates (other than the
Companies) is a party that primarily relates to the operations of
the Companies (collectively, the “Company Contracts”). Schedule 5.11 and the
definition of the term “Company Contracts” exclude any and all student loans. True and correct
copies of the Company Contracts, including amendments thereto, have been made available or provided
to Purchaser. Each such contract is in full force and effect and enforceable against any Company,
as applicable, and no Company is in default under any of the Company Contracts and no party thereto
has received or provided written notice to or from the other party thereto of any termination or
cancellation thereof, and, to the Knowledge of Seller, no event has occurred that, with the passage
of time or the giving of notice (or both), would constitute a default by the Companies with
material consequences to the Companies, or would permit material modification, acceleration or
termination or cancellation thereof by the other parties thereto. Except as set forth on
Schedule 5.1(c), no notice to, or consent, approval or waiver is required from, any other
Person under the Company Contracts in connection with the consummation of the transactions
contemplated hereby.



     5.12 Employees. None of the Companies has any employees or any liability pursuant to
any “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended).



     5.13 Seller’s Brokers. Except for Merrill Lynch & Co. (for whose compensation Seller
shall be solely responsible), no broker or finder has acted directly or indirectly for Seller or
the Companies, nor has Seller or any of the Companies incurred any obligation to pay any brokerage
or finder’s fee or other commission in connection with this Agreement and the transactions
contemplated hereby.



ARTICLE VI




REPRESENTATIONS AND WARRANTIES OF PURCHASER




     Purchaser hereby represents and warrants to Seller that:



     6.1 Purchaser’s Corporate Existence and Authority.



     (a) Purchaser is a stock life insurance company duly organized, existing and in good standing
under the laws of the State of Minnesota and is duly qualified and possesses all licenses, permits,
approvals, authorizations and consents necessary to transact life, accident, and health insurance
and/or reinsurance on an authorized basis, and possesses a certificate of authority, permit or
license (or is exempted from such requirements) to act as a third party administrator in each of
the jurisdictions in the United States shown on Schedule 5.1(a) to the Master Agreement. All



17









 




of such licenses, permits, approvals, authorizations and consents are valid and in full force and
effect, except where the failure of which to be in full force and effect would not reasonably be
expected to cause a material adverse effect on Purchaser. Purchaser is duly qualified to do
business as a foreign corporation and it is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a material
adverse effect on Purchaser.




     (b) Purchaser has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement, and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary corporate action on the
part of Purchaser. This Agreement has been duly and validly executed and delivered to the
Companies and Seller by Purchaser and assuming due authorization, execution, delivery and
performance by the other parties hereto, constitutes, when executed and delivered by Purchaser
(assuming due authorization, execution and delivery by the other parties thereto) shall constitute,
the valid and legally binding obligation of Purchaser, enforceable in accordance with its terms
except as the same may be limited by the Enforceability Exception.



     (c) The execution, delivery and performance by Purchaser of this Agreement does not and will
not (i) conflict with or result in any breach or violation of or any default under (or give rise to
any right of termination, cancellation or acceleration under) (A) the bylaws or certificate of
incorporation of Purchaser or (B) any note, bond, mortgage, indenture, lease, license, permit,
agreement or other instrument or obligation to which Purchaser is a party or by which Purchaser is
or may be bound, excluding from the foregoing such breaches, violations or defaults that would not
have a material adverse effect on Purchaser; and (ii) violate any Applicable Law to which Purchaser
is subject.



     (d) No consent, approval, non-disapproval, authorization, ruling, order of, notice to, or
registration with, any Governmental Authority or any other Person is required on the part of
Purchaser in connection with the execution and delivery of this Agreement or the consummation by
Purchaser, of the transactions contemplated hereby.



     6.2 Availability of Funds; Financial Impact. At Closing, Purchaser will have
sufficient cash or immediately available funds necessary to enable it to consummate the
transactions contemplated by this Agreement.



     6.3 Absence of Certain Changes. Since December 31, 2007, there has not been any
event, occurrence or development which has had, or would be reasonably expected to have, a material
adverse effect on Purchaser. Since December 31, 2007, Purchaser has conducted its business in the
ordinary course consistent with past practice.



     6.4 Compliance with Applicable Law. Purchaser is (and, after giving effect to the
transactions contemplated by this Agreement, Purchaser will be) in compliance with all Applicable
Law with respect to the conduct of its business and



18









 




operations (including capital requirements),
except where the failure to so comply would not reasonably be expected to have a material adverse
effect on Purchaser.




     6.5 Litigation Against Purchaser. There are no actions, suits, investigations or
proceedings pending or (to the knowledge of Purchaser) threatened against Purchaser at law or in
equity, in, before, or by any Person, that individually or in the aggregate have or would
reasonably be expected to have a material adverse effect on Purchaser.



     6.6 Purchaser’s Brokers. Except for Fletcher Financial (for whose compensation
Purchaser shall be solely responsible), no broker or finder has acted directly or indirectly for
Purchaser, nor has Purchaser incurred any obligation to pay any brokerage or finder’s fee or other
commission in connection with this Agreement and the transactions contemplated hereby.



     6.7 Non-Reliance. Purchaser is an informed and sophisticated purchaser, and has
undertaken such investigation with respect to the business of the Companies as it has deemed
necessary to make an informed decision with respect to the execution, delivery and performance of
this Agreement.



     6.8 Investment Intent. Purchaser is acquiring the Equity Interests for its own
account and not with a view to their distribution within the meaning of Section 2(11) of the
Securities Act of 1933, as amended.



     6.9 No Knowledge of Material Adverse Effect. As of the date hereof, to the knowledge
of Purchaser, no material adverse effect exists as to the ability of Purchaser to enter into this
Agreement and consummate the transactions contemplated hereby.



ARTICLE VII




COVENANTS




     7.1 Maintenance of Business by the Companies.



     (a) From the date of this Agreement until the Closing Date, Seller shall cause each of the
Companies to: (i) 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 respective Company; and (ii) maintain all licenses,
qualifications and authorizations of each Company to do business in each jurisdiction in which it
is presently licensed, qualified or authorized.



     (b) Without limiting the generality of Section 7.1(a), during the period from the date
of this Agreement to the Closing Date, to the extent it affects any Company and except as set forth
on Schedule 7.1 or as expressly permitted by this Agreement, Seller shall not, and shall
cause the Companies not to, without the prior written consent of Purchaser:



19









 






     (i) (A) reallocate any assets currently owned, used or held for use by any Company to
any other line of business, unit or division of either Seller or any Affiliate of Seller,
(B) distribute or dispose of any asset of the Companies; provided, however,
that the provisions of this Section 7.1(b)(i) shall not apply to the acquisition or
disposition of assets by any Company in the ordinary course of business consistent with
past practice;




     (ii) (A) enter into, modify or make any substantial change to any Company Contract or
(B) acquire any assets for any Company the cost of which in the aggregate exceeds $50,000;
provided, however, that the provisions of this Section 7.1(b)(ii)
shall not apply to the acquisition or disposition of Cash Equivalents by any Company in the
ordinary course of business consistent with past practice;




     (iii) (A) permit or allow any of the assets of the Companies to become subject to any
lien other than Permitted Exceptions, or (B) waive any claims or rights relating to any
Company, except in the ordinary course of business consistent with past practices;




     (iv) with respect to any Company, except (A) as set forth on Schedule 7.1 and
(B) pursuant to the agreements set forth on Schedule 7.10, (1) pay any dividend or
make any distribution with respect to its stock, or split, combine, reclassify or otherwise
amend the terms of such stock, or make any direct or indirect redemption, purchase or other
acquisition of shares of such stock, or (2) make any payment to Seller or any Affiliate of
Seller;




     (v) with respect to any Company, (A) issue any equity securities (including, but not
limited to, additional shares of its authorized but not issued capital stock) or grant any
options, warrants, or other rights to purchase or obtain any of its equity securities or
issue, sell, pledge or otherwise dispose of any of its equity securities, (B) make any loan
or advance under any loan to or guarantee any obligation of any Person, or (C) issue any
note, bond, or other debt security, or create, incur, assume, refinance, or guarantee any
indebtedness or any material capitalized lease obligation;




     (vi) maintain or cause any Company to maintain its books and records other than in the
same manner and with the same care that such books and records have been maintained prior
to the execution of this Agreement;




     (vii) request any ruling from, or enter into any agreement with, any Governmental
Authority with respect to any Company, insofar as such ruling or agreement relates to Taxes
for which any Company may be liable;




     (viii) with respect to any Company, (A) make or terminate any Tax election or take any
Tax Return position inconsistent with past practices, or (B)
authorize or effect any amendment to or change its certificate of incorporation,



20









 





memorandum
of association or other similar organizational documents in any
respect;


     (ix) make any change in the historical practices in the timing of its purchase of
student loans under the Richland Agreement;




     (x) undertake any action that would cause any of the representations and warranties
contained in Section 5.10 to be untrue; or




     (xi) agree in writing or otherwise to take any of the actions described above in this
Section 7.1(b).



          7.2 Continued Access to Information by Seller. From the Closing Date until seven (7)
years after the Closing Date, Purchaser will give Seller reasonable access during Purchaser’s
regular business hours upon reasonable advance notice and under reasonable circumstances and shall
be subject to restrictions under applicable Law to books and records transferred to Purchaser to
the extent necessary for the preparation of financial statements, regulatory filings or Tax returns
of Seller or its Affiliates in respect of periods prior to Closing, or in connection with any Legal
Proceedings. Seller shall be entitled, at its sole cost and expense, to make copies of the books
and records to which they are entitled to access pursuant to this Section 7.2.



          7.3 Access Prior to Closing. Subject to Section 11.7 hereof, prior to
Closing, upon reasonable prior written notice, Seller shall cause its officers, managers,
directors, employees, auditors and other agents to afford the officers, managers, directors,
employees, auditors and other agents of Purchaser reasonable access during normal business hours to
the officers, directors, employees, subcontractors, agents, properties, offices and other
facilities of the Companies and their books and records, and shall furnish Purchaser with such
financial, operating and other data and information with respect to the business of the Companies,
as Purchaser, through its officers, employees, subcontractors or agents, may reasonably request.
In exercising its rights hereunder, Purchaser shall conduct itself so as not to unreasonably
interfere in the conduct of the business of the Companies prior to Closing. Purchaser and Seller
shall undertake measures reasonably designed to preserve any relevant privilege or confidentiality
obligations that might otherwise be lost or breached in connection with such access.



          7.4 Filings, Consents and Approvals. The parties shall cooperate and use commercially
reasonable efforts to obtain all approvals and consents to the transactions contemplated by this
Agreement, including consents to the assignment of the Assigned Contracts and the consents of the
third parties set forth on Schedule 5.1(c); provided that neither Purchaser nor
Seller shall bear any cost or be required to undertake any additional obligation, risk or
arrangement in connection with obtaining such consents. Except in connection with the Modified
Richland Arrangements or an Alternative Arrangement, in the event and to the extent that the
parties are unable to
obtain any required approval, modification or consent of one or more Persons to any such
consents, (i) Seller shall use commercially reasonable efforts in cooperation with Purchaser to (a)
cause to be provided to Purchaser the intended benefits of any such



21









 




agreement or modification,
(b) cooperate in any arrangement, reasonable and lawful as to Seller and Purchaser, designed to
provide such benefits to Purchaser and (c) enforce for the account of Purchaser any rights of the
Seller or its Affiliates arising from such agreements, including the right to elect to terminate in
accordance with the terms thereof on the advice of Purchaser, and (ii) Purchaser shall use
commercially reasonable efforts to perform the obligations of Seller and its Affiliates arising
under such agreements and licenses, to the extent that, by reason of the transactions consummated
pursuant to this Agreement or otherwise, Purchaser is placed in the same position as Seller or its
Affiliates under such agreements, as intended to be modified. Following Closing, Seller shall
continue to use commercially reasonable efforts to obtain such approvals, consents, and
modifications and if and when any such approval, consent, or modification shall be obtained or such
agreement or license shall otherwise become assignable or modified, Seller and its Affiliates shall
promptly assign, and Purchaser shall assume, all of the rights and obligations thereunder.




     7.5 Conduct Pending Closing. From the date of this Agreement to the Closing Date, (a)
Seller shall, and shall cause the Companies to, use their best efforts to conduct their affairs in
such a manner so that, except as otherwise contemplated or permitted by this Agreement, the
representations and warranties of Seller contained in Article V 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 (unless such representations and warranties relate to a specified date); (b) Purchaser
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 Purchaser
contained in Article VI 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 (unless such
representations and warranties relate to a specified date); (c) Seller shall notify Purchaser
promptly of any event, condition or circumstance which, if existing or known on the date hereof,
would have been required to be set forth in any schedule or disclosed pursuant to this Agreement or
of any fact which, if existing or known on the date hereof, would have made any of the
representations of such party contained herein untrue in any material respect; and (d) Purchaser
shall notify Seller promptly of any event, condition or circumstance which, if existing or known on
the date hereof, would have been required to be set forth in any schedule or disclosed pursuant to
this Agreement or of any fact which, if existing or known on the date hereof, would have made any
of the representations of Purchaser contained herein untrue in any material respect. No such
information shall impact any representation or warranty of the party disclosing such information in
connection with any breach of any representation or warranty; provided that a breach of
this Section 7.5 shall not be considered for purposes of determining the satisfaction of
the closing conditions set forth in Article VIII or give rise to a right of termination
under Article IV if the underlying breach or breaches with respect to which the other party
failed to give notice would not result in the failure of the closing conditions set forth in
Article VIII or would not result in the ability of such non-breaching Party to terminate
this Agreement under Article IV, as the case may be.



     7.6 Further Assurances. Subject to the terms and conditions of this Agreement, Seller
and Purchaser will use their best efforts to take, or cause to be taken,



22









 




all actions or to do, or
cause to be done, all things or 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, Seller and Purchaser 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.




     7.7 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.



     7.8 Assignment of Assigned Contracts; Modification.



     (a) Subject to Section 7.4, at the Closing, Seller shall assign (or cause its
Affiliates to assign) to Purchaser all of Seller’s (or, if applicable, its Affiliates’) rights and
obligations in, to and under the Assigned Contracts pursuant to the Assignment and Assumption
Agreement and Seller and its Affiliates shall have no further obligations or liabilities with
respect to the Assigned Contracts.



     (b) The parties shall use commercially reasonable efforts to modify the Richland Agreement so
that (i) any obligations to purchase or service Excess Program Loans shall be the obligation of
Seller or any of its Affiliates (other than the Companies) and not of UFC2 and (ii) any obligations
to purchase and service Program Loans (as defined in the Richland Agreement) that are not Excess
Program Loans shall be the obligation of UFC2 and Purchaser or any of its Affiliates and not of
Seller or any of its Affiliates (other than the Companies) (as modified, the “Modified Richland
Arrangements”). The Modified Richland Arrangements shall be one three-party agreement or two
separate two-party agreements. “Excess Program Loans” means those Program Loans required
to be purchased pursuant to the Richland Agreement in excess of the first $10,000,000 in par value
of Program Loans not reflected as an asset on the June 30, 2008 balance sheet of UFC2. If the
parties are unable to obtain Richland’s consent to the Modified Richland Arrangements, the parties
shall use commercially reasonable efforts to enter into a loan origination and sale agreement with
a third party on terms substantially similar to those contained in the Richland Agreement, as if
modified as set forth in the preceding sentence (an “Alternative Arrangement”). No later
than five (5) Business Days prior to the Closing Date, Seller shall provide a notice to Purchaser
(the “Arrangement Notice”) stating whether or not (i) Seller has obtained Richland’s
consent
to the Modified Richland Arrangements or (ii) a third party has either entered into, or agreed
to enter into an Alternative Arrangement.



     7.9 Notice Contracts. As promptly as practicable after the Closing (and in no event
later than five (5) Business Days after the Closing), Seller shall provide notice to the other
parties to the contracts set forth on Schedule 7.9 (the “Notice Contracts”), that
all notices or copies thereof required to be given by such other parties to Seller pursuant to the
Notice Contracts shall no longer be given to Seller but shall instead be given to Purchaser.



23









 





     7.10 Intercompany Balances, Accounts and Agreements. Seller and Purchaser hereby
agree that, except as provided on Schedule 7.10, all intercompany balances, accounts and
agreements between the Companies on the one hand, and Seller and its Affiliates on the other hand,
shall be eliminated and terminated, without any payment by any Company, and, after the Closing
Date, no Company shall be bound thereby or have any liability thereunder. Without limiting the
generality of the foregoing sentence, any amount payable under Seller’s line of credit with UFC2
(the outstanding balance of which was reflected on UFC2’s March 31, 2008 balance sheet as
$5,345,442) will be eliminated, as of the Closing Date, without any payment of unpaid principal or
accrued and unpaid interest by UFC2 to Seller at any time following the date hereof.



     7.11 Quarterly Financial Information.



     (a) From the date hereof through the Closing Date, within forty-five (45) days following the
end of each fiscal quarter, Seller shall make available to Purchaser, the unaudited financial
statements of the Companies, as of the end of, and for, each fiscal quarter (collectively, the
“Quarterly Financial Statements”).



     (b) The Quarterly Financial Statements when completed, will present fairly, in all material
respects, the financial condition and results of operations of each Company, as of and for the
dates and periods therein specified, and will be prepared in accordance with GAAP, except as
expressly set forth within the subject financial statements, including the notes thereto (subject
to normal year-end audit adjustments).



ARTICLE VIII




CONDITIONS TO CLOSING




     8.1 Conditions to Purchaser’s Obligations to Close. The obligation of Purchaser 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 Purchaser to the extent permitted
by law:



     (a) the representations and warranties of Seller contained in this Agreement shall be true and
correct in all material respects on the date hereof and as of the Closing Date;



     (b) Seller shall have performed and complied with all agreements, covenants, obligations and
conditions required by this Agreement to be so performed or complied with by Seller at or before
the Closing;



     (c) there shall be in effect no injunction, writ, preliminary restraining order or any order
of any nature directing that the transactions contemplated by this Agreement not be consummated as
herein provided;



     (d) Seller shall have delivered, or caused to be delivered, to Purchaser stock certificates
representing the Equity Interests, duly endorsed in blank or accompanied by stock transfer powers
executed by an authorized officer of Seller;



24









 





     (e) the consents set forth on Schedule 5.1(c) shall have been obtained and copies
thereof shall have been delivered to Purchaser without any material conditions, restrictions or
limitations;



     (f) Purchaser and Seller shall have entered into and executed the Assignment and Assumption
Agreement in substantially the form of Exhibit A;



     (g) Purchaser and Seller shall concurrently close the transactions contemplated under the
Master Agreement or such closing shall have previously occurred;



     (h) Purchaser shall have received the written resignations of each of the directors and
officers of the Companies requested by Purchaser; and



     (i) Seller shall have executed and delivered to Purchaser a release, in substantially the form
of Exhibit B, of all claims against any Company by Seller or any Affiliate of Seller.



     8.2 Conditions to Seller’s Obligations to Close. The obligation of Seller 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 Seller to the extent permitted by
law:



     (a) the representations and warranties of Purchaser contained in this Agreement shall be true
and correct in all material respects on the date hereof and as of the Closing Date;



     (b) Purchaser shall have performed and complied with all agreements, covenants, obligations
and conditions required by this Agreement to be so performed or complied with by Purchaser at or
before the Closing;



     (c) there shall be in effect no injunction, writ, preliminary restraining order or any order
of any nature directing that the transactions contemplated by this Agreement not be consummated as
herein provided;



     (d) Purchaser shall have delivered, or caused to be delivered, to Seller evidence of the wire
transfer referred to in Section 3.2;



     (e) the consents set forth on Schedule 5.1(c) shall have been obtained and copies
thereof shall have been delivered to Seller without any material conditions, restrictions or
limitations;



     (f) Purchaser and Seller shall have entered into and executed the Assignment and Assumption
Agreement in substantially the form of Exhibit A; and



     (g) Purchaser and Seller shall concurrently close the transactions contemplated under the
Master Agreement or such closing shall have previously occurred.




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ARTICLE IX




INDEMNIFICATION




          9.1 Survival of Representations and Warranties; Covenants.




          (a) The representations and warranties of the parties contained in this Agreement, any
certificate delivered pursuant hereto or any Seller Document, Companies Document or Purchaser
Document shall survive the Closing through and including the eighteen (18) month anniversary of the
Closing Date; provided, however, that the representations and warranties (i) of
Seller set forth in (A) Sections 5.1 (Seller Existence and Authority), 5.3
(Companies) and 5.13 (Seller’s Brokers) shall survive the Closing indefinitely and (B)
Section 5.2 (Taxes) shall survive until the expiration of the applicable statute of
limitations, and (ii) of Purchaser set forth in Sections 6.1 (Purchaser Existence and
Authority) and 6.6 (Purchaser’s Brokers) shall survive the Closing indefinitely (in each
case, the “Survival Period”); provided, however, that any obligations under
Sections 9.2(a) and 9.3(a) shall not terminate with respect to any Losses as to
which the Person to be indemnified shall have given notice (stating in reasonable detail the basis
of the claim for indemnification) to the indemnifying party in accordance with Section 9.4
before the termination of the applicable Survival Period.




          (b) All covenants and agreements made by the parties to the extent that the foregoing, by
their express terms, are to have effect or be performed after the Closing Date, shall survive the
Closing in accordance with their terms.




          9.2 Indemnification by Seller. Subject to Section 9.5, Seller hereby agrees
to indemnify and hold Purchaser, the Companies, and their respective directors, officers,
employees, Affiliates, stockholders, agents, attorneys, representatives, successors and permitted
assigns harmless from and against any and all Losses based upon or arising out of:




          (a) subject to Section 9.1(a), any breach of any of the representations or warranties
made by Seller in this Agreement as of the date hereof and at and as of the Closing Date (ignoring
for purposes of this Section 9.2(a), any materiality or Material Adverse Effect qualifier
therein);




          (b) the breach of any covenant on the part of Seller;




          (c) any existing or threatened action, suit or proceeding identified or required to be
identified on Schedule 5.6; and




          (d) (i) the breach by Seller, CFLD, UFC2 or any of their Affiliates of any Securitization
Documents prior to the Closing, (ii) the failure of Seller, CFLD, UFC2 or any of their Affiliates
to comply prior to the Closing with any requirement with respect to bankruptcy remoteness, legal
(not accounting or tax) corporate separateness or any requirement with respect to the activities of
CFLD or UFC2 contained in any of the
Securitization Documents or organizational documents of CFLD or UFC2 or (iii) the breach of
any Applicable Law by Seller, CFLD, UFC2 or any of their Affiliates prior to




26









 







the Closing that has
an adverse effect on the financial condition of CFLD or UFC2 or the transactions contemplated by
the Securitization Documents. For purposes of this Section 9.2(d), Losses shall be reduced
(A) to the extent that such Losses can be satisfied with any available assets of CFLD, (B) by any
amounts recoverable by CFLD or Purchaser or any of its Affiliates pursuant to third-party
guarantees, and (C) by the adverse effect on such assets or guarantees resulting from any breaches,
failures or violations of the nature described in clauses (i) through (iii) of this
subsection (d) by Purchaser, the Companies or any of their Affiliates after the Closing.




          9.3 Indemnification by Purchaser. Subject to Section 9.7, Purchaser hereby
agrees to indemnify and hold Seller and their respective directors, officers, employees,
Affiliates, stockholders, agents, attorneys, representatives, successors and permitted assigns
harmless from and against any and all Losses based upon or arising out of:




          (a) subject to Section 9.1(a), any breach of any of the representations or warranties
made by Purchaser in this Agreement as of the date hereof and at and as of the Closing Date
(ignoring for purposes of this Section 9.3(a), any materiality or material adverse effect
qualifier therein); and




          (b) the breach of any covenant on the part of Purchaser.




          9.4 Notice of Claim. As soon as reasonably possible, but in no event subsequent to
thirty (30) days after receipt by an indemnified party hereunder of written notice of any demand,
claim or circumstances which, upon the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or investigation (a
“Claim”) that may result in a Loss, such indemnified party shall give notice thereof
(“Claims Notice”) to the indemnifying party. The Claims Notice shall describe the Claim in
reasonable detail, and shall indicate the amount (estimated, if necessary) of the Loss that has
been or may be suffered by such indemnified party. The failure of the indemnified party to give
the Claims Notice within in the time provided for herein shall not affect the indemnifying party’s
obligation under this Article IX except if, and then only to the extent that, such failure
materially prejudices the indemnifying party or its ability to defend such Claim.




          9.5 Opportunity to Defend. Within thirty (30) days of receipt of any Claims Notice
given pursuant to Section 9.4, the indemnifying party shall notify the indemnified party in
writing of the acceptance of or objection to the Claim and whether the indemnifying party will
indemnify the indemnified party and defend the same at the expense of the indemnifying party with
counsel selected by the indemnifying party (who shall be approved in writing by the indemnified
party, such approval not to be unreasonably withheld); provided that the indemnified party
shall at all times have the right to fully participate in the defense of the Claim at its own
expense or, as provided herein below, at the expense of the indemnifying party. Failure by the
indemnifying party to object in writing within such thirty (30) day period shall be deemed to be
acceptance of the Claim by the indemnifying party. In the event that the indemnifying party
objects to a Claim within said thirty (30) days or does not object but fails to meet its




27









 







indemnification obligations hereunder, the indemnified party shall have the right, but not the
obligation, to undertake the defense, and to compromise and/or settle (in the exercise of
reasonable business judgment) the Claim, all at the risk and expense (including, without
limitation, reasonable attorneys fees and expenses) of the indemnifying party. Except as provided
in the preceding sentence, the indemnified party shall not compromise and/or settle any Claim
without the prior written consent of the indemnifying party, such consent not to be unreasonably
withheld. If the Claim is one that cannot by its nature be defended solely by the indemnifying
party, the indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request, provided that any associated expense shall be paid by
the indemnifying party.




          9.6 Limitation on Indemnification. Neither party shall be entitled to indemnification
unless the party seeking indemnification makes claim therefore pursuant to the procedures set forth
in Section 9.4 of this Agreement.




          9.7 Certain Limitations on Indemnification. Notwithstanding the provisions of this
Article IX, Seller and Purchaser’s indemnification obligations for Losses under
Sections 9.2(a) and 9.3(a), respectively, shall be subject to the limitations set
forth in Sections 10.2.4 and 10.2.5 of the Master Agreement. Any Losses for which (i) Seller has
indemnification obligations pursuant to Section 9.2(a) shall subject to the limitations
contained in Section 10.2.4 of the Master Agreement (including the Min-Threshold (as defined in the
Master Agreement)) and shall be aggregated with any Losses for which Seller and/or the Ceding
Companies have indemnification obligations pursuant to Sections 10.2.1(i) or 10.2.2(i) of the
Master Agreement in determining whether the Indemnification Threshold (as defined in the Master
Agreement) or the thirty-five percent (35%) cap contained in Section 10.2.4 of the Master Agreement
has been met and (ii) Purchaser has indemnification obligations pursuant to Section 9.3(a)
shall subject to the limitations contained in Section 10.2.5 of the Master Agreement (including the
Min-Threshold) and shall be aggregated with any Losses for which Purchaser has indemnification
obligations pursuant to Section 10.2.3 of the Master Agreement in determining whether the
Indemnification Threshold or the thirty-five percent (35%) cap contained in Section 10.2.5 of the
Master Agreement has been met. The limitation contained in this Section 9.7 shall not
apply, expressly or by implication, to claims based on Sections 5.1, 5.2,
5.3, 5.13, 6.1, or 6.6.




          9.8 Exclusive Remedy. Except with respect to intentional fraud, from and after the
Closing, the sole and exclusive remedy for any breach or failure to be true and correct, or alleged
breach or failure to be true and correct, of any representation or warranty or any covenant or
agreement in this Agreement, shall be indemnification in accordance with this Article IX
and Article X. Notwithstanding the foregoing, this Section 9.8 shall not (a)
operate to interfere with or impede the operation of the provisions of Article III
providing for the resolution of certain disputes relating to the Purchase Price between the parties
and/or by an Independent Accountant or (b) limit the
rights of the parties to seek equitable remedies (including specific performance or injunctive
relief).



28









 







ARTICLE X




TAX MATTERS




          10.1 Access to Tax Records; Cooperation. After the Closing, Seller and Purchaser
shall cooperate, and shall cause their respective Affiliates, officers, employees, agents, auditors
and representatives to cooperate, and will each afford (or cause the Companies and their respective
Affiliates to afford) to the other or to such other’s representatives or agents reasonable access
during normal business hours (on terms not unreasonably disruptive to the business, operations or
employees of the party or parties of which access is sought) to the records and all other data and
information relating to Taxes of the Companies pertaining to taxable periods ending on or prior to
the Closing Date (and any Straddle Period) for the purpose of obtaining information relating to
Taxes of the Companies, to the extent such cooperation or access is reasonably necessary: (a) to
prepare, complete and file any Tax Returns (including amended Tax Returns and claims for refunds or
credits); (b) to prosecute or defend on behalf of the Companies litigation or administrative
controversies controlled by Seller or Purchaser, as the case may be, under this Agreement; (c) to
comply with requests made by any Taxing Authority conducting a Tax audit, investigation or inquiry
relating to the Companies’ activities, assets or capital stock; and (d) to satisfy any other
request of Seller or Purchaser, as the case may be, that is reasonable under the circumstances.




          10.2 Liability for Taxes and Related Matters.




          (a) Seller’s Liability for Taxes. Seller shall be liable for (i) in the case of all
Taxes imposed on the Companies for taxable periods for which the applicable Tax Return is filed or
due to be filed on or before the Closing Date (taking into account extensions), all Taxes required
to be shown on such Tax Returns, (ii) in the case of all Taxes imposed on the Companies for any
other taxable period that ends on or before the Closing Date, except to the extent reflected in the
Financial Statements, all Taxes required to be shown on such Tax Returns, (iii) all Taxes
attributable to the Pre-Closing Period of any Straddle Period of the Companies, (iv) all Taxes
imposed on or attributable to Seller or its Affiliates (other than the Companies) for any taxable
period, and (v) all Taxes or Tax-related liabilities imposed on the Companies with respect to
taxable periods or portions thereof ending on or before the Closing Date as a consequence of the
Companies’ liability for the Taxes of any other Person under Treas. Reg. § 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by contract or operation
of law or otherwise.




          (b) Taxes for Short Taxable Year of Companies. To the extent such action is permitted
by applicable law, Seller and Purchaser shall close all relevant taxable periods of the Companies
as of the close of business on the Closing Date. In any case in which a taxable period of the
Companies cannot be closed as of the Closing Date, then, for purposes of this Agreement, the
determination of Taxes of the Companies for each of
the Pre-Closing Period and the Post-Closing Period of any resulting Straddle Period shall be
determined on the basis of an interim closing of the books of the Companies as of the close of
business on the Closing Date, except that exemptions, allowances, deductions or



29









 






similar amounts
that are calculated on an annual basis, such as the deduction for depreciation, and Taxes that are
imposed ratably during a taxable period, shall be ratably apportioned on a per diem basis.




          (c) Preparation and Filing of Tax Returns.





     (i) Seller shall cause to be prepared and timely filed, taking into account all valid
extensions of time to file (A) all Tax Returns that are required to be filed by or with
respect to the Companies on an affiliated, consolidated, combined or unitary basis with
Seller or with at least one Affiliate of Seller that is not one of the Companies for
taxable periods beginning on or before the Closing Date, and (B) all Tax Returns of the
Companies (or Tax Returns in which the Companies are required to be included) that are due
to be filed (taking into account extensions) on or before the Closing Date. Seller
represents, warrants and covenants that (1) all such Tax Returns shall be prepared
consistent with past practices and shall be true, accurate and complete in all material
respects, and (2) it shall pay or cause to be paid to the appropriate Taxing Authority on a
timely basis the full amount of Taxes required to be shown on such Tax Returns. Seller
shall provide Purchaser a copy of each such Tax Return or portion thereof related to the
Companies, as filed.




     (ii) Except as provided in Section 10.2(c)(i), Purchaser shall cause to be
prepared and timely filed (taking into account extensions) (A) all Tax Returns of the
Companies that are due to be filed (taking into account extensions) after the Closing Date
and (B) all Tax Returns of the Companies for any Straddle Period. Purchaser represents,
warrants and covenants that (1) all such Tax Returns shall be prepared consistent with past
practices and shall be true, accurate and complete in all material respects, and (2) it
shall pay or cause to be paid to the appropriate Taxing Authority on a timely basis the
full amount of Taxes required to be shown on such Tax Returns. Purchaser shall provide to
Seller a copy of such Tax Return at least 30 days prior to the due date thereof for
Seller’s review and approval, which approval shall not be unreasonably withheld. Seller
shall provide Purchaser its comments within 20 days of the receipt of such Tax Returns.
Seller shall remit to Purchaser no later than 3 days prior to the filing of any such Tax
Return the portion of the Taxes shown on such Tax Return for which Seller is liable under
this Agreement.




     (iii) Seller shall have the right to file (or cause to be filed or require Purchaser
to file or cause to be filed) any amended Tax Return with respect to the Companies to the
extent that such amended Tax Return is (i) in respect of any taxable period or portion
thereof ending on or before the Closing Date and (ii) does not have an adverse effect on
the Companies or Purchaser for any taxable period or portion thereof beginning after the
Closing Date. Purchaser may only file amended Tax Returns in respect of any taxable period
or portion thereof
ending on or before the Closing Date, following receipt of Seller’s written approval,
which approval shall not be unreasonably withheld.



30









 





          (d) Tax Proceedings.





     (i) Each party hereto shall provide the other with prompt notice of any Tax adjustment
proposed by any Taxing Authority or other claim which could give rise to a claim for
indemnification under Article IX or this Article X; provided that
the failure to provide such notice shall not affect any right to indemnification under this
Agreement except to the extent the party not receiving notice is materially prejudiced
thereby. If the resolution of any Tax proceeding would be grounds for indemnification
under this Agreement by the party not in control of the conduct of such Tax proceeding
pursuant to this Section 10.2(d) (the “Non-Controlling Party”), (A) the
party in control of such Tax proceeding (the “Controlling Party”) shall keep the
Non-Controlling Party fully informed of any proceedings, events and developments relating
to or in connection with such Tax Proceeding; (B) the Non-Controlling Party shall be
entitled to receive copies of all correspondence and documents relating to such Tax
proceeding; and (C) at its own cost and expense, the Non-Controlling Party shall have the
right to participate in (but not control) the conduct of such Tax proceeding.
Notwithstanding any such control (1) Purchaser shall not, and shall not permit the
Companies to, enter into any settlement or admit any fault or liability with respect to any
Tax proceeding that could give rise to a claim for indemnification hereunder without
Seller’s express written prior consent, which consent shall not be unreasonably withheld or
delayed, and (2) Seller shall not enter into any settlement or admit any fault or liability
that is or purports to be binding on the Companies for any taxable period that could have
any adverse effect on the liability of Purchaser or the Companies for Taxes for any period
(or portion thereof) beginning after the Closing Date, without Purchaser’s express written
prior consent, which consent shall not be unreasonably withheld or delayed.




     (ii) Seller shall have the sole right to control any Tax proceeding relating to
taxable periods of the Companies ending on or before the Closing Date, and to employ
counsel of its choice and expense.




     (iii) With respect to Straddle Periods, the parties shall jointly control any Tax
proceedings, and neither party shall admit any fault or liability, or settle or compromise
any matter, without the prior written consent of the other party, which consent shall not
be unreasonably withheld or delayed.




     (iv) Purchaser shall have the sole right to control any Tax proceeding relating to
taxable periods of the Companies beginning on or after the Closing Date.



          (e) Record Retention. Any tax books, records and information of or relating to the
Companies shall be retained by Seller and Purchaser until the expiration of the relevant statute of
limitations applicable to the Taxes at issue. If Seller or Purchaser
shall desire to dispose of any of such Tax books, records and information after the expiration
of such period, such disposing party shall, prior to such disposition, give the



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other party a
reasonable opportunity, at the other party’s expense, to segregate and remove such books, records
and information as the other party may select.




          10.3 Survival of Obligations. The obligations of the parties set forth in this
Article X shall remain in effect until the later of (a) the closing of the period of the
relevant statute of limitations applicable to the Taxes at issue or (b) resolution of any claims
made pursuant to this Article X prior to such date.




          10.4 Tax Sharing Agreement. All Tax sharing agreements, Tax allocation agreements or
similar agreements relating to Taxes (other than this Agreement) with respect to or involving the
Companies shall be terminated as of the Closing, and, after the Closing Date, neither Purchaser and
the Companies nor Seller (or any of its direct or indirect Affiliates) shall be bound thereby or
have any liability thereunder.




          10.5 Certain Taxes. All transfer, documentary, sales, use, stamp, registration and
similar Taxes and fees (including any penalties and interest) incurred in connection with this
Agreement shall be borne equally by Purchaser on the one hand and Seller on the other hand, and
Purchaser and Seller shall cooperate in the filing of all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees. If required by applicable legal requirements, Purchaser and Seller will join
in the execution of any such Tax Returns and other documentation. Purchaser or Seller, as the case
may be, shall promptly, but in no case later than the due date for payment, reimburse Seller or
Purchaser, as the case may be, in full for the reimbursing party’s one-half share of any amounts
paid by the other party in connection with any such Taxes or Tax Returns.




          10.6 Allocation. No later than thirty (30) days following the Closing Date, Seller
shall prepare and deliver to Purchaser, for Purchaser’s review and approval, a statement (the
“Allocation Statement”) allocating the Purchase Price among the Companies and then among
the assets of NSA, in accordance with Section 1060 of the Code and the Treasury Regulations
thereunder. Unless otherwise required by a determination (as defined in Section 1313 of the Code),
neither Seller (or its Affiliates) nor Purchaser (or its Affiliates) shall file any Tax Return or
take a position before any Governmental Authority that is inconsistent with the Allocation
Statement.




          10.7 Tax Treatment of Payments. Seller and Purchaser shall treat any indemnity
payments made pursuant to Article IX and this Article X as adjustments to the
allocable portion of the Purchase Price for Tax purposes unless otherwise required pursuant to a
“determination” within the meaning of Section 1313(a) of the Code or a similar or analogous
provision of state, local or foreign Tax law.




          10.8 FIRPTA Affidavit. An affidavit of non-foreign status from Seller that complies
with Section 1445 of the Code (a “FIRPTA Affidavit”) will be delivered to Purchaser at the
Closing.




          10.9 Refunds. Purchaser shall pay (or cause to be paid) to Seller any refunds or
credits of Taxes received or realized by Purchaser with respect to which Seller



32









 






has agreed to
provide indemnification under this Agreement (including any interest paid thereon and net of any
Taxes incurred in respect of the receipt or accrual of the refund).




          10.10 Election under Section 338(h)(10).




          (a) At Purchaser’s written request received by Seller within thirty (30) days following the
Closing (the “Election Request”), Seller and Purchaser shall join in making (or causing to
be made) an election under Section 338(h)(10) of the Code (and all corresponding elections
available under any other law) (collectively, the “Section 338(h)(10) Elections”) with
respect to the sale of CFLD and/or UFC2. Seller and Purchaser shall take (or cause to be taken)
all steps necessary in order to effectuate the Section 338(h)(10) Elections in accordance with
applicable laws (including, without limitation, the preparation and timely filing of IRS Form 8023
and all similar state and local forms) and Seller and Purchaser shall cooperate with each other in
making such elections. Purchaser shall deliver (or cause to be delivered) to Seller, within ten
(10) days after delivery of the Election Request to Seller, three (3) original executed IRS Forms
8023 (and all applicable corresponding state or local forms) with respect to CFLD and UFC2. Seller
shall thereafter prepare and file such forms and Seller shall provide Purchaser with copies of all
such forms so filed within fifteen (15) days after filing.




          (b) Within sixty (60) days following Purchaser’s request, Purchaser shall prepare (or cause to
be prepared) and deliver to Seller a schedule (the “Section 338 Allocation Schedule”)
allocating the Aggregate Deemed Sales Price, as defined in Treasury Regulation Section 1.338-4, for
the assets of CFLD and UFC2 among such assets of CFLD and UFC2 (based on the portion of the
Purchase Price allocated to these entities pursuant to the Allocation Statement). The Section 338
Allocation Schedule shall be reasonable and shall be prepared in accordance with Section 338(h)(10)
and, as applicable, Section 1060, of the Code and the Treasury Regulations promulgated thereunder.
The Section 338 Allocation Schedule shall be deemed to be accepted by and shall be conclusive and
binding on Seller except to the extent, if any, that Seller shall have delivered, within thirty
(30) days after the date on which the Section 338 Allocation Schedule is delivered to Seller, a
written notice to Purchaser stating each and every item to which Seller takes exception (it being
understood that any amounts not disputed shall be final and binding). If a change proposed by the
Seller is disputed by Purchaser, then Seller and Purchaser shall negotiate in good faith to resolve
such dispute. If, after a period of twenty (20) days following the date on which Seller gives
Purchaser notice of any such proposed change, any such proposed change still remains disputed, then
Seller and Purchaser shall submit the remaining disputes to the Independent Accountant. The
decision of the Independent Accountant shall be final and binding. All of the fees and expenses of
the Independent Accountant shall be equally paid by Purchaser, on the one hand, and Seller, on the
other hand. Promptly upon receiving the final and binding Section 338 Allocation Schedule,
Purchaser and Seller shall return an executed copy thereof to the other party. Purchaser and
Seller shall file (or cause to be filed) all federal, state and local Tax Returns in accordance
with the Section 338 Allocation Schedule, and shall take no Tax position contrary thereto or
inconsistent therewith (including, without
limitation, in any amended return or claim for refund, any examination or audit by any Taxing
Authority, or any other Tax proceeding), except to the extent otherwise required



33









 






by a
“determination” within the meaning of Section 1313(a) of the Code or a similar or analogous
provision of state, local or foreign law.




ARTICLE XI




MISCELLANEOUS




          11.1 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) received by the receiving party if mailed by United States overnight express mail,
(c) sent by facsimile or telecopy machine, followed by confirmation mailed by United States
first-class mail or overnight express mail, or (d) delivered in person or by commercial courier, in
each case to the parties at the following addresses:



If to Seller, to:



HealthMarkets, LLC

9151 Boulevard 26

North Richland Hills, TX 76180

Attention: General Counsel

Facsimile: (817) 255-5391



With a copy (which shall not constitute notice) to:



Weil, Gotshal & Manges LLP

200 Crescent Court, Suite 300

Dallas, TX 75201-6950

Attention: Michael A. Saslaw

Facsimile: (214) 746-7777



If to Purchaser, to:



Wilton Reassurance Company

187 Danbury Rd.

Riverview Building, Third Floor

Wilton, Connecticut 06897-4122

Attention: Chief Executive Officer

Facsimile: (203) 762-4445



With a copy to:



David A. Massey

Sutherland Asbill & Brennan LLP

1275 Pennsylvania Avenue, NW




34









 







Washington, DC 20004-2415

Facsimile: (202) 637-3593



Either party may change the names or addresses where notice is to be given by providing notice to
the other party of such change in accordance with this Section 11.1.




          11.2 Entire Agreement. This Agreement (including the Exhibits and Schedules thereto)
and the Master 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 and thereof, which are merged with and into
this Agreement. 




          11.3 Assignment. This Agreement shall not be assigned by any of the parties hereto
without the prior written approval of the other parties; provided, however, that
Purchaser may assign its rights and obligations hereunder relating to the purchase of the Companies
to one or more of its Affiliates existing as of the date hereof provided Purchaser remains
primarily liable.




          11.4 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 executive officer of 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 an executive officer of
each Company, Seller and Purchaser, respectively.




          11.5 No Third Party Beneficiaries. The terms and provisions of this Agreement are
intended solely for the benefit of Seller and Purchaser 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.




          11.6 Public Announcements. At all times at or before the Closing, Seller and
Purchaser will each consult with the 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
any public report, statement or release to be made solely on behalf of a party. If Seller and
Purchaser 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 wishing to issue or make such report, statement or release, required by
Applicable Law or by legal disclosure obligations, then such party may make or issue the legally
required report, statement or release.




          11.7 Confidentiality. Each of Seller and Purchaser 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 or by other requirements of Applicable Law (provided,



35









 






however, that such disclosure shall be limited only to the extent that it is required by
regulatory authorities or to satisfy such legal process, and the party having such obligation of
disclosure notifies the other party of such process in a timely fashion sufficient to allow the
party whose Confidential Information is the subject of such disclosure to take appropriate legal
action to quash or limit such disclosure), 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 (“Confidential Information”), 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 later acquired by the receiving party from other sources not
themselves bound by, and in breach of, a confidentiality agreement. Neither Seller nor Purchaser
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. Each of Seller and Purchaser will be responsible for any breach
of the terms of this Section 11.7 by its respective officers, directors, employees, agents,
consultants, attorneys and other representatives. If this Agreement is terminated pursuant to
Article IV, 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.




          11.8 Governing Law. This Agreement will be governed by and construed in accordance
with the laws of the State of Texas, without regard to its conflicts of law doctrine.




          11.9 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.




          11.10 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.




          11.11 Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under any present or future Applicable Law or if determined by a court of
competent jurisdiction to be unenforceable, and if the rights or obligations of Seller or Purchaser
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 herefrom.




36









 








          11.12 Arbitration. All disputes (other than disputes relating to the operation of the
provisions of Article III providing for the resolution of certain disputes relating to the
Purchase Price between the parties and/or by an Independent Accountant) between Purchaser and
Seller arising out of or relating to this Agreement, including the formation and validity thereof,
on which an amicable understanding cannot be reached will be decided by arbitration between the
parties in accordance with the provisions of Article IX of the Master Agreement. Notwithstanding
the foregoing, if either Purchaser or Seller seeks, consents to, or acquiesces in the appointment
of or otherwise becomes subject to any trustee, receiver, liquidator or conservator (including any
state insurance regulatory agency or authority acting in such a capacity), the other party shall
not be obligated to resolve any claim, dispute or cause of action under this Agreement by
arbitration. Notwithstanding any other provision of this Section 11.12, nothing contained
in this Agreement shall require arbitration of any issue for which equitable or injunctive relief,
including specific performance, is sought.




[SIGNATURE PAGE FOLLOWS]




37









 





          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective authorized officers, as of the date first written above.




	 	 	 	 	 
	 	 	HEALTHMARKETS, LLC
	 
	 	 	 	 
	 

	 	By:
	 	HEALTHMARKETS, INC., its sole
	 	 	member






	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	Name: David W. Fields 	 
	 	Title: President and Chief Operating Officer 	 
	 



[SIGNATURE
PAGE TO STOCK PURCHASE AGREEMENT]





 









 





	 	 	 	 	 
	 	WILTON REASSURANCE COMPANY

 	 
	 	By:  	 	 
	 	Name:  	 
	 	Title:  	 
	 



[SIGNATURE
PAGE TO STOCK PURCHASE AGREEMENT]