Document:

exhibit1012bcgpurchaseag

                                                               Execution Version                          STOCK PURCHASE AGREEMENT                                      AMONG                   HORACE MANN EDUCATORS CORPORATION,                                       AND                               ROBERT PAGLIONE,         PAGLIONE FAMILY IRREVOCABLE TRUST F/B/O ADAM PAGLIONE,    PAGLIONE FAMILY IRREVOCABLE TRUST F/B/O LISA AND JORGE ARROYO,                                   BEAU ADAMS                                       AND                       BENEFIT CONSULTANTS GROUP, INC.                          DATED AS OF OCTOBER 30, 2018    40733748.21  

 

                               TABLE OF CONTENTS                                                                               Page      ARTICLE I      DEFINITIONS ...................................................................................................1        Section 1.1 Definitions..........................................................................................................1      ARTICLE II     PURCHASE AND SALE ................................................................................15        Section 2.1 Purchase and Sale; Purchase Price ...................................................................15        Section 2.2 Closing .............................................................................................................16        Section 2.3 Closing Deliveries ............................................................................................16        Section 2.4 Closing Payment ..............................................................................................18        Section 2.5 Accounts Receivable and Post-Closing Adjustment........................................18        Section 2.6 Earn-Out Payments ..........................................................................................21      ARTICLE III    REPRESENTATIONS AND WARRANTIES OF THE SELLERS ...............23        Section 3.1 Company Organization and Corporate History ...............................................23        Section 3.2 Capital Structure ..............................................................................................24        Section 3.3 Authority and Enforceability ...........................................................................25        Section 3.4 Consents and Approvals; No Conflict .............................................................26        Section 3.5 Financial Information; Absence of Undisclosed Liabilities ............................27        Section 3.6 Real Property Interest ......................................................................................28        Section 3.7 Plan Sponsors and Plans ..................................................................................29        Section 3.8 Material Contracts ............................................................................................29        Section 3.9 Employee Benefits; Employees .......................................................................30        Section 3.10 Taxes ................................................................................................................33        Section 3.11 Compliance with Law; Permits ........................................................................35        Section 3.12 Litigation ..........................................................................................................37        Section 3.13 Intellectual Property .........................................................................................37        Section 3.14 Producers..........................................................................................................39        Section 3.15 Broker-Dealer and Investment Adviser ...........................................................39        Section 3.16 Recordkeeping Services ...................................................................................41        Section 3.17 Bank Accounts; Affiliate Transactions ............................................................41        Section 3.18 Absence of Change ..........................................................................................42        Section 3.19 Insurance ..........................................................................................................42        Section 3.20 Privacy and Data Security ................................................................................42        Section 3.21 Environmental Matters.....................................................................................42        Section 3.22 Brokers .............................................................................................................43      ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF BUYER ...........................43        Section 4.1 Incorporation and Authority of Buyer .............................................................43        Section 4.2 No Conflict.......................................................................................................43        Section 4.3 Consents and Approvals ..................................................................................44        Section 4.4 Securities Law Matters ....................................................................................44        Section 4.5 Independent Investigation ................................................................................44        Section 4.6 Non-Reliance ...................................................................................................44        Section 4.7 Brokers .............................................................................................................44                                            -i-  40733748.21  

 

                                                                                                                 TABLE OF CONTENTS                                     (continued)                                                                             Page   ARTICLE V      COVENANTS .................................................................................................44      Section 5.1 Conduct of Business ........................................................................................44      Section 5.2 Access to Information ......................................................................................46      Section 5.3 Approvals and Consents ..................................................................................47      Section 5.4 Announcement .................................................................................................48      Section 5.5 Confidentiality .................................................................................................48      Section 5.6 D&O Liabilities ...............................................................................................49      Section 5.7 Releases by Sellers ...........................................................................................49      Section 5.8 Non-Competition; Non-Solicitation ................................................................49      Section 5.9 Exclusivity .......................................................................................................50      Section 5.10 Indebtedness; Affiliate Transactions; Accounts Receivable ............................51      Section 5.11 Further Assurances...........................................................................................51      Section 5.12 Notification of Certain Matters ........................................................................51      Section 5.13 One-Day Notes.................................................................................................52      Section 5.14 Private Letter Ruling ........................................................................................52    ARTICLE VI     EMPLOYEE MATTERS.................................................................................52      Section 6.1 Employee Matters ............................................................................................52    ARTICLE VII    CONDITIONS PRECEDENT .........................................................................55      Section 7.1 Conditions to Each Party’s Obligations ...........................................................55     Section 7.2 Conditions to Obligations of Buyer .................................................................56     Section 7.3 Conditions to Obligations of the Sellers ..........................................................57   ARTICLE VIII   TAX MATTERS ..............................................................................................57     Section 8.1 Agreements Regarding Tax Matters ................................................................57     Section 8.2 Section 338(h)(10) Election .............................................................................60     Section 8.3 Tax Sharing Agreements..................................................................................61     Section 8.4 Tax Treatment of Indemnity Payments ............................................................61   ARTICLE IX     SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND                 COVENANTS .................................................................................................61     Section 9.1 Survival of Representations and Warranties ....................................................61      Section 9.2 Survival of Covenants ......................................................................................62      Section 9.3 Survival Period.................................................................................................62    ARTICLE X      INDEMNIFICATION......................................................................................62      Section 10.1 Obligation to Indemnify ...................................................................................62      Section 10.2 Indemnification Procedures; Certain Limitations ............................................64      Section 10.3 Exclusive Remedies .........................................................................................67    ARTICLE XI     TERMINATION ..............................................................................................67      Section 11.1 Termination ......................................................................................................67      Section 11.2 Effect of Termination .......................................................................................68                                         -ii-   40733748.21  

 

                                                                                                                 TABLE OF CONTENTS                                     (continued)                                                                             Page   ARTICLE XII    GENERAL PROVISIONS ..............................................................................68      Section 12.1 Fees and Expenses ...........................................................................................68      Section 12.2 Notices .............................................................................................................68      Section 12.3 Interpretation ....................................................................................................69      Section 12.4 Entire Agreement; Third-Party Beneficiaries ..................................................70      Section 12.5 Governing Law ................................................................................................70      Section 12.6 Assignment ......................................................................................................70      Section 12.7 Dispute Resolution; Enforcement ....................................................................70      Section 12.8 Severability; Amendment and Waiver .............................................................71      Section 12.9 Specific Performance .......................................................................................72      Section 12.10 Certain Acknowledgments; Informed Decision to Sell ...................................72      Section 12.11 Counterparts .....................................................................................................73      Section 12.12 WAIVER OF JURY TRIAL ............................................................................73      Exhibits      Exhibit A   Certificates of Trust   Exhibit B   Indebtedness Payoff Amount  Exhibit C   Non-Compete and Non-Disclosure Agreements  Exhibit D   Spousal Consent  Exhibit E   Form of Release  Exhibit F   Working Capital   Exhibit G   Earn-Out Calculation  Exhibit H   Independent Accountants    Seller Disclosure Schedule  Buyer Disclosure Schedule                                               -iii-   40733748.21  

 

                       STOCK PURCHASE AGREEMENT            This STOCK PURCHASE AGREEMENT, dated as of October 30, 2018 (this   “Agreement”), is made by and among HORACE MANN EDUCATORS CORPORATION, a   Delaware corporation (“Buyer”), ROBERT PAGLIONE, an individual resident of the State of   New Jersey (the “Class A Shareholder”), THE PAGLIONE FAMILY IRREVOCABLE TRUST   F/B/O ADAM PAGLIONE, an irrevocable trust established under the laws of the State of New   Jersey (the “Adam Paglione Trust”), THE PAGLIONE FAMILY IRREVOCABLE TRUST F/B/O   LISA AND JORGE ARROYO, an irrevocable trust established under the laws of the State of New   Jersey (the “Lisa Arroyo Trust” and together with the Adam Paglione Trust, the “Trusts”), BEAU   CHRISTIAN ADAMS, an individual resident of the State of New Jersey (“Adams” and together   with the Class A Shareholder and the Trusts, the “Sellers” and each individually, a “Seller”), and   BENEFIT CONSULTANTS GROUP, INC., a Pennsylvania corporation (the “Company”).    Buyer, the Company (prior to the Effective Time) and the Sellers shall be referred to herein from   time to time collectively as the “parties” and individually as a “party.”                                     RECITALS         WHEREAS, the Sellers collectively own all of the issued and outstanding shares of the  Company;         WHEREAS, the Company owns all of the issued and outstanding capital stock of BCG  Securities, Inc., a Pennsylvania corporation (“BCGS”);            WHEREAS, the Company and BCGS engage in the business of providing retirement   planning, consulting, actuarial designing and recordkeeping services with respect to non-qualified   and qualified plans, investment advisory and brokerage services, and other related services; and          WHEREAS, the Sellers desire to sell to Buyer, and Buyer desires to acquire from Sellers,   all of the outstanding capital stock of the Company upon the terms and subject to the conditions   set forth herein;          NOW THEREFORE, in consideration of the mutual covenants, conditions and agreements   set forth herein and for other good and valuable consideration, the receipt and sufficiency of which   are hereby acknowledged, the parties hereto agree as follows:                                      ARTICLE I                                                                            DEFINITIONS          Section 1.1 Definitions.  For purposes of this Agreement, the following terms shall have   the respective meanings set forth below:          “Acceptable PLR” means a private letter ruling from the IRS reasonably satisfactory to   Buyer that the Company will be treated as continuing to be an S corporation within the meaning   of Sections 1361 and 1362 of the Code on and after December 31, 2017.     40733748.21  

 

         “Accounts Receivable” means all notes and accounts receivable of the Company Business,  determined in accordance with Applicable Accounting Principles.                “Action” means any claim, action, suit, litigation, arbitration, investigation, subpoena,  examination or other proceeding by or before any Governmental Authority or arbitral body.          “Acquisition Proposal” has the meaning set forth in Section 5.9.         “Adam Paglione Trust” has the meaning set forth in the introductory paragraph hereof.         “Adams” has the meaning set forth in the introductory paragraph hereof.         “Additional Holdback” has the meaning set forth in Section 5.14.         “Affiliate” means, with respect to any specified Person, any other Person that, at the time  of determination, directly or indirectly through one or more intermediaries, Controls, is Controlled  by, or is under common Control with, such first person.         “Agreement” has the meaning set forth in the introductory paragraph hereof.         “Allocation Schedule” has the meaning set forth in Section 8.2(c).         “Applicable Accounting Principles” means GAAP applied on a consistent basis.         “Assets” means the Leased Real Property, machines, furniture, computer hardware,  Intellectual Property, Computer Software, Technology, Contracts, office furnishings and other  tangible personal property which are owned or used in the Company Business.  Assets shall not  include the art work at the Leased Real Property set forth in Section 1.1 of the Seller Disclosure  Schedule, which art work shall be retained and owned by Seller, Robert Paglione.         “Base Consideration” means an amount equal to $25 million.         “BCGS” has the meaning set forth in the Recitals hereof.           “BCGS Financial Statements” has the meaning set forth in Section 3.5(a).         “BCGS Shares” has the meaning set forth in Section 3.2(b).         “Benefit Plans” means each “employee pension benefit plan” (as defined in Section 3(2)  of ERISA), “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), “employee  plan” (as defined in Section 3(3) of ERISA, and each stock option or other equity based,  employment or other contract for personal services, bonus, incentive or deferred compensation,  welfare, life, medical, or dental benefits, retention, change-in-control, restrictive covenant, Tax  gross-up, severance, paid leave, vacation, fringe, or other benefit, compensation plan, program,  policy, arrangement or agreement, whether or not subject to ERISA and whether or not written,  (a) that is sponsored, maintained, or contributed to by the Company or any of its Affiliates, (b)  with respect to which the Company or any of its Affiliates otherwise has any obligation or liability                                         -2-  40733748.21  

 

     (whether direct or contingent), or (c) that otherwise provides benefits to any current or former   employee, officer, director or independent contractor of the Company or any of its Affiliates.          “Books and Records” means the originals or copies of all books and records, data and   information, customer lists, disclosure and other documents and filings required under all   applicable Laws, administrative records, marketing information, customer information, personnel   records, sales records, financial records, Tax records, compliance records and email data of the   Company, BCGS and Company Business, including, without limitation, any database, magnetic   or optical media or any other form of recorded, computer generated or stored information or   process (including emails) and the Company’s and BCGS’s organizational, ownership and   corporate records.          “Business Day” means any day other than a Saturday, Sunday, a U.S. federal holiday or a   day on which the New York Stock Exchange is closed.           “Buyer” has the meaning set forth in the introductory paragraph hereof.          “Buyer 401(k) Plan” has the meaning set forth in Section 6.1(c).          “Buyer Disclosure Schedule” means the Buyer Disclosure Schedule delivered by Buyer to   the Sellers concurrently with the execution of this Agreement.          “Buyer Fundamental Representations” has the meaning set forth in Section 9.1.          “Buyer Indemnitees” has the meaning set forth in Section 10.1(a).          “Buyer Material Adverse Effect” means a material impairment of the ability of Buyer to   perform its obligations under the Agreement or to consummate the transactions contemplated   thereby.          “Buyer’s Allocation” has the meaning set forth in Section 8.2(c).          “Cause” means, with respect to any Person, the occurrence of any of the following: (i) such   Person’s indictment of, commission of or plea of guilty or nolo contendere to any felony or any   crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any   state thereof or under the laws of any other jurisdiction; (ii) such Person’s commission of, or   participation in, a fraud or act of dishonesty against Buyer or any Affiliate of Buyer or any client   of Buyer or any of its Affiliates or such Person’s commission of an act or omission that could bring   the business of the Buyer and its Affiliates into material disrepute or cause such entities significant   embarrassment; (iii) such Person’s material violation of any material policy, contract or agreement   between the Person and Buyer or any of its Affiliates (other than this Agreement); (iv) any act or   omission by such Person involving malfeasance or gross negligence in the performance of the   Person’s duties and responsibilities to the detriment of Buyer or any of its Affiliates; (v) such   Person’s habitual use of illegal drugs or alcohol during the performance of his duties for the Buyer   or its Affiliates; (vi) such Person’s violation of the applicable rules or regulations of any   governmental or self-regulatory authority that causes material harm to Buyer or any of its  Affiliates; or (vii) such Person’s disqualification or bar by any governmental or self-regulatory  authority from serving in the capacity required by his or her job description or such Person’s loss                                         -3-   40733748.21  

 

     of any governmental or self-regulatory license that is reasonably necessary for such Person to   perform his or her duties or responsibilities, in each case as an employee of Buyer or any of its   Affiliates.  The determination as to whether Cause has occurred shall be made by Buyer, in its sole   discretion.          “Certificates of Trust” means, collectively, the Certificate of Trust relating to the Adam   Paglione Trust and the Certificate of Trust relating to the Lisa Arroyo Trust, in each case attached   hereto as Exhibit A.          “Change of Control” means, with respect to any Person, (i) any event or series of events   by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the   Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in   Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended), directly or  indirectly, of shares of the capital stock of such Person representing more than 50% of the  aggregate ordinary voting power represented by the issued and outstanding capital stock of such   Person, or (ii) any transaction involving a sale of all or substantially all of the assets of such   Person to an independent third party.                    “Class A Common Stock” has the meaning set forth in Section 3.2(a).          “Class A Shareholder” has the meaning set forth in the introductory paragraph hereof.          “Class B Common Stock” has the meaning set forth in Section 3.2(a).          “Closing” has the meaning set forth in Section 2.2.          “Closing Consideration” means the Base Consideration plus the Working Capital   Adjustment less the Indebtedness Payoff Amount less the Company Transaction Expenses.          “Closing Date” has the meaning set forth in Section 2.2.          “Closing Payment” has the meaning set forth in Section 2.4(b).          “COBRA” has the meaning set forth in Section 6.1(f).          “Code” means the Internal Revenue Code of 1986, as amended, as well as any guidance   issued thereunder.          “Company” has the meaning set forth in the recitals.          “Company 401(k) Plan” has the meaning set forth in Section 6.1(c).          “Company Business” means the business of the Company and BCGS, including but not   limited to providing retirement planning, consulting, actuarial designing and recordkeeping   services with respect to non-qualified and qualified plans, investment advisory and brokerage   services, and any ancillary services.                                            -4-   40733748.21  

 

           “Company Material Adverse Effect” means any fact, circumstance, condition, event,   development, occurrence, change or effect that (a) has, or could reasonably be expected to have,   individually or in the aggregate, a material adverse effect on the business, sales, prospects assets,   liabilities, operations, or financial condition or results of operations of the Company, BCGS or the   Company Business, (b) has caused, or could reasonably be expected to cause, individually or in   the aggregate, material damage or harm to the commercial reputation of the Company, BCGS or   the Company Business, including association with any misleading sales practices, or (c) causes, or   reasonably could be expected to cause, individually or in the aggregate, a material impairment of   the ability of the Seller Parties to perform their obligations hereunder or to consummate the   transactions contemplated hereby; provided, however, that no effect, change, event, occurrence or   development (an “Event”) (by itself or when aggregated with any other Event) resulting from,   arising out or relating to, any of the following shall be deemed to give rise to a Company Material   Adverse Effect with respect to clause (a) hereof, or be taken into account when determining   whether a “Company Material Adverse Effect” under clause (a) or (b) hereof, has occurred or may,   would or could occur: (i) any Event (including any loss of employees, any disruption in supplier,   distributor, partner or similar relationships) to the extent resulting from or arising out of the public   announcement of this Agreement, (ii) any action taken by Seller Parties that is consented to by   Buyer in writing and (iii) to the extent that such Event does not disproportionately affect Sellers,   the Company, BCGS or the Company Business relative to other participants in the industries or  geographic locations in which Sellers, the Company, or BCGS participate: (A) any Event resulting  from or arising out of general economic or political conditions or changes in such conditions  (including acts of terrorism or war), (B) changes in GAAP or applicable Law after the date of this  Agreement and (C) changes resulting from natural or man-made disaster, a declaration of a  national emergency, war, or the occurrence of any military attack.          “Company Real Property Leases” has the meaning set forth in Section 3.6(b).          “Company Shares” means, collectively, the shares of Class A Common Stock and Class B   Common Stock of the Company.            “Computer Software” means currently used versions, releases, modifications, updates,   upgrades, enhancements thereto of computer software applications, programs, middleware,   firmware, materials and tapes used in the administration of the Company Business, as well as any   legacy versions thereof necessary to meet customer needs, including documentation, object code,   executables and available source code, in each case owned or used by the Company or any of its   Affiliates.          “Company Transaction Expenses” means, in each case solely to the extent not paid   immediately prior to the Closing Date, and whether or not invoiced, (i) the fees and expenses   payable by the Company to MacElree Harvey, Ltd. and any other attorneys engaged by the   Company in connection with this Agreement and the transactions and other agreements   contemplated by this Agreement, and (ii) the fees and expenses payable by the Company to outside   accountants or other advisors, in each case incurred on or before the Closing Date in connection   with this Agreement and the transactions and other agreements contemplated by this Agreement.           “Confidentiality Agreement” means that certain Non-Disclosure Agreement dated   February 28, 2018 by and between the Company and Horace Mann Services Corporation.                                           -5-   40733748.21  

 

         “Continued Employee” has the meaning set forth in Section 6.1(a).         “Continuing Membership Application” has the meaning set forth in Section 5.3(b).         “Contract” means any contract, agreement, Permit, note, lease, license, instrument or other  legally binding obligation.         “Control,” “Controlled” or “Controlling” means, as to any Person, the possession, directly  or indirectly, of the power to direct or cause the direction of the management and policies of such  Person, whether through the ownership of voting securities, by contract or otherwise.  The terms  “Controlled by” and “under common Control with” shall have correlative meanings.         “Customer” means any Plan Sponsor or individual recipient of individual wealth advisory  or other services by the Company or BCGS in connection with the Company Business.         “D&O Indemnified Person” has the meaning set forth in Section 5.6.         “Disputed Item” has the meaning set forth in Section 2.5(c).         “Earn-Out Payment” has the meaning set forth in Section 2.6(b).         “Earn-Out End Date” has the meaning set forth in Section 2.6(a).         “Earn-Out Start Date” has the meaning set forth in Section 2.6(a).         “Effective Time” has the meaning set forth in Section 2.2.         “Eligibility Date” has the meaning set forth in Section 6.1(d).         “Employee” means each natural person who is a common law employee of the Company  or BCGS, each of which (including any Employee on leave and any employee on long-term  disability) is listed on Section 3.9(g) of the Seller Disclosure Schedule.         “Environmental Laws” means all applicable Law governing Environmental Matters.         “Environmental Matters” means any matters arising out of or relating to health and safety,  or pollution or protection of the environment or workplace, including, without limitation, any of  the foregoing relating to the use, generation, transport, treatment, storage, or disposal of any  material defined as a “hazardous substance” or “hazardous waste” under any Environmental Law.         “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, as  well as any guidance issued thereunder.         “ERISA Affiliate” means any Person (whether incorporated or unincorporated) that  together with the Company would be deemed a “single employer” within the meaning of Section  414 of the Code.         “Estimated Closing Consideration” has the meaning set forth in Section 2.4(a).                                        -6-  40733748.21  

 

           “Estimated Working Capital Adjustment” has the meaning set forth in Section 2.4(a).          “Example Calculation” has the meaning set forth in Section 3.5(a).          “Existing Employment Agreement” means each employment agreement or other   agreement for personal services between the Company or BCGS, on one hand, and an Employee,   on the other hand.  For the avoidance of doubt, each such agreement (including any terminated   agreement for which the Company or BCGS has any liability) is listed on Section 3.9(h) of the   Seller Disclosure Schedule.           “Final Adjustment Amount” has the meaning set forth in Section 2.5(f)(ii).          “Final Working Capital Adjustment” has the meaning set forth in Section 2.5(b).          “Financial Statements” has the meaning set forth in Section 3.5(a).          “FINRA” means the Financial Industry Regulatory Authority, Inc.          “First Holdback Release Amount” means $2.5 million.          “First Holdback Release Date” has the meaning set forth in Section 10.2(i).          “Fund” means any registered investment company, bank commingled fund or other   unregistered pooled investment entity or separate account in which any Participant or Plan Sponsor   invests as part of any investment menu or other program offered by the Company or BCGS with   respect to the Company Business.          “Fund Agreement” means any Contract to which Company or BCGS is a party with any   Fund, an Affiliate of a Fund, or an agent of a Fund (including any Fund Manager) that is related   to the Company Business and calls for the payment to or on behalf of the Company or BCGS in   excess of $5,000 per annum, including, but not limited to, all agreements that are styled as  “participation agreements” and any corresponding ancillary documents, and all Contracts  providing for the use of Funds as investment options and payment of distribution service fees,  administrative service fees, shareholder service fees or other payments relating to the offering of  such Funds as investment options.          “Fund Managers” means the advisors to the Funds.          “GAAP” means generally accepted accounting principles in the United States.          “Governmental Approval” has the meaning set forth in Section 3.4.          “Governmental Authority” means any domestic or foreign governmental, legislative,   judicial, administrative or regulatory authority, agency, self-regulatory organization (including   FINRA), commission, body, court or entity.          “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation,   determination or award entered by or with any Governmental Authority.                                         -7-   40733748.21  

 

         “Holdback Amount” means $5,000,000.          “Holdback Release Date” means the First Holdback Release Date or Second Holdback  Release Date, as applicable.         “Indebtedness” means, with respect to any Person, any obligations of such Person or its  Subsidiaries whether evidenced by notes, bonds, debentures or similar instruments or otherwise  that relate to (a) borrowed money or any obligation to repay amounts, (b) any deferred purchase  price of goods or services, (c) any letter of credit, (d) any capital lease, lease-purchase arrangement  or similar agreement, (e) any undertaking by such Person or its Subsidiaries on which others rely  in extending credit or conditional sales agreements, or (f) any undertaking in the nature of  guarantees of the obligations described in clauses (a) through (e) above of any other Person, in  each case including any accrued and unpaid interest or penalty thereon.          “Indebtedness Payoff Amount” means the aggregate amounts required to extinguish the  Indebtedness set forth on Exhibit B hereto.         “Indemnification Cap” has the meaning set forth in Section 10.1(a).         “Indemnification Deductible” has the meaning set forth in Section 10.1(a).         “Indemnification Retention Amount” means the aggregate amount of all claims for  indemnification set forth in any demand for indemnification made by a Buyer Indemnitee pursuant  to and in compliance with Article VII or Article X as applicable (whether disputed or undisputed)  on or prior to the applicable Holdback Release Date that are outstanding and unpaid as of such  Holdback Release Date.         “Indemnified Party” has the meaning set forth in Section 10.2(a).         “Indemnifying Party” has the meaning set forth in Section 10.2(a).         “Indemnity Claim” has the meaning set forth in Section 10.2(a).         “Independent Accountant” has the meaning set forth in Section 2.5(d).         “Individual Registered Representative Agreement” means each agreement among the  Company, BCGS and a Registered Person pursuant to which such Registered Person is appointed  as a “registered representative” of BCGS and/or serves as an investment adviser representative of  BCGS.         “Intellectual Property” means any and all of the following: (a) Trademarks; (b)  copyrightable works and works of authorship, including moral rights, copyright, registrations and  applications for registration thereof, and all rights therein provided by applicable Law; (c) Trade  Secrets and confidential know-how; (d) patents, patent applications and statutory invention  registrations, including reissues, divisions, continuations, continuations-in-part, renewals,  extensions and reexaminations thereof, all patents that may issue on such applications, and all  rights therein provided by applicable Law; and (e) other intellectual property and related  proprietary rights, interests and protections.                                         -8-  40733748.21  

 

           “Interest Rate” means the greater of (a) a rate of interest per annum equal to the rate of   interest quoted in The Wall Street Journal, Money Rates Section as the “Prime Rate” as in effect   from time to time, or (b) the applicable federal short-term rate as defined in section 1274(d) of the  Code.            “Investment Advisers Act” means the Investment Advisers Act of 1940, as amended, and   the rules and regulations of the SEC thereunder.          “IRS” means the Internal Revenue Service.          “Knowledge” means, with respect to Seller Parties, the actual knowledge after due inquiry   of the individuals listed in Section 1.1(a) of the Seller Disclosure Schedule.          “Law” means any federal, state, local or foreign law, statute or ordinance, common law or   any rule, regulation, standard, judgment, order, writ, injunction, ruling, decree, arbitration award,   agency requirement, license or permit of any Governmental Authority.          “Leased Real Property” has the meaning set forth in Section 3.6(b).          “Licensed Intellectual Property and Technology” has the meaning set forth in Section   3.13(c).          “Lien” means any mortgage, deed of trust, pledge, hypothecation, security interest,   encumbrance, claim, lien or charge of any kind.          “Lisa Arroyo Trust” has the meaning set forth in the introductory paragraph hereof.          “Losses” means any and all liabilities, claims, expenses (including reasonable attorneys’   fees and expenses) and damages, reasonably foreseeable lost profits and any claim properly paid   to a third party in connection with a Third Party Claim, provided, that Losses shall exclude   punitive, consequential, special, and indirect damages (including any damages based on any type   of multiple).          “Material Contract” means any (i) Services Agreement, (ii) Plan Sponsor Recordkeeping   Agreement, (iii) Fund Agreement, (iv) Revenue Agreement, (v) Significant Producer Agreement,   (vi) any Contract evidencing Indebtedness of the Company or BCGS, (vii) any other Contract with   any Customer, and (viii) any other Contract to which the Company or BCGS is a party or by which   its assets are bound that (a) calls for the payment by or on behalf of the Company or BCGS in   excess of $10,000 per annum, or the delivery of goods or services with a fair market value in excess   of $10,000 per annum, during the remaining term thereof, (b) establishes a joint venture or similar   arrangement, (c) involves an acquisition or disposition of any material portion of the Company   Business or pursuant to which there is continuing indemnification obligations of the Company or   BCGS, (d) contains covenants restricting the ability of the Company or BCGS to compete in any   line of business or geographical area or to do business with any Person or solicit the employment   of any Person or (e) constitutes any real property interest.          “MSRB” means the Municipal Securities Rulemaking Board.                                         -9-   40733748.21  

 

           “Non-Compete and Nondisclosure Agreements” means the Non-Compete and   Nondisclosure Agreements between Buyer, on one hand, and each of the Principals, on the other   hand, in substantially the form attached hereto as Exhibit C.            “OFAC” has the meaning set forth in Section 3.11(e).          “One-Day Notes” means the One-Day Notes to be delivered by Buyer to the Sellers at   Closing in a form mutually acceptable to Buyer and Sellers.           “Ordinary Course of Business” means, with respect to any Person, the ordinary course of   business of such Person consistent with past practice.          “Organizational Documents” means (a) the articles or certificate of incorporation and   bylaws of a corporation; and (b) any charter, trust documents, or similar document adopted or filed   in connection with the creation, formation, or organization of a Person, and (c) any amendment to  any of the foregoing.          “Outside Date” has the meaning set forth in Section 11.1(b).          “Owned Intellectual Property” means the Intellectual Property relating to the Company   Business owned by the Company or any of its Affiliates.          “Participant” means an employee who meets the eligibility requirements to participate in a   plan that is included in the Company Business with the applicable Plan Sponsor.          “Permits” has the meaning set forth in Section 3.11(b).          “Permitted Liens” means all imperfections of title or Liens (a) that arise out of Taxes   imposed that are not due and payable as of the Closing Date or are being contested in appropriate   proceedings, (b) of carriers, warehousemen, mechanics, materialmen and other similar Persons or   other similar Liens imposed by Law incurred in the Ordinary Course of Business for sums not yet   delinquent or being contested in good faith, or (c) that relate to deposits made in the Ordinary   Course of Business in connection with workers’ compensation, unemployment insurance and other   types of social security, other than, in each case, such imperfections or Liens that would   individually or in the aggregate with other Permitted Liens, interfere with the use of the asset or   assets to which such Liens relates in the Ordinary Course of Business or materially detract from   the value of such asset or assets.          “Person” means any natural person, corporation, partnership, joint venture, limited liability   company, association, trust, unincorporated organization or other entity.          “Personal Information” means (i) any “nonpublic personal information” as such term is   defined under Title V of the U.S. Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., and the rules   and regulations issued thereunder, (ii) any “individually identifiable health information” or   “protected health information” as such terms are used under Health Insurance Portability and   Accessibility Act of 1996 and the rules and regulations issued thereunder, (iii) any information   that can specifically identify an individual, such as name, signature, address, social security  number, telephone number or other unique identifier, together with any other information that                                         -10-   40733748.21  

 

   relates to an individual who has been so identified in any format whether written, electronic or  otherwise, or (iv) information that can be used to authenticate an individual (including, without  limitation, passwords or PINs, biometric data, unique identification numbers, answer to security  questions, or other personal identifiers) in each case in any format whether written, electronic or  otherwise.         “Phantom Stock Plan” means the Phantom Stock and Stock Appreciations Rights Plan, by  and between the Company and Stephen E. Sokolic, dated April 12, 2004 and terminated as to  future benefits as of December 28, 2006,  as amended from time to time.          “Plan” means any non-qualified deferred compensation plans, qualified defined  contribution or defined benefit plans or other arrangements or programs sponsored or maintained  by a Plan Sponsor with respect to which the Company or any of its Affiliates provides any  retirement plan program services as part of the Company Business.         “Plan Sponsor” means an employer or other entity that sponsors or maintains non-qualified  deferred compensation plans, qualified defined contribution or defined benefit plans or other  arrangements or programs with respect to which the Company or any of its Affiliates provides  services as part of the Company Business.         “Plan Sponsor Recordkeeping Agreements” means any Contract pursuant to which the  Company or any of its Affiliates provides Recordkeeping Services to a Plan Sponsor and which  has resulted in the annual payments to the Company or any of its Affiliates in excess of $5,000 per  annum.         “Post-Closing Statement” has the meaning set forth in Section 2.5(b).         “Post-Closing Tax Period” means any Tax period that begins after the Closing Date and  the portion of any Straddle Period that begins after the Closing Date.         “Pre-Closing Statement” has the meaning set forth in Section 2.4(a).         “Pre-Closing Tax Period” means any Tax period that ends on or before the Closing Date  and the portion of any Straddle Period ending at the end of the Closing Date.         “Principals” means Robert Paglione, Adam Paglione, Jorge Arroyo and Beau Adams.         “Pro Rata Share” means for each Seller, the number of Company Shares owned by such  Seller over the total number of Company Shares.            “Producer” has the meaning set forth in Section 3.14(a).         “Purchase Price” has the meaning set forth in Section 2.1(b).         “Quarterly Financial Statements” has the meaning set forth in Section 3.5(a).         “Recordkeeping Services” means, administrative maintenance of plans and plan- participant accounts, processing of plan transactions, transfer and clearing services related to plan-                                       -11-  40733748.21  

 

   level trades, check preparation, provision of Tax reporting information, plan consulting, participant  distribution education services and related services.         “Recovery Amounts” has the meaning set forth in Section 10.2(d).         “Registered Intellectual Property” means all Owned Intellectual Property that is registered,  filed or issued under the authority of any Governmental Authority (or, in the case of an internet  domain name, with an internet domain name registrar), or for which an application to register has  been filed with any Governmental Authority.         “Registered Person” means each Employee and independent contractor of the Company or  any of its Affiliates who is (a) required to be licensed as a registered representative with certain  states and FINRA, and/or (b) required to be licensed or registered as an investment adviser  representative where such licensing or registration is required by a state, in order to perform his or  her responsibilities for or on behalf of the Company or any of its Affiliates in connection with the  Company Business.         “Related Person” means (a) with respect to a particular individual: (i) each other member  of such individual’s Family; and (ii) any Person that is directly or indirectly Controlled by such  individual or one or more members of such individual’s Family, and (b) with respect to a specified  Person other than an individual, any other Person that directly or indirectly Controls, is directly or  indirectly Controlled by, or is directly or indirectly under common Control with such specified  Person.  For purposes of this definition, the “Family” of an individual includes (A) the individual,  (B) the individual’s spouse, (C) the individual’s children (including adoptive relationships); and  (D) all familial relations living in the individual’s household.  In the case of a trust, any trustee or  co-trustee shall be deemed to control the relevant trust.         “Representatives” as to any Person, means such Person’s directors, officers, partners (other  than limited partners), managers, employees, Affiliates, representatives (including financial  advisors, attorneys and accountants) or agents.         “Resolution Period” has the meaning set forth in Section 2.5(d).         “Restricted Period” has the meaning set forth in Section 5.8(a).         “Revenue Agreement” means any Contract to which the Company or BCGS or one of their  agents is a party, which calls for the payment in excess of $5,000 per annum, directly or indirectly,  to the Company or BCGS.         “Salary Continuation Agreement” means that certain Salary Continuation Agreement  between the Company and Robert Paglione, dated January 1, 2008, as amended from time to time.         “SEC” means the U.S. Securities and Exchange Commission.         “Second Holdback Release Date” has the meaning set forth in Section 10.2(i).         “Section 338(h)(10) Election” has the meaning set forth in Section 8.2(a).                                        -12-  40733748.21  

 

         “Securities Act” means the Securities Act of 1933, as amended, and the rules and  regulations of the SEC thereunder.         “Selected Court” has the meaning set forth in Section 12.7(b).         “Seller Delivered Documents” has the meaning set forth in Section 3.4.         “Seller Disclosure Schedule” means the Seller Disclosure Schedule delivered by the  Company to Buyer concurrently with the execution of this Agreement.          “Seller Fundamental Representations” has the meaning set forth in Section 9.1.         “Seller Indemnitees” has the meaning set forth in Section 10.1(b).         “Seller Parties” means Sellers and, prior to the Effective Time, the Company.         “Sellers” has the meaning set forth in the introductory paragraph hereof.         “Services Agreement” means any Contract to which the Company or BCGS is a party  pursuant to which services are provided by any Person in connection with the Company Business  such as the provision of system, infrastructure, application, custodial, trust or brokerage, clearing  or settlement services (other than Plan Sponsor Recordkeeping Agreements, other Contracts with  Customers, or Fund Agreements) and which calls for the payments by or on behalf of the Company  or BCGS to such Person in excess of $5,000 per annum.         “Significant Producer” has the meaning set forth in Section 3.14(c).         “Significant Producer Agreement” has the meaning set forth in Section 3.14(c).         “Spousal Consents” means the consent of the spouse of each of the Class A Shareholder  and Adams, in substantially the form set forth as Exhibit D.         “Straddle Period” means any Tax year or period beginning on or before the Closing Date  and ending after the Closing Date.         “Subsidiary” of any Person means another Person of which more than 50% of the total  combined voting power of all classes of stock or other voting interests or Controlling equity  interest in the case of a Person that is not a corporation is owned at the time of determination  directly or indirectly by such first Person.         “Substantially Converted” means conversion of 90% or more of the Buyer’s “retirement  advantage” plans (which does not include remitter services or data sharing) from the Buyer’s  platform to the Company’s platform such that Buyer clients are able to access their client account  information from the website maintained by the Company; provided that a plan shall be deemed  converted to the Company’s platform if (i) the plan has not been converted due to delay by the  custodian (Matrix/MG Trust) or the recordkeeping platform (FIS Relius), provided that Sellers  shall have used best efforts to cause such conversion, or (ii) the plan has been converted and is  subsequently “de-converted” by the Buyer.                                          -13-  40733748.21  

 

           “Survival Period” has the meaning set forth in Section 9.3.          “Target Net Working Capital” means $800,000.                  “Tax Closing Agreement” has the meaning set forth in Section 3.10(g).          “Tax Ruling” has the meaning set forth in Section 3.10(g).          “Tax” means any federal, state, county, local, or foreign tax (including income taxes and   Transfer Taxes), charge, fee, levy, impost, duty, or other assessment, including income, gross   receipts, excise, employment, sales, use, transfer, recording, license, payroll, franchise, severance,   documentary, stamp, occupation, windfall profits, environmental, highway use, commercial rent,   customs duty, capital stock, paid-up capital, profits, withholding, social security, single business,   unemployment, disability, real property, personal property, registration, ad valorem, value added,   alternative or add-on minimum, estimated, or other tax or taxing fee of any kind whatsoever,   imposed or required to be withheld by any Taxing Authority, including any estimated payments   relating thereto, any interest, penalties, and additions imposed thereon or with respect thereto,   whether disputed or not, and including liability for taxes of another Person under Treasury   Regulations Section 1.1502-6 or similar provision of state, local or foreign law, or as a transferee   or successor, by contract or otherwise.          “Tax Adjustment” has the meaning set forth in Section 8.2(b).          “Tax Return” means any return, declaration or report relating to Taxes due, any information   return with respect to Taxes, or other similar report, statement, declaration or document required   to be filed under applicable Law in respect of Taxes, any amendment to any of the foregoing, any   claim for refund of Taxes paid, and any attachments, amendments or supplements to any of the   foregoing.          “Taxing Authority” means the IRS and any other domestic or foreign Governmental   Authority responsible for the administration and/or collection of any Tax.          “Technology” means hardware, information technology equipment and systems, third-  party software, data and databases, and associated documentation, in each case relating to the   Company Business as currently conducted and owned by or licensed by the Company.          “Texas Application” has the meaning set forth in Section 5.3(b).          “Third Party Claim” has the meaning set forth in Section 10.2(b).          “Trademarks” mean trademarks, trade names, service marks, trade dress, logos, internet   domain names, any and all common law rights thereto, and registrations and applications for   registration thereof (including intent-to-use applications), all rights therein provided by applicable  Law, and all reissues, extensions and renewals of any of the foregoing.          “Trade Secrets” means information that derives economic value, actual or potential, from   not being generally known and not being readily ascertainable to other persons who can obtain  economic value from its disclosure or use and that is the subject of reasonable efforts by the                                         -14-   40733748.21  

 

     Company, Buyer or their respective Affiliates to maintain its secrecy or confidentiality and has  value as a result of such secrecy or confidentiality.  Trade Secrets may include either technical or   non-technical data, including, without limitation, information concerning the Customers   (including Customer information, identities, profiles, preferences and contacts), vendors,   suppliers, products, pricing or pricing strategies, personnel assignments and policies, the legal or   financial affairs, or the management of, in each case, the Company or Buyer or their respective   Affiliates.           “Transaction Documents” means, without duplication, this Agreement and all documents   to be executed or delivered pursuant to this Agreement and any other agreements, instruments, and   documents required to be delivered at the Closing.          “Transfer Taxes” means any sales, use, transfer, stamp, or similar Taxes imposed with   respect to the sale of the Company Shares pursuant to this Agreement.          “Treasury Regulations” means the regulations prescribed under the Code.          “Trusts” has the meaning set forth in the introductory paragraph hereof.          “Unresolved Items” has the meaning set forth in Section 2.5(d).          “WARN Act” has the meaning set forth in Section 6.1(h).          “Wire Transfer” means a payment in immediately available funds by wire transfer in lawful   money of the United States of America to such account or accounts as shall have been designated   by notice to the paying party.          “Working Capital” means an amount determined in accordance with the Example   Calculation set forth on Exhibit F.                   “Working Capital Adjustment” means an amount (which may be a negative) equal to the   Working Capital as of the Effective Time less the Target Net Working Capital.                                             ARTICLE II                                                                         PURCHASE AND SALE          Section 2.1 Purchase and Sale; Purchase Price.                  (a)   Upon the terms and subject to the conditions of this Agreement, at the   Closing, the Sellers shall sell all of the Company Shares to Buyer free and clear of all Liens, and   Buyer shall purchase all of the Company Shares from the Sellers.                (b)   The “Purchase Price” for the Company Shares shall be                       (i)   the Base Consideration, plus                       (ii)  the Working Capital Adjustment; plus                                         -15-   40733748.21  

 

                     (iii) any Earn-Out Payment as calculated and payable in accordance with              Section 2.6 hereof.         Section 2.2 Closing.  Unless this Agreement shall have been terminated pursuant to  Section 11.1 and subject to the satisfaction or waiver of each of the conditions set forth in  Article VII in accordance with this Agreement, the closing of the purchase and sale of the  Company Shares and the consummation of the other transactions contemplated by this Agreement  (the “Closing”) shall take place at the offices of Eversheds Sutherland (US) LLP, 700 Sixth Street,  NW, Washington, DC, at 10:00 am (Central Time) on the Business Day that is three (3) Business  Days following the date that all of the conditions set forth in Article VII are satisfied or waived  (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the  satisfaction or waiver of those conditions at the Closing) in accordance with this Agreement unless  another date, time or place is agreed to by the parties hereto.  The actual date and time of the  Closing are referred to herein as the “Closing Date.”  The effective time of Closing shall, for all  purposes, be 12:00 am (Central Time) on the Closing Date (the “Effective Time”).         Section 2.3 Closing Deliveries.                 (a)   At the Closing the Sellers shall deliver to Buyer:                       (i)   certificates representing the Company Shares, endorsed in blank for              transfer or accompanied by duly executed blank stock powers with all appropriate              stock transfer tax stamps affixed, together with such other instruments as shall              reasonably be required by Buyer to vest fully in Buyer all right, title and interest in              and to the Company Shares free and clear of any Liens;                      (ii)  duly executed counterparts of each Non-Compete and              Nondisclosure Agreement;                      (iii) the Spousal Consents;                      (iv)  payoff letters evidencing the settlement of Indebtedness of the              Company and the discharge and release of any Liens related thereto as              contemplated by Section 5.10;                     (v)   a letter from the landlord of the Leased Real Property in a form              reasonably satisfactory to Buyer consenting (or not objecting) to the change in              control of the Company;                      (vi)  duly executed resignations, together with releases of the Company              and BCGS in substantially the form attached hereto as Exhibit E, reasonably              satisfactory to Buyer from each of the officers and directors of the Company and              BCGS identified by Buyer, effective as of the Closing from their positions as              officers and directors;                      (vii) a certificate dated the Closing Date and executed by Sellers stating              that the conditions set forth in Section 7.2(a) and 7.2(b) have been satisfied;                                        -16-  40733748.21  

 

                     (viii) a certificate dated the Closing Date and executed by the trustee of              each Trust stating that the condition set forth in Section 7.2(c) has been satisfied;                     (ix)  evidence of the termination of each Existing Employment              Agreement reasonably satisfactory to Buyer;                      (x)   evidence of the termination of (A) all Contracts set forth in Section              3.17(b)(ii) of the Seller Disclosure Schedule and the settlement of all amounts due              thereunder, (B) if the Closing Date occurs in 2019, all Benefit Plans and other              Contracts set forth in Section 3.9(b) of the Seller Disclosure Schedule, and (C) the              Company 401(k) Plan in accordance with Section 6.1(c), in each case reasonably              satisfactory to Buyer;                     (xi)  Certificate of the Secretary of the Company and BCGS dated as of              the Closing Date (A) certifying, as complete and accurate as of the Closing Date,              attached copies of the Company’s and BCGS’s Organizational Documents, each              amended as of such date, and (B) certifying and attaching all resolutions adopted              by the Company’s and BCGS’s board of directors authorizing the execution,              delivery and performance by the Company of this Agreement and by the Company              and BCGS (if applicable) of the other Seller Delivered Documents and the              consummation of all transactions contemplated hereby and thereby, and certifying              that such resolutions are in full force and effect and are all of the resolutions adopted              in connection with such transactions;                     (xii) Good Standing Certificate for the Company and BCGS from the              Pennsylvania Secretary of State;                     (xiii) an IRS Form 8023, with attached schedules as required, containing              all information required by the IRS with respect to each S Corporation Shareholder              (as defined in the Treasury Regulations) of the Company, and signed by each Seller              in accordance with the IRS instructions to such Form; and                     (xiv) evidence of termination of the Salary Continuation Agreement and              Phantom Stock Plan, in each case reasonably satisfactory to Buyer.               (b)   Deliveries at Closing by Buyer.  At the Closing, Buyer will pay or deliver  to the Sellers the following:                     (i)   each Seller’s Pro Rata Share of the Closing Payment in accordance              with Section 2.4(b) hereof;                     (ii)  a certificate dated the Closing Date and executed by an officer of              Buyer stating that the conditions set forth in Section 7.3(a) and 7.3(b) have been              satisfied;                      (iii) Certificate of the Secretary of the Buyer dated as of the Closing Date              certifying and attaching all resolutions adopted by the Buyer’s board of directors              authorizing the execution, delivery and performance by the Buyer of this                                        -17-  40733748.21  

 

                 Agreement and by the Buyer of the other Transaction Documents to which Buyer               is a party and the consummation of all transactions contemplated hereby and               thereby, and certifying that such resolutions are in full force and effect and are all               of the resolutions adopted in connection with such transactions; and                      (iv)  Good Standing Certificate for the Buyer from the Delaware               Secretary of State.                (c)   Each party shall deliver, or cause to be delivered, to the other party such   other documents as may be reasonably necessary to consummate the transactions contemplated by   this Agreement.          Section 2.4 Closing Payment.                  (a)   Not later than three (3) Business Days prior to the Closing Date, the Sellers   shall deliver to Buyer a statement (the “Pre-Closing Statement”) consisting of (i) an estimated pro   forma consolidated balance sheet of the Company and BCGS as of the Effective Time prepared in   accordance with the remaining provisions of this Section 2.4, together with (ii) a calculation of the   estimated Working Capital Adjustment as of the Effective Time derived from such pro forma   consolidated balance sheet, with the Indebtedness Payoff Amount and Company Transaction   Expenses estimated as of the Effective Time (the “Estimated Working Capital Adjustment”), and   (iii) an estimate of the Closing Consideration (the “Estimated Closing Consideration”).  All items   set forth in the Pre-Closing Statement shall be (A) based upon the Books and Records and prepared   in good faith, (B) based on the same format as the balance sheets contained in the Financial   Statements as of year-end 2017 with respect to the consolidated balance sheet and the Example   Calculation with respect to the Estimated Working Capital Adjustment, (C) prepared consistent   with the Applicable Accounting Principles and with respect to the Estimated Working Capital   Adjustment also consistent with the notes set forth in the Example Calculation, and (D)   accompanied with work papers and supporting documentation and a written certification from the   Chief Financial Officer of the Company certifying that the Pre-Closing Statement and calculation  therein comply with the requirements of this Section 2.4(a).                    (b)   At the Closing, Buyer shall pay to each Seller One-Day Notes in an amount   equal to such Seller’s Pro Rata Share of the result of (i) the Estimated Closing Consideration,   minus (ii) the Holdback Amount minus (iii) an amount to be held back pursuant to Section 5.14.    The aggregate amount required to be paid at the Closing pursuant to the One-Day Notes under   clauses (i), (ii) and (iii) of this Section is referred to as the “Closing Payment”.            Section 2.5 Accounts Receivable and Post-Closing Adjustment.                   (a)   Following the Closing, Sellers shall be entitled to, as an adjustment in the   Purchase Price, receive from the Company one hundred percent (100%) of (i) the Accounts   Receivable existing and aged two hundred forty (240) days or less as of the Closing Date that are   received by Company after the Closing Date and were not included in the calculation of Working   Capital Adjustment, and (ii) any other Accounts Receivable existing as of the Closing Date that   were not included in the calculation of Working Capital Adjustment and that are received by the   Company after the Closing Date but on or prior to December 31, 2019.  All Accounts Receivable                                         -18-   40733748.21  

 

     existing as of the Closing Date and not reflected in the calculation of Working Capital Adjustment   shall be identified as such in Section 3.5(d) of the Seller Disclosure Schedule as updated by Seller   as of the fifth (5th) Business Day prior to the Closing Date.  From and after the Closing Date,   Company shall use commercially reasonable efforts to collect the Accounts Receivable balances   aged two hundred forty (240) days or less and will remit such funds, net of the Company’s   collection expense, to Seller.                 (b)   As promptly as practicable, but no later than one hundred twenty (120) days   after the Closing Date, Buyer shall prepare and deliver to Sellers a statement (the “Post-Closing   Statement”) consisting of (i) a pro forma consolidated balance sheet of the Company and BCGS   as of the Effective Time, (ii) a calculation of the Working Capital Adjustment as of the Effective  Time derived from such pro forma consolidated balance sheet, including the Indebtedness Payoff  Amount and Company Transaction Expenses as of the Effective Time (the “Final Working Capital   Adjustment”), and (iii) a calculation of the Closing Consideration.  The Post-Closing Statement   shall be (A) based upon the Books and Records and prepared in good faith, (B) based on the same   format as the consolidated balance sheets contained in the Financial Statements as of year-end   2017 with respect to the consolidated balance sheet and the Example Calculation with respect to   the Working Capital Adjustment, (C) prepared consistent with the Applicable Accounting   Principles and with respect to the Working Capital Adjustment also consistent with the Example   Calculation and the notes therein, and (D) accompanied with work papers and supporting   documentation and a written certification from a responsible financial officer of Buyer certifying   that the Post-Closing Statement complies with the requirements of this Section 2.5(b).                 (c)   If Sellers disagree with the Post-Closing Statement on the basis that it   contains manifest mathematical errors or was not prepared in accordance with Section 2.5(b),   Sellers may, within thirty (30) days after its receipt of the Post-Closing Statement, deliver a notice   to Buyer disagreeing with the Post-Closing Statement and specifying in reasonable detail each   item that the Sellers dispute on such basis (a “Disputed Item”), the amount in dispute for each such   Disputed Item and the reasons supporting Sellers’ positions.  If the Sellers do not deliver a notice   of any Disputed Items within such thirty (30) day period, the Post-Closing Statement as delivered   by Buyer shall be final, conclusive and binding on the Buyer and Sellers.                 (d)   If a notice of disagreement shall be delivered in accordance with Section   2.5(c), Buyer and Sellers shall, during the fifteen (15) days following such delivery (the   “Resolution Period”), negotiate in good faith to reach agreement on the Disputed Items.  If, during   such period, Buyer and Sellers are unable to reach such agreement, they shall promptly thereafter   engage, and submit the unresolved Disputed Items (the “Unresolved Items”) to any of the   independent registered public accounting firms listed on Exhibit H, or, if none of such firms is   engaged, the parties will engage an independent registered public accounting firm that is selected   by Sellers (and not engaged or used by Seller or Buyer within the past five years) and reasonably   acceptable to Buyer (the “Independent Accountant”), which shall promptly review this Agreement   and the Unresolved Items; provided, that if Buyer and Sellers are not able to agree on the   accounting firm to serve as the Independent Accountant within ten (10) days after the end of the  Resolution Period, Buyer and Sellers shall request the American Arbitration Association to appoint  as the Independent Accountant an independent registered public accounting firm that has not had  a material relationship with Buyer, Sellers or any of their respective Affiliates (including the  Company) within the preceding two years, and such appointment shall be final, binding and                                         -19-   40733748.21  

 

   conclusive on Buyer and Sellers.  Buyer and Sellers shall use commercially reasonable efforts to  cause the Independent Accountant to issue its written determination with respect to the Unresolved  Items within thirty (30) days after the Unresolved Items are submitted for review.  Each party shall  use commercially reasonable efforts to furnish to the Independent Accountant such work papers,  books, records and documents and other information pertaining to the Unresolved Items as the  Independent Accountant may request. The Independent Accountant shall (i) make a determination  with respect to the Unresolved Items in a manner consistent with the principles set forth in this  Section 2.5, and in no event shall the Independent Accountant’s determination of the value of any  Unresolved Items be for an amount that is outside the range of Buyer’s and Sellers’ disagreement  on such Unresolved Items.  The final determination with respect to all Unresolved Items shall be  set forth in a written statement by the Independent Accountant delivered to Buyer and Sellers and  shall be final, conclusive and binding on Buyer and Sellers.  The fees, expenses and costs of the  Independent Accountant incurred in rendering any determination pursuant to this Section 2.5 shall  be borne by the Sellers, on the one hand, and Buyer, on the other hand, in inverse proportion as  they may prevail, in the aggregate, on all Unresolved Items resolved by the Independent  Accountant, based on the dollar amount of such Unresolved Items, which proportionate allocations  shall also be determined by the Independent Accountant at the time the determination of the  Independent Accountant is rendered on the Unresolved Items.                (e)   In connection with the preparation or review of the Pre-Closing Statement  and the Post-Closing Statement, each of Buyer and Sellers shall provide (or cause their respective  Affiliates, including the Company, to provide) the other with reasonable access to records,  documentation and employees as reasonably requested to the extent related to such preparation or  review.               (f)   Within five (5) days after the final determination of the Post-Closing  Statement:                      (i)   If the Final Working Capital Adjustment as finally determined              pursuant to Sections 2.5(b) or (c) above is greater than the Estimated Working              Capital Adjustment, Buyer shall owe Sellers such excess.  If the Final Working              Capital Adjustment as finally determined pursuant to Sections 2.5(c) or (d) above              is less than the Estimated Working Capital Adjustment, Sellers shall owe Buyer the              amount of such deficit.                        (ii)  The net amount (if any) pursuant to Section 2.5(f)(i) owed by Buyer              to the Sellers, on the one hand, or by the Sellers to Buyer, on the other hand, in each              case plus interest accrued at the Interest Rate from and including the Closing Date              but excluding the date of payment, is referred to as the “Final Adjustment Amount”;              it being understood and agreed that if the net effect pursuant to this Section 2.5(f)(ii)              is an increase in the Closing Payment, then within three (3) Business Days              following the final determination of the Final Adjustment Amount Buyer shall pay              by bank certified check or Wire Transfer to each Seller an amount in cash equal to              such Seller’s Pro Rata Share of the Final Adjustment Amount, and if the net effect              pursuant to this Section 2.5(f)(ii) is a decrease in the Closing Payment, then Buyer              shall claim the amount of such Final Adjustment Amount due to it from the              Holdback Amount.                                         -20-  40733748.21  

 

                       (iii) If the Final Adjustment Amount is payable to Buyer but is greater               than the Holdback Amount, then Buyer shall be entitled to (a) retain the entirety of               the Holdback Amount, and (b) if Sellers do not pay the amount by which the Final               Adjustment Amount exceeds the Holdback Amount within three (3) Business Days,               be entitled to pursue an indemnity claim against the Sellers under Section 10.1(a)(v)               for the amount by which the Final Adjustment Amount exceeds the Holdback               Amount. The Final Adjustment Amount shall be treated as an adjustment to the               Purchase Price for Tax purposes.          Section 2.6 Earn-Out Payments.                 (a)   Subject to the terms of this Section 2.6, Sellers shall be eligible to receive   an earn-out payment described in Section 2.6(b) if (i) the Company and BCGS achieve the revenue   target set forth below and (ii) Sellers shall have used their best efforts to Substantially Convert   Buyer’s “Retirement Advantage” platform to the platform of the Company within twelve months   of the Closing Date and have Substantially Converted such platform on or prior to the Earn-Out   End Date.  Any such earn-out payment shall be calculated on the Earn-Out End Date (as hereinafter  defined) and payable in accordance with this Section 2.6.  For purposes of this Section 2.6, the   following terms shall have the respective meanings set forth below:          “Benchmark Date” means September 30, 2018.          “Benchmark Revenue” means $8,655,662, representing the net revenue of the Company         and BCGS, calculated in accordance with Exhibit G, for the twelve-month period ending         on the Benchmark Date.            “Earn-Out End Date” means the third (3rd) anniversary of the Earn-Out Start Date.          “Earn-Out Start Date” means the first day of the first month following the Closing Date.          “Total Net Revenue” means the net revenue of the Company and BCGS for the twelve-        month period ending on the Earn-Out End Date, calculated in accordance with Exhibit G.          For the avoidance of doubt, (i) Total Net Revenue shall include net revenue of business         acquired on account of acquisitions, mergers, stock purchases, or asset purchases that occur         after the Closing Date and prior to the Earn-Out End Date to the extent made by the         Company or BCGS, as mutually agreed by the parties hereto, and (ii) Total Net Revenue        shall exclude the revenue generated from the business converted from the Buyer’s        “Retirement Advantage” platform to the platform of the Company.                  (b)   If the condition in Section 2.6(a)(ii) is satisfied, Buyer shall give the Sellers  written notice of Buyer’s calculation of the following amount (the “Earn-Out Payment”) within   ninety (90) days following the Earn-Out End Date:                      (i)   if the Total Net Revenue exceeds the Benchmark Revenue by fifteen               percent (15%) or more but less than nineteen percent (19%), the respective Seller’s               Pro Rata Share of $1,250,000.00;                                          -21-   40733748.21  

 

                     (ii)  if the Total Net Revenue exceeds the Benchmark Revenue by               nineteen percent (19%) or more but less than twenty-four percent (24%), the              respective Seller’s Pro Rata Share of $2,500,000.00;                      (iii) if the Total Net Revenue exceeds the Benchmark Revenue by              twenty-four percent (24%) or more, the respective Seller’s Pro Rata Share of              $5,000,000.00; and                      (iv)  if the Total Net Revenue does not exceed the Benchmark Revenue              or exceeds the Benchmark Revenue by less than fifteen (15%), zero.   The Earn-Out Payment, if any, will be payable to each Seller in accordance with the respective  Seller’s Pro Rata Share and will be paid by Buyer to each Seller by certified bank checks or Wire  Transfer no later than the third (3rd) Business Day following the notice delivered by Buyer pursuant  to this Section 2.6(b). For the avoidance of doubt, (i) the parties hereto acknowledge that the Earn- Out Payment, if any, is based on service fees the Company and its Subsidiaries generate and is not  in any way commission payments, (ii) each Seller’s right to receive their Pro Rata Share of the  Earn-Out Payment, if any, shall not be conditioned on (or measured with respect to), if applicable,  their continued employment with or services to the Company or its Affiliates and shall be treated  as additional Purchase Price for federal and state income tax purposes, and (iii) no Earn-Out  Payment shall be payable by Buyer if the Buyer’s “Retirement Advantage” platform has not been  Substantially Converted to the platform of the Company on or prior to the first anniversary date of  the Closing.               (c)   Notwithstanding anything herein to the contrary, if any indemnification  obligation is owing from Sellers to Buyer under Article VIII or Section 10.1 as of the date of any  Earn-Out Payment and the Holdback Amount has been exhausted such amount shall be deducted  from the Earn-Out Payment payable by Buyer to the Sellers ratably in accordance with the Sellers’  Pro Rata Share up to the Earn-Out Payment allocable to each such Seller.               (d)   Buyer shall provide its documentation in support of its calculation of the  Earn-Out Payment to the Sellers at the time of its notice to the Sellers of its calculation delivered  under Section 2.6(b), and the Sellers shall have thirty (30) days from the date of receipt of such  Earn-Out Payment or such notice, as the case may be, to deliver written notice of its objections to  the calculation of the Earn-Out Payment, specifying in reasonable detail the basis for the  objections.  If Sellers do not timely object, Buyer’s calculation of the Earn-Out Payment shall be  binding and conclusive.  If the Sellers object on a timely basis, the calculation of the Earn-Out  Payment shall not be binding and conclusive, and Buyer and the Sellers shall negotiate in good  faith to resolve the Sellers’ objections.  If Buyer and Sellers resolve such objections, the amount  they agree upon shall be final and binding, but if the objections cannot be resolved by such  negotiation within thirty (30) days after Buyer’s receipt of the Sellers’ objections, Buyer and  Sellers shall cause the calculation of the Earn-Out Payment, and all documents related thereto, to  be submitted to the Independent Accountant and the procedures, timelines and expense allocations  set forth in Section 2.5 with respect to the resolution of the Purchase Price as of the Closing Date  shall be followed to obtain final resolution of such Earn-Out Payment.                                         -22-  40733748.21  

 

                 (e)   Any increase in the Earn-Out Payment to be paid to Sellers determined  pursuant to Section 2.6(d) shall be made within three (3) Business Days after such payment has   been finally determined by certified bank checks or Wire Transfer from Buyer to each Seller based   on their Pro Rata Share.                (f)   From and after the Closing until the Earn-Out End Date, (i) Buyer shall and   shall cause any Affiliates of Buyer to, operate the Company Business in a commercially reasonable   manner, and (ii) Buyer shall not (A) cease offering products and services related solely to   retirement plans that are qualified under Section 401(a), (B) sell or transfer to any third-party not   affiliated with Buyer the Company, BCGS or the Company Business, (C) reduce the budget of the   Company Business below fifty percent (50%) of the budget of the Company Business as of the   Closing Date, or (D) take any action or inaction in bad faith with the intention of decreasing the   amount of any Earn-Out Payment or impairing Buyer’s ability to make any Earn-Out Payment;  provided that, except as set forth in the foregoing clause (ii), the provisions of this Section 2.6(f)   shall not (x) require Buyer or any Affiliate of Buyer (including the Company and BCGS) to   continue any line of business or service conducted or offered by the Company or BCGS as of any   date or (y) limit Buyer or any Affiliate of Buyer (including the Company and BCGS) from   modifying or changing any aspect of the Company Business.                (g)   Notwithstanding anything herein to the contrary, in the event there is a   Change of Control with respect to the Buyer prior to the Earn-Out End Date, the Earn-Out Payment   shall immediately vest at the rate and for the amount set forth in Section 2.6(b)(iii) and, subject to   Section 2.6(c), will be payable to each Seller in accordance with the respective Seller’s Pro Rata   Share, by certified bank checks or Wire Transfer no later than the tenth business day following the   event described in this Section 2.6(g).                                     ARTICLE III                                                         REPRESENTATIONS AND WARRANTIES OF THE SELLERS          The Seller Parties hereby jointly and severally represent and warrant to Buyer as follows:          Section 3.1 Company Organization and Corporate History.                  (a)   Organization.  Each of the Company and BCGS is a corporation duly   incorporated, organized, validly existing and in good standing under the laws of the   Commonwealth of Pennsylvania.  Each of the Company and BCGS (i) has the corporate power   and authority to own or lease all of its properties and assets and to carry on its business as it is now   being conducted, and (ii) is duly licensed or qualified to do business and in good standing in each   jurisdiction in which the nature of the business conducted by it or the character or location of the   properties and assets owned or leased by it makes such licensing or qualification necessary and is   not subject to any cost, restriction or penalty for failing to qualify (except where the failure to be   so licensed, qualified, or in good standing under this clause (ii) would not, individually or in the   aggregate, reasonably be expected to have a Company Material Adverse Effect).                  (b)   Organizational Documents.  Section 3.1 of the Seller Disclosure Schedule   sets forth a true, correct and complete copy of each of the Company’s, BCGS’s and each Trust’s                                         -23-   40733748.21  

 

   Organizational Documents as amended and/or restated and in effect.  No change has been made to  such Organizational Documents since December 31, 2015.                 (c)   Subsidiaries and Other Ownership Interests.  The Company has no  Subsidiaries or Affiliates other than its wholly-owned Subsidiary BCGS.  Other than BCGS, no  part of the Company Business is through or otherwise involving a Subsidiary or an Affiliate.    Section 3.1(c) of the Seller Disclosure Schedule lists each business or Person that Company or  BCGS has owned or operated within the last five (5) years (whether as a Subsidiary, through a  joint venture or otherwise).  Section 3.1(c) of the Seller Disclosure Schedule also lists: (i) all capital  stock or other direct or indirect ownership interests of Company or BCGS in any Person; and (ii)  all loans, advances or similar arrangements by Company or BCGS to any other Person (except for  trade terms extended to Customers in the Ordinary Course of Business).                 (d)   Acquisition or Sale of any Business.  Section 3.1(d) of the Seller Disclosure  Schedule lists each acquisition or sale (however effected) by Company or BCGS of any entity,  business or of a related group of assets and/or liabilities within the last five (5) years. Copies of all  agreements and closing documents relating to each such acquisition or sale have been provided to  Buyer.  Section 3.1(d) of the Seller Disclosure Schedule lists each such acquired entity, business  or related group of assets that has been merged into, or otherwise combined with or transferred to,  Company, BCGS or a predecessor thereof.         Section 3.2 Capital Structure.                 (a)   The authorized capital stock of the Company consists of 100,000 shares of  common stock, par value $0.01 per share. The common stock is divided into two classes, voting  and nonvoting common stock.  There are 100 authorized shares of Class A voting common stock,  of which twenty (20) shares are issued and outstanding and (such issued and outstanding stock,  the “Class A Common Stock”), and 99,900 authorized shares of Class B nonvoting common stock,  of which 49,980 shares are issued and outstanding (such issued and outstanding stock, the “Class  B Common Stock”), and are owned of record and beneficially by the Sellers in the respective  amounts and percentages of ownership set forth in Section 3.2(a) of the Seller Disclosure Schedule,  free and clear of all Liens and other restrictions except as set forth in Section 3.2(a) of the Seller  Disclosure Schedule.  The Sellers are the only record owners of capital stock of the Company and  own all right, title and interest in and to such Company Shares.  Section 3.2(a) of the Seller  Disclosure Schedule lists all issuances and redemptions of Company’s capital stock since  December 31, 2011.  All issuances, transfers and redemptions of the capital stock of the Company  and the Company’s predecessors in interest, were in full compliance with all applicable Law.                (b)   The authorized capital stock of BCGS consists of 200,000 shares of  common stock, par value $0.25 per share, of which 18,000 shares are issued and outstanding  (such  issued and outstanding stock, the “BCGS Shares”), all of which are owned of record and  beneficially by the Company, free and clear of all Liens and other restrictions.  Since 2000, no  Person other than the Company has ever owned any BCGS Shares or other equity interests in  BCGS.                 (c)   Except as set forth in Section 3.2(c) of the Seller Disclosure Schedule, none  of Company’s or BCGS’s capital stock is held in its treasury.  All Company Shares and BCGS                                        -24-  40733748.21  

 

     Shares are legally and validly issued, fully-paid and nonassessable, without violation of any  preemptive or dissenters’ or similar rights (and no preemptive or other subscription rights have  ever existed with respect to Company’s and BCGS’s capital stock) and in full compliance with   federal and state securities laws and other applicable Law.  Each of the Company and BCGS has   complied with the terms of its capital stock. Except as set forth in Section 3.2(c) of the Seller   Disclosure Schedule, there are no options, warrants, subscriptions, puts, calls or other rights,   commitments, undertakings or understandings to acquire, dispose of or restrict the transfer of, any   of Company’s or BCGS’s capital stock or other securities of any kind or class or rights, obligations   or undertakings convertible into Company securities or BCGS securities of any kind or class; nor   are there any stock option phantom stock, stock appreciation rights, or similar plans or programs   relating to the Company’s or BCGS’s capital stock, or any convertible securities or other rights,   agreements or commitments of any character relating to or obligating the Company or BCGS to   issue or sell any share of capital stock or any other interest in the Company or BCGS.  Each item   listed on Section 3.2(c) of the Seller Disclosure Schedule shall be terminated or otherwise cease   to be in effect as of no later than immediately prior to the Closing.  Neither the Company nor   BCGS is subject to any obligation to purchase, redeem or otherwise acquire any of its capital stock   or securities (or any options or rights or obligations described in the preceding sentence) upon the   occurrence of a specified event (and assuming that specified time periods have passed and   appropriate notices have been given) or otherwise.                    (d)   There are no voting trusts or other voting or similar agreements or   understandings to which the Company or any Seller is a party with respect to the voting of the   Company Shares.  There are no bonds, debentures, notes or other indebtedness of the Company   having the right to vote (or convertible into, or exchangeable for, securities having the right to   vote) on any matters on which holders of the Company Shares may vote.  Except for this   Agreement and restrictions imposed by applicable Law, there are no voting trusts, stockholder   agreements, proxies or other rights or agreements in effect with respect to the voting, transfer or   dividend rights of the Company Shares.                (e)   Sellers’ transfer of the Company Shares to Buyer pursuant to this   Agreement will pass to Buyer all right, title and interest to and in the Company Shares free of any   Lien or restriction and all other adverse claims whatsoever except, following the Closing,   restrictions as exist under applicable Laws relating to securities.          Section 3.3 Authority and Enforceability.                  (a)   Each Seller Party has the power and authority to execute, deliver and   perform each of the Seller Delivered Documents without the consent or action of any other person.    The execution, delivery and performance of the Seller Delivered Documents have been duly   authorized by all necessary action on the part of each such Seller Party in compliance with   governing or applicable agreements, instruments, documents and applicable Law.                (b)   Each trustee of each Seller that is a Trust is the duly appointed and acting   trustee of the Trust for which he or she is acting as trustee, which is identified next to such Seller’s   name in Section 3.3(a)(ii) of the Seller Disclosure Schedule, and is currently the only trustee of   such Trust. Sellers have previously delivered to Buyer a true and complete copy of each agreement   that establishes such Trust, which documents have not been amended since the date of such                                         -25-   40733748.21  

 

   delivery.  Each Trust is validly existing under the laws of the state whose law the terms of the  instrument creating such Trust invoke as governing such Trust, which is shown next to the name  of such Trust on Schedule 3.3(a)(ii). The trustee of each Trust has the capacity, power and authority  on behalf of such Trust to enter into this Agreement and the other Seller Delivered Documents to  be executed and delivered by such trustee pursuant to this Agreement in such trustee’s fiduciary  capacity on behalf of such Trust, to perform such trustee’s obligations hereunder and thereunder  on behalf of such Trust, and to sell to Buyer such Trust’s Company Shares for the consideration  provided in Section 2.1 as adjusted in accordance with this Agreement in each case without the  consent or action of any other person.  Since the creation of each Trust, no steps have been taken  to liquidate, dissolve, or otherwise adversely affect the organization, existence or operation of such  Trust.  The execution, delivery and performance of the Seller Delivered Documents have been  duly authorized by all necessary action on the part of the trustee of each Trust in compliance with  governing or applicable agreements, instruments, documents, duties and applicable Law.  On or  prior to the date hereof, the trustee of each Trust has delivered to Buyer an executed copy of the  applicable Certificate of Trust, and the representations made in the Certificates of Trust are hereby  incorporated by reference.               (c)   This Agreement has been duly and validly authorized, executed and  delivered by each Seller Party, and (assuming the valid authorization, execution and delivery of  this Agreement by Buyer) is the legal, valid and binding obligation of such Seller Party,  enforceable in accordance with its terms, and each of the other Seller Delivered Documents to  which a Seller is or will be a party has been duly and validly authorized by such Seller and will be  duly and validly executed and delivered by such Seller and, upon execution and delivery by such  Seller, will be (assuming the valid authorization, execution and delivery by the other party or  parties thereto) the legal, valid and binding obligation of such Seller, enforceable in accordance  with its terms, subject in each case to the effects of bankruptcy, insolvency, fraudulent conveyance,  reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights  generally and general equitable principles (whether considered in a Proceeding in equity or at law).   Neither any act or omission of any Seller Party or any predecessor in interest, nor execution,  delivery or performance of this Agreement, has resulted in, or will result in, any person having any  claim or cause of action whatsoever involving ownership of  the Company or any of its assets.         Section 3.4 Consents and Approvals; No Conflict.  Except for the items set forth on  Section 3.4 of the Seller Disclosure Schedule, the execution and delivery by the Seller Parties of  this Agreement and of each other agreement, instrument and document to be executed and  delivered by the Sellers pursuant to this Agreement (this Agreement and such other agreements,  instruments and documents being referred to collectively as the “Seller Delivered Documents”) do  not, and the consummation by the Sellers of the transactions contemplated by the Seller Delivered  Documents will not, require any consent, approval, license, permit, order, qualification,  authorization of, or registration or other action by, or any filing with or notification to, any  Governmental Authority (each, a “Governmental Approval”) to be obtained or made by any Seller  Party or BCGS (except such consents, approvals, licenses, permits, orders, qualifications,  authorizations of, or registrations or other actions or filings which, individually or in the aggregate,  would not reasonably be expected to have a Company Material Adverse Effect).  The execution  and delivery by the Seller Parties of, and the consummation by the Seller Parties of the transactions  contemplated by the Seller Delivered Documents do not and will not (a) violate or conflict with  the Organizational Documents of the Company or BCGS or any Seller, (b) provided that all                                        -26-  40733748.21  

 

   consents, approvals, authorizations and other actions described in Section 3.4 of the Seller  Disclosure Schedule have been obtained or taken, conflict with or violate in any material respect  any Law or other Governmental Order applicable to the Company or BCGS or by which any of  the Company’s or BCGS’s properties or assets are bound or subject, (c) in the case of the Trusts,  violate or conflict with the trustee’s fiduciary duties or (d) result in any material breach of, or  constitute a material default (or event that, with the giving of notice or lapse of time, or both, would  constitute a default) under, or give to any Person any rights of termination, acceleration or  cancellation of, or result in the creation of any Lien (other than Permitted Liens) on any of the  assets or properties of the Company or BCGS pursuant to any Material Contract to which the  Company or BCGS is a party of or by which the Company’s or BCGS’s properties or assets are  bound.              Section 3.5 Financial Information; Absence of Undisclosed Liabilities.                (a)   The Sellers have previously delivered or made available to Buyer true,  accurate and complete copies of (i) BCGS’s audited financial statements as of and for the years  ended December 31, 2015, December 31, 2016, and December 31, 2017 (the “BCGS Financial  Statements”), (ii) consolidated and consolidating balance sheets and statements of operations, cash  flows and changes in stockholder’s equity of the Company and BCGS, as of and for the years  ended December 31, 2015 and December 31, 2016, and with the related compilation reports of the  Company’s independent accountant, (iii) the unaudited consolidated and internally prepared  balance sheet and statements of operations, cash flows and changes in stockholder’s equity of the  Company and BCGS as of December 31, 2017 and for the nine (9) months ended September 30,  2018 (the “Quarterly Financial Statements” and, together with the statements described in clauses  (i) and (ii) above, collectively the “Financial Statements”), and (iv) an example of the Company’s  calculation of Working Capital as of May 31, 2018 (the “Example Calculation”).  The Quarterly  Financial Statements are subject to normal and recurring year-end adjustments (which will not be  material individually or in the aggregate) and the absence of notes.               (b)   The Financial Statements and items therein: (i) have been prepared and are  in accordance with the Books and Records and with respect to the statements set forth in Section  3.5(a)(ii), accounts and entries therein relating to BCGS have been prepared and are in accordance  with the BCGS Financial Statements; and (ii) except as set forth in Section 3.5(b) of the Seller  Disclosure Schedule (A) have been prepared in accordance with Applicable Accounting Principles  on a consistent basis throughout the periods covered by such statements and (B) fairly present in  all material respects the Company’s consolidated or BCGS’s (as applicable) financial condition  and results of Company’s consolidated or BCGS’s (as applicable) operations, cash flows and  changes in shareholder’s equity as of their respective dates or for the periods thereof; provided that  the Quarterly Financial Statements are subject to normal recurring year-end adjustments (which  will not be material individually or in the aggregate) and the absence of notes. The Example  Calculation is based on the Books and Records and has been prepared in accordance with  Applicable Accounting Principles and consistent with the notes contained therein.  Neither the  Company nor any Seller has received any complaint, allegation, assertion or claim of any material  inadequacy in the Company’s internal accounting controls or the accuracy of the Financial  Statements and, to the Knowledge of Seller Parties, there is no basis for any such complaint,  allegation, assertion or claim.                                        -27-  40733748.21  

 

                 (c)   Neither the Company nor BCGS has any liability of any nature (whether   accrued, absolute, contingent, changing, known, unknown, determinable, indeterminable,   liquidated, unliquidated or otherwise and whether due or to become due and, thus, whether or not   such would be considered a liability for generally accepted accounting principles), except (i) as   and to the extent expressly reflected or specifically reserved against in the Financial Statements   (which reserves are adequate) or, pursuant to the Applicable Accounting Principles, where such   liabilities are not required to be reserved against or reflected in the Financial Statements or notes   thereto, (ii) as set forth in Section 3.5(c) of the Seller Disclosure Schedule, or (iii) for trade   payables and similar ordinary and necessary liabilities (none of which is a liability or obligation   for breach of contract, warranty, tort or infringement and excluding liabilities arising from the   borrowing of money or secured indebtedness or negligent or unlawful actions of Company or   BCGS or their respective officers, directors, shareholders, agents, employees or Affiliates) arising   in the Ordinary Course of Business since September 30, 2018.  Neither the Company nor BCGS   has any Indebtedness other than the Indebtedness set forth on Exhibit B.                (d)   Section 3.5(d) of the Seller Disclosure Schedule sets forth an accurate and   complete breakdown and aging of all Accounts Receivables of the Company and BCGS as of   September 30, 2018. All of the Accounts Receivable are valid accounts receivable which arose in   bona fide sales or services transactions in the Ordinary Course of Business. Except as set forth in   Section 3.5(d) of the Seller Disclosure Schedule, the Accounts Receivable are collectible in full   within 90 days after their respective billing dates subject to the reserve for doubtful accounts set   forth on the Quarterly Financial Statements.                (e)   The Company and BCGS have devised and maintained systems of internal   accounting controls with respect to the Company Business sufficient to provide reasonable   assurances that (i) all transactions are executed in accordance with management’s general or   specific authorization, (ii) all transactions are recorded as necessary to permit the preparation of   Financial Statements in conformity with the Applicable Accounting Principles and to maintain   proper accountability for items, (iii) access to its property and assets is permitted only in   accordance with management’s general or specific authorization and (iv) recorded accountability   for items is compared with actual levels at reasonable intervals and appropriate action is taken with   respect to any differences.                (f)   Each of the Company and BCGS has good and valid title to, or a valid   leasehold interest in, all of its Assets (other than “off-the-shelf” or software that is available  generally through retail distribution networks or is subject to “shrink-wrap” or “click wrap” license  agreements or retail software). All such Assets (including leasehold interests) are free and clear of  all Liens except for Permitted Liens and except as set forth on Section 3.5(f) of the Seller   Disclosure Schedule.  Except as set forth in Section 3.5(f) of the Seller Disclosure Schedule, the   Assets and Permits are sufficient for the continued conduct of the Company Business after the   Closing in substantially the same manner as conducted prior to the Closing.            Section 3.6 Real Property Interest.                  (a)   Neither the Company nor BCGS owns any real property.  Neither the   Company nor BCGS is a party to any agreement or option to purchase any real property or interest                                          -28-   40733748.21  

 

   therein.  Neither the Company nor BCGS has any liability arising out of the prior ownership of  real property by it or its predecessors in interest.               (b)   Section 3.6(b) of the Seller Disclosure Schedule sets forth a list of all real  property leases to which the Company or BCGS is a party (whether as a (sub)lessor, (sub)lessee,  guarantor or otherwise) (the “Company Real Property Leases”; all real property in which the  Company or BCGS holds a leasehold interest, whether as lessee or sublessee, the “Leased Real  Property”) and the street address with respect to the Company Real Property Leases.  Except for  the Company Real Property Leases identified in Section 3.6(b) of the Seller Disclosure Schedule,  the Company and BCGS do not own any interest (fee, leasehold or otherwise) in any real property.   Except as set forth in Section 3.6(b) of the Seller Disclosure Schedule, the Company and BCGS  enjoy peaceful and undisturbed possession of the Leased Real Property.                (c)   Except as set forth in Section 3.6(b) of the Seller Disclosure Schedule, the  Company or BCGS owns a valid leasehold interest in the Leased Real Property, which is free and  clear of any Liens.               (d)   Each Company Real Property Lease is in full force and effect and  enforceable by the Company or BCGS, in accordance with its terms.  Since December 31, 2015,  neither the Company nor BCGS has received any written notice of default with respect to any  Company Real Property Lease, and since December 31, 2015, no event has occurred and no  condition exists that, with notice or lapse of time or both, would constitute a default by the  Company or BCGS or, to the Knowledge of Seller Parties, any other part thereto, under any of the  Company Real Property Leases.  Neither any Seller Party nor BCGS has assigned or placed any  Lien upon any Leased Real Property.         Section 3.7 Plan Sponsors and Plans.                 (a)   Except as set forth in Section 3.7(a) of the Seller Disclosure Schedule, since  December 31, 2017, (i) none of the Plan Sponsors set forth on Section 3.7(b) of the Seller  Disclosure Schedule has terminated, or notified Company, BCGS or any Seller in writing of an  intention not to renew or to terminate, all or a material portion of the services related to the  Company Business, and (ii) to the Knowledge of Seller Parties, none of the Plan Sponsors set forth  on Section 3.7(b) of the Seller Disclosure Schedule has otherwise indicated that any Plans are or  will be subject to any requests for proposals.               (b)   Section 3.7(b) of the Seller Disclosure Schedule sets forth a true and  complete list of each Plan as of June 30, 2018 that is part of the Company Business and indicates  for each Plan (i) the plan type (non-qualified deferred compensation plans within the meaning of  Section 409A(d)(1) of the Code, qualified defined contribution or defined benefit plans, including  whether such plan qualifies under Section 401(a), 401(k), 403(b) or 457(b) of the Code, or other  arrangements or programs), (ii) whether such Plan is, as of the date hereof, to the Knowledge of  Seller Parties, subject to an outstanding request for proposal, (iii) the number of Participants in  such Plan as of such date, and (iv) the Plan Sponsor to the extent applicable and the revenues  generated by each such Plan Sponsor for the twelve months ended December 31, 2017.         Section 3.8 Material Contracts.                                          -29-  40733748.21  

 

                 (a)   Section 3.8(a) of the Seller Disclosure Schedule sets forth a true and   complete list of each of the Material Contracts.  Each Material Contract is a legal, valid, binding   and in all material respects enforceable obligation of Company or BCGS, and, to the Knowledge   of Seller Parties, of each other party to such Material Contract.  Except as set forth in Section   3.8(a) of the Seller Disclosure Schedule, neither the Company nor BCGS nor, to the Knowledge   of the Seller Parties, any other party thereto is in material breach or violation of, or in material   default under, any Material Contract and each such Material Contract is in full force and effect in   all material respects, and, to the Knowledge of Seller Parties, there does not exist under any   Material Contract any event or condition that, after notice or lapse of time or both, would constitute   a material violation, breach or event of default thereunder.  Sellers have made available to Buyer   a true and correct copy of each Material Contract.  The Material Contracts include a true, accurate   and complete list of all Contracts evidencing Indebtedness of the Company or BCGS.                (b)   Except as set forth in Section 3.8(b) of the Seller Disclosure Schedule,   neither the Company nor BCGS has received from any other party to a Material Contract any   notice in writing of termination or intention to terminate such Material Contact or any notice in   writing of intention to otherwise reduce amounts payable to Company or BCGS.                (c)   There are no fees paid to Company or BCGS that are a condition of or   inducement for inclusion of any Fund as an investment option for Plan Sponsors to make available   to Participants.  Section 3.8(c) of the Seller Disclosure Schedule contains a true and correct list of   all Funds as of the date hereof.          Section 3.9 Employee Benefits; Employees.                (a)   Section 3.9(a) of the Seller Disclosure Schedule sets forth a true and   complete list of each Benefit Plan. The Company has delivered or made available to Buyer   complete and correct copies of all Benefit Plans, including any amendments thereto and the current   summary plan description thereof, all summaries of material modifications, and any other   summary of the Benefit Plans, along with, in each case and to the extent applicable, (i) true and   complete descriptions of the material terms of any unwritten Benefit Plans; (ii) true and complete   copies of any employee handbooks or similar documents describing such Benefit Plans; (iii)   insurance policies related to the Benefit Plans; (iv) all non-routine communications received from  or sent to the IRS, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor  (including a written description of any such oral communication) with respect to such Benefit Plan;  (iv) true and complete copies of each Form 5500 filed for such Benefit Plan (including all  attachments, audit reports and schedules), actuarial reports, summaries of material modifications,  summary annual reports, and any other required employer notices (including governmental filings  and descriptions of changes to Benefit Plans) relating to the Benefit Plans, in each case, for the  last three (3) plan years, as applicable; (v) true and complete copies of the most recent IRS  determination letter or opinion letter; and (vi) a schedule of awards or benefits provided for under  each Benefit Plan.                 (b)   Except as set forth in Section 3.9(b) of the Seller Disclosure Schedule, all   Benefit Plans have been maintained and operated in all material respects in accordance with their   terms, ERISA, the Code and other applicable Laws.  The Company and each ERISA Affiliate have   satisfied all of their material obligations under or with respect to each Benefit Plan under applicable                                         -30-   40733748.21  

 

     Law and the terms of such Benefit Plan.  The Company and each ERISA Affiliate have timely   made all contributions, premiums and other payments required to be made with respect to such   Benefit Plan on or before their due dates and, if not yet due, such items have been properly reflected   or accrued on the Company’s financial statements to the extent required.  No circumstances exist   that would result in a liability to the Company (whether direct or indirect) under Title IV of ERISA   with respect to any defined benefit pension plan that is or has been sponsored, maintained, or   contributed to by the Company or any of its ERISA Affiliates.  None of the Company or any of its   ERISA Affiliates has (or has ever had) any liability with respect to any (i) “multiemployer plan,”   as defined in Section 3(37) of ERISA, (ii) “multiple employer plan,” as described in Section 413(c)   of the Code, (iii) “multiple employer welfare arrangement,” as defined in Section 3(40) of ERISA,   (iv) “voluntary employees’ beneficiary association,” as defined in Section 501(c)(9) of the Code,   or (v) a Benefit Plan covered by Title IV of ERISA.  Each Benefit Plan that is a “nonqualified   deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code and that is   subject to Section 409A of the Code is set forth in Section 3.9(b) of the Seller Disclosure Schedule   and, except as set forth in Section 3.9(b) of the Seller Disclosure Schedule, has been operated in   compliance in all respects with Section 409A of the Code and the final regulations and other   applicable guidance issued thereunder.  The Company has not paid and will not pay in connection   with the consummation of the transactions contemplated by this Agreement compensation to any   current or former employee or independent contractor of the Company pursuant to a Benefit Plan   in a manner that would reasonably be expected to cause compensation paid under such plan to   become subject to the Tax imposed by Section 409A(a)(1)(B) or 409A(b)(5) of the Code.                (c)   Each Benefit Plan that is intended to qualify under Section 401(a) of the   Code, and each amendment thereto, is the subject of a favorable determination letter (or opinion   letter, if applicable) from the IRS as to its qualification under the Code, and, to the Knowledge of   Seller Parties, no circumstances exist that would reasonably be expected to adversely affect the   validity of an Benefit Plan’s tax-qualification.  All amendments and actions required to bring each   Benefit Plan into material conformity with the applicable provisions of ERISA, the Code and other   Law have been made or taken, except to the extent such amendments or actions are not required   by Law to be made or taken until after the Closing Date.                 (d)   Neither the execution of this Agreement nor the consummation of the   transactions contemplated hereby will (either alone or together with any other event) entitle any   Employee and/or Seller to severance, retention, change of control or other similar pay or benefits   under, or accelerate the time of payment or trigger any payment or funding (through a grantor trust   or otherwise) of compensation or benefits under, or increase the amount payable or trigger any  other material obligation pursuant to, any Benefit Plan. Neither the Company nor BCGS has made  any payment which constitutes an “excess parachute payment” within the meaning of Code  §280(G), and no payment by the Company or BCGS required to be made under any written or oral  agreement will, if made, constitute an “excess parachute payment” within the meaning of Code  §280(G).  Neither the execution of this Agreement nor the consummation of the transactions  contemplated hereby will (either alone or together with any other event) result in any payment that  could constitute an “excess parachute payment” within the meaning of Section 280G of the Code.                (e)   Except as set forth in Section 3.9(e) of the Seller Disclosure Schedule,   neither the Company nor BCGS has any obligations for post-termination welfare or retirement  benefits other than coverage mandated by applicable Law.  Neither the Company nor BCGS                                         -31-   40733748.21  

 

   thereof has any obligation or commitment to adopt or approve any plan, arrangement or other  scheme that will become a Benefit Plan, or, except where required by Law, any amendment to any  Benefit Plan.  No proposal or commitment has been communicated to any Continuing Employee  regarding the introduction, increase or improvement of any Benefit Plan.  Neither the Company  nor BCGS has made any loan or advance, or provided any other form of financial assistance to  any Employee or Seller that is still outstanding as of the Closing.  Neither the Company nor BCGS  has any defined benefit plan.               (f)   Except for accruals disclosed on the latest balance sheet, the Company and  BCGS do not have any liabilities (i) for any bonus payments to any employee, manager, director,  officer or independent contractor (or any former employee, manager, director, officer or  independent contractor), (ii) for any workers’ compensation benefits which have or, to the  Knowledge of Seller Parties, may become payable as a result of events prior to Closing, (iii) for  any matching or other employer contributions to any 401(k) plan, (iv) to any employee, director  or independent contractor (or any former employee, director or independent contractor) related to  compensation or for benefits accrued prior to Closing under any Benefit Plan (including with  respect to any accrued but unused or unpaid vacation, sick time or other paid time off), or (v) to  any employee, manager, director, officer or independent contractor arising out of any acts or  omissions by the Sellers or the Company or BCGS prior to the Closing.               (g)   Section 3.9(g) of the Seller Disclosure Schedule lists each Employee as of  the date of this Agreement and as updated no later than five (5) days before the Closing Date, and  for each such Employee, (i) the individual’s title or position (including whether full or part time  and whether hourly, salaried, or commissioned), (ii) the individual’s job location, (iii) the  individual’s date of hire, (iv) the individual’s current base salary or hourly wages and base salary  or hourly wages for the last three (3) completed fiscal years, and (v) for the last three (3) completed  fiscal years, the individual’s annual incentive and bonus compensation paid and the target  incentive compensation for the current year (with each form of incentive compensation separately  listed and including any commissions).  Section 3.9(g) of the Seller Disclosure Schedule also lists  all individuals providing services to the Company or otherwise with respect to the Company  Business of more than five (5) hours per month as consultants or other independent contractors.               (h)   Section 3.9(h) of the Seller Disclosure Schedule lists each written (i)  employment agreement and offer letter with any Employee; (ii) personal service contracts for  individuals who perform services for the Company or BCGS in the capacity of an independent  contractor; and (iii) non-compete, non-solicit, confidentiality or proprietary rights agreements with  current or former Employees or independent contractors of the Company or BCGS, which with  respect to clauses (i), (ii) and (iii) are currently in effect, and true and complete copies of all such  agreements referred to in clauses (i), (ii) and (iii) above (and any amendments thereto) have been  furnished or made available to Buyer, and, with respect to the type of agreements set forth in  clauses (i) and (ii) above, neither the Company nor BCGS is a party to any such oral agreements  which cannot be terminated at will by the Company or BCGS without penalty or any continuing  obligations thereunder.  Except as set forth on Section 3.9(h) of the Seller Disclosure Schedule, to  the Knowledge of Seller Parties, no Employee or independent contractor of the Company or BCGS  is a party to, or is otherwise bound by, any agreement or arrangement, including any  confidentiality, noncompetition, or proprietary rights agreement, between such Employee or  independent contractor, as the case may be, and any other Person, in each case, that (x) limits the                                        -32-  40733748.21  

 

   Employee’s or independent contractor’s ability to perform such Employee’s or independent  contractor’s duties to the Company or BCGS, or (y) has a negative material effect on the Company  or BCGS.               (i)   Neither the Company nor BCGS is party to any labor or collective  bargaining agreements.  There has never been any union organizing activity or similar activity  affecting the Company, BCGS, or any Employees.  The Company and BCGS have complied, in  all material respects, with all Laws related to employment and labor, including those related to  equal employment opportunity, worker classification, affirmative action, nondiscrimination,  immigration, wages, hours, benefits, collective bargaining, the payment of social security and  similar Taxes, occupational safety and health, and plant closings, the Fair Labor Standards Act and  the WARN Act.  The Company and BCGS have not failed to pay any current or former employees  for any wages (including overtime), salaries, commissions, bonuses, benefits or other direct  compensation for any services performed by them or amounts required to be reimbursed to such  individuals.  Neither the Company nor BCGS has received any notice that it is not in or has not  been in compliance with any Laws relating to the employment of labor, including any Laws  relating to wages, hours, collective bargaining, worker classification, affirmative action, the  WARN Act, the payment of social security and similar taxes, equal employment opportunity,  employment discrimination and employment, occupational or workplace safety or that the  Company is liable for any arrears of wages or any taxes or penalties for failure to comply with any  of the foregoing.  The Company and BCGS have, for all purposes (including coverage and benefits  under Benefit Plans, overtime and payroll tax purposes) correctly classified those individuals  performing services as common law employees, leased employees, independent contractors or  agents of the Company or BCGS.  Any and all notices to, or filings or registrations with, any labor  organizations, works council or any similar person, required to be made by the Company or BCGS  in connection with the execution of this Agreement have been timely made.               (j)   There are no pending or, to the Knowledge of Seller Parties, threatened  material claims against the Company or BCGS under any Law related to employee benefits  (including relating to the Benefit Plans, other than routine claims for benefits), employment or  labor.  There are no charges with respect to or relating to the Company, BCGS or the Employees  pending before any applicable Governmental Authority responsible for the prevention of unlawful  employment practices, and neither the Company nor BCGS has received notice from any  Governmental Authority responsible for the enforcement of labor or employment Laws of an  intention to conduct an investigation of the Company or BCGS, and no such investigation is in  process.               (k)   The Company, BCGS and each Employee is in material compliance with  all applicable visa and work permit requirements, and no visa or work permit held by an Employee  will expire within six (6) months.         Section 3.10 Taxes.  Except as set forth on Section 3.10 of the Seller Disclosure  Schedule:                 (a)   The Seller Parties have made or will make available prior to the Closing to  Buyer correct and complete copies of all federal and state income, state, franchise and excise, state  sales and use, personal property, federal and state payroll (including unemployment), escheat and                                        -33-  40733748.21  

 

   unclaimed property (if required for any Tax Return), and material local business Tax Returns filed  with respect to the Company and BCGS (together with all examination reports and statements of  deficiencies assessed against or agreed to by the Company or BCGS) with respect to any taxable  period ending on or after December 31, 2013.  All such Tax Returns since December 31, 2015,  have been delivered to Buyer.               (b)   (i) Each of the Company and BCGS has properly and timely filed all Tax  Returns required to be filed by it, all of which are correct and complete in all material respects and  were prepared in compliance with all applicable Laws; (ii) each of the Company and BCGS has  paid all Taxes required to be paid by it (whether or not shown on a Tax Return); (iii) no audit of  the Company or BCGS by any Governmental Authority has been conducted, is currently pending  or, to the Knowledge of the Seller Parties, is threatened, and no notice of any proposed audit, or  of any Tax deficiency or adjustment, has been received by the Company or BCGS; (iv) there are  no agreements or waivers currently in effect that provide for an extension of time for the  assessment of any Tax against the Company or BCGS; (v) the Financial Statements fully accrue  all actual and contingent liabilities for Taxes with respect to all periods through the dates thereof  in accordance with Applicable Accounting Principles; (vi) since the date of the Quarterly Financial  Statements, neither the Company nor BCGS has incurred any liabilities for Taxes except in the  Ordinary Course of Business; (vii) no Action is pending or has been threatened, and no claim has  been asserted against or with respect to the Company or BCGS in respect of any Tax; and (viii) no  claim has been made by a Governmental Authority in a jurisdiction where a Tax Return is not filed  by or on behalf of the Company or BCGS that the Company or BCGS is subject to Tax in that  jurisdiction.                      (c)   Neither the Company nor BCGS has participated in any transaction that  could give rise to a disclosure obligation as a “reportable transaction” under Section 6111 of the  Code and the Treasury Regulations thereunder or any similar provision under other similar  applicable Laws.               (d)   Neither the Company nor BCGS is, nor has it ever been, a United States real  property holding corporation within the meaning of Section 897(c)(2) of the Code during the  applicable period specified in Section 897(c)(1)(A)(ii) of the Code. No Seller Party is a “foreign  person” as such term is defined in Section 1445 of the Code.               (e)   Neither the Company nor BCGS has ever been either the “distributing  corporation” (within the meaning of Section 355(a)(1) of the Code) or the “controlled corporation”  (within the meaning of Section 355(a)(1) of the Code) in a distribution that is described, or  purported to be described, in Section 355 of the Code. Within the last five years, neither the  Company nor BCGS has been a party to a “reorganization” as that term is defined in Section 368  of the Code.               (f)   Each of the Company and BCGS   has materially complied with the  provisions of the Code relating to the withholding and payment of Taxes, including, without  limitation, the withholding and reporting requirements under Code sections 1441 through 1464,  3401 through 3406, and 6041 through 6049, as well as similar provisions under any other  applicable Laws, and has, within the time and in the manner prescribed by Law, withheld from  employee wages and paid over to the proper Governmental Authority all amounts required. Each                                        -34-  40733748.21  

 

   of the Company and BCGS has appropriately classified all service providers as either employees  or independent contractors for all Tax purposes. Each of the Company and BCGS (i) has collected  and remitted all applicable sales and/or use Taxes to the appropriate Governmental Authority or  (ii) has obtained, in good faith, any applicable sales and/or use Tax exemption certificates.                (g)   Neither Company nor BCGS has received any Tax Ruling or entered into a  Tax Closing Agreement with any Governmental Authority that would have a continuing effect  after the Closing Date. For purposes of the preceding sentence, the term “Tax Ruling” shall mean  written rulings of a Governmental Authority relating to Taxes, and the term “Tax Closing  Agreement” shall mean a written and legally binding agreement with a Governmental Authority  relating to Taxes.               (h)   Except as set forth in Section 3.10(h) of the Seller Disclosure Schedule, the  Company has been a validly electing S corporation within the meaning of Sections 1361 and 1362  of the Code at all times since 2003, and it will be a valid S corporation at all times up to the  Effective Time. The Company will not be liable for any Tax under Code Section 1374 in  connection with the deemed sale of the Company’s assets (including the assets of any qualified  subchapter S subsidiary) caused by the Section 338(h)(10) Election (as hereinafter defined).  The  Sellers have not filed (and will not file) any income tax return, election or other document that is  inconsistent with the Company’s classification as an “S” Corporation for applicable Tax purposes  and the beneficiaries of Lisa Arroyo Trust have filed joint federal income tax returns for all years  since 2008.  The Company has not in the past five years (i) acquired assets from a C corporation  in a transaction in which the Company’s Tax basis for the acquired assets was determined, in whole  or in part, by reference to the Tax basis of the acquired assets (or any other property) in the hands  of the transferor, or (ii) except for BCGS, acquired the stock of any corporation that is a qualified  subchapter S subsidiary.               (i)   Except as set forth in Section 3.10(h) of the Seller Disclosure Schedule,  BCGS has been a qualified subchapter S subsidiary within the meaning of Section 1361(b)(3)(B)  of the Code at all times during its existence.               (j)   Except as set forth in Section 3.10(j) of the Seller Disclosure Schedule, all  Sellers that are organized as trusts qualify either as a qualified subchapter S trust within that  meaning of Section 1361(d) of the Code or an electing small business trust within the meaning of  Section 1361(e) of the Code.                (k)   The Salary Continuation Agreement does not cause the Company to not  confer identical rights to its shareholders with respect to distribution and liquidation proceeds  within the meaning of Treas. Reg. § 1.1361-1(1).          Section 3.11 Compliance with Law; Permits.                 (a)   Except as otherwise qualified in this Agreement, the Company and BCGS  have, since December 31, 2015, been in compliance, in all material respects, with all applicable  Laws, including Laws related to privacy, Permits and Governmental Orders applicable to it or its  assets, properties or Company Business.  Neither the Company nor BCGS is a party to, or bound  by, any Governmental Order that is material to the Company Business.  Neither the Company nor                                        -35-  40733748.21  

 

     BCGS has at any time since December 31, 2015 (i) received any written notice from any   Governmental Authority regarding any actual or alleged material violation of, or failure to comply   with any applicable Law or (ii) to the Knowledge of Seller Parties, been placed under investigation   with respect to any material violation of applicable Law.  The Company and BCGS has made   available to the Buyer true and correct copies of all reports or other written correspondence   between the Company or BCGS and any Governmental Authority or any Person acting on behalf   of a Governmental Authority since December 31, 2015 relating to any unclaimed property or   escheat matters and the Company and BCGS has complied with all unclaimed property or escheat   obligations.  Neither the Company nor BCGS underwrites insurance policies, collects premiums   or settles any insurance claims.                (b)   The Company and BCGS hold all material governmental qualifications,   registrations, filings, licenses, permits, approvals or authorizations necessary to conduct the   Company Business and to own or use its assets and properties associated with the Company   Business, as the Company Business, assets and properties are conducted, owned and used by the   Company and BCGS (collectively, the “Permits”).  All material Permits are valid and in full force   and effect.  Neither the Company nor BCGS is the subject of any pending or, to the Knowledge of  Seller Parties, threatened Action seeking the revocation, suspension, termination, modification or  impairment of any material Permit. There is no Governmental Order that would be binding on the  Company or BCGS following the Closing that prohibits or restricts the payment of shareholder  dividends or other shareholder distributions by the Company or BCGS.  The Company and BCGS  hold all applicable insurance licenses they are required to hold to conduct the Company Business,   including third party administrator, insurance agency or producer licenses, under any applicable   state Law.                (c)   Except as qualified herein, to the Knowledge of Seller Parties, each of the   Company and BCGS and their Affiliates, and to the Knowledge of Seller Parties, the Producers,   are and have been in connection with the Company Business, in material compliance in with   applicable Laws regulating the marketing and sale of securities, life insurance policies and annuity   contracts, regulating advertisements, requiring mandatory disclosure of information relating to the   securities, policy information, requiring employment of standards to determine if the purchase of   a policy or contract is suitable for an applicant, prohibiting the use of unfair methods of   competition and deceptive acts or practices and regulating replacement transactions. For purposes   of this Section 3.11(c), (i) “advertisement” means any material designed to create public interest   in life insurance policies and annuity contracts or in an insurer, or in an insurance producer, or to   induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain   such a policy or contract, and (ii) “replacement transaction” means a transaction in which a new   life insurance policy or annuity contract is to be purchased by a prospective insured and the   proposing producer knows or should know that one or more existing life insurance policies or   annuity contracts will lapse, or will be forfeited, surrendered, reduced in value or pledged as   collateral.                (d)   The Company and BCGS are in material compliance with applicable anti-  money laundering Laws. The Company and BCGS have established and maintain an anti-money   laundering program, which includes written internal policies, procedures and controls, including a   means for monitoring and identifying suspicious activity, the designation of an anti-money   laundering compliance officer, an ongoing employee training program, an independent audit                                         -36-   40733748.21  

 

     function to test such programs annually, and any additional requirements set forth in the rules of   any self-regulatory organization (including FINRA) of which the Company or BCGS is a member.                (e)   Neither the Company nor BCGS has, directly or indirectly, (i) made   political contributions or expenditures except in accordance with applicable Law, or (ii) offered or   provided any unlawful remuneration, entertainment or gifts to any Person, including any official   of any Governmental Authority.  No Customer of BCGS is listed on any published list of blocked   persons maintained by the Office of Foreign Assets Control of the U.S. Department of Treasury   (“OFAC”). The Company and BCGS have taken commercially reasonable steps to ensure that no   Customer in any account is listed on any published list of blocked persons maintained by OFAC.          Section 3.12 Litigation.  Except as set forth in Section 3.12 of the Seller Disclosure   Schedule, there are no Actions pending or, to the Knowledge of Seller Parties, threatened in   writing, against the Company or BCGS or relating to any Company Business or any Seller in its   capacity as a shareholder of the Company.  There are no orders outstanding to which the Company   or BCGS or any of their respective properties, rights or assets is subject.          Section 3.13 Intellectual Property.                 (a)   Except as set forth in Section 3.13(a) of the Seller Disclosure Schedule, each   of the Company and BCGS owns all right, title and interest in, or has enforceable rights or licenses   to use, free and clear of all Liens, the Intellectual Property, the Computer Software and the   Technology used in the Company Business as currently conducted.                 (b)   Section 3.13(b) of the Seller Disclosure Schedule sets forth a complete and   correct listing of (i) all Computer Software (other than “off-the-shelf” or software that is available  generally through retail distribution networks or is subject to “shrink-wrap” or “click wrap” license  agreements or retail software), (ii) all material common law Trademarks that are used in the  conduct of the Company Business, and (iii) all Registered Intellectual Property used in the conduct  of the Company Business.  Except as set forth in Section 3.13(b) of the Seller Disclosure Schedule,   all Registered Intellectual Property is not canceled, expired or abandoned, all maintenance or other   fees have been paid and all filings required to maintain such rights have been made.                (c)   Section 3.13(c) of the Seller Disclosure Schedule sets forth a complete and   correct listing of all material Intellectual Property and Technology used in the conduct of the   Company Business that are owned by a third party and licensed to Company or BCGS (excluding   any software that is available generally through retail distribution networks or is subject to “shrink- wrap” or “click wrap” license agreements) (“Licensed Intellectual Property and Technology”).    Correct and complete copies of all licenses or other agreements relating to the Licensed Intellectual   Property and Technology have heretofore been delivered by Sellers to Buyer.  Except as set forth   on Section 3.13(c) of the Seller Disclosure Schedule, the Company and BCGS are in material   compliance with the terms of the license or purchase agreements governing any Licensed   Intellectual Property and Technology, including any obligation to pay any license fees or royalties   for use of the Licensed Intellectual Property and Technology.  Except as set forth on Section   3.13(c) of the Seller Disclosure Schedule, none of the rights in the Licensed Intellectual Property   and Technology granted to the Company or BCGS will become abandoned and no third-party   licensor will be entitled to terminate or revoke any such right or increase fees or liabilities to the                                         -37-   40733748.21  

 

     Company or BCGS as a direct result of the transactions contemplated by this Agreement except   where such abandonment, termination, or revocation would not, individually or in the aggregate,   reasonably be expected to have a Company Material Adverse Effect. Except as set forth in Section   3.13(c) of the Seller Disclosure Schedules, the Company and BCGS are in compliance in all   material respects with the terms of the license or purchase agreements governing any Computer   Software owned by a third party and licensed to the Company or BCGS.  Section 3.13(c) of the   Seller Disclosure Schedule sets forth a complete and correct list of all Owned Intellectual Property,  Computer Software or Technology used in the conduct of the Company Business that is owned by  Company or BCGS that has been licensed to a third party, and correct and complete copies of all  licenses or other agreements relating to such Owned Intellectual Property, Computer Software or  Technology have heretofore been delivered by Sellers to Buyer.                (d)   Except as set forth in Section 3.13(d) of the Seller Disclosure Schedule,   neither the Company nor BCGS has received any written notice of any infringement or   misappropriation of the rights of any third party that has not been resolved with respect to any   Intellectual Property, Computer Software or Technology.  No use by the Company or BCGS of   any Intellectual Property, Computer Software or Technology infringes or misappropriates any   Intellectual Property or technology right of any third party in any material respect related to the   conduct of the Company Business.  To the Knowledge of Seller Parties, no Person is infringing or   misappropriating any material Owned Intellectual Property or Computer Software.                (e)   All Persons who have materially contributed to the creation, invention or   development of the Owned Intellectual Property and Computer Software (other than “off-the-  shelf” or software that is available generally through retail distribution networks or is subject to   “shrink-wrap” or “click wrap” license agreements or retail software) have assigned to Company   or BCGS all of their rights therein to the extent such rights have not been vested in Company or   BCGS by operation of applicable Law.                (f)   The Company and BCGS have used commercially reasonable efforts to   maintain the confidentiality and secrecy of the Trade Secrets and material proprietary information   relating to the Company Business. Except as set forth in Section 3.13(f) of the Seller Disclosure   Schedule, all employees, consultants and contractors who have been given access to such Trade   Secrets or material proprietary information for the performance of their duties for the Company or   BCGS have signed agreements (or are subject to an enforceable duty of confidentiality) that   adequately protect the interests of the Company and BCGS in such Trade Secrets or other material   proprietary information used in the Company Business.                (g)   The Technology owned by the Company or BCGS (i) has been reasonably   maintained, (ii) has been operated in material compliance with all applicable manufacturer   specifications, and (iii) is in good working condition to perform all material information   technology operations necessary for the conduct of the Company Business.  The Company has  taken or has caused to be taken commercially reasonable steps to provide for the backup and  recovery of the data critical to the conduct of the Company Business as currently conducted.  Since   December 31, 2015, neither the Company nor BCGS has experienced an unplanned interruption   of operation of the Technology or Computer Software that had a material impact on the Company   Business or any Plan.  Except as set forth in Section 3.13(g) of the Seller Disclosure Schedule, the   Computer Software (other than “off-the-shelf” or software that is available generally through retail                                         -38-   40733748.21  

 

     distribution networks or is subject to “shrink-wrap” or “click wrap” license agreements or retail   software) is not, in whole or in part, subject to the provisions of any open source license agreement.           Section 3.14 Producers.                   (a)   Section 3.14(a) of the Seller Disclosure Schedule sets forth a true and   complete list of the brokers, broker-dealers, producers, third party administrators or intermediaries   or other Persons who are regularly engaged to market or sell the services offered by the Company   Business, other than employees of Company or BCGS (each Person who undertakes such   activities, a “Producer”), and their compensation, including commissions, for the twelve-month   period ending September 30, 2018.  Except as disclosed in Section 3.14(a) of the Seller Disclosure   Schedule, (i) neither the Company nor BCGS have any compensation plans or programs for the   payment of compensation to Producers other than commissions and volume-based bonus   arrangements, and (ii) since December 31, 2017, no Producer has provided written notice to the   Company or BCGS of his or her intention to cease association with the Company.                (b)   Except as set forth in Section 3.14(b) of the Seller Disclosure Schedule, all   times since January 1, 2013, (i) each Producer at the time such Producer marketed, wrote, sold,   produced, administered or managed any portion of the Company Business, was duly licensed and   appointed (if necessary for the type of business marketed, written, sold, produced, administered or   managed by such Producer) as required by applicable Law; (ii) all compensation (including any   commission, commission expense, allowance or other fees payable or remittable) paid to each such   Producer was paid in accordance with applicable Law; (iii) no such Producer has violated (or with   or without notice or lapse of time or both would have violated) any term or provision of any agency   or other contract with the Company or BCS or policy thereof or any applicable Law or   Governmental Order applicable to any aspect (including, but not limited to, the marketing, writing,   sale, production, administration or management) of the Company Business; and (iv) no such   Producer has been enjoined, indicted, convicted or made the subject of any consent decree or   judgment on account of any violation of applicable Law in connection with such Producer’s   actions in his, her or its capacity as Producer for the Company or BCGS or is the subject of any   enforcement or disciplinary proceeding alleging any such violation.  Neither the Company nor   BCGS has made any loan to any Producer.                (c)   Section 3.14(c) of the Seller Disclosure Schedule sets forth a true and   correct list of the top twenty-five (25) Producers by commissions paid by the Company and BCGS   for the twelve-month period ending December 31, 2017 (each, a “Significant Producer”).  Sellers   have made available true, accurate and complete copies of (i) any agreements in force on the date   hereof between the Company or BCGS, on one hand, and any Significant Producer, on the other   hand, and (ii) any selling agreement between the Company or BCGS, on one hand, and any   independent broker-dealer or registered investment advisor, on the other hand (items (i) and (ii),   collectively, “Significant Producer Agreements”).              Section 3.15 Broker-Dealer and Investment Adviser.                (a)   BCGS is duly registered as a broker-dealer with the SEC and the MSRB, a  member of the Securities Investor Protection Corporation, admitted to membership in FINRA, and  duly registered, licensed or qualified as a broker-dealer in each jurisdiction where the conduct of                                         -39-   40733748.21  

 

     the Company Business requires such registration, licensing or qualification.  BCGS is in   compliance in all material respects with the state securities laws governing the operations of   broker-dealers in each state in which it operates and applicable FINRA and MSRB requirements.    BCGS is duly registered as an investment adviser under the Investment Advisers Act.  BCGS is   duly registered, licensed or qualified as an investment adviser in each state or any other jurisdiction   where the conduct of the Company Business requires such registration, licensing or qualification,   and BCGS is in good standing under the rules and regulations thereof.  BCGS is in compliance in   all material respects with federal and state securities Laws.                (b)   Section 3.15(b) of the Seller Disclosure Schedules contains a true, complete   and correct list of all Registered Persons, along with the following information with respect to each   Registered Person: (i) the Registered Person’s employment status with the Company or BCGS, (ii)   the date of the Registered Person’s Individual Registered Representative Agreement, (iii) the   jurisdiction(s) in which the Registered Person is registered as a “registered representative;” and   (iv) the jurisdiction(s) in which the Registered Person is registered as an investment adviser   representative.  Each of the Registered Persons is, and has been since such Registered Person   became associated with BCGS, duly registered as a “registered representative” with FINRA and   in all applicable states, duly licensed or registered as an investment adviser representative in all   applicable states, and is in material compliance with the applicable Laws having jurisdiction over  each such Registered Person, and such registrations are and have been in full force and effect.  The  Company has delivered or made available to Buyer true, correct and complete copies of each  Individual Registered Representative Agreement, and each Individual Registered Representative  Agreement is in full force and effect and is valid, binding and enforceable upon the Company,  BCGS and the Registered Person that is a party thereto and will continue to be following Closing,  and none of the Company, BCGS nor the Registered Person that is a party thereto is in material  default under, and no event has occurred which, with the passage of time or giving of notice or  both, would result in the Company, BCGS or the Registered Person that is a party thereto being in  material default under, any of the terms of each Individual Registered Representative Agreement.                (c)   Except as set forth in Section 3.15(c) of the Seller Disclosure Schedule,   none of the Company, BCGS, or any of their respective officers, managers, directors, Employees,   or, solely with respect to services relating to the Company Business, independent contractors are   or have been (i) the subject of any investigations or disciplinary proceedings or orders of the SEC,   FINRA or any other Governmental Authority arising under applicable Law and no such   disciplinary proceeding or order is pending or, to the Knowledge of Seller Parties, threatened, nor   is any basis known to the Sellers for any such action by any Governmental Authority;   (ii) permanently enjoined by the order, judgment or decree of any court or other Governmental   Authority from engaging in or continuing any conduct or practice in connection with any activity;   (iii) convicted of any crime or subject to any disqualification which would be the basis for any   denial, suspension, revocation or limitation of any necessary registration (including, with respect   to the Registered Person’s status as a “registered representative” or investment adviser   representative), or for any limitation on its activities, in connection with the Company Business;   and (iv) subject to or involved in any orders, disqualifications, penalties or special restrictions   relating to or affecting its services related to the Company Business.                (d)   Neither BCGS nor any of the Persons associated with BCGS, as enumerated   under Section 506 of Regulation D under the Securities Act, are subject to any of the disqualifying                                         -40-   40733748.21  

 

     events listed in Section 506(d) of Regulation D under the Securities Act, and, to the Knowledge   of Seller Parties, there is no inquiry, investigation, proceeding or action pending against any such   Person that would reasonably be expected to result in any such disqualifying event.          Section 3.16 Recordkeeping Services.  With respect to any aspect of the Company   Business involving Recordkeeping Services provided to or with respect to employee benefit plans   by the Company and BCGS:                (a)   All such Recordkeeping Services are in material compliance with   applicable Law and the terms of the applicable Material Contracts and all systems and procedures   used in the delivery of such services are designed to comply with applicable Law and the terms of  the applicable Material Contracts.               (b)   All such products and services relate solely to retirement plans that are  qualified under Section 401(a), 401(k), 403(b) or 457 of the Code, funeral trusts, nonqualified   deferred compensation plans, and related arrangements.                (c)   All fees, service charges or other compensation, including the retention of   float and disclosures required under Sections 404(a)(5) and 408(b)(2) of ERISA, relating to the   Company Business have been adequately and timely disclosed to Plan Sponsors and are imposed,   assessed, levied or charged only pursuant to a written agreement between the Company and the   Plan Sponsor or other responsible Person.                (d)   The systems and procedures utilized by the Company and BCGS in   administering the Company Business are reasonably designed to prevent nonexempt prohibited   transactions within the meaning of Section 4975 of the Code or Section 406 of ERISA or a failure   to comply with Section 409A of the Code.                (e)   Except as set forth in Section 3.16(e) of the Seller Disclosure Schedule,   neither the Company nor BCGS agrees under the terms of any Contracts related to the Company   Business to the status of, or responsibility as, a “fiduciary” (as such term is defined under Section   3(21)(A) of ERISA or any parallel provision of the Code or applicable state Laws) with respect to   any Plan.          Section 3.17 Bank Accounts; Affiliate Transactions.                  (a)   Sellers have previously made available to Buyer a true, accurate and   complete list of the bank names, locations and account numbers of all bank and safe deposit box   accounts of the Company or BCGS or used in connection with the Company Business, including   any custodial accounts for securities owned by the Company, BCGS or used in connection with   the Company Business, and the names of all persons authorized to draw thereon or to have access   thereto.                (b)   Except as set forth in Section 3.17(b) of the Seller Disclosure Schedule, (i)   no Seller Party, trustee of a Seller, officer, director or employee of the Company or BCGS, nor   any Related Person to any of the foregoing, nor any entity in which any such Person owns any   equity interest, is a party to any Contract, commitment or transaction with the Company or BCGS   or has any material interest in any property used by the Company or BCGS; and (ii) all transactions                                         -41-   40733748.21  

 

     between either the Company or BCGS on the one hand and any Related Person on the other hand   are conducted at fair market values and on commercially reasonable terms.           Section 3.18 Absence of Change.  Except as set forth in Section 3.18 of the Seller   Disclosure Schedule, since January 1, 2018, (i) the Company and BCGS have conducted the   Company Business in the Ordinary Course of Business, and (ii) there has not been any fact,   circumstance, condition, event or change having, or that would reasonably be expected to have,   individually or in the aggregate, a Company Material Adverse Effect.  Without limiting the   generality of the foregoing, since September 30, 2018, neither the Company nor BCGS has taken  any action or failed to take any action that would have resulted in a breach of Section 5.1, had such   section been in effect since September 30, 2018.          Section 3.19 Insurance.  Sellers have made available to Buyer a true and complete list of   all insurance policies covering the assets, business, equipment, properties, operations, Employees,   consultants, directors, officers and managers of the Company, BCGS and the Company Business,   together with a description of the coverage and the annual premium for the immediately prior year.   There is no claim by the Company or BCGS currently pending under any of such policies as to  which coverage has been questioned, denied or disputed by the insurers of such policies.  Each  such insurance policy is in full force and effect, all premiums payable under all such policies have  been timely paid, and the Company and BCGS are otherwise in material compliance with the terms  of such policies.  To the Knowledge of Seller Parties, since the time any such policies were last  issued or renewed, there has not been any threatened termination of, material premium increase  with respect to, or alteration of coverage under, any such policies.          Section 3.20 Privacy and Data Security.  (i) The Company and BCGS have in place (A)   administrative, technical and physical safeguards designed to protect against the destruction, loss,   or alteration of Personal Information, (B) appropriate security measures designed to protect   Personal Information, and (C) privacy policies and procedures, all of which safeguards, measures   and policies and procedures described in (A) – (C) above meet or exceed the requirements of all   applicable Laws; (ii) the Company and BCGS have complied with all applicable Laws pertaining   to privacy and personal information security in all material respects and with all applicable   contractual privacy obligations and their respective internal privacy policies and guidelines   relating to the collection, storage, use and transfer of Personal Information; (iii) to the Knowledge   of the Seller Parties, the Company and BCGS are not, and during the preceding three (3) years,   have not been, under investigation or audit, by any private party or Governmental Authority,   arising out of an actual or alleged privacy or information security incident nor has any private party   or Governmental Authority alleged any breach of contract or non-compliance with Laws related   to a privacy or information security matter; and (iv) since December 31, 2015, there has been (x)   to the Knowledge of Seller Parties, no unauthorized access, use, destruction, modification,   disclosure or transfer of any Personal Information in the possession, custody or Control of the   Company or BCGS, or a contractor or agent acting on behalf of the Company or BCGS, and (y)   no claim in writing from any affected individual nor any request or inspection from any   Governmental Authority that may give rise or has given rise to any liability under applicable Law   in relation to data protection, data security or privacy.          Section 3.21 Environmental Matters.                                           -42-   40733748.21  

 

               (a)   The Company and BCGS are in compliance with all applicable  Environmental Laws, except for such noncompliance that has not had, and would not individually  or in the aggregate reasonably be expected to have, a Company Material Adverse Effect.               (b)   Neither the Company nor BCGS has received written notice of any Actions  during the last five (5) years alleging any violation of, or liability under, any Environmental Law,  except for such Actions that have not had, and would not individually or in the aggregate  reasonably be expected to have, a Company Material Adverse Effect.         Section 3.22 Brokers.  No broker, investment banker, financial advisor or other Person is  entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in  connection with the transactions contemplated by this Agreement based upon arrangements made  by or on behalf of any Seller Party.                                    ARTICLE IV                                                          REPRESENTATIONS AND WARRANTIES OF BUYER         Buyer represents and warrants to Sellers as follows:         Section 4.1 Incorporation and Authority of Buyer.  Buyer is a corporation duly  incorporated, validly existing and in good standing under the Laws of the State of Delaware.  Buyer  has all requisite corporate power and authority to enter into, consummate the transactions  contemplated by and carry out its obligations under this Agreement.  The execution and delivery  by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated by  hereby have been duly authorized by all requisite corporate action on the part of Buyer. This  Agreement has been duly and validly executed and delivered by Buyer and assuming due  authorization, execution and delivery by the other parties hereto or thereto, this Agreement  constitutes, the legal, valid and binding obligation of Buyer, enforceable against it in accordance  with its terms, subject to the effects of bankruptcy, fraudulent conveyance, reorganization,  moratorium and other similar Laws relating to or affecting creditors’ rights generally and general  equitable principles (whether considered in a proceeding in equity or at law).           Section 4.2 No Conflict.  Provided that all consents, approvals, authorizations and other  actions described in Section 4.3 have been obtained or taken, the execution and delivery by Buyer  of, and the consummation by Buyer and each applicable Affiliate of Buyer of the transactions  contemplated by, this Agreement do not and will not (a) violate or conflict with the organizational  documents of Buyer or the applicable Affiliate of Buyer, (b) subject to the receipt of the consents,  approvals and authorizations described in Section 4.3, conflict with or violate in any material  respect any Law or other Governmental Order applicable to Buyer or the applicable Affiliate of  Buyer by which any of them or any of their respective properties or assets is bound or subject or  (c) result in any material breach of, or constitute a material default (or event which, with the giving  of notice or lapse of time, or both, would constitute a default) under, or give to any Person any  rights of termination, acceleration or cancellation of, or result in the creation of any Lien (other  than Permitted Liens) on any of the assets or properties of Buyer or any other applicable Affiliate  of Buyer pursuant to, any Contract to which Buyer or such other Affiliate of Buyer is a party or  by which any of them or any of their respective properties or assets is bound or subject.                                        -43-  40733748.21  

 

         Section 4.3 Consents and Approvals.  Except for the items set forth on Section 4.3 of  the Buyer Disclosure Schedule, the execution and delivery by Buyer of this Agreement do not, and  the consummation by Buyer or the applicable Affiliate of Buyer of the transactions contemplated  by this Agreements will not, require any Governmental Approval to be obtained or made by Buyer  or the applicable Affiliate of Buyer), except for any Governmental Approvals the failure of which  to be obtained or made would not, individually or in the aggregate, reasonably be expected to have  a Buyer Material Adverse Effect.         Section 4.4 Securities Law Matters.  The Company Shares are being acquired by Buyer  for its own account and without a view to the public distribution or sale of the Company Shares or  any interest therein.  Buyer understands and agrees that it may not sell, transfer, assign, pledge or  otherwise dispose of any of the Company Shares other than pursuant to a registered offering in  compliance with, or in a transaction exempt from, the registration requirements of the Securities  Act and applicable state and foreign securities Laws.         Section 4.5 Independent Investigation.  Buyer has conducted its own independent  investigation, review and analysis of the Company and BCGS, and acknowledges that it has been  provided adequate access to the personnel, properties, assets, premises, books and records, and  other documents and data of the Company and BCGS for such purpose. Buyer acknowledges and  agrees that: (a) in making its decision to enter into this Agreement and to consummate the  transactions contemplated hereby, Buyer has relied solely upon its own investigation and the  express representations and warranties of Sellers set forth in Article III of this Agreement  (including related portions of the Seller Disclosure Schedules) and the Transaction Documents;  (b) neither Sellers, the Company, BCGS nor any other Person has made any representation or  warranty as to Sellers, the Company, BCGS, the Company Business or this Agreement, except as  expressly set forth in Article III of this Agreement (including the related portions of the Seller  Disclosure Schedules) and the Transaction Documents, and (c) actual future results of the  Company may differ from current expectations.         Section 4.6 Non-Reliance.  Buyer is not relying and has not relied on any  representations or warranties whatsoever regarding the subject matter of this Agreement, express  or implied, except for the representations and warranties of Sellers contained in this Agreement,  the Seller Disclosure Schedules and the Transaction Documents.         Section 4.7 Brokers.  No broker, investment banker, financial advisor or other Person is  entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in  connection with the transactions contemplated by this Agreement based upon arrangements made  by or on behalf of Buyer or any of its Affiliates.                                    ARTICLE V                                                                           COVENANTS          Section 5.1 Conduct of Business.  During the period from the date of this Agreement  until the Closing, except (a) as expressly contemplated by this Agreement, (b) for the matters set  forth in Section 5.1 of the Seller Disclosure Schedule, (c) as required by applicable Law or (d) as  Buyer otherwise consents in advance in its discretion, the Sellers shall, and shall cause Company                                        -44-  40733748.21  

 

     and BCGS to, (x) conduct the Company Business only in the Ordinary Course of Business, (y) use   commercially reasonable efforts to preserve intact the business organizations and goodwill of the   Company Business and maintain material relationships with Customers, Funds, Employees,   suppliers, service providers and other third parties having business dealings with the Company   Business and (z) not do any of the following:                (a)   declare, set aside or pay any non-cash dividends, or make any other non- cash distributions, in respect of the Company Shares or BCGS Shares;               (b)   repurchase, redeem, repay or otherwise acquire any outstanding Company  Shares or BCGS Shares;               (c)   transfer, issue, sell or dispose of any Company Shares or BCGS Shares, or  grant options, warrants, calls or other rights to purchase or otherwise encumber or acquire any  capital stock or other interest in the Company or BCGS;               (d)   effect any recapitalization, reclassification, stock split or similar change in  the capitalization of the Company or BCGS;               (e)   amend the Organizational Documents of the Company, BCGS or either  Trust, adopt or enter into any plan of liquidation, dissolution, merger, reorganization or similar  transaction of the Company or BCGS, or allow the Company or BCGS to acquire any other Person  or substantially all of the assets of any other Person or enter into a new line of business;               (f)   make any change in the accounting, sales, marketing or administration  policies, practices or principles of the Company or BCGS in effect on the date hereof (other than  any change required by applicable Law or GAAP);               (g)   (x) purchase, sell, lease, exchange, transfer, encumber or otherwise dispose  of or allow to lapse or acquire any property or assets of the Company, BCGS or the Company  Business (including Permits and Intellectual Property rights) or (y) make any capital expenditure  with respect to the Company or BCGS;               (h)   incur any Indebtedness, or allow the Company or BCGS to (x) assume,  grant, guarantee or endorse, or otherwise as an accommodation become responsible for, the  obligations or Indebtedness of any Person, or (y) make any loans or advances or investments in  capital;               (i)   except in the Ordinary Course of Business, enter into, amend, terminate,  renew or extend any Material Contract;               (j)    (x) promise or grant any increase in the compensation or benefits of any  Employee, except as required by Law or by any Benefit Plan or contract in existence on the date  hereof, or (y) enter into, or amend in any respect, any employment contract (except in the Ordinary  Course of Business), agreement for personal services or Benefit Plan;                (k)   hire, terminate or accept the resignation of any key officer or Employee,  other than for cause;                                          -45-   40733748.21  

 

                 (l)   modify the contingent obligations of the Company or BCGS by way of   guaranty, endorsement, indemnity or waiver;                (m)   pay, settle or compromise any Action or threatened Action involving the   Company, BCGS, or the Company Business;                 (n)   acquire any real property or any direct or indirect interest in real property;                (o)   (u) make, amend, or revoke any election related to Taxes or take any Tax   position that is inconsistent with past practice or that would reasonably be expected to adversely   affect the Company or BCGS, (v) settle or compromise any Tax liability or surrender any right to   claim a Tax refund, offset, or other reduction in Tax liability, (w) enter into any closing agreement   related to Taxes, (x) consent to any extension or waiver of the limitations period applicable to any   Tax claim or assessment, (y) amend any Tax Returns or file any claims for Tax refunds, or   (z) make a request for a written ruling of a Governmental Authority relating to Taxes; or                (p)   enter into any legally binding commitment with respect to any of the   foregoing.    From the date hereof through the Closing Date, no Seller shall sell, transfer or otherwise convey   any Company Shares.          Section 5.2 Access to Information.                  (a)   From the date hereof until the Closing Date or earlier termination of this   Agreement, Sellers and the Company will, and will cause BCGS to, provide Buyer and its   Representatives with reasonable access during normal business hours to the operations of the   Company and BCGS and management personnel, and such books and records pertaining to the   Company, BCGS and the Company Business as Buyer may reasonably request in advance;   provided, however, that Buyer agrees that (i) such access will give due regard to minimizing   interference with the operations, activities and Employees, and (ii) such access and disclosure will  not be provided if it would jeopardize any attorney-client or other privilege.  Prior to the Closing,  Buyer and its Representatives will contact and communicate with the Employees, suppliers and  other business relations of the Company and BCGS in connection with the transactions  contemplated hereby only with the prior written consent of the Company; provided, however, that   the Company shall have the right to have a Representative present during any such contact in the   event that it consents to such contact. From the date hereof until the Closing Date or earlier   termination of this Agreement, subject to any applicable confidentiality requirement, Seller Parties   shall and shall cause Company and BCGS to provide full access to Buyer and its Representatives   of Seller Parties’ and BCGS’s communications with any Governmental Authority or Person with   respect to any Action relating to the Company or BCGS and shall provide access for Buyer and its   Representatives to directly communicate with such Governmental Authority or Person if   permitted.                (b)   From the date hereof until the Closing, the Company shall deliver to Buyer   reasonably promptly, and in any case within two (2) Business Days, following the preparation   thereof, all quarterly and annual financial statements for the Company and BCGS, in each case   together with the exhibits and schedules thereto.  Such financial statements shall (A) be based on                                         -46-   40733748.21  

 

     the Books and Records, (B) be prepared in accordance with Applicable Accounting Principles on   a basis consistent with the preparation of the Financial Statements, and (C) present fairly, in all   material respects, Company’s consolidated and/or BCGS’s (as applicable) financial condition as   of their respective dates and the results of Company’s consolidated and/or BCGS’s (as applicable)   operations for the periods then ended.             Section 5.3 Approvals and Consents.                (a)   Subject to the terms and conditions hereof, Seller Parties shall and shall   cause Company and BCGS to, use their respective reasonable best efforts (i) to take, or cause to   be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to   consummate and make effective, as soon as practicable after the date hereof, the transactions   contemplated hereby and (ii) to obtain as promptly as practicable all necessary Permits,   Governmental Orders or other consents, approvals or authorizations of Governmental Authorities   or any third parties necessary in connection with the consummation of the transactions   contemplated hereby; provided that the Sellers shall be responsible for the costs associated with   obtaining any such approvals. In connection therewith, Seller Parties shall, and shall cause   Company and BCGS to make all legally required filings as promptly as practicable in order to   facilitate prompt consummation of the transactions contemplated hereby, shall provide and shall   cause to provide such information and communications to Governmental Authorities as such   Governmental Authorities may request, and shall take and shall cause Company and BCGS to take   all reasonable steps that are necessary, proper, or advisable to obtain such Governmental   Approvals or third party consents. The Sellers shall provide to Buyer copies of all applications or   other communications to Governmental Authorities in connection with this Agreement in advance   of the filing or submission thereof; provided, in no event will any party be required to disclose to   the other party any information to the extent prohibited by applicable Law.                (b)   Without limiting the generality of the foregoing: the Seller Parties shall  cause BCGS to prepare and file (i) with FINRA not more than ten (10) Business Days after the   date hereof a substantially complete and accurate continuing membership application on Form   CMA pursuant to NASD Rule 1017 with respect to BCGS (the “Continuing Membership   Application”) in connection with the transactions contemplated hereby, and thereafter, upon   FINRA’s request, promptly provide such additional information as may be requested by FINRA,   and (ii) with the Texas Department of Insurance not more than ten (10) Business Days after the   date hereof a Texas Form FIN-531 for approval or non-disapproval of the change of control of   BCGS (the “Texas Application”).  Seller Parties shall, and shall cause BCGS to, make available   to Buyer and its Representatives all material documents to be filed with FINRA or the Texas   Department of Insurance prior to submission, and provide Buyer with a reasonable opportunity to   review and comment on such documents prior to submission.  The Buyer shall cooperate with the   Seller Parties and BCGS in preparing the Continuing Membership Application and Texas   Application, including by promptly making available additional information relating to its   business, assets, properties or ownership as may be requested by FINRA or the Texas Department   of Insurance, and taking such other actions reasonably requested by FINRA or the Texas   Department of Insurance in connection with the Continuing Membership Application or Texas   Application, as applicable.  In the event FINRA approval of the Continuing Membership   Application has not been obtained prior to Closing, Buyer and the Sellers shall continue to use   their respective reasonable best efforts to obtain FINRA approval of the Continuing Membership                                         -47-   40733748.21  

 

   Application by providing to FINRA on a timely basis such information and documents, and taking  such other actions, as FINRA may request.         Section 5.4 Announcement.  The initial press release with respect to the transactions  contemplated by this Agreement shall be a release mutually acceptable to the Buyer and Sellers.   Thereafter, no party shall, and Sellers shall cause the Principals and Employees not to, make any  public announcement or notice of this Agreement or the transactions contemplated hereby;  provided, however, that notwithstanding the foregoing, Buyer may issue press releases required  by applicable Law or applicable stock exchange rules without the Sellers’ consent.  Prior to the  Closing, Seller Parties shall not, and shall cause BCGS, the Principals, Employees and their  respective Representatives to not, make any announcement or disclosure relating to this Agreement  or the transactions contemplated hereby to the Plan Sponsors or other Customers, Participants,  agents or Employees of, or other Persons with significant business relationships with, the  Company, BCGS or the Company Business without first obtaining the prior written approval of  Buyer, which approval will not be unreasonably withheld, conditioned or delayed.           Section 5.5 Confidentiality.                  (a)   Except as otherwise expressly required by Law, Sellers shall not, and shall  cause the Principals not to: (i) disclose any Confidential Information (as defined below) to any  Person whatsoever, other than to Buyer or its Affiliates or their respective Representatives, or (ii)  sell or use for its own direct or indirect benefit or the benefit of any other Person (other than Buyer,  its Affiliates or their respective Representatives) in any manner whatsoever, any Confidential  Information. For purposes of this Agreement, “Confidential Information” means the confidential  or proprietary business information of the Buyer, the Company, BCGS, or the Company Business,  whether or not marked as such, including any business plans, technology, plans, blueprints,  drawings, models, designs, templates, processes, formulae, computer programs, customer lists,  supplier lists, pricing data, financial data, Trade Secrets or other information identified or  otherwise treated as confidential or proprietary business information; provided, however, that  Confidential Information shall not include any information: (x) that is in the public domain through  no fault of disclosure by any Seller, any Related Person thereof, or their respective Representatives,  or (y) that is lawfully acquired by a Seller, any of its Related Person or their respective  Representatives from and after the Closing from sources which are not prohibited from disclosing  such information by a legal, contractual or fiduciary obligation. Each Seller acknowledges and  agrees that the Confidential Information is owned by the Company, BCGS, Buyer and its  Affiliates, is secret, is the subject of reasonable efforts by Buyer and its Affiliates, Company or  BCGS, as applicable, to keep it secret, and has value because of its secrecy. Additionally,  Confidential Information may be shared by any party only on a need-to-know basis with its  officers, directors, Employees, Affiliates, third party service providers, auditors, attorneys, or  consultants in connection with the dispute resolution process specified in this Agreement.   If a  Seller, its Related Person or their respective Representatives are compelled to disclose any  information by judicial or administrative process or by other requirements of applicable Law, such  Seller shall promptly notify Buyer in writing, shall disclose only that portion of such information  which they are advised by counsel in writing is legally required to be disclosed, and shall, if  requested, use reasonable best efforts to obtain an appropriate protective order or other reasonable  assurance that confidential treatment will be accorded such information.                                          -48-  40733748.21  

 

                 (b)   Each Seller acknowledges and agrees that the restrictions contained herein   are reasonable and necessary to protect Buyer’s legitimate business interest, constitute a material   inducement for Buyer to enter into this Agreement, and, if violated, would cause Buyer irreparable   harm for which monetary damages would not be an adequate remedy.  Accordingly, each Seller   agrees that if any portion of this Section 5.5 is breached, then Buyer may at its election in any court   of competent jurisdiction, and in addition to any other remedy available to it, obtain specific   performance of such provision or enjoin a Seller from engaging in the activities proscribed by this   Section 5.5, in each case without any requirement to post a bond for such purpose. Notwithstanding   anything set forth in this Agreement, Buyer is expressly permitted to disclose the existence of this   Section 5.5 or any obligation set forth in this Section 5.5 to any Person with whom a Seller   conducts business or proposes to conduct business in a manner that may violate this Section 5.5.          Section 5.6 D&O Liabilities.  From and after the Closing Date, Buyer shall not, and   shall cause the Company and BCGS not to, take any steps that would reasonably be expected to   affect adversely the rights of any individual who served as a director or officer of the Company or   BCGS at any time prior to the Effective Time (each, a “D&O Indemnified Person”) to be   indemnified, under applicable Law or the Organizational Documents of the Company or BCGS as   they existed prior to the Effective Time, with respect to matters arising out of or pertaining to   matters existing or occurring at or prior to the Effective Time and relating to the fact that the D&O   Indemnified Person was a director or officer of the Company or BCGS, whether asserted or   claimed prior to, at or after the Closing Date.            Section 5.7 Releases by Sellers.  If, but only if, the Closing occurs, then each Seller on   behalf of himself individually and, as applicable, as trustee on behalf of each Trust, hereby forever,   absolutely, unconditionally and irrevocably releases and discharges the Company, BCGS, Buyer,   and Buyer’s Affiliates from all obligations and liabilities of either the Company or BCGS to the   Seller, all agreements and understandings of either the Company or BCGS involving the Seller,   and all rights, claims and causes of action (whether at law or in equity and whether or not currently   known to exist) of the Seller against either the Company or BCGS that are a result of, involve or   otherwise exist by reason of any act, omission, fact, circumstance or other matter, cause or thing   whatsoever that arose, occurred or existed before the Closing, including without limitation any   indemnification obligations to the Seller, and  the right to advancement and reimbursement of   expenses, pursuant to the organizational documents of the Company or BCGS; provided, however,  that nothing in this Section waives, releases or restricts in any manner whatsoever a claim arising  out of or related to this Agreement, including without limitation any of a Seller’s rights to  indemnification hereunder or otherwise arising out of this Agreement.          Section 5.8 Non-Competition; Non-Solicitation.                (a)   Each Seller agrees that, from the Closing Date until the date that is sixty   (60) months thereafter (the “Restricted Period”), each such Seller shall refrain from, and shall   cause such Seller’s Affiliates to refrain from directly or indirectly engaging in, offering or   providing anywhere in the United States any Recordkeeping Services or Company Business of the   types provided by the Company or BCGS as of the Closing Date, or soliciting for engagement in   any such business, except in such Seller’s capacity, if any, as an employee of the Buyer or an   Affiliate following the Closing; provided that if such Seller is an individual continuously employed   by the Buyer, the Company or their respective Affiliates following the Closing, is in good standing                                         -49-   40733748.21  

 

     and is thereafter terminated without Cause during the sixty (60) month period following the   Closing Date, the “Restricted Period” for such individual for purposes of this Section 5.8(a) shall,   notwithstanding anything to the contrary in the preceding sentence, be the shorter of (i) the   Restricted Period as set forth above, or (ii) the period from the date of such termination until the   date that is twelve (12) months thereafter.                (b)   Each Seller agrees that, during the Restricted Period, such Seller shall not   sell or propose to sell to, or otherwise solicit, whether through an employee, a producer or   otherwise, any Recordkeeping Services or other services constituting Company Business to any   Plan Sponsor, except in connection with such Seller’s capacity, if any, as an employee of the Buyer  or an Affiliate following the Closing.                (c)   Each Seller and Buyer acknowledge that the agreements contained in this   Section 5.8 are an integral part of the transactions contemplated by this Agreement and that without   these agreements Buyer would not have entered into this Agreement.                 (d)   Each Seller acknowledges and agrees that the character, duration and   geographical scope of this Section 5.8 are reasonable in light of the circumstances as they exist on   the date hereof.  Notwithstanding the foregoing, if nonetheless any provision (or any part thereof)   contained in this Section 5.8 shall for any reason be held invalid, illegal or unenforceable in any   respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this   Section 5.8, but this Section 5.8 shall be construed as if such invalid, illegal or unenforceable   provision (or part thereof) had never been contained herein.  It is the intention of the parties that if   any of the restrictions or covenants contained herein is held to cover a geographic area or to be for   a length of time that is not permitted by Law, or in any way construed to be too broad or to any   extent invalid, such provision (or part thereof) shall not be construed to be null, void and of no   effect, but to the extent such provision (or part thereof) would be valid, legal or enforceable under   Law, a court of competent jurisdiction shall construe and interpret or reform this Section 5.8 to   provide for a covenant having the maximum enforceable provisions as shall be valid, legal and   enforceable under Law.          Section 5.9 Exclusivity.  From the date of this Agreement until the Closing or until this   Agreement is terminated in accordance with Article XI, no Seller Party, nor any Principal or BCGS   or any of their respective Related Person or Representatives, shall directly or indirectly negotiate,   solicit, initiate, enter into, encourage, participate in, or respond to any inquiries, discussions, or   proposals from or with any other Person relating to an acquisition or possible acquisition of the   Company, BCGS, or any portion of the Company Business or Assets, whether by sale or lease of   Assets, joint venture, sale of outstanding equity interests, issuance of additional securities, merger,   consolidation, recapitalization or other similar transaction (each, an “Acquisition Proposal”), or   furnish or make available to any other Person any information or documents relating to the   Company, BCGS, any Assets or the Company Business in contemplation of such an acquisition   or possible acquisition.  The Seller Parties shall, and shall cause the Company, BCGS, the   Principals and their Related Persons and their respective Representatives to, immediately terminate   any such inquiries, discussions, proposals or Contracts that exist as of the date hereof, if any. The   Seller Parties shall promptly, and in any event within two (2) days after receipt, notify Buyer in   writing of the receipt by any of them of any Acquisition Proposal or request for information related                                         -50-   40733748.21  

 

     to an Acquisition Proposal, and shall disclose to Buyer the terms of any such Acquisition Proposal   or request for information, as the case may be.           Section 5.10 Indebtedness; Affiliate Transactions; Accounts Receivable.                  (a)   The Seller Parties shall, and shall cause Company and BCGS to, take such   actions as may be necessary to extinguish the Indebtedness set forth on Exhibit B prior to the   Closing Date.                (b)   The Company and BCGS shall take such actions as may be necessary to   terminate all Contracts set forth in Section 3.17(b) of the Seller Disclosure Schedule and cause all   outstanding balances thereunder to be paid concurrently with the Closing Date such that there is   no future liability thereunder of the Company or BCGS.                  (c)   The Seller Parties shall take such actions as may be necessary to close all   Company and BCGS corporate credit cards and payoff all Indebtedness thereunder and remove   the Company and BCGS from any guaranty obligations with respect thereto.                (d)   Between the date of this Agreement and the Closing Date, Sellers and the   Company shall use commercially reasonable efforts to bring Accounts Receivable balances   current.          Section 5.11 Further Assurances.  Each of the parties hereto (i) shall, and shall cause its   Affiliates to, execute such documents and other papers and perform such further acts as may be   reasonably required to carry out the provisions hereof and the transactions contemplated hereby,   including without limitation developing and implementing an appropriate transition plan, and (ii)   shall, and shall cause its Affiliates to, refrain from taking any actions that could reasonably be   expected to materially impair, delay or impede the Closing.            Section 5.12 Notification of Certain Matters.  Between the date of this Agreement and   the Closing Date, each party shall give prompt notice to the other parties at such time that such   party becomes aware of the occurrence, or nonoccurrence, of any event which, if existing,   occurring or known on the date hereof should have been so disclosed, or which is necessary to   correct any information in the Seller Disclosure Schedule or the Buyer Disclosure Schedule which  was or has been rendered inaccurate thereby, which notice will describe the relevant fact, matter,   circumstance, occurrence, non-occurrence or event in reasonable detail; provided, however, that   for purposes of determining the rights and obligations of the parties under this Agreement, any   such supplemental disclosure by any party shall not be deemed to have been disclosed as of the   date hereof, to constitute a part of, or an amendment or supplement to the Seller Disclosure   Schedule or the Buyer Disclosure Schedule (as applicable), or to cure any breach or inaccuracy of   a representation, warranty, covenant, condition or agreement as of the date hereof unless so agreed   to in writing by the other party.  Notwithstanding the previous sentence, if (i) the matter so   disclosed is in respect of an event occurring or a matter arising after the date hereof and would   result in Seller’s inability to satisfy the condition to Closing set forth in Section 7.2(a) (as expressly   acknowledged by Seller in the notice to Buyer of such matter and in the certificate required to be   delivered under Section 2.3(a)(vii)), and (ii) Buyer waives compliance with any failure to fulfill   such condition and elects to close, then the Seller Disclosure Schedule shall be deemed to have                                         -51-   40733748.21  

 

     been updated to include the matter so disclosed and Buyer shall not have any claim for indemnity   hereunder with respect to such breach.            Section 5.13 One-Day Notes.  Each Seller acknowledges none of the Buyer, its Affiliates   or their respective Representatives makes any representation, warranty or guaranty of any tax   treatment or purported tax treatment arising from or attributable to the issuance of the One-Day   Notes or the Purchase Price, and each Seller, on behalf of himself individually and, as applicable,   as trustee on behalf of each Trust, hereby forever, absolutely, unconditionally and irrevocably   disclaims all rights, claims and causes of action against the Company, BCGS, Buyer, any of its   Affiliates, or any of their respective Representatives related to the tax treatment of the Purchase   Price or One-Day Notes.          Section 5.14 Private Letter Ruling.  If (a) all conditions to Closing set forth in Article VII   have been satisfied except for the condition set forth in Section 7.2(g), and (b) the parties mutually   agree to consummate the transactions contemplated hereby despite the failure of Sellers to satisfy   the condition set forth in Section 7.2(g), then (x) an additional $3 million (the “Additional   Holdback”) will be held back from the Closing Payment in accordance with Section 2.4(b), and   (y) if an Acceptable PLR is delivered to Buyer following the Closing Date, Buyer will, within five  (5) Business Days of Buyer’s receipt thereof, pay to each Seller by certified bank checks or Wire  Transfer such Seller’s Pro Rata Share of such Additional Holdback. For the avoidance of doubt, if  Buyer holds back the Additional Holdback from the Closing Payment pursuant to this Section 5.14   and Sellers are unable to deliver an Acceptable PLR following the Closing Date, Buyer shall have   no obligation to pay to Sellers the Additional Holdback at any time.                                       ARTICLE VI                                                                         EMPLOYEE MATTERS          Section 6.1 Employee Matters.                  (a)   Continued Employees.  During the period commencing at the Closing and   ending on the date which is twelve (12) months from the Closing (or if earlier, the date of the   employee’s termination of employment with the Company), Buyer shall, and shall cause the   Company to, provide each Company Employee who remains employed immediately after the   Closing (“Continued Employee”) with: (i) base salary or hourly wages and paid vacation which   are no less than the base salary or hourly wages provided by the Company immediately prior to   the Closing; (ii) target bonus opportunities (excluding equity-based compensation), if any, which   are no less than the target bonus opportunities (excluding equity-based compensation) provided by   the Company immediately prior to the Closing; and (iii) retirement and welfare benefits that are   no less favorable in the aggregate than those provided by the Company immediately prior to the   Closing. The Buyer reserves the right to terminate any Continued Employees, provided that if any   Continued Employees are terminated within twelve (12) months of the Closing, such terminated   Continued Employees shall be offered severance benefits that are no less favorable than the   practice, plan or policy in effect for such Continued Employee immediately prior to the Closing.   Sellers shall cause each Continued Employee to provide to Buyer a completed Employment   Eligibility Verification USCIS Form I-9, verifying the identity and employment authorization of  the Continued Employee, prior to the Closing Date.                                         -52-   40733748.21  

 

                 (b)   Employees on Leave.  Notwithstanding anything in this Agreement to the   contrary, any Employee who is on long-term, short-term or other authorized leave as of the close  of business on the Closing Date will continue to be covered by the leave plan in which he is then  participating and will not be a Continued Employee unless and until he advises Company that he  wants to return to full-time employment with Company within the six months immediately  following the Closing.  In making that decision, Buyer will, and will cause Company to, comply   with applicable Law as to those employees of Company on leave or on layoff on the Closing Date,   including re-employment.                (c)   Company 401(k) Plan.  Effective no later than immediately before the   Closing Date and contingent upon the Closing, the Company shall take all actions necessary and   appropriate to terminate the Benefit Consultants Group 401(k) Plan (the “Company 401(k) Plan”)   in accordance with applicable Law and to amend the Company 401(k) Plan to remove pre-  requisites for eligible participants to receive and fully vest in all matching and non-elective   employer contributions on the Closing Date, which contributions shall be in an amount consistent   with past practice and as set forth on Section 6.3(c) of the Seller Disclosure Schedule.  No later   than the Closing Date, the Company will contribute to the Company 401(k) Plan all employer and   employee contributions with respect to the period before the Closing as set forth on Section 6.1(c)   of the Seller Disclosure Schedule.  The Company will be responsible for all liabilities with respect   to the Company 401(k) Plan whether arising before or after the Closing.  Buyer will cause the   Continued Employees who were participants in Company’s 401(k) plan in which the Continued   Employees participate on the Closing Date to be automatically enrolled in a 401(k) plan sponsored   by the Buyer or one of its Affiliates (the “Buyer 401(k) Plan”), which will occur as soon as   administratively practical. Following the Closing, Buyer also agrees to provide each Continued   Employee an opportunity to make a direct rollover to the Buyer 401(k) Plan of an eligible   distribution from the Company 401(k) Plan that includes promissory notes reflecting such   Continued Employee’s then outstanding participant loans under the Company 401(k) Plan.                (d)   Company Benefit Plans.                       (i)   Except as otherwise provided herein or set forth in Section 6.1(c)               and (e), if the Closing Date occurs in calendar year 2018, from and after the Closing               Date through December 31, 2018, Buyer shall cause the Company to continue to               cover the Continuing Employees under the Benefit Plans on substantially the same               terms and conditions as in effect immediately prior to Closing. Notwithstanding the               foregoing, except as otherwise provided in Section 6.1(c) and (e), Buyer shall cause               the Company to terminate the Benefit Plans as of December 31, 2018, and the               Continued Employees shall, effective as of January 1, 2019 (the “Eligibility Date”),               to the extent otherwise permitted by the terms of the applicable plans, be               immediately eligible to participate in the employee benefit plans, arrangements and               programs maintained by Buyer and its Affiliates in which similarly situated               employees of Buyer and its Affiliates are generally eligible to participate.                      (ii)  If the Closing Date occurs in calendar year 2019, except as               otherwise provided herein or set forth in Section 6.1(c) and (e), Seller shall cause               the Company to continue to cover the Continuing Employees under the Benefit               Plans through the Closing Date.  Notwithstanding the foregoing, except as                                         -53-   40733748.21  

 

                 otherwise provided in Section 6.1(c) and (e), upon written request of the Buyer,               Seller shall cause the Company to terminate the Benefit Plans as of the Closing               Date and the Continued Employees shall, effective as of the Closing Date (the               “Eligibility Date”), to the extent otherwise permitted by the terms of the applicable               plans, be immediately eligible to participate in the employee benefit plans,               arrangements and programs maintained by Buyer and its Affiliates in which               similarly situated employees of Buyer and its Affiliates are generally eligible to               participate.                      (iii) With respect to severance and vacation benefits and any employee               benefit plan maintained by Buyer or an Affiliate of Buyer for the benefit of any               Continued Employee, effective as of the Eligibility Date, Buyer shall, or shall cause               its Affiliate to, recognize all service with the Company of the Continued Employee,               as if such service were with Buyer, for vesting, eligibility and severance and               vacation accrual rate purposes (but not for any purposes under any defined benefit               plan or eligibility under any retiree life or medical plan), provided, however, such               service shall not be recognized to the extent that such recognition would result in a               duplication of benefits.                        (iv)  The Company shall cause the Phantom Stock Plan and Salary               Continuation Agreement to be terminated effective as of no later than immediately               prior to Closing.                (e)   Accrued Compensation.  Prior to, or as soon as reasonably practicable   following Closing, the Company will pay its employees or accrue on its financial statements all   accrued compensation through the Closing Date, including wages, business expense, and other   reimbursements and all severance payments for all of Company’s employees who are not   Continued Employees, and, to the extent required by Law, obligations for accrued but unpaid   vacation and other paid time off.                (f)   COBRA Coverage.  Sellers will reimburse the Company or Buyer for all   costs of any required continuation coverage pursuant to Code §4980B (“COBRA”) for the   Company employees who are not Continued Employees and their “qualified beneficiaries” (as   defined in Code §4980B(g)(1)) with respect to any “qualifying event” (as defined in Code   §4980B(f)(3)) that occurred before the Closing Date.  Buyers will provide, or cause the Company   to provide, COBRA coverage for the Continued Employees and their qualified beneficiaries with   respect to “qualifying events” occurring on or after the Closing Date.                (g)   Workers Compensation.  The Sellers will reimburse Company or Buyer for   all the cost of workers’ compensation claims, both medical and disability, for Company employees  that relate to loss events occurring before the Closing Date.  Buyer will be, or will cause Company  to be, responsible for all workers’ compensation claims for Continued Employees that relate to  loss events occurring on or after the Closing Date.                (h)   WARN Act.  Neither the Sellers, on the one hand, nor Buyer, on the other,   shall cause the Company or its Affiliates to take any actions that will cause liability for the other   or require Buyer or Sellers to give notice or otherwise comply with the Workers Adjustment and                                         -54-   40733748.21  

 

     Retraining Notification Act or any similar state or local law (the “WARN Act”).  The parties hereto   shall cooperate to effectuate this Section 6.1(h).                 (i)   Confidentiality.  From and after the date hereof, except as otherwise   provided herein, the parties hereto will use commercially reasonable efforts to cause all Employees   and Continuing Employees to execute and deliver an agreement pursuant to which such Employee   (a) acknowledges that the Confidential Information of the Company and its Affiliates is owned by   the Company or Buyer (as applicable), is secret, is the subject of reasonable efforts by the   Company and Buyer (as applicable) to keep it secret, and has value because of its secrecy, (b)   agrees to hold in trust and strictest confidence all such Confidential Information and to use all   reasonable measures to protect such Confidential Information from disclosure, and to make no use   of such Confidential Information, except in connection with his or her employment with the   Company or its Affiliates, and (c) agrees not to compete with the business of the Buyer or its   Affiliates (including the Company and BCGS) or solicit customers of the Buyer or its Affiliates   (including the Company and BCGS).                  (j)   No Third Party Beneficiaries.  Each provision of this Section 6.1 is included   for the sole benefit of Buyer and the Company.  Without limiting the foregoing, this Section 6.1:   (i) does not create or confer any express or implied third party beneficiary or other rights on any   individual or any legal representative of any individual (including any current or former employee,   any participant in any employee benefit plan, or any dependent or beneficiary of any of the   foregoing, any alternative payee or dependent or beneficiary of any of the foregoing and further   including collective bargaining agents or representatives); (ii) without limiting or being limited by   the foregoing clause (i), does not create or confer any rights to any of the foregoing individuals or   other persons described in clause (i) to either (A) continued employment with the Company or   employment with Buyer or any Affiliate of either of them (and thus does not constitute or create  an employment agreement) or (B) participation in any employee benefit plan, program, agreement  or arrangement of the Company or Buyer or any Affiliate of either of them; and (iii) will not be   construed either (A) to establish, amend, or modify any employee benefit plan or any other plan,   program, agreement or arrangement of Company or Buyer or any Affiliate of either of them or (B)   to alter or limit the ability of Buyer or the Company or any Affiliate of either of them to amend,   modify or terminate any employee benefit plan or any other plan, program, agreement or   arrangement of Buyer or the Company or any Affiliate of either of them.                                     ARTICLE VII                                                                      CONDITIONS PRECEDENT          Section 7.1 Conditions to Each Party’s Obligations.  The respective obligations of the   parties hereto to consummate the Closing shall be subject to the satisfaction or waiver at or prior   to the Closing Date of the following conditions:                (a)   No Injunctions or Restraints; Illegality. (i) There shall not be in effect any   Governmental Order, injunction (whether temporary, preliminary or permanent) or other legal   restraint or prohibition issued by any Governmental Authority of competent jurisdiction that has   the effect of making the transactions contemplated by this Agreement illegal or otherwise   prohibiting consummation thereof, and (ii) there shall not be any Law or Governmental Order                                         -55-   40733748.21  

 

     enacted, entered, enforced or deemed applicable to the transactions contemplated hereby which   makes the consummation of the transactions contemplated hereby illegal.                (b)   FINRA Approval.  Either (i) FINRA shall have delivered to BCGS its   written approval of the Continuing Membership Application without any material conditions,   restrictions or limitations, which approval shall be in full force and effect, or (ii) subject to Buyer’s   express written consent, BCGS shall not have received any written notice of objection to the   Closing, or the imposition of any interim restrictions under NASD Rule 1017(c)(1), from FINRA   within forty-five (45) days after FINRA has deemed the Continuing Membership Application   substantially complete                (c)   Texas Approval.  Either (i) the parties shall have received the approval from   the Texas Department of Insurance with respect to a change of control of BCGS, or (ii) the Texas   Department of Insurance shall not have provided to BCGS or the Company any written notice of   objection to the Closing within sixty (60) days after the Texas Department of Insurance’s   confirmation of receipt of the completed Texas Application.          Section 7.2 Conditions to Obligations of Buyer.  The obligations of Buyer to   consummate the Closing shall also be subject to the satisfaction or waiver at or prior to the Closing  Date of the following conditions:                (a)   Representations and Warranties.  (i) The Seller Fundamental   Representations shall be true and correct on and as of the date of this Agreement and on and as of   the Closing Date in all respects, and (ii) the representations and warranties of the Seller Parties   contained in this Agreement (other than the Seller Fundamental Representations), disregarding all   qualifications and exceptions contained therein relating to materiality or Company Material   Adverse Effect, shall be true and correct on and as of the date of this Agreement and on and as of   the Closing Date with the same effect as if made on and as of the Closing Date (other than such   representations and warranties that are made as of a specified date, which representations and   warranties shall be true and correct as of such date), except where the failure of any such   representations and warranties to be so true and correct would not reasonably be expected to have,   individually or in the aggregate, a Company Material Adverse Effect.                (b)   Covenants and Agreements.  The Seller Parties shall have performed and   complied in all material respects with all covenants and agreements required by this Agreement to   be performed or complied with by it or them on or prior to the Closing Date.                (c)   Certificates of Trust.  The representations, warranties and certifications   contained in the Certificates of Trust shall be true and correct on and as of the date of this   Agreement and on and as of the Closing Date in all respects.                (d)   Closing Deliveries. Buyer shall have received each of the closing deliveries   specified in Section 2.3(a).                (e)   Material Consents. The third party consents listed on Schedule 7.2(e) shall   have been received by the parties.                                          -56-   40733748.21  

 

               (f)   No Company Material Adverse Effect; Resolution of Actions.  No fact,  circumstance, condition, event or change shall exist or have occurred or come to exist since the  date of this Agreement that has had or would reasonably be expected to have, individually or in  the aggregate, a Company Material Adverse Effect.  The Actions listed on Section 3.12 of the  Seller Disclosure Schedule as of the date hereof shall have been resolved to the reasonable  satisfaction of Buyer.               (g)   S Corporation Status.  The Sellers shall have delivered to Buyer an  Acceptable PLR.         Section 7.3 Conditions to Obligations of the Sellers.  The obligation of the Sellers to  consummate the Closing shall also be subject to the satisfaction or waiver at or prior to the Closing  Date of the following conditions:               (a)   Representations and Warranties.  (i) The Buyer Fundamental  Representations shall be true and correct  on and as of the date of this Agreement and on and as of  the Closing Date in all respects, and (ii) the representations and warranties of Buyer contained in  this Agreement (other than the Buyer Fundamental Representations), disregarding all  qualifications or exceptions contained therein relating to materiality or Buyer Material Adverse  Effect, shall be true and correct on and as of the date of this Agreement and on and as of the Closing  Date with the same effect as if made on and as of the Closing Date (other than such representations  and warranties that are made as of a specified date, which representations and warranties shall be  true and correct as of such date) except where the failure of any such representations and warranties  to be so true and correct would not reasonably expected to have, individually or in the aggregate,  a Buyer Material Adverse Effect.               (b)   Covenants and Agreements. Buyer shall have performed and complied in  all material respects with all covenants and agreements required by this Agreement to be performed  or complied with by it on or prior to the Closing Date.               (c)   Closing Deliveries.  The Sellers shall have received each of the closing  deliveries specified in Section 2.3(b).                                   ARTICLE VIII                                                                           TAX MATTERS         Section 8.1 Agreements Regarding Tax Matters.                 (a)   Liability for Taxes.  The Sellers shall be responsible for and shall indemnify  and hold harmless the Buyer Indemnitees from and against (i) all Taxes of the Company and BCGS  attributable to any Pre-Closing Tax Period except to the extent of any accrued current liability for  Taxes taken into account in the calculation of the Final Working Capital Adjustment, (ii) any  liability for Taxes as a result of a company being a member of a consolidated, combined, unitary  or similar group for state, local or Foreign law on or prior to the Closing, (iii) any liability for  Taxes resulting from a breach or inaccuracy of the representations contained in Section 3.10 (for  this purpose, the breach of any representation or warranty shall be determined without regard to  any limitation as to Knowledge or materiality), (iv) any liability for Taxes resulting from the                                        -57-  40733748.21  

 

     Company’s failure to make a valid election, or to maintain its status as an S corporation, (v) Sellers’   share of the Transfer Taxes under Section 8.1(g), (vi) any incremental Taxes imposed on the   Company and BCGS in a Post-Closing Tax Period attributable to the Company being determined   to be ineligible to make a Section 338(h)(10) Election, (vii) any liability for Taxes resulting from  a breach or inaccuracy of the covenants contained in Section 5.10, and (viii) any liability resulting   from the Company’s or BCGS’s failure to comply with the requirements of Section 409A of the   Code or resulting from any other matter identified in Section 3.9(b) of the Seller Disclosure   Schedule, including without limitation back Taxes, excise Taxes, Tax reporting, non-compliance   with Section 409A of the Code and the termination and settlement of such programs (including   any obligation to reimburse or “gross-up” any Person for interest or additional Tax under Section   409A(a)(1)(B) of the Code).                (b)   Returns for Pre-Closing Periods. Subject to the provisions of this Section   8.1, Sellers shall prepare or cause to be prepared all income Tax Returns for Company and BCGS   for all Pre-Closing Tax Periods which are filed after the Closing Date, including the Company’s   and BCGS’s federal and state income Tax Return for such Pre-Closing Tax Periods. All other Tax   Returns to be filed after Closing will be prepared by the Company. Such income Tax Returns shall   be prepared consistently with past practice of the Company and BCGS unless contrary to   applicable Law. The Sellers shall include on the income Tax Returns for the Pre-Closing Tax  Periods the income, deductions and credits of the Company and BCGS for all applicable Pre- Closing Tax Periods.  The Sellers will submit all such income Tax Returns to Buyer for its review  and comment at least thirty (30) days prior to the filing date and will discuss and consider in good  faith any questions or comments of Buyer concerning such returns. Upon the resolution of any  questions or comments to Buyer’s reasonable satisfaction, Buyer shall cause such income Tax  Returns to be filed unless otherwise required by applicable Law. The Sellers shall pay all fees and  expenses associated with preparing the income Tax Returns to be prepared by them under this  Section and all other Tax Returns for the Pre-Closing Tax Periods the original due dates of which  are on or prior to the Closing Date.                 (c)   Returns for Straddle Periods. In the case of any Straddle Period, the portion   of any such Taxes that are allocable to the Pre-Closing Tax Period shall:  (i) in the case of income   Taxes be determined on the basis of an interim closing of the books, and (ii) in the case of Taxes   imposed on a periodic basis with respect to the assets of the Company or BCGS or otherwise   measured by the level of any item deemed to be the amount of such Taxes for the entire period (or   in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the   immediately preceding period), the amount of such Tax for the entire period shall be multiplied by   a fraction the numerator of which is the number of calendar days in the period ending on the   Closing Date and the denominator of which is the number of calendar days in the entire period.    The portion of any such Taxes that is not allocable to the Pre-Closing Tax Period under this Section   8.1(c) shall be allocable to the Post-Closing Tax Period.                (d)   Tax Payments.  The Sellers shall pay an amount equal to all Taxes due as   shown on the Tax Returns for the Pre-Closing Tax Periods for the Company and BCGS to Buyer   not less than five (5) Business Days before the relevant due date.                (e)   Audits. In the event Buyer receives notice of a claim by a Governmental   Authority in respect of Taxes of either the Company or BCGS for any Pre-Closing Tax Period (a                                         -58-   40733748.21  

 

   “Pre-Closing Tax Claim”), then Buyer shall give written notice to the Sellers of such claim. The  Sellers shall have the right to defend any Pre-Closing Tax Claim for which the Sellers would have  an indemnification obligation hereunder so long as (i) the Sellers give written notice to Buyer  within fifteen (15) Business Days after Buyer has given written notice of the Pre-Closing Tax  Claim, and (ii) the Sellers conduct the defense of the Pre-Closing Tax Claim actively and  diligently. Buyer may retain separate co-counsel at its sole cost and expense and consult in the  defense of the Pre-Closing Tax Claim. Buyer shall also be permitted to receive copies of any  pleadings, correspondence with the Governmental Authority or court, and other documents filed  with the Governmental Authority or court as Buyer may reasonably request related to the Pre- Closing Tax Claim and to attend any and all meetings, hearings and proceedings concerning such  Pre-Closing Tax Claim. If the Sellers do not assume the defense of any Pre-Closing Tax Claim  (including if the Sellers do not deliver the notice required by clause (i) of this Section), Buyer may  continue to defend such Pre-Closing Tax Claim at Sellers’ cost. Buyer will not consent to a  settlement of, or the entry of any judgment arising from, any such claim without the prior written  consent of the Sellers (such consent not to be unreasonably withheld, conditioned or delayed). If  the Sellers conduct the defense of a Pre-Closing Tax Claim, the Sellers will keep Buyer reasonably  informed as to the status of such Pre-Closing Tax Claim, including all compromise or settlement  offers. The Sellers shall consult with Buyer prior to the settlement of any such Pre-Closing Tax  Claim and shall obtain the prior written consent of Buyer prior to the settlement of any such Pre- Closing Tax Claim (x) that would materially affect Buyer in any taxable period ending after the  Closing Date or (y) relating to the transactions contemplated hereby, which consent may be given  or withheld in Buyer’s sole discretion.                 (f)   Assistance.  After the Closing Date, Buyer and its Affiliates (including the  Company and BCGS), on the one hand, and Sellers, on the other hand, shall provide each other  with such assistance as may be reasonably requested in connection with the preparation of any Tax  Return, any audit or other examination by any Taxing Authority, or any judicial or administrative  proceeding relating to liability for Taxes of either the Company, BCGS, or any Employee Plan.  The party requesting such assistance pursuant to this Section 8.1(f) shall reimburse the other for  reasonable out-of-pocket expenses incurred in providing such assistance.                 (g)   Transfer Taxes.  Notwithstanding any provision of this Agreement to the  contrary, all Transfer Taxes shall be borne 50% by the Buyer and 50% by the Sellers.  The Buyer  shall file or cause to be filed to the extent permitted by Law, all Tax Returns as may be required  to comply with the provisions of such Laws relating to Transfer Taxes.  The Sellers shall cooperate  with the Buyer in connection with all such filings and shall file those Tax Returns that the Buyer  is not permitted to file.               (h)   Amended Tax Returns.  The Sellers shall not, and shall not cause or permit  the Company or BCGS to, file or cause to be filed any amended Tax Return or claims for refund  with respect to any Pre-Closing Tax Period without the prior written consent of the Buyer, which  consent shall not be unreasonably withheld, conditioned or delayed, nor shall Buyer file or cause  or permit to be filed any amended Tax Return or claims for refund for the Company or BCGS for  any Pre-Closing Tax Period, without the prior written consent of the Sellers, which consent shall  not be unreasonably withheld, conditioned or delayed.                                         -59-  40733748.21  

 

                 (i)   Refunds.  Any tax refund received by the Company or BCGS (or Buyer on   either of their behalf) for a Pre-Closing Tax Period shall be for the account of the Sellers unless   such refund was included in the Final Working Capital Adjustment. Buyer shall pay any such   refund to the Sellers within five (5) Business Days after receipt thereof, net of any tax cost to Buyer   attributable to the receipt of such refund (including interest).                  (j)   Post-Closing Access to Records; Cooperation.  Prior to the Closing, the   Sellers will transfer to the Company custody and control of all records and all other data and   information relating to Taxes of Company and BCGS pertaining to Pre-Closing Tax Periods and  the Straddle Period. After the Closing, the Buyer will cause the Company to afford to the Sellers  or to such Sellers’ Representatives reasonable access during normal business hours (on terms not  unreasonably disruptive to the business, operations or employees of the Company) to the records  and all other data and information relating to Taxes pertaining to Pre-Closing Tax Periods and the  Straddle Period and to the Company’s employees, to the extent such access is reasonably  necessary: (i) to prepare and complete any Tax Returns required to be made hereunder; (ii) to  prosecute or defend on behalf of the Company and BCGS any proceedings controlled by Sellers;  (iii) to comply with requests made by any Taxing Authority conducting an audit, investigation or  inquiry relating to the Company’s and BCGS’s activities; and (iv) for any other purpose. After the  Closing, (x) Buyer and Sellers agree to retain, or (in the case of Buyer) cause the Company to   retain, all books and records with respect to Tax matters pertinent to the Company or BCGS   relating to Pre-Closing Tax Periods and the Straddle Period until the expiration of the statute of   limitations (and, to the extent notified by Sellers, any extensions thereof) of the respective Tax   periods, and to abide by all record retention agreements entered into with any Governmental   Authority; and (y) Buyer agrees to give the Sellers reasonable written notice prior to transferring,   destroying or discarding any such books and records and, if the Sellers so requests, Buyer will   allow Sellers to take possession of such books and records.          Section 8.2 Section 338(h)(10) Election.                  (a)   At the election of Buyer, Buyer and the Sellers shall make a joint election   under Section 338(h)(10) of the Code and comparable provisions of state law with respect to the   purchase and sale of the Company Shares (the “Section 338(h)(10) Election”) and shall timely file   with the proper authorities executed copies of Internal Revenue Service Forms 8023 and 8883, and   any similar state forms, with respect to the Company. If Buyer notifies Seller Parties that Buyer   desires to make a Section 338(h)(10) Election, then Seller Parties and Buyer shall cooperate in   preparing and filing IRS Form 8023 and other documentation required to effect the election for   Federal and state Tax purposes.                (b)   In the event the Section 338(h)(10) Election is made, as a condition   precedent thereto, Buyer shall pay to Sellers, in cash, the amount of additional consideration (if   any) necessary for Sellers to be made whole such that the after-Tax net proceeds from the sale of   the Company’s stock with the Section 338(h)(10) Election received by the Sellers are equal to the   after-Tax net proceeds that Sellers would have received had the Section 338(h)(10) Election not   been made, taking into account all appropriate state, federal and local Tax implications (the “Tax   Adjustment”).  The amount of the Tax Adjustment shall be paid to Sellers at least ten (10) days   prior to the due date (without extensions) for Sellers to file their federal income tax returns for the   taxable year that includes the Closing Date.  Sellers shall provide Buyer with a schedule computing                                         -60-   40733748.21  

 

     the amount of the Tax Adjustment within twenty (20) days after the parties have agreed to the   allocation of the Purchase Price.                  (c)   Sellers and Buyer agree to allocate the Purchase Price in accordance with   this Section 8.2. If Buyer elects to make a Section 338(h)(10) Election, Sellers and Buyer agree to   allocate the “Aggregate Deemed Sale Price” (as defined in Section 1.338-4 of the Treasury   Regulations) among the assets of the Company in accordance with Section 1.338-6 of the Treasury   Regulations. Within a reasonable time after the Closing Date (not to exceed ninety (90) days),   Buyer shall prepare and deliver to Sellers  a notice setting forth Buyer’s good faith calculation of   the “Aggregate Deemed Sales Price” and the  allocation (“Buyer’s Allocation”) among the assets   owned by the Company immediately prior to Closing (the “Allocation Schedule”). If the Sellers   agree with the Buyer’s Allocation, or if the Sellers fail to timely deliver an objection notice in   accordance with this Section 8.2(c), the Buyer’s Allocation shall be final, conclusive and binding.   If Sellers notify the Buyer in writing within thirty (30) days following receipt of the Allocation   Schedule that Sellers object to one or more items reflected in the Allocation Schedule, Sellers and   Buyer shall negotiate in good faith to resolve such dispute; provided, however, that if Sellers and   Buyer are unable to resolve any dispute with respect to the Allocation Schedule within sixty (60)   days following the date on which Sellers received the Allocation Schedule, such dispute shall be   resolved by the Independent Accountant acting as an objective, neutral party in the same manner  contemplated by Section 2.5(d). The final determination with respect to the Allocation Schedule   shall be set forth in a written statement by the Independent Accountant delivered to Buyer and   Sellers and shall be final, conclusive and binding on Buyer and Sellers.   The fees and expenses of   the Independent Accountant shall be borne equally by Sellers and Buyer. Buyer and Sellers shall   cooperate with each other in connection with the matters contemplated by this Section 8.2(c),   including by furnishing such books and records as may be reasonably requested by the other party   or the Independent Accountant.  Buyer and Seller Parties shall file all Tax Returns (including   amended returns and claims for refund) and information reports in a manner consistent with the   Allocation Schedule. Any adjustments to the Purchase Price under this Agreement shall be   allocated in a manner consistent with the Allocation Schedule.          Section 8.3 Tax Sharing Agreements.  All Tax Sharing Agreements or similar   obligations (arising under contract or otherwise) and all powers of attorney that relate to Taxes   with respect to or involving the Company or BCGS will be terminated prior to the Closing and   after the Closing neither the Company nor BCGS shall be bound thereby or have any liabilities   thereunder.          Section 8.4 Tax Treatment of Indemnity Payments.  To the extent permitted by Law,   the parties agree to treat any indemnity payment made under this Article VIII or Article X as an   adjustment to the Purchase Price for all federal, state, local, or foreign tax purposes and the parties   agree to file their Tax Returns accordingly.                                     ARTICLE IX                                                 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS          Section 9.1 Survival of Representations and Warranties.  All representations and   warranties made by the Seller Parties or Buyer contained in this Agreement or any documentation                                         -61-   40733748.21  

 

     or certification delivered in connection with this Agreement shall survive the Closing and shall   terminate and expire at the close of business on the date that is thirty-six (36) months after the  Closing Date; provided, that the representations and warranties contained in (x) Section 3.1   (Organization and Corporate History), Section 3.2 (Capital Structure), Section 3.3 (Authority and   Enforceability), Section 3.10 (Taxes), and Section 3.22 (Brokers) (collectively, the “Seller   Fundamental Representations”) and (y) Section 4.1 (Incorporation and Authority of Buyer),   Section 4.4 (Securities Law Matters) and Section 4.7 (Brokers) (collectively, the “Buyer   Fundamental Representations”) shall survive indefinitely or until the latest date permitted by   applicable Law; provided, further, that the representations and warranties contained in Section   3.10 (Taxes) shall terminate thirty (30) days following the expiration of the applicable statute of   limitations.           Section 9.2 Survival of Covenants.  The covenants or other agreements made by the   Seller Parties or Buyer which by their terms contemplate full performance on or prior to the   Closing Date shall survive the Closing and expire on the date that is twelve (12) months after the   Closing Date.  The covenants or other agreements made by the Sellers or Buyer which by their   terms contemplate performance after the Closing Date shall survive the Closing for the period   contemplated by their respective terms.           Section 9.3 Survival Period.  The period of time a covenant, agreement, representation   or warranty survives the Closing pursuant to Sections 9.1 and 9.2 shall be the “Survival Period”   with respect to such covenant, agreement, representation or warranty. The parties acknowledge   that the time periods set forth in this Article IX for the assertion of claims under this Agreement   are the result of arms-length negotiation among the parties and that the parties intend for such time   periods to be enforced as agreed by the parties.                                      ARTICLE X                                                                           INDEMNIFICATION          Section 10.1 Obligation to Indemnify.                  (a)   Subject to the Survival Period and the limitations set forth in this Article X,   the Company (only if the Closing is not consummated) and Sellers, jointly and severally, will   indemnify and hold harmless each of Buyer, its Affiliates (including the Company on and after the   Effective Time), and their respective officers, directors, partners, managers, employees, agents,   advisers and Representatives and their respective successors and assigns (collectively, the “Buyer   Indemnitees”) from and against all Losses (without duplication of recovery for the same Loss) to   the extent arising from or related to:                       (i)   any breach of the representations and warranties of the Seller Parties               contained in this Agreement or the Seller Disclosure Schedule or certifications               delivered in connection with this Agreement (other than the representations and               warranties contained in Section 3.10 (Taxes) or constituting Seller Fundamental               Representations),                                            -62-   40733748.21  

 

                       (ii)  any breach of the representations and warranties of the Seller Parties               constituting Seller Fundamental Representations or contained in Section 3.10               (Taxes),                      (iii) any breach of the covenants or agreements of the Seller Parties               contained in this Agreement or any certificates or documents delivered in               connection with this Agreement,                      (iv)  any Action set forth or required to be set forth on Section 3.12 of the               Seller Disclosure Schedule and any additional Action resulting from or relating to               the issues or matters giving rise to such Actions set forth or required to be set forth               on Section 3.12 of the Seller Disclosure Schedule,                      (v)   any Final Adjustment Amount owed to Buyer in excess of the               Holdback Amount,                      (vi)  Sellers’ share of any Transfer Tax under Section 8.1(g),                       (vii) any transfer of Company Shares prior to the date hereof, including               the failure to notify or obtain approval of any Governmental Authority (including               without limitation the filing of a Continuing Membership Application) in               connection with such transfer, or                      (viii) without duplication, any indemnity obligation of the Sellers under               Section 8.1(a).    provided, however, that, except in the case of fraud, the Sellers shall not have any liability under   Section 10.1(a)(i) unless the aggregate of all Losses for which the Sellers would, but for this   proviso, be liable, exceeds on a cumulative basis an amount equal to $100,000 (the   “Indemnification Deductible”), and then only to the extent of any such excess.  In any event, except   in the case of fraud by the Sellers, the maximum amount for which the Sellers shall be liable under  Section 10.1(a)(i) shall not exceed $2,000,000 in the aggregate (the “Indemnification Cap”).                (b)   Subject to the Survival Period and the limitations set forth in this Article X,   Buyer agrees to indemnify and hold harmless the Sellers, and their Affiliates and respective   Representatives and each of their respective successors and assigns (collectively, the “Seller   Indemnitees”) from and against all Losses (without duplication of recovery for the same Loss) to   the extent arising from or related to:                       (i)   any breach of the representations and warranties of Buyer contained               in this Agreement or any documents or certifications delivered in connection with               this Agreement (other than any representations and warranties constituting Buyer               Fundamental Representations),                       (ii)  any breach of the representations and warranties of Buyer               constituting Buyer Fundamental Representations,                                           -63-   40733748.21  

 

                       (iii) any breach of any of the covenants and agreements of Buyer               contained in this Agreement or any certificates or documents delivered in               connection with this Agreement, or                      (iv)  any Final Adjustment Amount owed to Sellers,                      (v)   Buyer’s share of any Transfer Taxes under Section 8.1(g);     provided, however, that, except in the case of fraud, Buyer shall not have any liability under   Section 10.1(b)(i) unless the aggregate of all Losses for which Buyer would, but for this proviso,   be liable, exceeds on a cumulative basis an amount equal to the Indemnification Deductible, and   then only to the extent of any such excess.  In any event, except in the case of fraud by Buyer, the   maximum amount for which Buyer shall be liable in the aggregate under Section 10.1(b)(i) shall   not exceed the Indemnification Cap.                (c)   For purposes of determining whether any representation or warranty has   been breached and the amount of the Losses in respect of breach of any representation or warranty   under Article VIII or this Article X, each representation and warranty contained in this Agreement   (other than with respect to subclause (ii) of the first sentence of Section 3.18) shall be read without   regard to any Company Material Adverse Effect, Buyer Material Adverse Effect or other   materiality qualifications or references.            Section 10.2 Indemnification Procedures; Certain Limitations.                  (a)   In order for a Buyer Indemnitee or a Seller Indemnitee (the “Indemnified   Party”) to be entitled to any indemnification provided for under this Agreement in respect of,   arising out of or involving a claim or demand made by, or an action, proceeding or investigation   instituted by, any Person (whether or not a party to this Agreement) (an “Indemnity Claim”), such   Indemnified Party must notify the party obligated to indemnify such Indemnified Party (the   “Indemnifying Party”) in writing, and in reasonable detail, of the Indemnity Claim promptly, and   in any event within thirty (30) days after such Indemnified Party learns of the Indemnity Claim;  provided, however, that failure to give such notification shall not affect the indemnification   provided hereunder unless and to the extent the Indemnifying Party shall have been prejudiced as   a result of such failure (except that the Indemnifying Party shall not be liable for any expenses   incurred during the period in which the Indemnified Party failed to give such notice).  Such written   notice shall specify in detail the facts constituting the basis for, and the amount of, the claim   asserted.  Thereafter, the Indemnified Party shall promptly deliver to the Indemnifying Party copies   of all notices and documents (including court papers) thereafter received by the Indemnified Party   relating to the Indemnity Claim.                (b)   If an Indemnity Claim is made against an Indemnified Party by a party that   is not a Buyer Indemnitee or Seller Indemnitee (a “Third Party Claim”), subject to this Section   10.2(b), the Indemnifying Party shall have the right to assume the defense and control of Third   Party Claims.  In the event the Indemnifying Party exercises such right to assume the defense and   control of a Third Party Claim, the Indemnified Party shall have the right but not the obligation   reasonably to participate in (but not control) the defense of Third Party Claims with its own counsel   and at its own expense unless (i) the Indemnifying Party and Indemnified Party shall have mutually                                         -64-   40733748.21  

 

   agreed in writing to the retention of the same counsel, (ii) the named parties to any such Third  Party Claim (including any impleaded parties) include the Indemnifying Party and Indemnified  Party and representation of both parties by the same counsel would, in the opinion of counsel to  such Indemnified Party, be impermissible under the applicable code of professional responsibility  due to actual or potential differing interests between the Indemnifying Party and Indemnified  Party, including situations in which there are one or more legal defenses available to the  Indemnified Party that are different from, or additional to, those available to the Indemnifying  Party, or (iii) the Indemnifying Party fails to diligently pursue the Third Party Claim  it has  assumed, in which case the Indemnifying Party will bear such expense of the Indemnified Party.   Any election by an Indemnifying Party to assume the defense of a Third Party Claim must be  delivered by the Indemnifying Party to the Indemnified Party within thirty (30) Business Days  after receipt of the Indemnified Party’s notice under Section 10.2(a), and failure on the part of the  Indemnifying Party to send such notice within such thirty (30) Business Day period shall be  deemed an election not to assume the defense of such Third Party Claim.  If the Indemnifying  Party elects to assume the defense of a Third Party Claim, then the Indemnified Party shall, and  shall cause each of its Representatives and permitted assigns to, cooperate fully with the  Indemnifying Party in the defense of any such Third Party Claim, which cooperation shall include  designating a liaison counsel to whom the Indemnifying Party may direct notices and other  communications, using commercially reasonable efforts to make witnesses available, and  providing records and documents to the extent such witnesses, records and documents are relevant  to the Third Party Claim.  In the event that the Indemnifying Party does not assume the defense of  a Third Party Claim within the thirty (30) Business Day period specified in this Section 10.2(b),  the Indemnified Party may assume the defense and control of a Third Party Claim at the  Indemnifying Party’s expense and may consent to a settlement of, or the entry of any judgment  arising from, any Third Party Claim without the consent of the Indemnifying Party.  The  Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment  arising from, any Third Party Claim as to which the Indemnifying Party has assumed the defense  in accordance with the terms of this Section 10.2(b), without the consent of any Indemnified Party,  but only to the extent that such settlement or entry of judgment: (i) provides solely for the payment  of money that will be paid in full by the Indemnifying Party, and (ii) provides a complete release  of, or dismissal with prejudice of claims against, any Indemnified Party potentially affected by  such Third Party Claim from all matters that were asserted in connection with such claims.               (c)   The obligations to indemnify and hold harmless a party hereto in respect of  a breach of representation, warranty or covenant will terminate on the applicable Survival Period  termination date (as set forth in Section 9.1 or 9.2), unless, prior to such applicable termination  date, an Indemnified Party has brought a claim for indemnification pursuant to Article VIII or  Section 10.1 subject to the terms and conditions of this Article X by delivering a written notice  (stating in reasonable detail the amount and nature of, and factual and legal basis for, any such  claim for indemnification, and the provisions of this Agreement upon which such claim for  indemnification is made) to the Indemnifying Party. If an Indemnified Party has made a proper  claim for indemnification pursuant to Section 10.2 prior to such termination date, then such claim,  if then unresolved, will not be extinguished by the passage of the deadlines set forth in Section 9.1  or Section 9.2.               (d)   Notwithstanding anything contained in this Agreement to the contrary,  Losses of an Indemnified Party shall be determined without duplication of recovery for the same                                        -65-  40733748.21  

 

     Loss and shall be net of any insurance or amounts from other applicable sources of recovery   actually recovered by the Indemnified Party with respect to such Loss, net of any actual costs,   expenses or premiums incurred in connection with securing or obtaining such proceeds (such net   amount, “Recovery Amounts”).  Each applicable Indemnified Party shall use commercially   reasonable efforts to recover from insurance policies or other applicable sources of recovery the   maximum portion of any Losses of such Indemnified Party.  If the applicable Indemnified Party   shall have used commercially reasonable efforts to recover any amounts recoverable under   insurance policies or other applicable sources of recovery and shall not have recovered the   applicable Losses, the applicable Indemnifying Party shall be liable for the amount by which such  Losses exceeds the Recovery Amounts (subject to the limitations contained in this Article X).  If   the applicable Indemnified Party fails to use commercially reasonable efforts to recover any   amounts recoverable under insurance policies or other applicable sources of recovery, the   applicable Indemnifying Party shall not be required to indemnify the applicable Indemnified Party   for that portion of any Losses that could reasonably be expected to have been included in a   Recovery Amount had the applicable Indemnified Party used such commercially reasonable   efforts.  Any related unreimbursed cost of recovery shall be included in Losses.  In addition, any   indemnification obligation of an Indemnifying Party shall be subject to and calculated in   accordance with the provisions of Section 8.4.                (e)   The Indemnified Party shall use, and shall cause each of its Affiliates to use,   commercially reasonable efforts to mitigate any Losses upon and after becoming aware of any   facts, matters, failures or circumstances that would reasonably be expected to result in any Losses   that are indemnifiable hereunder.                (f)   In the event of indemnification payment pursuant to this Article X by or on   behalf of any Indemnifying Party to any Indemnified Party, such Indemnifying Party shall be   subrogated to the rights of the Indemnified Party as against any third party in respect of the Loss   to which the payment relates, provided, that until the Indemnified Party recovers full payment of   its Loss, any and all claims of the Indemnifying Party against any such third party on account of   said payment are hereby made expressly subordinated and subjected in right of payment to the   Indemnified Party’s rights against such third party.  Such Indemnified Party shall cooperate with   such Indemnifying Party in a reasonable manner, and at the cost of such Indemnifying Party, in   presenting any subrogated right, defense or claim.                (g)   In the event a claim or any action for indemnification under this Article X   has been finally determined, the amount of such final determination shall be paid (i) if the   Indemnified Party is a Buyer Indemnitee prior to the Closing Date, by the Seller Parties to the   Indemnified Party on demand by Wire Transfer, (ii) if the Indemnified Party is a Buyer Indemnitee   on or after the Closing Date, subject to Section 2.6(c), first by payment of such amounts from the   Holdback Amount to the Indemnified Party, and if the Holdback Amount is insufficient to   compensate Buyer Indemnitee for such amount, then by payment by Seller(s) to the Indemnified   Party on demand by Wire Transfer, and (iii) if the Indemnified Party is a Seller Indemnitee, by   Buyer to the Indemnified Party on demand by Wire Transfer.  A claim or an action, and the liability   for and amount of damages therefor, shall be deemed to be “finally determined” for purposes of   this Article X when the parties to this Agreement have so determined by mutual agreement or, if   disputed, when a final non-appealable Governmental Order has been entered into with respect to   such claim or action.                                         -66-   40733748.21  

 

                 (h)   The representations, warranties and covenants of the Seller Parties and the   Buyer Indemnitees’ rights to indemnification with respect thereto, shall not be affected or deemed   waived by reason of (and the Buyer Indemnitee shall be deemed to have relied upon the   representations and warranties of the Sellers, as applicable, set forth herein notwithstanding) any   investigation made by or on behalf of any of the Buyer Indemnitee (including any of their   Representatives) or by reason of the fact that any of the Buyer Indemnitee or their Representatives   knew or should have known that any such representation or warranty is, was or might be   inaccurate, regardless of whether such investigation was made or such knowledge was obtained   before or after the execution and delivery of this Agreement.                (i)   On the date that is eighteen (18) months from the Closing Date (the “First   Holdback Release Date”), Buyer shall release to each Seller its respective Pro Rata Share of the   amount equal to (a) the First Holdback Release Amount, minus (i) the amount, if any, of any   payments from the Holdback Amount to Buyer Indemnitees contemplated by Section 10.2(g) prior   to the First Holdback Release Date, minus (b) the Indemnification Retention Amount as of the   First Holdback Release Date.  On the date that is thirty-six (36) months from the Closing Date (the   “Second Holdback Release Date”), Buyer shall release to each Seller its respective Pro Rata Share   of the amount equal to (x) any remaining Holdback Amount, minus (y) the amount, if any, of any   payments from the Holdback Amount to Buyer Indemnities contemplated by Section 10.2(g) prior   to the Second Holdback Release Date, minus (z) the Indemnification Retention Amount as of the  Second Holdback Release Date.          Section 10.3 Exclusive Remedies.  Each party acknowledges and agrees that, in the   absence of fraud or willful or intentional misconduct on the part of a party and subject to Sections   2.6 and 12.9 and the rights and remedies under the Non-compete and Nondisclosure Agreements   and the Certificates of Trust, following the Closing the indemnification provisions of Article VIII   or this Article X shall be the sole and exclusive remedies of the parties for the breach or inaccuracy   of any representation or warranty or breach of any covenant or agreement contained in this   Agreement, and notwithstanding anything herein to the contrary, no breach of any representation,   warranty, covenant or agreement contained herein shall give rise to any right on the part of any   party hereto to rescind this Agreement or any of the transactions contemplated hereby.                                     ARTICLE XI                                                                             TERMINATION          Section 11.1 Termination.  This Agreement and the transaction contemplated hereby   may be terminated any time prior to the Closing only as follows:                (a)   by mutual written consent of Buyer and the Seller Parties;                (b)   by either Buyer or the Seller Parties if the Closing shall not have been   consummated on or before June 1, 2019 (the “Outside Date”); provided, however, that the   termination right under this Section 11.1(b) shall not be available to any party whose material   breach of this Agreement has been the cause of, or resulted in, the failure of the Closing to have   been consummated on or before the Outside Date;                                           -67-   40733748.21  

 

               (c)   by either Buyer, on one hand, or the Seller Parties, on the other hand, if a  Governmental Authority shall have issued a Governmental Order or taken any other action that is  final and non-appealable and that restrains, enjoins or otherwise prohibits the consummation of  the transactions contemplated hereby;                (d)   by Buyer, if Buyer is not in material breach of its obligations under this  Agreement, and if there shall have been a material breach by any Seller Parties of any of their  respective representations, warranties, covenants or agreements contained in this Agreement,  which breach would result in the failure to satisfy one or more of the conditions set forth in Section  7.2(a) or Section 7.2(b) and such breach (if curable) has not been cured within (i) thirty (30) days  after written notice thereof by Buyer to the Sellers or (ii) any shorter period of time that remains  between the date such written notice is provided and the Outside Date; or               (e)   by the Seller Parties, if no Seller Party is in material breach of its obligations  under this Agreement, and if there shall have been a material breach by Buyer of any of its  representations, warranties, covenants or agreements contained in this Agreement, which breach  would result in the failure to satisfy one or more of the conditions set forth in Section 7.3(a) or  Section 7.3(b) and such breach (if curable) has not been cured within (i) thirty (30) days after  written notice thereof by the Sellers to Buyer or (ii) any shorter period of time that remains between  the date such written notice is provided and the Outside Date;          Section 11.2 Effect of Termination.  If this Agreement is terminated and the transactions  contemplated hereby are not consummated pursuant to Section 11.1 above, this Agreement will  become null and void and of no further force and effect, except for (a) the provisions of Article I,  Section 5.4, Section 5.5, Article X, Article XI and Article XII and (b) rights and obligations arising  from any breach of this Agreement prior to such termination.                                    ARTICLE XII                                                                      GENERAL PROVISIONS         Section 12.1 Fees and Expenses.  Except for any reimbursement of fees or expenses that  may be awarded as damages in any action, suit or proceeding arising out of this Agreement or any  documents delivered in connection with this Agreement and except as otherwise provided in this  Agreement, each party hereto shall pay its own fees and expenses incident to preparing for,  entering into and carrying out this Agreement and the consummation of the transactions  contemplated hereby.            Section 12.2 Notices.  All notices, requests, demands, waivers and other communications  required or permitted to be given or made under this Agreement shall be in writing and shall be  deemed to have been duly given or made (and shall be deemed to have been duly given or made  upon receipt) if (a) delivered personally, (b) mailed by certified or registered mail (postage prepaid,  return receipt requested) or (c) sent by email with receipt confirmed (followed by delivery of an  original via overnight courier service), as follows (or at such other address for a party as shall be  specified by like notice):                     (i)   if to Buyer, to                                        -68-  40733748.21  

 

                     The Horace Mann Educators Corporation                    1 Horace Mann Place                    Springfield, IL 62715                   Attention:  Donald M. Carley, SVP & General Counsel                   Email:  Donald.Carley@horacemann.com                                      with a copy (which shall not constitute notice) to:                    Eversheds Sutherland (US) LLP                   700 Sixth Street, NW                   Suite 700                   Washington, DC 20001                   Attention:  Ling Ling, Esq.                   Email:  lingling@eversheds-sutherland.com                                        (ii)  if to the Sellers, to                    Benefit Consulting Group, Inc.                   51 Haddonfield Road                   Suite 210                   Cherry Hill Road, NJ 08002                   Attention:  Beau Adams                            Jorge Arroyo                            Adam Paglione                                                    with a copy to:                    MacElree Harvey, Ltd.                   17 West Miner Street                   West Chester, PA 19382                   Attention:  Harry J. DiDonato, Esq.                   Email:  HDiDonato@macelree.com                            Section 12.3 Interpretation.  For purposes of this Agreement, the words “hereof,”  “herein,” “hereby” and other words of similar import refer to this Agreement as a whole (including  any Exhibits, Annexes, Schedules and the disclosure schedules) and not to any particular provision  of this Agreement unless otherwise indicated.  All references herein to Articles, Sections,  Subsections, Paragraphs, Exhibits, Annexes and Schedules shall be deemed references to Articles  and Sections and Subsections and Paragraphs of, and Exhibits, Annexes and Schedules to, this  Agreement unless the context shall otherwise require. The table of contents and headings contained  in this Agreement are for reference purposes only and will not affect in any way the meaning or  interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are  used in this Agreement, they will be deemed to be followed by the words “without limitation,”  whether or not they are in fact followed by those words or words of like import.  The word “or”  shall not be exclusive.  Whenever the singular is used herein, the same will include the plural, and  whenever the plural is used herein, the same will include the singular, where appropriate.                                        -69-  40733748.21  

 

     Whenever used in this Agreement, reference to a particular gender shall include the masculine,   feminine and neutral genders.  Where this Agreement states that a party “shall,” “will” or “must”   perform in some manner or otherwise act or omit to act, it means that the party is legally obligated   to do so in accordance with this Agreement. All Exhibits and the Seller Disclosure Schedule and   the Buyer Disclosure Schedule 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 capitalized term used in any   Exhibit, Schedule, Annex or section or subsection of the Seller Disclosure Schedule or the Buyer   Disclosure Schedule but not otherwise defined therein will have the meaning given to such term   in this Agreement.  Any reference to “days” means calendar days unless Business Days are   expressly specified.  If any action under this Agreement is required to be done or taken on a day   that is not a Business Day, then such action shall be required to be done or taken not on such day   but on the first succeeding Business Day thereafter.  “Writing,” “written” and comparable terms   refer to printing, typing and other means of reproducing words (including electronic media) in a   visible form.  References from or through any date mean, unless otherwise specified, from and   including or through and including, respectively.  This Agreement is to be construed without   regard to any presumption or rule requiring construction or interpretation against the party drafting   or causing any instrument to be drafted.  Any reference herein to any applicable Law, Contract   (including this Agreement) or document, or any section thereof, shall, unless otherwise expressly   provided, be a reference to such applicable Law, Contract, document or section as amended,   modified or supplemented (including any successor section) and in effect from time to time.    References to “$” or “dollars” are references to United States dollars.            Section 12.4 Entire Agreement; Third-Party Beneficiaries.  This Agreement and the   documents and certificates delivered in connection with this Agreement constitute the entire   agreement of the parties hereto with respect to the subject matter of this Agreement and supersede   all prior agreements and undertakings, both written and oral, other than the Confidentiality   Agreement to the extent not in conflict with this Agreement, between or on behalf of the Sellers  and Buyer with respect to the subject matter of this Agreement.  Except as provided in Section 5.6   with respect to D&O Indemnified Persons, and Article X with respect to Buyer Indemnitees and   Seller Indemnitees, this Agreement is for the sole benefit of the parties to this Agreement and their   permitted successors and assigns, and nothing in this Agreement, express or implied, is intended   to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any   nature whatsoever under or by reason of this Agreement.          Section 12.5 Governing Law.  This Agreement shall be governed by, and construed in   accordance with, the Laws of the State of Illinois, regardless of the Laws that might otherwise   govern under applicable principles of conflicts of laws thereof.          Section 12.6 Assignment.  Neither this Agreement nor any of the rights, interests or   obligations under this Agreement shall be assigned, in whole or in part, by operation of law or   otherwise by any of the parties without the prior written consent of the other parties, and any such   assignment that is not consented to shall be null and void.  Subject to the preceding sentence, this   Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and   their respective successors and assigns.          Section 12.7 Dispute Resolution; Enforcement.                                           -70-   40733748.21  

 

                 (a)   In the event of any dispute arising under this Agreement, prior to the   commencement of litigation, a senior officer of Buyer and the Seller Parties shall attempt in good   faith to resolve the dispute consistent with the terms of this Agreement.  If they are unable to   resolve the dispute in this manner within a reasonable period of time, the parties may pursue   judicial remedies with respect to such dispute.                (b)   The parties agree that any action arising directly or indirectly out of this   Agreement shall be litigated (1) if such action is brought by any Seller against Buyer or its   Affiliates, only in the United States District Court for the Central District of Illinois and (2) if such  action is brought by Buyer, its successors or assigns or its Affiliates against any Seller, only in the  United States District Court for the District of New Jersey. Each party hereby irrevocably and  unconditionally submits to the jurisdiction of the District Court specified above (the “Selected   Court”) for purposes of enforcing this Agreement or determining any claim arising from or related   to the transactions contemplated by this Agreement.  In any such action, suit or other proceeding,   each party hereto irrevocably and unconditionally waives and agrees not to assert by way of   motion, as a defense or otherwise any claim that it is not subject to the jurisdiction of the Selected   Court, that such action, suit or other proceeding is not subject to the jurisdiction of the Selected   Court, that such action, suit or other proceeding is brought in an inconvenient forum or that the   venue of such action, suit or other proceeding is improper.  The parties hereto agree that any   process or other paper to be served in connection with any action or proceeding under this   Agreement shall, if delivered, sent or mailed in accordance with Section 12.2, constitute good,   proper and sufficient service thereof.  Each party hereto also agrees that any final and unappealable  judgment against a party hereto in connection with any action, suit or other proceeding shall be  conclusive and binding on such party and that such award or judgment may be enforced in any  court of competent jurisdiction, either within or outside of the United States.  A certified or  exemplified copy of such award or judgment shall be conclusive evidence of the fact and amount  of such award or judgment.  Notwithstanding anything contained herein to the contrary or any  waivable provision of Law, in the event of litigation among the parties, any prejudgment interest  applied shall be at the Interest Rate.          Section 12.8 Severability; Amendment and Waiver.                  (a)   Whenever possible, each provision or portion of any provision of this  Agreement shall be interpreted in such manner as to be effective and valid under applicable Law,  but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or  unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity,  illegality or unenforceability shall not affect any other provision or portion of any provision in  such jurisdiction so long as the economic or legal substance of the transactions contemplated by  this Agreement is not affected in any manner adverse to any party.  Upon such determination that  any provision is invalid, illegal or unenforceable, the parties shall negotiate in good faith to modify  this Agreement so as to effect the original intent of the parties as closely as possible in a mutually  acceptable manner in order that the transactions contemplated by this Agreement be consummated  as originally contemplated to the greatest extent possible.               (b)   This Agreement may be amended, and the terms hereof may be waived,  only by a written instrument signed by each of the parties or, in the case of a waiver, by the party  waiving compliance.                                         -71-   40733748.21  

 

                 (c)   No delay on the part of any party in exercising any right, power or privilege   hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any   right, power or privilege, nor any single or partial exercise of any such right, power or privilege,   preclude any further exercise thereof or the exercise of any other such right, power or privilege.          Section 12.9 Specific Performance.  The parties agree that irreparable damage would   occur in the event that any of the provisions of this Agreement were not performed in accordance   with their specific terms or were otherwise breached.  It is accordingly agreed that, without the   necessity of posting bonds or other undertaking, the parties shall be entitled to an injunction or   injunctions to prevent breaches of this Agreement and to enforce specifically the terms and   provisions of this Agreement in accordance with this Agreement, this being in addition to any   other remedy to which such party is entitled at law or in equity.  In the event that any action is   brought in equity to enforce the provisions of this Agreement, no party hereto shall allege, and   each party hereto hereby waives the defense or counterclaim, that there is an adequate remedy at   law.          Section 12.10 Certain Acknowledgments; Informed Decision to Sell.                  (a)   Each Seller expressly acknowledges and agrees that (a) except as expressly   set forth in Article IV, neither Buyer nor any of Buyer’s Affiliates nor any of their respective   Representatives has made any representation or warranty or covenant or agreement whatsoever   (whether oral or written or express or implied) to any Seller as to any of the matters that are the   subject of this Agreement (including the Earn-Out Payments) and (b) no act or omission by Buyer   is, or will be deemed to constitute, a representation or warranty by Buyer.                (b)   Without limiting the foregoing, each Seller acknowledges and agrees that   neither Buyer nor any of its Representatives has made any representation or warranty or covenant   or agreement whatsoever (whether oral or written or express or implied) to such Seller as to any   aspect of Buyer’s operations, the achievement of any Total Net Revenue or other performance   targets, or the payment of any amount of the Earn-Out Payments.  EACH SELLER ALSO   EXPRESSLY ACKNOWLEDGES AND AGREES (1) THAT EACH AND EVERY   STATEMENT IN PRIOR DISCUSSIONS (IF ANY) AS TO THE EARN-OUT PAYMENTS   (INCLUDING ANY AS TO THE PROBABILITY OF ACHIEVING THE METRICS SET   FORTH IN SECTION 2.6(B), ANY ASPECT OF BUYER’S OPERATIONS OR THE   PAYMENT OF ANY AMOUNT OF THE EARN-OUT PAYMENTS) IS HEREBY   WITHDRAWN AND (2) THAT THE SELLERS ARE NOT RELYING ON ANY SUCH   STATEMENTS.  Each Seller   further acknowledges and agrees that it, he or she has,  independently and without reliance upon Buyer or any of its Representatives and based on such  documents and information as it, he or she has deemed appropriate has made his, her or its own  appraisal of and investigation into the business, operations, property, prospects, financial and other  conditions affecting any of Buyer’s operations, has it, his or her own assumptions about the future  operations of Buyer’s business, the economies and markets in which Buyer operates, and any  opportunities for improvement of any of Buyer’s operations, and has made its, his or her own  decision to sell the Company Shares and otherwise perform its, his or her obligations in this  Agreement on the terms and conditions set forth in this Agreement (including the Earn-Out  Payments) and otherwise execute, deliver and perform this Agreement.                                         -72-   40733748.21  

 

               (c)   EACH SELLER FURTHER EXPRESSLY ACKNOWLEDGES AND  AGREES THAT THE ACKNOWLEDGEMENTS AND AGREEMENTS IN THIS SECTION  SHALL SURVIVE CLOSING.         Section 12.11 Counterparts.  This Agreement may be executed in one or more  counterparts, and by the different parties to each such agreement in separate counterparts, each of  which when executed will be deemed to be an original but all of which taken together will  constitute one and the same agreement.  Delivery of an executed counterpart of a signature page  by facsimile or other means of electronic transmission shall be as effective as delivery of a  manually executed counterpart of this Agreement.         Section 12.12 WAIVER OF JURY TRIAL.  EACH PARTY TO THIS AGREEMENT  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE  UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT  ISSUES AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND  UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY  JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF  OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY  THIS AGREEMENT.  EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT  (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS  REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD  NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER,  (B) EACH PARTY HERETO UNDERSTANDS AND HAS CONSIDERED THE  IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY HERETO MAKES THIS WAIVER  VOLUNTARILY AND (D) EACH PARTY HERETO HAS BEEN INDUCED TO ENTER INTO  THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND  CERTIFICATIONS OF THIS SECTION 12.12. ANY PARTY HERETO MAY FILE AN  ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS  WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR  RIGHT TO TRIAL BY JURY.                      [Remainder of this page intentionally left blank.]                                                  -73-  40733748.21  

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their  respective officers thereunto duly authorized, all as of the date first written above.                                      HORACE MA           ATORS                                    CORPORAT                                     By    ,                                       Na  e: M,  ck 2tArati- LS                                       T. e: c est +- i G g: 0                          Signature Page to Stock Purchase Agreement  

 

      IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their  respective officers thereunto duly authorized, all as of the date first written above.                                          ROBERT PAGLIONE                                          PAGLIONE FAMILY TRUST F/B/O ADAM                                        PAGLIONE                                         By                                           Name: Lisa Arroyo                                           Title: Trustee for Paglione Family Trust F/B/O                                                Adam Paglione                                         PAGLIONE FAMILY TRUST F/B/O LISA AND                                        JORGE ARROYO                                         By                                           Name:  Adam Paglione                                           Title: Trustee for Paglione Family Trust F/B/O                                                Lisa and Jorge Arroyo                                         BEAU ADAMS                                          BENEFITS CONSULTAN       S GROUP, INC.                                         By                                           Nam‘:  Jorg' Arr yo                                           Title: President                             Signature Page to Stock Purchase Agreement  

 

      IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their  respective officers thereunto duly authorized, all as of the date first written above.                                     ROBERT PAGLIONE                                     PAGLIONE FAMILY TRUST F/B/0 ADAM                                   PAGLIONE                                   By           /                                        ame:         ✓                                      Title:                                    PAGLIONE FAMILY TRUST F/B/0 LISA AND                                    JORGE ARROYO                                    By                                      Name:                                      Title:                                     BEAU ADAMS                                      BENEFITS CONSULTANTS GROUP, INC.                                    By                                      Name:                                      Title:                          Signature Page to Stock Purchase Agreement  

 

                                  Exhibit A                                 Certificates of Trust                                 [Executed at signing]                                        A-1 40733748.21  

 

                                  Exhibit B                              Indebtedness Payoff Amount                               As of September 30, 2018   FirsTrust Line of Credit Account #10172-504870            $    497,678.25   FirsTrust Term Loan Acct 8026                                   279,268.56   FirsTrust Term Loan Acct 8027                                   242,288.80   FirsTrust Letter of credit Acct 0832 (Landlord holds letter -0-  drawdowns)                                                        -      Salary Continuation Agreement (Robert Paglione)              5,000,000.00   Phantom Stock Plan (Stephen Sokolic)1                           629,816.50   Sokolic Release Consideration                                    40,000.00   Note Payable - Beau Adams                                        44,000.00   Note Payable - Jorge Arroyo                                      44,000.00   Note Payable - Adam Paglione                                     44,000.00                                                            $ 6,821,052.61    1 As of October 30, 2018                                        B-1 40733748.21  

 

                                  Exhibit C                       Non-Compete and Non-Disclosure Agreement                                     [See attached.]                                        C-1 40733748.21  

 

                                                                     NON-COMPETITION, NON-SOLICITATION                        AND NON-DISCLOSURE AGREEMENT          This Non-Competition, Non-Solicitation and Non-Disclosure Agreement (this  “Agreement”) is entered into as of the ____ day of ____________, 2018, by and between Horace   Mann Educators Corporation, a Delaware corporation (“Buyer”), and [Name of Principal]1 (the   “Principal”).           WHEREAS, in connection with that certain Stock Purchase Agreement, dated as   of____________ , 2018, by and among Buyer, Robert Paglione, the Paglione Family Irrevocable   Trust f/b/o Adam Paglione, the Paglione Family Irrevocable Trust f/b/o Lisa and Jorge Arroyo,   Beau Christian Adams, and Benefit Consultants Group, Inc. (the “Company”) (the “Stock   Purchase Agreement”), Buyer is acquiring all of the equity of the Company;          WHEREAS, the Principal is currently an employee of the Company;         WHEREAS, Buyer or one of its Affiliates wishes to employ the Principal with respect to  the continued business and operations of the Company and its Subsidiaries following the Closing  and the Principal agrees to continue in the employ of Buyer or its Affiliate following the Closing;  and         WHEREAS, the Principal acknowledges that the execution and delivery of this  Agreement is a condition to Buyer’s obligation to consummate the transactions pursuant to the  Stock Purchase Agreement and that Buyer is relying on the Principal’s entering into this  Agreement in consummating such transactions.          NOW, THEREFORE, in consideration of the premises and the mutual agreements  contained in this Agreement and the Stock Purchase Agreement, the parties agree as follows:          1.    Defined Terms.  All capitalized terms not expressly defined in this Agreement   shall have the respective meanings ascribed to them in the Stock Purchase Agreement.          2.    Acknowledgment.  The Principal acknowledges that (i) the execution and   delivery of this Agreement is a condition to Buyer’s obligation to purchase the Company Shares   pursuant to the Stock Purchase Agreement and that Buyer is relying on this Agreement in   consummating such purchase, (ii) Buyer intends to carry on the business of the Company and its   Subsidiaries, and (iii) the Principal will receive significant remuneration in connection with the   transactions consummated under the Stock Purchase Agreement. The Principal further   acknowledges that (i) he has become familiar with confidential information and trade secrets of   the Company and its Subsidiaries and Affiliates, and, during the course of his employment with   Buyer or its Affiliate, will become familiar with the confidential information and trade secrets of   the Buyer Entities; and (ii) his services are of special, unique and extraordinary value to the                                                       1 Note to Draft: Principals who are continuing employment post-Closing to sign this Agreement (i.e., Adam   Paglione, Jorge Arroyo and Beau Adams).                                         1   40947999.4   2983433v2   020818.64824  

 

   Buyer Entities.  For the purposes of this Agreement, “Buyer Entities” means Buyer and its  Subsidiaries and Affiliates (including the Company and its Affiliates and Subsidiaries).         3.    Covenant Not to Compete.  During the Principal’s employment with Buyer or its  Affiliate and for an additional twelve (12) month period following the Principal’s termination of  employment for any reason (the “Restricted Period”), the Principal agrees that, except as  otherwise occurring in the performance of his duties as an employee of Buyer or its Affiliate, he  (i) shall refrain from, directly or indirectly, engaging in, soliciting for engagement in, performing  services (whether as employee, officer, director, shareholder, member, manager, consultant,  investor, partner, sole proprietor or otherwise) for, or be concerned with or interested in,  financially or otherwise, or offering or providing anywhere in the United States any business of  the types (x) conducted by a Buyer Entity as of the date of the Principal’s termination of  employment (the “Termination Date”), or (y) actively developed, marketed or solicited by a  Buyer Entity during the twelve (12) month period prior to the Termination Date; and (ii) shall  not sell or propose to sell to, or otherwise solicit, whether through another employee, a producer  or otherwise, any other services, including but not limited to Recordkeeping Services, provided  by a Buyer Entity to any Plan Sponsor (clauses (i) and (ii) collectively, a “Competing  Business”); provided, however, that nothing in this Section 3 shall preclude, prohibit or restrict  the Principal from engaging, or require the Principal not to engage, in making investments in  Persons engaging in a Competing Business not in excess of two percent (2%) of the outstanding  securities  of such entity. For purposes of this Agreement, “Plan Sponsor” means an employer or  other entity that sponsors or maintains non-qualified deferred compensation plans, qualified  defined contribution or defined benefit plans or other arrangements or programs with respect to  which a Buyer Entity provides services as of the Termination Date or has actively solicited  during the twelve (12) month period prior to the Termination Date.          4.    Non-Solicitation, Non-Disparagement.  During the Restricted Period, the  Principal shall not, except as otherwise occurring in the performance of his duties as an  employee of Buyer or its Affiliate; directly or indirectly, (a) solicit for employment or hire any  employee who is then a current employee of any Buyer Entity, or within the six (6)-month period  prior to the Termination Date, has been an employee, of any Buyer Entity; (b) (i) hire or solicit  for hire any Producer who is then a Producer, or within the twelve (12) month period prior to the  Termination Date has been a Producer, or (ii) solicit, encourage, initiate or participate in  discussions or negotiations with, or provide any information to, any present or future Producer  for the purpose of causing the  termination or other alteration of his, her or its relationship with a  Buyer Entity; (c) (i) solicit insurance business from any Person who is then a policyholder or  customer of a Buyer Entity, or within the twelve (12) month period prior to the Termination Date  has been a policyholder or customer of a Buyer Entity (or any successor in interest to any such  Person) for the purpose of securing Record Keeping Services or insurance business or contracts  related to the Record Keeping Services or insurance businesses of the Buyer Entities, or  (ii) solicit, encourage, initiate or participate in discussions or negotiations with, or provide any  information to, any present or future policyholder or customer of a Buyer Entity for the purpose  of causing the termination or other alteration of his, her or its relationship with a Buyer Entity;  (d) solicit or attempt to solicit any Competing Business from any Person with whom the  Principal and/or employees managed by the Principal had material contact, and that is, or in the  twelve (12) month period prior to the Termination Date was, a customer of a Buyer Entity or                                         2  40947999.4  2983433v2  020818.64824  

 

     with respect to which any Buyer Entity actively solicits, or has solicited, the sale of products and   services offered by the Buyer Entities; or (e) disparage a Buyer Entity or any of their products,   services, or activities or any of their partners, officers, or employees.  For the purposes of this   Agreement, “Producer” means brokers, broker-dealers, producers, third party administrators or  intermediaries or other Persons who market or sell the services offered by a Buyer Entity, other  than employees of the Buyer Entities.          5.    Confidentiality, Non-Disclosure. Except as otherwise expressly required by   Law, the Principal shall not disclose any Confidential Information (as defined below) to any   Person whatsoever, other than as authorized by the Buyer Entities during the performance of the   Principal’s duties as an employee of Buyer or its Affiliate.  For purposes of this Agreement  “Confidential Information” means the confidential or proprietary business information of the   Buyer Entities, whether or not marked as such, whether acquired by the Buyer Entities prior to or   after Closing, including any business plans, technology, plans, blueprints, drawings, models,   designs, templates, processes, formulae, computer programs, customer lists, supplier lists,   pricing data, financial data, Trade Secrets or other information identified or otherwise treated as   confidential or proprietary business information; provided, however, that Confidential   Information shall not include any information: (x) that is in the public domain through no fault of   disclosure by the Principal, or (y) that is lawfully acquired by the Principal from source(s) which   are not prohibited from disclosing such information by a legal, contractual or fiduciary   obligation. The Principal acknowledges and agrees that the Confidential Information is owned by   the Buyer Entities, is secret, is the subject of reasonable efforts by the Buyer Entities to keep it   secret, and has value because of its secrecy.  If the Principal is compelled to disclose any   information by judicial or administrative process or by other requirements of applicable Law, the   Principal shall promptly notify Buyer in writing, shall disclose only that portion of such   information which he is advised by counsel in writing is legally required to be disclosed, and   shall, if requested, use reasonable best efforts to obtain an appropriate protective order or other   reasonable assurance that confidential treatment will be accorded such information.   Notwithstanding the foregoing, nothing in this Agreement prohibits the Principal from reporting   to any governmental authority information concerning possible violations of law or regulation.   The Principal further acknowledges that, at all times, Trade Secrets shall be subject to the   maximum protections available under applicable Law and no less protection than that provided   by this Agreement applicable to “Confidential Information,” as described in this Section 5. For   the purposes of this Agreement, “Trade Secrets” means information that (i) derives economic   value, actual or potential, from not being generally known and not being readily ascertainable to   other persons who can obtain economic value from its disclosure or use and that is the subject of   reasonable efforts by the Buyer Entities to maintain its secrecy or confidentiality and has value   as a result of such secrecy or confidentiality, or (ii) is defined as such by the New Jersey   statutory and common law and by federal law.  Trade Secrets may include either technical or   non-technical data, including, without limitation, information concerning customers of the Buyer   Entities (including customer information, identities, profiles, preferences and contacts), vendors,   suppliers, products, pricing or pricing strategies, personnel assignments and policies, the legal or   financial affairs, or the management of, in each case, the Buyer Entities.           6.    Right To Injunction; Equitable Relief.  In the event the Principal violates any of   his obligations under Sections 3, 4 or 5, the Buyer Entities may proceed against him in law or in                                          3   40947999.4   2983433v2   020818.64824  

 

   equity for such damages or other relief as a court may deem appropriate.  The Principal  acknowledges that a violation of any of the provisions of Sections 3, 4 or 5 may cause the Buyer  Entities irreparable harm which may not be adequately compensated for by money damages.   The Principal therefore agrees that in the event of any actual or threatened violation of Sections  3, 4 or 5, the Buyer Entities shall be entitled, in addition to other remedies that they may have, to  a temporary restraining order and to preliminary and final injunctive relief against the Principal  to prevent any violations of Sections 3, 4 or 5, without the necessity of posting a bond.  It is the  intent and understanding of each party hereto that if, in any action before any court or other  Governmental Authority legally empowered to enforce this Agreement, any term, restriction,  covenant or promise in Sections 3, 4 or 5 is found to be unreasonable and for that reason  unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the  extent necessary to make it enforceable by such court or other Governmental Authority and any  such court or other Governmental Authority shall have authority, as permitted by applicable  Law, to apply reformation or “blue pencil” principles to provide for the greatest possible  duration, geographical territory and business scope to the covenants contained herein.         7.    Covenants Reasonable.  The parties to this Agreement acknowledge that the  covenants set forth in Sections 3, 4, 5 and 6 are (i) reasonable in all respects, including duration,  territory and scope of activity restricted, in light of the transactions contemplated by this  Agreement and the Stock Purchase Agreement; (ii) an essential element of this Agreement and  that, but for these covenants, the parties would not have entered into the Stock Purchase  Agreement; and (iii) necessary to protect the goodwill of the Buyer Entities and to protect other  legitimate business interests of the Buyer Entities.         8.    Severability.  Whenever possible, each provision or portion of any provision of  this Agreement shall be interpreted in such manner as to be effective and valid under applicable  Law, but if any provision or portion of any provision of this Agreement is held to be invalid,  illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such  invalidity, illegality or unenforceability shall not affect any other provision or portion of any  provision in such jurisdiction so long as the economic or legal substance of the transactions  contemplated by this Agreement is not affected in any manner adverse to any party.  Upon such  determination that any provision is invalid, illegal or unenforceable, the parties shall negotiate in  good faith to modify this Agreement so as to effect the original intent of the parties as closely as  possible in a mutually acceptable manner in order that the transactions contemplated by this  Agreement be consummated as originally contemplated to the greatest extent possible.           9.    Failure or Indulgence Not Waiver; Remedies Cumulative.  No delay on the  part of any party in exercising any right, power or privilege hereunder shall operate as a waiver  thereof, nor shall any waiver on the part of any party of any right, power or privilege, nor any  single or partial exercise of any such right, power or privilege, preclude any further exercise  thereof or the exercise of any other such right, power or privilege. Any and all remedies herein  expressly conferred upon a party will be deemed cumulative with and not exclusive of any other  remedy conferred hereby, or by Law or equity upon such party, and the exercise by a party of  any one remedy will not preclude the exercise of any other remedy.         10.   Notices.  All notices, requests, demands, waivers and other communications  required or permitted to be given or made under this Agreement shall be in writing and shall be                                        4  40947999.4  2983433v2  020818.64824  

 

     deemed to have been duly given or made (and shall be deemed to have been duly given or made   upon receipt) if (a) delivered personally or by a nationally recognized overnight courier, (b)   mailed by certified or registered mail (postage prepaid, return receipt requested) or (c) sent by   facsimile or email with receipt confirmed (followed by delivery of an original via overnight   courier service), as follows (or at such other address for a party as shall be specified by like   notice):    (a)   If to Buyer, to          Horace Mann Educators Corporation         1 Horace Mann Place         Springfield, IL 62715         Attention:  Donald M. Carley, SVP & General Counsel         Email:  Donald.Carley@horacemann.com    (b)   if to the Principal, to        [●]    or to such other address as the party to whom notice is to be given may have furnished to the   other party in writing in accordance with this Section 10. All such notices or communications   shall be deemed to be received (i) in the case of personal delivery, nationally recognized   overnight courier or registered or certified mail, on the date of such delivery and (ii) in the case   of facsimile or email, upon confirmed receipt.          11.   Assignment.   Neither this Agreement nor any of the rights, interests or   obligations under this Agreement shall be assigned, in whole or in part, by operation of law or   otherwise by any of the parties without the prior written consent of the other parties, and any   such assignment that is not consented to shall be null and void.  Subject to the preceding   sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by,   the parties and their respective successors and assigns.          12.   Entire Agreement.  This Agreement and the Stock Purchase Agreement, and the   documents and certificates delivered in connection therewith, constitute the entire agreement of   the parties hereto with respect to the subject matter of this Agreement and supersede all prior   agreements and undertakings, both written and oral, between or on behalf of the Principal and  Buyer with respect to the subject matter of this Agreement.          13.   Execution and Delivery.  This Agreement may be executed in one or more   counterparts, and by the different parties in separate counterparts, each of which when executed   will be deemed to be an original but all of which taken together will constitute one and the same   agreement.  Delivery of an executed counterpart of a signature page by facsimile or other means   of electronic transmission shall be as effective as delivery of a manually executed counterpart of   this Agreement.          14.   Governing Law; Jurisdiction; Waiver of Jury Trial.                                           5   40947999.4   2983433v2   020818.64824  

 

                 (a)   This Agreement shall be governed by, and construed in accordance with,   the Laws of the State of New Jersey, regardless of the Laws that might otherwise govern under   applicable principles of conflicts of laws thereof.                (b)   Each party hereby irrevocably and unconditionally submits to the   exclusive jurisdiction of any court of the United States or any state court, which in either case is   located in the State of New Jersey (each, a “New Jersey Court”) for purposes of enforcing this   Agreement or determining any claim arising from or related to the transactions contemplated by   this Agreement.  In any such action, suit or other proceeding, each party hereto irrevocably and   unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any   claim that it is not subject to the jurisdiction of any such New Jersey Court, that such action, suit   or other proceeding is not subject to the jurisdiction of any such New Jersey Court, that such   action, suit or other proceeding is brought in an inconvenient forum or that the venue of such   action, suit or other proceeding is improper; provided, however, that nothing set forth in this   sentence shall prohibit any party hereto from removing any matter from one New Jersey Court to   another New Jersey Court.  The parties hereto agree that any process or other paper to be served   in connection with any action or proceeding under this Agreement shall, if delivered, sent or   mailed in accordance with Section 10 constitute good, proper and sufficient service thereof.    Each party hereto also agrees that any final and unappealable judgment against a party hereto in   connection with any action, suit or other proceeding shall be conclusive and binding on such   party and that such award or judgment may be enforced in any court of competent jurisdiction,   either within or outside of the United States.  A certified or exemplified copy of such award or  judgment shall be conclusive evidence of the fact and amount of such award or judgment.   Notwithstanding anything contained herein to the contrary or any waivable provision of Law, in  the event of litigation among the parties, any prejudgment interest applied shall be at the Interest  Rate.                (c)   EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND   AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT   IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE,   EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES   ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY   LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS   AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.    EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO   REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS   REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD   NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER,   (B) EACH PARTY HERETO UNDERSTANDS AND HAS CONSIDERED THE   IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY HERETO MAKES THIS WAIVER   VOLUNTARILY AND (D) EACH PARTY HERETO HAS BEEN INDUCED TO ENTER   INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND   CERTIFICATIONS OF THIS SECTION 14. ANY PARTY HERETO MAY FILE AN   ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS   WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF   THEIR RIGHT TO TRIAL BY JURY.                                          6   40947999.4   2983433v2   020818.64824  

 

         15.   Amendment.  This Agreement may be amended, and the terms hereof may be  waived, only by a written instrument signed by each of the parties or, in the case of a waiver, by  the party waiving compliance.                  IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date  first written above.                                   BUYER:                                                                HORACE MANN EDUCATORS CORPORATION                                                                                                By: ___________________________________                                Name:                                 Title:                                                                                                 PRINCIPAL:                                                                  [Name of Principal]                                                                                                ____________________________________                                                                                        7  40947999.4  2983433v2  020818.64824  

 

                                  Exhibit D                                   Spousal Consent                                 [Executed at signing]                                        D-1 40733748.21  

 

                                  Exhibit E                                   Form of Release                                     [See attached.]                                        E-1 40733748.21  

 

                                                                                                                                               [_________], 2018                                            [Benefit Consultants Group, Inc.]      [BCG Securities, Inc.]     [Horace Mann Educators Corp.]                Re: Release of Claims1            Ladies and Gentlemen:                  Reference is made to that certain Stock Purchase Agreement, dated as of the date hereof,      by and among Horace Mann Educators Corporation (“Buyer”), Robert Paglione, The Paglione      Family Irrevocable Trust f/b/o Adam Paglione, The Paglione Family Irrevocable Trust f/b/o Lisa      and Jorge Arroyo, Beau Christian Adams, and Benefit Consultants Group, Inc. (the “Company”)      (the “Stock Purchase Agreement”).  Any undefined terms used herein and not defined have the      meanings set forth in the Stock Purchase Agreement.                        I acknowledge and agree that execution and delivery of this Release of Claims (this      “Release”) is a condition to Buyer’s obligation to purchase the Company Shares pursuant to the      Stock Purchase Agreement, and that Buyer is relying on this Release in consummating such      purchase. For good and valuable consideration, the receipt and sufficiency of which is hereby      acknowledged, and intending to be legally bound, in order to induce Buyer to purchase the      Company Shares pursuant to the Stock Purchase Agreement, I agree as follows:                   I, [___________], on behalf of myself and my heirs, executors, administrators and      assigns (collectively, “Related Persons”), hereby forever, absolutely, unconditionally and      irrevocably release, acquit and forever discharge, to the fullest extent permitted by Law, the      Company, BCG Securities, Inc. (“BCGS”), Buyer, Buyer’s Affiliates, each of their Benefit      Plans, and each of their respective past, present and future officers, managers, directors,      equityholders, partners, members, Affiliates, employees, counsel and agents (individually, a      “Releasee” and collectively, “Releasees”) from all obligations and liabilities of either the      Company or BCGS to me, all agreements and understandings of either the Company or BCGS      involving me, and all of my rights, claims and causes of action (whether at law or in equity and      whether or not currently known to exist) against either the Company or BCGS that are a result      of, involve or otherwise exist by reason of any act, omission, fact, circumstance or other matter,      cause or thing whatsoever that arose, occurred or existed before the Closing, including without      limitation any indemnification obligations to me, and the right to advancement and      reimbursement of expenses, pursuant to the organizational documents of the Company or BCGS      (collectively, the “Released Claims”). For clarity, notwithstanding anything herein to the      contrary, this Release does not in any way release any loss, liability, claim, damage or expense      (including indemnity, costs of investigation and defense and reasonable attorneys’ and      accountants’ fees), whether or not involving third-party claims, arising directly or indirectly from      or in connection with the Stock Purchase Agreement or any documents ancillary thereto or      executed in connection therewith.                                                               1 Note to Draft: This form to be used for the beneficiaries of the Trusts (L. Arroyo, Jorge Arroyo, and A. Paglione).            41006896.2   2983440v2  020818.64824  

 

                                                                                                           I represent and warrant to each Releasee that I have not transferred, assigned, or      otherwise disposed of any part of or interest in any Released Claim. I hereby irrevocably      covenant not to, directly or indirectly, assert any claim or demand, or commence, institute, or      voluntarily aid in any way, or cause to be commenced or instituted, any proceeding of any kind      against any Releasee based upon any Released Claim.                        Without in any way limiting any rights and remedies otherwise available to any Releasee,      I agree to indemnify and hold harmless each Releasee from and against and shall pay to each      Releasee the amount of, or reimburse each Releasee for, all loss, liability, claim, damage      (including incidental and consequential damages), or expense (including costs of investigation      and defense and reasonable attorneys’ and accountants’ fees), whether or not involving third-     party claims, arising directly or indirectly from or in connection with (a) the assertion by or on      behalf of me or any of my Related Persons of any Released Claim, and (b) the assertion by any      third party of any claim or demand against any Releasee which claim or demand arises directly     or indirectly from, or in connection with, any assertion by or on behalf of me or any of my     Related Persons against such third party of any Released Claim.                      I acknowledge and agree that the execution of this Release does not constitute in any     manner whatsoever an admission of liability on the part of any Releasee for any Released Claim,     and that such liability is specifically denied.                      I agree to (a) execute and deliver such other documents and (b) do such other acts and     things, as Buyer may reasonably request for the purpose of carrying out the intent of this     Release.                      This Release may not be amended, supplemented, or otherwise modified except in a     writing signed by the Person against whose interest such change will operate.                      All matters relating to or arising out of this Release will be governed by and construed in     accordance with the Laws of the State of New Jersey, regardless of the Laws that might     otherwise govern under applicable principles of conflicts of laws thereof.                                                                    Very truly yours,                                                              [____________]              41006896.2   2983440v2  020818.64824  

 

                                                                                                                                         [_________], 2018                                      [Benefit Consultants Group, Inc.]   [BCG Securities, Inc.]   [Horace Mann Educators Corp.]          Re: Letter of Resignation and Release1      Ladies and Gentlemen:            Reference is made to that certain Stock Purchase Agreement, dated as of the date hereof,   by and among Horace Mann Educators Corporation (“Buyer”), Robert Paglione, The Paglione   Family Irrevocable Trust f/b/o Adam Paglione, The Paglione Family Irrevocable Trust f/b/o Lisa   and Jorge Arroyo, Beau Christian Adams, and Benefit Consultants Group, Inc. (the “Company”)   (the “Stock Purchase Agreement”).  Any undefined terms used herein and not defined have the   meanings set forth in the Stock Purchase Agreement.                  I acknowledge and agree that execution and delivery of this Letter of Resignation and   Release (this “Letter Agreement”) is a condition to Buyer’s obligation to purchase the Company   Shares pursuant to the Stock Purchase Agreement, and that Buyer is relying on this Letter   Agreement in consummating such purchase. For good and valuable consideration, in the amount   of forty-thousand dollars ($40,000), the receipt and sufficiency of which is hereby acknowledged,   and intending to be legally bound, in order to induce Buyer to purchase the Company Shares   pursuant to the Stock Purchase Agreement, I agree as follows:             I, [Steven Sokolic], do hereby resign from my position as [General Counsel of the   Company and BCG Securities, Inc., a Pennsylvania Corporation (“BCGS”)]2, effective as of the   Closing of (and conditioned upon the Closing under) the Stock Purchase Agreement.                   In addition, on behalf of myself and my heirs, executors, administrators and assigns   (collectively, “Related Persons”), I hereby forever, absolutely, unconditionally and irrevocably   release, acquit and forever discharge, to the fullest extent permitted by Law, the Company, BCGS,   Buyer, Buyer’s Affiliates, each of their Benefit Plans, and each of their respective past, present   and future officers, managers, directors, equityholders, partners, members, Affiliates, employees,   counsel and agents (individually, a “Releasee” and collectively, “Releasees”) from all obligations   and liabilities of either the Company or BCGS to me, all agreements and understandings of either   the Company or BCGS involving me, and all of my rights, claims and causes of action (whether   at law or in equity and whether or not currently known to exist) against either the Company or   BCGS that are a result of, involve or otherwise exist by reason of any act, omission, fact,   circumstance or other matter, cause or thing whatsoever that arose, occurred or existed before the   Closing, including without limitation any indemnification obligations to me, and the right to   advancement and reimbursement of expenses, pursuant to the organizational documents of the   Company or BCGS (collectively, the “Released Claims”).                                                               1 Note to Draft: This form to be used for S. Sokolic   2 Note to Draft: To confirm       41006865.2  

 

                                                                                         I represent and warrant to each Releasee that I have not transferred, assigned, or otherwise   disposed of any part of or interest in any Released Claim. I hereby irrevocably covenant not to,   directly or indirectly, assert any claim or demand, or commence, institute, or voluntarily aid in any   way, or cause to be commenced or instituted, any proceeding of any kind against any Releasee  based upon any Released Claim.                Without in any way limiting any rights and remedies otherwise available to any Releasee,  I agree to indemnify and hold harmless each Releasee from and against and shall pay to each  Releasee the amount of, or reimburse each Releasee for, all loss, liability, claim, damage (including  incidental and consequential damages), or expense (including costs of investigation and defense  and reasonable attorneys’ and accountants’ fees), whether or not involving third-party claims,  arising directly or indirectly from or in connection with (a) the assertion by or on behalf of me or  any of my Related Persons of any Released Claim, and (b) the assertion by any third party of any  claim or demand against any Releasee which claim or demand arises directly or indirectly from,  or in connection with, any assertion by or on behalf of me or any of my Related Persons against  such third party of any Released Claim.                I acknowledge and agree that the execution of this Letter Agreement does not constitute in  any manner whatsoever an admission of liability on the part of any Releasee for any Released  Claim, and that such liability is specifically denied.                I agree to (a) execute and deliver such other documents and (b) do such other acts and  things, as Buyer may reasonably request for the purpose of carrying out the intent of this Letter  Agreement.                This Letter Agreement may not be amended, supplemented, or otherwise modified except  in a writing signed by the Person against whose interest such change will operate.                All matters relating to or arising out of this Letter Agreement will be governed by and  construed in accordance with the Laws of the State of New Jersey, regardless of the Laws that  might otherwise govern under applicable principles of conflicts of laws thereof.                                                        Very truly yours,                                                [Steven Sokolic]        41006865.2  

 

                                                                                                                                         [_________], 2018                                      [Benefit Consultants Group, Inc.]   [BCG Securities, Inc.]  [Horace Mann Educators Corp.]          Re: Letter of Resignation, Release, Non-Competition, Non-Solicitation and Non-           Disclosure1      Ladies and Gentlemen:            Reference is made to that certain Stock Purchase Agreement, dated as of the date hereof,   by and among Horace Mann Educators Corporation (“Buyer”), myself, The Paglione Family   Irrevocable Trust f/b/o Adam Paglione, The Paglione Family Irrevocable Trust f/b/o Lisa and Jorge   Arroyo, Beau Christian Adams, and Benefit Consultants Group, Inc. (the “Company”) (the “Stock   Purchase Agreement”).  Any undefined terms used herein and not defined have the meanings set   forth in the Stock Purchase Agreement.                  I acknowledge that I own the Class A Voting Stock of the Company (my “Equity Interest”)   and, in connection with such ownership, have significantly contributed to the development and   goodwill of the Company. I acknowledge that in connection with the consummation of the   transactions contemplated by the Stock Purchase Agreement (the “Transaction”), I will receive   significant proceeds from the sale of my Equity Interest and that a significant asset the Buyer is   purchasing pursuant to the Transaction (and for which I am receiving proceeds) is such   development and goodwill of the Company.                   I acknowledge and agree that execution and delivery of this Letter of Resignation, Release,   Non-Competition, Non-Solicitation and Non-Disclosure (this “Letter Agreement”) is a condition   to Buyer’s obligation to purchase the Company Shares pursuant to the Stock Purchase Agreement,   that Buyer is relying on this Letter Agreement in consummating the Transaction and that without   my agreement to such Letter Agreement, the Buyer would not consummate the Transaction. For   good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,   and intending to be legally bound, in order to induce Buyer to purchase the Company Shares   pursuant to the Stock Purchase Agreement, I agree as follows:             I, Robert Paglione, do hereby resign from my position as [Chief Executive Officer and   member of the board of directors of the Company and BCG Securities, Inc., a Pennsylvania   Corporation (“BCGS”)]2, effective as of the Closing of (and conditioned upon the Closing under)   the Stock Purchase Agreement.                   In addition, on behalf of myself and my heirs, executors, administrators and assigns   (collectively, “Related Persons”), I hereby forever, absolutely, unconditionally and irrevocably   release, acquit and forever discharge, to the fullest extent permitted by Law, the Company, BCGS,   Buyer, Buyer’s Affiliates, each of their Benefit Plans, and each of their respective past, present                                                      1 Note to Draft: This form to be used for R. Paglione   2 Note to Draft: To confirm       40875129.6  

 

                                                                                 and future officers, managers, directors, equityholders, partners, members, Affiliates, employees,  counsel and agents (individually, a “Releasee” and collectively, “Releasees”) from all obligations  and liabilities of either the Company or BCGS to me, all agreements and understandings of either  the Company or BCGS involving me, and all of my rights, claims and causes of action (whether  at law or in equity and whether or not currently known to exist) against either the Company or  BCGS that are a result of, involve or otherwise exist by reason of any act, omission, fact,  circumstance or other matter, cause or thing whatsoever that arose, occurred or existed before the  Closing, including without limitation any indemnification obligations to me, and the right to  advancement and reimbursement of expenses, pursuant to the organizational documents of the  Company or BCGS (collectively, the “Released Claims”). For clarity, notwithstanding anything  herein to the contrary, this Letter Agreement does not in any way release any loss, liability, claim,  damage or expense (including indemnity, costs of investigation and defense and reasonable  attorneys’ and accountants’ fees), whether or not involving third-party claims, arising directly or  indirectly from or in connection with the Stock Purchase Agreement or any documents ancillary  thereto or executed in connection therewith.                I represent and warrant to each Releasee that I have not transferred, assigned, or otherwise  disposed of any part of or interest in any Released Claim. I hereby irrevocably covenant not to,  directly or indirectly, assert any claim or demand, or commence, institute, or voluntarily aid in any  way, or cause to be commenced or instituted, any proceeding of any kind against any Releasee  based upon any Released Claim.                Without in any way limiting any rights and remedies otherwise available to any Releasee,  I agree to indemnify and hold harmless each Releasee from and against and shall pay to each  Releasee the amount of, or reimburse each Releasee for, all loss, liability, claim, damage (including  incidental and consequential damages), or expense (including costs of investigation and defense  and reasonable attorneys’ and accountants’ fees), whether or not involving third-party claims,  arising directly or indirectly from or in connection with (a) the assertion by or on behalf of me or  any of my Related Persons of any Released Claim, and (b) the assertion by any third party of any  claim or demand against any Releasee which claim or demand arises directly or indirectly from,  or in connection with, any assertion by or on behalf of me or any of my Related Persons against  such third party of any Released Claim.                I acknowledge and agree that the execution of this Letter Agreement does not constitute in  any manner whatsoever an admission of liability on the part of any Releasee for any Released  Claim, and that such liability is specifically denied.                I acknowledge and agree that for a period of sixty (60) months from the date hereof (the  “Restricted Period”), I (i) shall refrain from, directly or indirectly, engaging in, soliciting for  engagement in, performing services (whether as employee, officer, director, shareholder, member,  manager, consultant, investor, partner, sole proprietor or otherwise) for, or be concerned with or  interested in, financially or otherwise, or offering or providing anywhere in the United States any  business of the types (x) conducted by a Buyer Entity as of the date hereof, or (y) actively  developed, marketed or solicited by a Buyer Entity during the twelve (12) month period prior to  the date hereof; and (ii) shall not sell or propose to sell to, or otherwise solicit, whether through  another employee, a producer or otherwise, any other services, including but not limited to      40875129.6  

 

                                                                                 Recordkeeping Services, provided by a Buyer Entity to any Plan Sponsor (clauses (i) and (ii)  collectively, a “Competing Business”); provided, however, that nothing in this paragraph shall  preclude, prohibit or restrict me from engaging, or require me not to engage, in making investments  in Persons engaging in a Competing Business not in excess of two percent (2%) of the outstanding  securities  of such entity. For purposes of this Letter Agreement, (i) “Buyer Entities” means Buyer  and its Subsidiaries and Affiliates (including the Company and its Affiliates and Subsidiaries), and  (ii) “Plan Sponsor” means an employer or other entity that sponsors or maintains non-qualified  deferred compensation plans, qualified defined contribution or defined benefit plans or other  arrangements or programs with respect to which a Buyer Entity provides services as of the date  hereof or has actively solicited during the twelve (12) month period prior to the date hereof.                I acknowledge and agree that during the Restricted Period I shall not directly or indirectly,  (a) solicit for employment or hire any employee who is then a current employee of any Buyer  Entity, or within the six (6)-month period prior to the date hereof, has been an employee, of any  Buyer Entity; (b) (i) hire or solicit for hire any Producer who is then a Producer, or within the  twelve (12) month period prior to the date hereof has been a Producer, or (ii) solicit, encourage,  initiate or participate in discussions or negotiations with, or provide any information to, any present  or future Producer for the purpose of causing the  termination or other alteration of his, her or its  relationship with a Buyer Entity; (c) (i) solicit insurance business from any Person who is then a  policyholder or customer of a Buyer Entity, or within the twelve (12) month period prior to the  date hereof has been a policyholder or customer of a Buyer Entity (or any successor in interest to  any such Person) for the purpose of securing Record Keeping Services or insurance business or  contracts related to the Record Keeping Services or insurance businesses of the Buyer Entities, or  (ii) solicit, encourage, initiate or participate in discussions or negotiations with, or provide any  information to, any present or future policyholder or customer of a Buyer Entity for the purpose  of causing the termination or other alteration of his, her or its relationship with a Buyer Entity; (d)  solicit or attempt to solicit any Competing Business from any Person with whom I and/or  employees managed by me had material contact, and that is, or in the twelve (12) month period  prior to the date hereof was, a customer of a Buyer Entity or with respect to which any Buyer  Entity actively solicits, or has solicited, the sale of products and services offered by the Buyer  Entities; or (e) disparage a Buyer Entity or any of their products, services, or activities or any of  their partners, officers, or employees.  For the purposes of this Letter Agreement, “Producer”  means brokers, broker-dealers, producers, third party administrators or intermediaries or other  Persons who market or sell the services offered by a Buyer Entity, other than employees of the  Buyer Entities.                I acknowledge and agree that, except as otherwise expressly required by Law, I shall not  disclose any Confidential Information (as defined below) to any Person whatsoever.  For purposes  of this Letter Agreement “Confidential Information” means the confidential or proprietary  business information of the Buyer Entities, whether or not marked as such, whether acquired by  the Buyer Entities prior to or after Closing, including any business plans, technology, plans,  blueprints, drawings, models, designs, templates, processes, formulae, computer programs,  customer lists, supplier lists, pricing data, financial data, Trade Secrets or other information  identified or otherwise treated as confidential or proprietary business information; provided,  however, that Confidential Information shall not include any information: (x) that is in the public  domain through no fault of disclosure by me, or (y) that is lawfully acquired by me from source(s)      40875129.6  

 

                                                                                   which are not prohibited from disclosing such information by a legal, contractual or fiduciary   obligation. I acknowledge and agree that the Confidential Information is owned by the Buyer   Entities, is secret, is the subject of reasonable efforts by the Buyer Entities to keep it secret, and   has value because of its secrecy.  If I am compelled to disclose any information by judicial or   administrative process or by other requirements of applicable Law, I shall promptly notify Buyer   in writing, shall disclose only that portion of such information which I am advised by counsel in   writing is legally required to be disclosed, and shall, if requested, use reasonable best efforts to   obtain an appropriate protective order or other reasonable assurance that confidential treatment   will be accorded such information. Notwithstanding the foregoing, nothing in this Agreement   prohibits me from reporting to any governmental authority information concerning possible   violations of law or regulation. I further acknowledge that, at all times, Trade Secrets shall be   subject to the maximum protections available under applicable Law and no less protection than   that provided by this Letter Agreement applicable to “Confidential Information,” as described in   this paragraph. For the purposes of this Letter Agreement, “Trade Secrets” means information that   (i) derives economic value, actual or potential, from not being generally known and not being   readily ascertainable to other persons who can obtain economic value from its disclosure or use   and that is the subject of reasonable efforts by the Buyer Entities to maintain its secrecy or   confidentiality and has value as a result of such secrecy or confidentiality, or (ii) is defined as such   by the New Jersey statutory and common law and by federal law.  Trade Secrets may include either   technical or non-technical data, including, without limitation, information concerning customers   of the Buyer Entities (including customer information, identities, profiles, preferences and   contacts), vendors, suppliers, products, pricing or pricing strategies, personnel assignments and   policies, the legal or financial affairs, or the management of, in each case, the Buyer Entities.                  I acknowledge and agree that in the event I violate any of my obligations under this Letter   Agreement, the Buyer Entities may proceed against me in law or in equity for such damages or   other relief as a court may deem appropriate.  I acknowledge that a violation of any of the   provisions of this Letter Agreement may cause the Buyer Entities irreparable harm which may not   be adequately compensated for by money damages.  I therefore agree that in the event of any actual   or threatened violation of this Letter Agreement, the Buyer Entities shall be entitled, in addition to   other remedies that they may have, to a temporary restraining order and to preliminary and final  injunctive relief against me to prevent any such violations, without the necessity of posting a bond.   If, in any action before any court or other Governmental Authority legally empowered to enforce  this Letter Agreement, any term, restriction, covenant or promise herein is found to be  unreasonable and for that reason unenforceable, then such term, restriction, covenant or promise  shall be deemed modified to the extent necessary to make it enforceable by such court or other  Governmental Authority and any such court or other Governmental Authority shall have authority,  as permitted by applicable Law, to apply reformation or “blue pencil” principles to provide for the  greatest possible duration, geographical territory and business scope to the covenants contained  herein.                I acknowledge and agree that the covenants set forth in this Letter Agreement are  (i) reasonable in all respects, including duration, territory and scope of activity restricted, in light  of the transactions contemplated by this Letter Agreement and the Stock Purchase Agreement;  (ii) an essential element of this Letter Agreement and that, but for these covenants, the parties  would not have entered into the Stock Purchase Agreement; and (iii) necessary to protect the        40875129.6  

 

                                                                                   goodwill of the Buyer Entities and to protect other legitimate business interests of the Buyer   Entities.                  I agree to (a) execute and deliver such other documents and (b) do such other acts and   things, as Buyer may reasonably request for the purpose of carrying out the intent of this Letter  Agreement.                This Letter Agreement may not be amended, supplemented, or otherwise modified except  in a writing signed by the Person against whose interest such change will operate.                All matters relating to or arising out of this Letter Agreement will be governed by and  construed in accordance with the Laws of the State of New Jersey, regardless of the Laws that  might otherwise govern under applicable principles of conflicts of laws thereof.                                                        Very truly yours,                                                  [Robert Paglione]        40875129.6  

 

                                     Exhibit F                Estimated and Final Working Capital Adjustment Examples                        Estimated Working Capital Adjustment      Cash                                                             789           Less: Restricted cash                                      (63)    Net Cash                                                          $          726                                                                                       Accounts receivable                                      1,160                                                                              Less: Accounts receivable > 90 days                (213)                         (1)  Net Accounts receivable                                                       947           (2)  Prepaids                                                                      103                                                                                              (3)(4)  Accounts payable                                                 (2,263)                              (5)  Deferred rent (current portion only)                                          (34)   Deferred income                                                             (157)                                                                                                                                         $           Estimated Working Capital                                        (678)                                                                       Less: Target Working Capital                                                  800                                                                                                                                          $        Estimated Working Capital Adjustment                             (1,478)                                                                                                                                           1) Accounts receivable has been reduced by the balances over 90 days; will be increased by $20,000   for Buyer’s portion of a release payment amount.   2) Prepaids reflect the write off of the custodian fee              3) Accounts payable excludes the following which will be paid off at closing:          Line of Credit, long-term and short-term debt, payable to owners, Phantom Stock          Plan, and Salary Continuation Agreement.                      4) Accounts payable includes the PTO liability and is subject to adjustment to include any litigation   reserve if needed.    5) Deferred rent only reflects the current portion of deferred rent.                                                                                                                                    F-1  40733748.21  

 

   Final Working Capital Adjustment                                                                             Calculated within 120 days after Closing Date (Example Calculation)                                                                              Cash                                                          500            Less: restricted cash                                 (25)             Net cash                                                     $   475                     (1)   Accounts receivable                                     1,225                Less:  Subsequent write-offs                          (50)                Less: Uncollected receivable > 90 days               (250)             Net Accounts receivable                                          975            (2)   Prepaids                                                          90                    (3)   Accounts payable                                               (1,600)                  (4)   Deferred income                                                 (393)               (5)   Deferred rent                                                   (300)                                                                               Final Net Working Capital                                    $   753)                                                                               Less:  Target Working Capital                                $   800                                                                                Final Working Capital Adjustment                             $ (1,603)                                                                               Estimated Working Capital Adjustment                           (1,635)                                                                               Final Adjustment Amount to Buyer / (Seller)                  $    32                                                                              1) Accounts receivable to be reduced by the balances over 90 days; will be increased by $20,000 for  Buyer’s portion of a release payment amount.  2) Prepaids to reflect the write off of the custodian fee  3) Accounts payable to exclude the following which will be paid off at closing:  Line of Credit, long-term and short-term debt, payable to owners, Phantom Stock   Plan, and Salary Continuation Agreement.  4) Accounts payable to include the PTO liability and is subject to adjustment to include any litigation  reserve if needed.  5) Deferred rent only reflects the current portion of deferred rent.                                         F-2  40733748.21  

 

                                       Exhibit G                                  Earn-Out Calculation           To be based on Benchmark Date                                                                                       For the twelve-months ended September 30, 2018                                                                    BCG                                                                              2               Fee Income - Accounts  4010-4217           $     5,715,190                 Less: Commissions – Accounts 5920                              0                Net                                                    5,715,190                                                                    BCS                                                             Commission Income - Accounts 4000-4316               13,599,266                Less: Commissions - Accounts 5090                1,227,310                Less: Commissions - Accounts 5920                     9,431,484                Net                                                    2,940,472                                                                                         Total Net Revenue                          $     8,655,662                                                                                                  2  Note: Accounts information to be included separately and shall not include any accounts converted from Buyer’s  accounts.                                         G-1   40733748.21  

 

                                      EXHIBIT H                                Independent Accountants                                             Crowe Horwath LLP   BDO USA LLP   RSM US LLP     40733748.21exhibit1013ntapurchaseag

                                              Execution Version              PURCHASE AGREEMENT                  BY AND AMONG         ELLARD FAMILY HOLDINGS, INC.                BRIAN M. ELLARD             THE JCE EXEMPT TRUST                       AND   HORACE MANN EDUCATORS CORPORATION         DATED AS OF DECEMBER 10, 2018  

 

                             TABLE OF CONTENTS                                                                            Page    ARTICLE I. DEFINITIONS ........................................................................................................................ 1     1.1    Certain Definitions .................................................................................................................... 1     1.2    Table of Defined Terms .......................................................................................................... 13    ARTICLE II. PURCHASE AND SALE..................................................................................................... 15     2.1    Purchase and Sale of Membership Interests and Minority-Owned Shares.............................. 15     2.2    Closing .................................................................................................................................... 15     2.3    Closing Deliveries ................................................................................................................... 15     2.4    Payment at Closing. ................................................................................................................. 17     2.5    Post-Closing Payment ............................................................................................................. 18     2.6    Escrow Account. ..................................................................................................................... 20    ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES ................... 21     3.1    Organization and Qualification ............................................................................................... 21     3.2    Organizational Documents ...................................................................................................... 21     3.3    Capitalization........................................................................................................................... 22     3.4    Subsidiaries ............................................................................................................................. 22     3.5    Authority; Enforceability. ....................................................................................................... 23     3.6    No Conflict; Required Filings and Consents. .......................................................................... 25     3.7    Material Contracts. .................................................................................................................. 26     3.8    Compliance with Law; Permits. .............................................................................................. 28     3.9    Financial Statements. ............................................................................................................... 30     3.10   Insurance Business. ................................................................................................................. 31     3.11   Producers; Sale Practices. ........................................................................................................ 33     3.12   Existing Reinsurance Contracts. .............................................................................................. 34     3.13   No Undisclosed Liabilities ...................................................................................................... 35     3.14   Absence of Certain Changes or Events ................................................................................... 35     3.15   Absence of Litigation, Claims and Orders .............................................................................. 35     3.16   Employee Benefit Plans. ......................................................................................................... 35     3.17   Labor Matters. ......................................................................................................................... 37     3.18  Real Property. .......................................................................................................................... 38     3.19   Taxes. ...................................................................................................................................... 39     3.20   Intellectual Property and Technology. .................................................................................... 42     3.21   Insurance ................................................................................................................................. 43     3.22   Environmental Matters. ........................................................................................................... 43     3.23   Affiliated Transactions ............................................................................................................ 44     3.24   Assets ...................................................................................................................................... 45     3.25   Investment Assets .................................................................................................................... 45     3.26   Policy and Valuation Data ....................................................................................................... 46     3.27  Bank Accounts; Power of Attorney ......................................................................................... 46     3.28  Privacy and Data Security ....................................................................................................... 47     3.29  Brokers .................................................................................................................................... 47   ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER .............................................. 47     4.1   Organization ............................................................................................................................ 47     4.2   Authority; Enforceability ........................................................................................................ 47     4.3   No Conflict; Required Filings and Consents ........................................................................... 48     4.4   Absence of Litigation, Claims and Orders .............................................................................. 48                                         - i - 

 

                             TABLE OF CONTENTS                                     (continued)                                                                             Page      4.5    Sufficient Funds ...................................................................................................................... 48     4.6    Brokers .................................................................................................................................... 49     4.7    Investment Purpose ................................................................................................................. 49    ARTICLE V. PRE-CLOSING COVENANTS ........................................................................................... 49     5.1    Conduct of Business Pending the Closing............................................................................... 49     5.2    Access to Information; Confidentiality. .................................................................................. 52     5.3    Governmental Approvals and Filings; Third Party Consents. ................................................. 53     5.4    Notification of Certain Matters ............................................................................................... 55     5.5    Interim Financial Statements ................................................................................................... 56     5.6    Public Announcements ............................................................................................................ 56     5.7    Further Assurances .................................................................................................................. 57     5.8    Delivery of Books and Records ............................................................................................... 57     5.9    Access to Books and Records ................................................................................................. 57     5.10   Non-Competition; Non-Solicitation ........................................................................................ 58     5.11  D&O Liabilities ....................................................................................................................... 59     5.12  Employee Matters.................................................................................................................... 59     5.13  Real Property Matters .............................................................................................................. 62     5.14  Name Change .......................................................................................................................... 62     5.15  Release .................................................................................................................................... 63     5.16  No Shop ................................................................................................................................... 63     5.17  Intercompany Agreements ...................................................................................................... 64     5.18  Bank Accounts ........................................................................................................................ 64     5.19  Investment Assets .................................................................................................................... 64     5.20  Retirement Annuity Payments ................................................................................................. 64     5.21  Capitalization of NTANY ....................................................................................................... 65     5.22  Fundamental Seller Obligations .............................................................................................. 65    ARTICLE VI. CONDITIONS PRECEDENT ............................................................................................ 66     6.1    Conditions to Each Party’s Obligations .................................................................................. 66     6.2    Conditions to Obligations of Buyer ......................................................................................... 66     6.3    Conditions to Obligations of Seller ......................................................................................... 67    ARTICLE VII. TERMINATION PRIOR TO CLOSING .......................................................................... 68     7.1   Termination ............................................................................................................................. 68     7.2   Effect of Termination .............................................................................................................. 69   ARTICLE VIII. TAX MATTERS .............................................................................................................. 69     8.1   Responsibility for Filing Tax Returns. .................................................................................... 69     8.2   Straddle Periods ....................................................................................................................... 69     8.3   Tax Covenants. ........................................................................................................................ 70     8.4   Contests Related to Taxes ....................................................................................................... 70     8.5   Cooperation on Tax Matters .................................................................................................... 71     8.6   Transfer Taxes ......................................................................................................................... 71     8.7   Section 338(h)(10) Election .................................................................................................... 71    ARTICLE IX. SURVIVAL AND INDEMNIFICATION .......................................................................... 72     9.1   Survival of Representations and Warranties ........................................................................... 72     9.2   Indemnification. ...................................................................................................................... 73                                         - ii - 

 

                            TABLE OF CONTENTS                                    (continued)                                                                            Page     9.3    Certain Limitations. ................................................................................................................. 74    9.4    Definitions.  ............................................................................................................................. 75    9.5    Procedures for Third Party Claims .......................................................................................... 75    9.6    Direct Claims ........................................................................................................................... 77    9.7    Adjustment to Purchase Price .................................................................................................. 77   ARTICLE X. MISCELLANEOUS............................................................................................................. 77    10.1   Amendment ............................................................................................................................. 77    10.2   Waiver ..................................................................................................................................... 77    10.3   Expenses .................................................................................................................................. 77    10.4   Notices ..................................................................................................................................... 77    10.5   Specific Performance .............................................................................................................. 79    10.6   Interpretation ........................................................................................................................... 80    10.7   Severability .............................................................................................................................. 80    10.8   Entire Agreement; Third Party Beneficiaries .......................................................................... 80    10.9   Assignment .............................................................................................................................. 80    10.10  Failure or Indulgence Not Waiver; Remedies Cumulative ..................................................... 81    10.11  Governing Law ........................................................................................................................ 81    10.12  Jurisdiction; Enforcement. ....................................................................................................... 81    10.13  Certain Limitations .................................................................................................................. 82    10.14  Counterparts ............................................................................................................................ 82    10.15  Post-Closing Representation ................................................................................................... 82                                         - iii - 

 

EXHIBITS   Exhibit A   —     Form of Escrow Agreement  Exhibit B   —     Keller Springs Lease Amendment and Terminations   ANNEXES   Annex A     —     Example Calculation  Annex B     —     Excluded Investments  Annex C     —     Key Independent Producers  Annex D     —     Specified Accounting Principles  Annex E     —     Renewal Commission Report  Annex F     —     Third-Party Consents   Seller Disclosure Schedule  Buyer Disclosure Schedule                                         - iv - 

 

                           PURCHASE AGREEMENT          This PURCHASE AGREEMENT, dated as of December 10, 2018 (this “Agreement”),  is by and among HORACE MANN EDUCATORS CORPORATION, a Delaware corporation  (“Buyer”), ELLARD FAMILY HOLDINGS, INC., a Nevada corporation (“Seller”), BRIAN M.   ELLARD, an individual residing in the State of Texas (“Ellard”), and THE JCE EXEMPT TRUST,   a Texas irrevocable trust (the “JCE Trust” and, together with Ellard, the “Minority Shareholders,”   and the Minority Shareholders together with the Seller, the “Seller Parties”).                                      RECITALS         WHEREAS, Seller owns one hundred percent (100%) of the equity interests of NTA Life   Enterprises, LLC, a Texas limited liability company (the “Company” and such equity interests, the  “Membership Interests”);          WHEREAS, the Company, Ellard and the JCE Trust collectively own one hundred percent   (100%) of the issued and outstanding shares of Ellard Enterprises, Inc. (“EEI”);          WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, the  Membership Interests; and         WHEREAS, Buyer further desires to purchase from the Minority Shareholders, and the   Minority Shareholders desire to sell to Buyer, the Minority Shareholders’ shares of EEI;           NOW, THEREFORE, in consideration of the foregoing and the mutual representations,   warranties, covenants and agreements herein contained, and intending to be legally bound hereby,   the parties hereto hereby agree as follows:                                     ARTICLE I.                                   DEFINITIONS         1.1 Certain Definitions.  For purposes of this Agreement, the following terms shall have   the following meanings:          “ACA Taxes” means any “health insurer provider” fee or other similar fee imposed by any   Governmental Authority in connection with the Patient Protection and Affordable Care Act,   including under Section 9010 thereof and including any assessments or fees imposed by any   Governmental Authority of any state or other jurisdictions in connection with the existence or   operation of, or participation in, any health insurance exchange or marketplace of such state or   jurisdictions.          “Adjusted Final Amount” means an amount equal to the Base Price plus the Final   Adjustment.           “Adjusted Initial Amount” means an amount equal to the Base Price plus the Estimated   Adjustment.   

 

           “Adjustment Period” means the period beginning July 1, 2018 and ending on the   Adjustment Time.          “Adjustment Time” means 11:59 p.m. eastern time on the last day of the month in which   the Closing Date falls.            “Affiliate” means, with respect to a specified Person, any other Person that directly or   indirectly, through one or more intermediaries, controls, is controlled by or is under common   control with such specified Person.           “Applicable Rate” means an interest rate equal to 4.5% per annum.          “Base Price” means $405,000,000.           “Book Value” means, as of any date, (i) with respect to any Investment Asset held by an   Insurance Subsidiary, the carrying value thereof as would be set forth, as of such date, in the   statement of annual condition in the statutory financial statements of the applicable Insurance   Subsidiary, as applicable (assuming such date was the end of an annual period) determined in  accordance with SAP applicable to such Insurance Subsidiary, consistently applied, and (ii) with  respect to any Investment Asset held by the Company or any of its Subsidiaries other than the  Insurance Subsidiaries, the carrying value thereof as would be set forth, as of such date, in the  balance sheet of the Company or Subsidiary of the Company, as applicable, determined in  accordance with GAAP, consistently applied.          “Books and Records” means all written or electronic accounts, ledgers and records   (including computer generated, recorded or stored records) of (i) the Company and its Subsidiaries,   or (ii) Seller or any Seller’s Affiliate to the extent relating solely or primarily to the Company or   its Subsidiaries, in each case, whether or not in the custody of the Company, its Subsidiaries, Seller   or any Seller’s Affiliate, including customer lists, contract forms, applications, enrollment forms,   policy information, policyholder information, claim records, sales records, underwriting records,   administrative, pricing, underwriting, claims handling and reserving manuals, corporate (including   Employee records) and accounting, reinsurance and other records (including the books of account   and other records), agreements of the Company or its Subsidiaries (including agreements with   Independent Producers), Tax records (including Tax Returns), disclosure and other documents and   filings required under applicable Law, financial records, and compliance records relating to the   Company and its Subsidiaries, including any database, magnetic or optical media and any other   form of recorded, computer generated or stored information or process relating to the operations   of the Company and its Subsidiaries.  For the avoidance of doubt, Books and Records does not   include consolidated state or federal Tax Returns of Seller or any of Seller’s Affiliates (other than   to the extent related to the Company or any of its Subsidiaries or the Insurance Contracts or   products or services provided by the Company or any of its Subsidiaries).          “Burdensome Condition” means any arrangement, condition or restriction imposed by any   Governmental Authority on Buyer, the Company or any of the Company’s Subsidiaries as a   condition of such Governmental Authority’s approval of the transactions contemplated by this   Agreement (i) to sell or hold separate or agree to sell, divest or discontinue, before or after the   Closing Date, any properties, assets, business or licenses of Buyer, its Affiliates or the Company                                          - 2 -  

 

     and its Subsidiaries, (ii) that requires the Buyer or any of the Seller Parties to commence, threaten   or otherwise seek to commence any Proceeding against a Governmental Authority or (iii) that is   reasonably likely to have a material negative effect on or impairment of the economic benefits that   either Buyer or the Seller Parties reasonably expected to derive from the consummation of the   transactions contemplated hereby, had such Persons not been obligated to take or refrain from   taking the relevant action or to become subject to the relevant condition, limitation, restriction or   requirement being imposed by a Governmental Authority.            “Business Day” means any day other than a Saturday, Sunday or day on which banks are   permitted or required by Law to close in Chicago, Illinois or Dallas, Texas.          “Buyer Disclosure Schedule” means the Buyer Disclosure Schedule delivered by Buyer to   the Seller Parties concurrently with the execution of this Agreement.          “Buyer Material Adverse Effect” means any fact, circumstance, condition, event,   development, occurrence, change or effect that has had, or will have, individually or in the   aggregate, a material adverse effect on the ability of Buyer to perform its obligations under this   Agreement or to consummate the transactions contemplated by this Agreement.          “Change of Control Agreements” means the four Change of Control Agreements between   the Company, on one hand, and each of Wade A. Rugenstein, Timothy A. Darley, Derik T.   Sanders, and Earl R. Fonville, on the other hand, in each case effective as of August 31, 2018.          “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.          “Company Action Level RBC” means with respect to each Insurance Subsidiary as of any   date of determination, its Company Action Level RBC, as defined in the NAIC Risk Based Capital   (RBC) Model Act or in the rules and procedures prescribed by the NAIC with respect thereto, in   each case, as in effect on the date of determination and determined consistent with the Specified   Accounting Principles.          “Company Distribution Adjustment” means the sum of all Unregulated Distributions after   June 30, 2018 and prior to the Closing Date; notwithstanding the foregoing, the Unregulated   Distribution declared prior to, but not yet paid as of, June 30, 2018, in the amount of $1 million   shall be expressly excluded as if such Unregulated Distribution had been fully paid prior to June   30, 2018.          “Company Material Adverse Effect” means any fact, circumstance, condition, event,   development, occurrence, change or effect that has had, or will have, individually or in the   aggregate, (a) a material adverse effect on the business, operations, results of operations or   condition (financial or other) of the Company or its Subsidiaries, taken as a whole, but excluding   any such effect to the extent resulting from or arising out of: (i) changes in general political,   economic or securities or financial market conditions (including changes in interest rates or   changes in equity prices); (ii) any matter affecting the industries in which the Company or its   Subsidiaries participates generally; (iii) any change or proposed change in GAAP, SAP or   applicable Law; (iv) natural catastrophe events, hostilities, acts of war or terrorism, or any  escalation or worsening thereof; or (v) the public announcement of the transactions contemplated   hereby; except in the case of clauses (i) through (iv), to the extent such changes or effects affect                                         - 3 -  

 

   the Company in a materially disproportionate manner relative to such other participants in the  businesses and industries in which the Company operates , or (b) a material adverse effect on the  ability of the Seller Parties to perform their respective obligations under this Agreement or to  consummate the transactions contemplated by this Agreement.  For purposes of demonstrating  whether any fact, circumstance, condition, event, development, occurrence, change or effect "will  have" a material adverse effect described in the foregoing clauses (a) or (b), the parties  acknowledge that “will” means that there is more than a fifty percent (50%) likelihood such  material adverse effect will occur under the circumstances.         “Company Transaction Expenses” means, in each case solely to the extent not paid  immediately prior to the Closing Date, and whether or not invoiced, (i) the fees and expenses  payable by the Company or any Subsidiary of the Company to Winstead PC and any other  attorneys engaged by the Company or any Subsidiary of the Company in connection with this  Agreement and the transactions and other agreements contemplated by this Agreement, (ii) the  fees and expenses payable by the Company or any Subsidiary of the Company to outside  accountants or other advisors, in each case incurred on or before the Closing Date in connection  with this Agreement and the transactions and other agreements contemplated by this Agreement,  and (iii) Indebtedness of the Company or any of its Subsidiaries, if any.          “Computer Programs” means current and prior versions of existing and available retired  (i) computer programs owned or used by or licensed to the Company or its Subsidiaries, including  all object code and all source code other than open source code, all executables and run books (and  related Contracts with escrow agents), (ii) software databases, including structures, format,  procedures and associated documentation for the organization, storage and sorting of information,  to the extent developed by or licensed to or used by the Company or its Subsidiaries, (iii) available  descriptions, specifications, flow-charts, templates, maps and any other work product used to  design, plan, organize and develop each of (i)–(ii), to the extent developed by or licensed to or  used by the Company or its Subsidiaries, and (iv) documentation, including design and  development artifacts, test data and scripts, user manuals, system documentation, operations  manuals/instructions and training materials, relating to each of (i)–(iii).         “Consolidated GAAP Net Income” means the net income of the Company and its  Subsidiaries for the Adjustment Period on a consolidated basis in accordance with GAAP, based  upon the Company’s Books and Records and the Pro Forma Consolidated GAAP Financial  Statement or the Final Consolidated GAAP Financial Statement, as applicable.          “Continuing Key Executive” means each of Wade A. Rugenstein, Timothy A. Darley and  Derik T. Sanders.         “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 or policies of a Person, whether through the ownership of stock or membership  interest, as trustee or executor, by contract or credit arrangement or otherwise.         “Court” means any court or arbitration tribunal of the United States, any domestic state,  any foreign country and any political subdivision or agency thereof.                                         - 4 -  

 

           “Covered Taxes” means any of the following: (i) any Taxes of the Company or its   Subsidiaries attributable to any Pre-Closing Tax Period except to the extent of any accrued current   liability for such Taxes taken into account in the calculation of the Final Adjustment Amount, (ii)   any liability of the Company or its Subsidiaries for Taxes as a result of the Company or any   Subsidiary being a member of a consolidated, combined, unitary or similar group for federal, state,   local or foreign law for a Pre-Closing Tax Period or imposed on the Company or any Subsidiary  by operation of law or pursuant to any contract or other agreement (including without limitation  any Tax Agreement) relating to a Pre-Closing Tax Period or (iii) Seller’s share of the Taxes, fees  and charges under Section 8.6.           “DAC Adjustment” means the amount, net of Tax, equal to (i) the deferred acquisition   cost asset of the Company and its Subsidiaries as of the Adjustment Time, based upon the Pro   Forma Financial Statements or Final Financial Statements, as applicable, minus (ii) the deferred  acquisition cost asset of the Company and its Subsidiaries as of June 30, 2018.          “Data Input Inaccuracies” means inaccuracies or omissions in (i) the inputting of factual   data, including data (and omission of data) relating to the inventory of insurance policies in force,   the terms of such policies or contracts, the relevant information related to the owners or insureds   of such insurance policies, the Reserves, the Investment Assets held by the Company or its   Subsidiaries or insurance policies and transactions related thereto, or (ii) the coding, compilation   or aggregation of such factual data, in either case other than omissions in the factual data inputs   resulting from reasonable judgments made by an actuary or other financial professional as to the   scope of factual data inputs (or omissions of factual data inputs).          “EE Realty Loan” means that certain promissory note, dated June 1, 2013, payable by EE   Realty, Inc. to NTAL.          “EE Realty Payoff Amount” means the unpaid principal and accrued interest as of the   Closing Date on the EE Realty Loan.          “Employee” means any current employee of the Company or any of its Subsidiaries.          “Employee Plan” means a written or unwritten plan, policy, program, agreement or   arrangement, whether covering a single individual or a group of individuals, sponsored, maintained   or contributed to by Seller or any ERISA Affiliate, which provides benefits or compensation to or   on behalf of Employees, or any of their beneficiaries, dependents, spouses or other family   members, that is (i) an “employee benefit plan” within the meaning of Section 3(3) of ERISA, (ii)   a stock bonus, stock purchase, stock option, restricted stock, stock appreciation right or similar   equity-based plan or arrangement, or (iii) any other employment, severance, deferred- compensation, retirement, welfare-benefit, bonus, retention, termination, change in control,  incentive or fringe benefit plan, policy, program, agreement or arrangement.            “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and   the rules and regulations promulgated thereunder.          “ERISA Affiliate” means an entity (whether or not incorporated) required to be treated as   a single employer with the Company or any of its Subsidiaries under Section 414 of the Code.                                          - 5 -  

 

           “Escrow Account” means the escrow account established pursuant to the Escrow   Agreement.          “Escrow Agent” means the escrow agent mutually agreed to by Buyer and Seller.          “Escrow Agreement” means the Escrow Agreement by and among Buyer, Seller and the   Escrow Agent substantially in the form attached hereto as Exhibit A.          “Escrow Amount” means $20,000,000.          “Estimated Adjustment” means an amount equal to (i) estimated Consolidated GAAP Net   Income minus, if positive, or plus the absolute value, if negative, (ii) the sum of (A) the estimated  DAC Adjustment, (B) the RBC Adjustment, (C) the Company Distribution Adjustment and (D)  the estimated Company Transaction Expenses, in each case as based on the Company’s Books and   Records and the applicable Pro Forma Financial Statements.          “Example Calculation” means the calculation set forth on Annex A.          “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.          “Excluded Investments” means those Investment Assets set forth on Annex B.          “Excluded Employee Liabilities” means all Liabilities (including for Taxes) in respect of   Excluded Employees arising out of or in connection with (i) any payments, compensation, benefits   or entitlements that Seller or any of its Affiliates owes or is obligated to provide, whether currently,   prospectively or on a contingent basis, with respect to any current or former Employee that is an   Excluded Employee, including wages, other remuneration, holiday or vacation pay, bonus,   severance pay (statutory or otherwise), commissions, post-employment medical or life obligations,   pension contributions, insurance premiums, and Taxes, (ii) under, or with respect to, ERISA, the   U.S. Worker Adjustment and Retraining Notification Act, Section 4980 of the Code, or any labor   or similar applicable law, that are incurred, accrued or arise prior to, or in connection with, the   Closing, including any Taxes imposed under Sections 3101, 3111 or 3301 of the Code, whether or   not yet required to be paid or recognized, (iii) any Employee Plan or (iv) the employment, transfer   or termination of employment.           “Excluded Liabilities” means all Liabilities in respect of (i) Covered Taxes, (ii) Excluded   Employee Liabilities, and (iii) Excluded Investments, including any obligation to fund any   commitment under an Excluded Investment.           “Executive Employment Agreement” means that certain Executive Employment   Agreement, dated April 30, 2015, by and between Stephen E. Murphy and EE Holdings, Inc. n/k/a   NTA Life Enterprises, LLC.           “Filing” means any registration, petition, statement, application, schedule, form,   declaration, notice, notification, report, submission or other filing.          “Final Adjustment” means an amount equal to (i) the Consolidated GAAP Net   Income minus, if positive, or plus the absolute value, if negative, (ii) the sum of (A) the DAC                                         - 6 -  

 

     Adjustment, (B) the RBC Adjustment, (C) the Company Distribution Adjustment, and (D) the   Company Transaction Expenses, in each case as based on the Company’s Books and Records and   the applicable Final Financial Statements, all as finally determined pursuant to Section 2.5.          “Final Consolidated GAAP Financial Statement” means the consolidated GAAP financial   statement of the Company and its Subsidiaries, as of the Adjustment Time and for the Adjustment   Period, prepared by Buyer after the Closing Date, and as finally determined pursuant to Section   2.5.          “Final Financial Statements” means, collectively, the Final Consolidated GAAP Financial   Statement and the Final Statutory Financial Statement.          “Final Statutory Financial Statement” means the statutory financial statement of the   Insurance Subsidiaries as of the Adjustment Time, prepared by Buyer after the Closing Date, and   as finally determined pursuant to Section 2.5.            “Financial Statements” means, collectively, the Statutory Statements and the Consolidated   GAAP Financial Statements.          “Fundamental Seller Obligations” means all obligations of Seller under this Agreement, if   any, to make Indemnity Payments to any Buyer Indemnified Person.          “Governmental Approval” means any consent, approval or authorization of, or registration,   declaration or filing with, any Governmental Authority.          “Governmental Authority” means any governmental agency or authority of the United   States, any domestic state, any foreign country and any political subdivision or agency thereof,   including any administrative agency, board or commission.          “Indebtedness” means, without duplication, the Company’s and its Subsidiaries’ (i)   outstanding indebtedness for borrowed money and all obligations represented by or owed under   bonds, notes, debentures, loan agreements, reimbursement agreements or other similar instruments   and debt securities, including accrued interest and prepayment premiums, penalties and breakage   fees related thereto, (ii) obligations (including breakage costs and termination payments) payable   under interest rate protection agreements, swaps, hedges or other instruments, (iii) all or any part   of the deferred purchase price of property or services (other than trade payables), including any   “earnout” or similar payments or any non-compete payments and (iv) guarantees of any of the  foregoing.            “Independent Producer” means any Person, other than the Company, any Subsidiaries of   the Company or any Employee, engaged in the solicitation, negotiation, effectuation, marketing,   sale or placement of any insurance policy underwritten by the Company or its Subsidiaries or of   any other products or services marketed, sold or provided by the Company or its Subsidiaries.          “Insurance Contract” means any contract or policy of insurance or reinsurance, binder, slip,   endorsement or certificate, and forms with respect thereto, including any life, health, accident and   disability insurance policy and any other insurance policy or insurance contract or certificate, in   each case issued, reinsured or assumed by the Company or any of its Subsidiaries.                                         - 7 -  

 

           “Insurance Subsidiaries” means NTAL and NTANY.          “Insurance Regulator” means, with respect to any jurisdiction, the Governmental Authority   charged with the supervision of insurance companies in such jurisdiction.          “Intellectual Property” means, on a worldwide basis, any or all of the following: (i)   trademarks, service marks, trade dress, and other indicia of source, and any pending applications   and registrations therefor now or hereafter in force, and all goodwill related thereto; (ii) trade   names, corporate names, assumed names or fictitious names and any registrations or foreign   qualifications therefor now or hereafter in force; (iii) domain names and any registrations therefor   now or hereafter in force, including access to the codes necessary to transfer such domain   registrations; (iv) copyrights and any registrations or applications therefor now or hereafter in   force; (v) intellectual property rights with regard to the Computer Programs; (vi) patents and patent   applications, including divisions, continuations, continuations-in-part and renewal applications,  and including renewals, extensions and reissues thereof now or hereafter in force; (vii) know-how   and trade secrets under applicable Law; and (viii) in each case, all administrative and legal rights   arising therefrom and relating thereto.          “Investment Assets” means any interest in any bonds, notes, debentures, mortgage loans,   real estate, instruments of indebtedness, stocks, partnership, membership or joint venture interests,   and all other equity interests, certificates issued by or interests in trusts, derivatives, or other assets   acquired for investment purposes.          “IT Systems” means the hardware, Software, data, databases, data communication lines,   network and telecommunications equipment, Internet-related information technology   infrastructure, wide area network and other information technology equipment owned, leased or   licensed by the Company of any of its Subsidiaries.          “Key Executives” means each of Wade A. Rugenstein, Timothy A. Darley, Stephen E.   Murphy, Derik T. Sanders and Earl R. Fonville.          “Key Independent Producers” means the Independent Producers identified on Annex C.          “Keller Springs Leases” means each of the Company Real Property Leases identified on   Schedule 3.18(a) between a Subsidiary of the Company, as tenant, and EE Realty, Inc., as landlord,   for the lease of the Keller Springs Property.          “Keller Springs Property” means the real property located at 4949 Keller Springs Road,   Addison, Texas 75001.          “Knowledge” means, with respect to the Seller Parties, the actual knowledge of the Key   Executives, and Natalie Lockmiller after reasonable inquiry and discussion among themselves and   their direct reports and, with respect to Buyer, the actual knowledge of Marita Zuraitis, Matthew   Sharpe, Bret Conklin and Elizabeth Moore after reasonable inquiry and discussion among   themselves and their direct reports.  For purposes of this definition, “reasonable inquiry” means   the internal inquiry a responsible individual in a similarly situated position at a similarly situated   company in the same industry would undertake in response to actual knowledge of facts or   circumstances that make such inquiry reasonably prudent in the normal course of carrying out the                                         - 8 -  

 

     duties of such individual; provided, however, that “reasonable inquiry” shall not require the   engagement of any third party auditor or investigator or require any special inquiry solely on   account of this Agreement or the transactions contemplated hereunder.          “Law” means all laws, statutes, ordinances, directives, Regulations and similar mandates   of any Governmental Authority, including all Orders having the effect of law in any jurisdiction.          “Liabilities” means, with respect to any Person, any liability or obligation of such Person   of any kind, character or description, whether known or unknown, absolute or contingent, accrued   or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or   several, due or to become due, vested or unvested, executory, determined, determinable or   otherwise.          “Lien” means any mortgage, deed of trust, pledge, hypothecation, security interest,   encumbrance, claim, lien or charge of any kind.           “Material Detrimental Event” means (i) twenty-five percent (25%) or more of the Key   Independent Producers are no longer Independent Producers, (ii) the Product Mix Percentage is   fifty percent (50%) or greater or (iii) the number of in-force Insurance Contracts is less than   285,000.          “Minority-Owned Shares” means all of the issued and outstanding shares of EEI owned by   the Minority Shareholders.          “Most Recent Quarterly Statements” means, collectively, the Most Recent Statutory   Statement and Most Recent GAAP Statement.          “NAIC” means the National Association of Insurance Commissioners.           “Non-Guaranteed Elements” means cost of insurance charges, loads and expense charges,   credited interest rates, discretionary bonus features, mortality and expense charges, administrative   expense risk charges, variable premium rates and variable paid-up amounts, retrospective bonuses,  and any other unspecified premiums, features or charges that either Insurance Subsidiary can  unilaterally change, each as applicable under the Insurance Contracts.          “NTAL” means National Teachers Associates Life Insurance Company, a Texas-domiciled   insurance company.          “NTANY” means NTA Life Insurance Company of New York, a New York-domiciled   insurance company.          “Order” means any binding judgment, order, writ, injunction, ruling or decree of, or any   settlement under the jurisdiction of, any Court or Governmental Authority.          “Organizational Documents” means, with respect to any Person, the certificate of   incorporation, bylaws, certificate of organization, operating agreement or other applicable   organizational documents of such Person.                                          - 9 -  

 

         “Permits” mean all franchises, authorizations, consents, approvals, licenses, registrations,  certificates, Orders, permits or other rights and privileges issued by any Governmental Authority.         “Permitted Lien” means, with respect to any asset, any: (i) carriers’, mechanics’,  materialmens’ or similar Lien with respect to amounts not yet due which do not interfere in any  material respect with the conduct of the business of the Company or any of its Subsidiaries as it is  currently conducted; (ii) Lien related to deposits required by applicable Law to be made to any  Insurance Regulator; or (iii) Lien for Taxes, assessments or other governmental charges not yet  due and payable or due and payable but not delinquent or the amount or validity of which is being  contested in good faith and for which adequate reserves are set forth in the financial statements of  the Company and its Subsidiaries.         “Person” means an individual, corporation, partnership, association, trust, estate,  unincorporated organization, limited liability company or other entity or group (as defined in  Section 13(d)(3) of the Exchange Act).         “Personal Information” means any of the following categories of information, in any  format whether written, electronic, or otherwise: (a) any “nonpublic personal information” as such  term is defined under Title V of the U.S. Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., and  the rules and regulations issued thereunder, (b) any personally identifiable information that is  protected by applicable Law related to data security and privacy, such as name, signature, address,  social security number, telephone number or other unique identifier, (c) information that can be  used to authenticate an individual (including passwords or PINs, biometric data, unique  identification numbers, answer to security questions, or other personal identifiers) or (d) any  “protected health information” as such term is defined under the Health Insurance Portability and  Accountability Act of 1996, as amended and the rules and regulations issued thereunder.         “Policy and Valuation Data” means the information listed in Section 3.26 of the Seller  Disclosure Schedule.         “Post-Closing Tax Period” means any taxable period or portion of a taxable period that is  not a Pre-Closing Tax Period.         “Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date  and that portion of any Straddle Period through the end of the Closing Date determined in  accordance with Section 8.2.         “Pro Forma Consolidated GAAP Financial Statement” means the pro forma consolidated  GAAP financial statement of the Company and its Subsidiaries, prepared by Seller, as of the  Adjustment Time.         “Pro Forma Financial Statements” means, collectively, the Pro Forma Consolidated GAAP  Financial Statement and the Pro Forma Statutory Financial Statement.         “Pro Forma Statutory Financial Statement” means the pro forma statutory financial  statement of the Insurance Subsidiaries, prepared by Seller, as of the Adjustment Time.                                        - 10 -  

 

         “Pro Rata Percentage” means with respect to Seller, ninety three and eight hundred sixty  six thousandths percent (93.866%), with respect to Ellard, three and sixty seven thousandths  percent (3.067%), and with respect to the JCE Trust, three and sixty seven thousandths percent  (3.067%).         “Proceeding” means any legal, administrative, arbitral or other proceeding, suit, or action  by or before any Governmental Authority, mediator or arbitrator.         “Product Mix Percentage” means the percentage derived by dividing (i) the number of  Insurance Contracts consisting of accident or disability insurance issued between June 30, 2018,  and the Closing Date, by (ii) the total number of Insurance Contracts issued between June 30,  2018, and the Closing Date.         “Purchase Price” means, collectively, the Company Purchase Price and the Share Purchase  Price.         “RBC Adjustment” means the amount equal to (i) the result of (A) the Company Action  Level RBC of NTAL as of the Adjustment Time, minus (B) the Company Action Level RBC of  NTAL as of June 30, 2018, multiplied by (ii) five hundred percent (500%).         “RBC Ratio” means, with respect to any insurance company, as of any date of  determination, the ratio of (i) Total Adjusted Capital (as defined in the NAIC Risk Based Capital  (RBC) Model Act or in the rules and procedures prescribed by the NAIC with respect thereto, in  each case, as in effect on the date of determination) to (ii) Company Action Level RBC.         “Regulated Subsidiary” means any Subsidiary of the Company that is licensed in one or  more jurisdictions as an insurance company, insurance agency and/or third party administrator.         “Regulation” means any rule, regulation, policy or interpretation (regarding such rule,  regulation or policy) of any Governmental Authority.         “Representatives” means, with respect to any Person, its officers, managers, employees,  investment bankers, attorneys, accountants, financial or other advisors or other agents.         “Reserves” means all reserves and other liabilities for claims, benefits, losses (including  incurred but not reported losses and losses in the course of settlement), expenses and unearned  premium arising under or in connection with an Insurance Contract.         “R&W Indemnifications” means Section 9.2(b)(i) and (ii) (in the case of the Seller Parties)  and Section 9.2(c)(i) and (ii) (in the case of Buyer).          “SAP” means, with respect to any regulated insurance company, the statutory accounting  practices prescribed by the Governmental Authority responsible for the regulation of insurance  companies in the jurisdiction in which such company is domiciled, consistently applied.         “Schedules” means collectively the Seller Disclosure Schedules and the Buyer Disclosure  Schedules.                                        - 11 -  

 

         “Seller Disclosure Schedule” means the Seller Disclosure Schedule delivered by the Seller  Parties to Buyer concurrently with the execution of this Agreement.          “Software” means all computer software, including but not limited to application software,  system software, firmware, middleware, mobile digital applications, assemblers, applets,  compilers and binary libraries including all source code and object code versions of any and all of  the foregoing, in any and all forms and media, and all related documentation.         “Special Dividend” means a dividend and distribution of excess capital in an aggregate  amount equal to the maximum amount approved by the Insurance Commissioner of the State of  Texas to be declared and paid, after the Closing Date, by NTAL.         “Specified Accounting Principles” means SAP as applicable to each Insurance Subsidiary  and GAAP as applicable to the Company and its Subsidiaries other than the Insurance Subsidiaries,  and as adjusted or more specifically set forth on Annex D.         “Straddle Period” means any taxable period beginning before and ending after the Closing  Date.         “Subsidiary” with respect to any Person, means any corporation, partnership, joint venture,  limited liability company or other legal entity of which such Person owns, directly or indirectly,  greater than 50% of the capital stock or other equity interests that are generally entitled to vote for  the election of the board of directors or other governing body of such corporation, partnership,  joint venture, limited liability company or other legal entity or to vote as a general partner thereof.         “Tax” or “Taxes” means any federal, state, local or non-U.S. income, excise,  environmental, capital stock, profits, social security (or similar), disability, registration, value  added, estimated, gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding,  payroll, employment, unemployment, excise, severance, stamp, occupation, premium, property or  windfall profits taxes, alternative or add-on minimum taxes, customs duties and other taxes or  assessments of any kind whatsoever, together with all interest, fines, penalties or additions  imposed by any taxing authority (domestic or foreign) on such entity.          “Tax Returns” means all returns, declarations, reports, and information statements and  returns required or permitted to be filed with a Governmental Authority relating to Taxes,  including, but not limited to, original returns and filings, amended returns, claims for refunds, and  information returns (federal, state, foreign, municipal or local), and any schedules attached to any  of the foregoing.           “Transaction Documents” means this Agreement, the Escrow Agreement and such other  instruments and agreements required by this Agreement to be executed and delivered hereunder.         “Treasury Regulations” means all proposed, temporary and final regulations promulgated  under the Code, as such regulations may be amended from time to time.         “True-Up Amount” means the Adjusted Final Amount minus the Adjusted Initial Amount.                                          - 12 -  

 

           “Unclaimed Property Matter” means any and all matters to the extent arising out of or   reflecting (i) the use or non-use of the Social Security Death Master File in the administration of   the Insurance Contracts, (ii) amounts of unclaimed property or escheat obligations relating to the   Insurance Contracts, the Company or any Subsidiary of the Company, including, without  limitation, in respect of unclaimed life insurance or other benefits and amounts payable to  beneficiaries or any other Persons under the Insurance Contracts or otherwise or (iii) any audit or  investigation by or on behalf of any Governmental Authority or third party relating to the  foregoing.          “Unregulated Distribution” means any distribution, dividend or other payment by the   Company to Seller in respect of the Membership Interests, which distribution, dividend or other   payment does not require any regulatory approval or non-disapproval if originated from either   Insurance Subsidiary.          “Wholly-Owned Subsidiary” means each direct or indirect Subsidiary of the Company   other than EEI, NTAL and NTANY.          1.2  Table of Defined Terms. Terms that are not defined in Section 1.1 have the meanings   set forth in the following Sections:    Accounting Arbitrator ...................................................................................  8.7(b)   Acquired Business .........................................................................................  5.10(c)(ii)   Adjustment Report ........................................................................................  2.5(c)(v)   Agreed Allocation .........................................................................................  8.7(b)   Agreement .....................................................................................................  Preamble   Alternative Transaction .................................................................................  5.16(b)   Assumed Reinsurance Contracts ...................................................................  3.12(b)   Buyer .............................................................................................................  Preamble   Buyer 401(k) Plan .........................................................................................  5.12(b)   Buyer’s Allocation ........................................................................................  8.7(b)   Buyer Indemnified Persons ...........................................................................  9.2(a)   Ceded Reinsurance Contracts .......................................................................  3.12(a)   Closing ..........................................................................................................  2.2   Closing Date ..................................................................................................  2.2   COBRA .........................................................................................................  5.12(e)   Company .......................................................................................................  Recitals   Company 401(k) Plan ...................................................................................  5.12(b)   Company Actuarial Analyses ........................................................................  3.10(f)   Company Intellectual Property Rights ..........................................................  3.20(a)   Company Purchase Price...............................................................................  2.1(a)   Company Real Property Leases ....................................................................  3.18(a)   Competing Business ......................................................................................  5.10(a)   Condition Satisfaction ...................................................................................  2.2   Confidential Information ...............................................................................  5.2(b)   Consolidated Statements ...............................................................................  3.9(b)   Continuing Employee ...................................................................................  5.12(a)(ii)   Deductible .....................................................................................................  9.3(a)                                        - 13 -  

 

   Dispute Notice ...............................................................................................  2.5(c)(ii)  Distribution Recovery Right .........................................................................  5.22(b)  EEI.................................................................................................................  Recitals  Ellard .............................................................................................................  Preamble  Enforceability Exceptions .............................................................................  3.5(a)  Environmental Laws .....................................................................................  3.22(c)(i)  Environmental Permits ..................................................................................  3.22(c)(ii)  Escrow Holdback Amount ............................................................................  2.6(b)  Escrow Release Date .....................................................................................  2.6(b)  Escrowed Funds ............................................................................................  2.6(a)  Excluded Employees .....................................................................................  5.12(a)(i)  Fundamental Representations .......................................................................  9.1  GAAP ............................................................................................................  3.9(b)  Hazardous Substances ...................................................................................  3.22(c)(iii)  HSR Act ........................................................................................................  3.6(b)  Delaware Court .............................................................................................  10.12(a)  Indemnifiable Loss ........................................................................................  9.4(c)  Indemnitee .....................................................................................................  9.4(a)  Indemnitor .....................................................................................................  9.4(b)  Indemnity Payment .......................................................................................  9.4(d)  Independent Accounting Firm.......................................................................  2.5(c)(iv)  Intercompany Agreements ............................................................................  3.23(a)  Investment Asset Report                                        5.19(a)  Investment Guidelines                                          3.25(b)  JCE Trust .......................................................................................................  Preamble  Keller Springs Lease Amendment and Terminations ...................................  5.13(a)  Leased Real Property ....................................................................................  3.18(a)  Material Contracts .........................................................................................  3.7(a)  Membership Interests ....................................................................................  Recitals  Minority Shareholders ...................................................................................  Preamble  Most Recent Statutory Statement ..................................................................  3.9(a)  Most Recent GAAP Statements ....................................................................  3.9(b)  Outside Date ..................................................................................................  7.1(b)  Owned Real Property ....................................................................................  3.18(a)  RBC Reports .................................................................................................  3.9(d)  Real Property .................................................................................................  3.18(a)  Recourse Distribution....................................................................................  5.22(b)  Reinsurance Contracts ...................................................................................  3.12(b)  Release ..........................................................................................................  3.22(c)(iv)  Required Governmental Authorizations .......................................................  3.6(b)  Review Period ...............................................................................................  2.5(c)(i)  Scheduled Company Intellectual Property ....................................................  3.20(a)  Section 280G Payments ................................................................................  5.12(i)  Section 338(h)(10) Election ..........................................................................  8.7(a)  Seller .............................................................................................................  Preamble  Seller Indemnified Persons ...........................................................................  9.2(c)                                        - 14 -  

 

     Seller Parties..................................................................................................  Preamble   Share Purchase Price .....................................................................................  2.1(b)   Statutory Statements .....................................................................................  3.9(a)   Survival Period ..............................................................................................  9.1   Tax Agreement ..............................................................................................  3.19(f)   Tax Claim ......................................................................................................  8.4   Third-Party Claim .........................................................................................  9.4(e)   Updated Adjustment Statement                                   2.5(b)   WARN ..........................................................................................................  3.17(d)   WARN Acts ..................................................................................................  3.17(d)                                        ARTICLE II.                               PURCHASE AND SALE          2.1  Purchase and Sale of Membership Interests and Minority-Owned Shares. Upon the   terms and subject to the conditions of this Agreement:          (a)   Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, all of the   Membership Interests, free and clear of any Liens, for an aggregate purchase price (the “Company   Purchase Price”) in cash equal to the Seller’s Pro Rata Percentage of the Base Price, as adjusted   pursuant to Section 2.4 and Section 2.5; and           (b)   Each Minority Shareholder agrees to sell to Buyer, and Buyer agrees to purchase   from the Minority Shareholders, all of the Minority-Owned Shares, free and clear of any Liens,  for an aggregate purchase price (the “Share Purchase Price”) in cash equal to the aggregate   Minority Shareholders' Pro Rata Percentages of the Base Price, as adjusted pursuant to Section 2.4   and Section 2.5; provided that, upon written notice to the Seller Parties prior to the Closing Date,   Buyer may assign its right to receive the Minority-Owned Shares to any Affiliate of Buyer   (including the Company) -by designating such Affiliate in such notice.          2.2  Closing.  The closing of the purchase and sale of the Membership Interests and the   Minority-Owned Shares and other transactions contemplated by this Agreement (the “Closing”)   shall take place by mutual exchange of electronic transmission of documents and instructions at   10:00 a.m., Eastern time, on (i) the last Business Day of the month in which all the conditions set   forth in Article VI have been satisfied or waived (other than those conditions that by their terms   are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the   Closing) in accordance with this Agreement (the “Condition Satisfaction”) or (ii) if the Condition   Satisfaction occurs less than five (5) Business Days prior to the last Business Day of such month,   then the Closing shall take place on the last Business Day of the month immediately following the   month in which the Condition Satisfaction occurs, in each case provided that all conditions set   forth in Article VI are satisfied or waived at the Closing, unless another date, time or place is   agreed to in writing by the parties hereto.  Upon the occurrence of the Closing, the date and time   that the Closing shall become effective shall be 11:59 p.m., Eastern time, on the date on which the   Closing occurs (such date and time are herein referred to as the “Closing Date”).          2.3  Closing Deliveries.                                          - 15 -  

 

         (a)   At the Closing, the Seller Parties shall deliver or cause to be delivered to Buyer:               (i)   an assignment of the Membership Interests from Seller to Buyer, duly        executed by Seller as of the Closing Date;                (ii)  certificates representing the Minority-Owned Shares, duly endorsed in        blank or accompanied by sufficient instruments of transfer and bearing all requisite stock        transfer stamps;               (iii) counterparts of each Transaction Document other than this Agreement to        which a Seller Party is a party, duly executed by such Seller Party;               (iv)  the Keller Springs Lease Amendment and Terminations, duly executed by        EE Realty, Inc., as landlord, and the applicable Subsidiary of the Company, as tenant;                (v)   an affidavit in the form set forth in the Treasury Regulations under        Section 1445(b)(2) of the Code certifying that, as of the Closing Date, Seller is not a        “foreign person”;                (vi)  a certificate of an officer of Seller executed by an authorized officer of        Seller, dated as of the Closing Date, certifying as to the Seller Parties’ compliance with the        conditions set forth in Section 6.2(a) and Section 6.2(b) and the satisfaction of the condition        set forth in Section 6.2(j);               (vii) a certificate of an officer of the Seller in the form reasonably acceptable to        the Buyer executed by an authorized officer of the Seller, dated no more than five (5) days        prior to the Closing Date, setting forth the true, accurate and complete information required        to be listed on Section 3.17(a) of the Seller Disclosure Schedule, but updated as of the date        of such certificate;               (viii) a certificate of good standing or certificate of fact, as applicable, from the        applicable jurisdiction of incorporation or formation of the Company and each Subsidiary        of the Company;                (ix)  resignations of those directors, managers and officers of the Company and        its Subsidiaries designated by Buyer prior to Closing effective as of the Closing;                (x)   the Closing Adjustment Statement and Pro Forma Financial Statements,        reasonably acceptable to Buyer; and               (xi)  an IRS Form 8023, with attached schedules as required, containing all        information required by the IRS with respect to each shareholder (as defined in the        Treasury Regulations) of each Subsidiary of the Company, and signed by each applicable        Seller Party in accordance with the IRS instructions to such Form.          (b)   At the Closing, Buyer shall make the payments and contributions contemplated by  Section 2.4 and also deliver or cause to be delivered to Seller Parties:                                        - 16 -  

 

               (i)   counterparts of each Transaction Document other than this Agreement to        which Buyer is a party, duly executed by Buyer;               (ii)  a certificate of Buyer duly executed by an authorized officer of Buyer, dated        as of the Closing Date, certifying as to Buyer’s compliance with the conditions set forth in        Section 6.3(a) and Section 6.3(b); and               (iii) a certificate of good standing or certificate of fact, as applicable, from the        applicable jurisdiction of incorporation or formation of Buyer.          2.4  Payment at Closing.               (a)   No later than five (5) Business Days prior to the anticipated Closing Date,  Seller shall deliver to Buyer the Pro Forma Financial Statements and a statement setting forth in  reasonable detail Seller’s calculation of the Estimated Adjustment, including the RBC Adjustment  estimated as of the Adjustment Time, estimated Company Transaction Expenses, as of the  Adjustment Time, and the Adjusted Initial Amount based thereon (such statement being referred  to herein as the “Closing Adjustment Statement”).  The Closing Adjustment Statement shall be (i)  in the form of the Example Calculation attached hereto as Annex A; (ii) accompanied by work  papers and other supporting documentation with respect to the calculation of the amounts set forth  thereon; and (iii) accompanied by a written certificate of the chief financial or accounting officer  of Seller certifying that the Pro Forma Financial Statements and Closing Adjustment Statement  (x) were prepared in good faith, (y) are based upon the Books and Records, and (z) were prepared  in accordance with the Most Recent Quarterly Statements and the Specified Accounting Principles.   If the Buyer believes that the Closing Adjustment Statement (including any amount or computation  set forth therein) or Pro Forma Financial Statements contain errors, deviates from the Example  Calculation or was not prepared in accordance with the Specified Accounting Principles, Buyer  may, on or prior to the second (2nd) Business Day prior to the anticipated Closing Date, deliver a  notice to Seller setting forth, in reasonable detail, each such disputed item or amount and the basis  for Buyer’s disagreement therewith, and for the period from Seller’s receipt of such notice to the  Closing Date, the parties shall cooperate in good faith to resolve any such disputes and agree upon  a revised Closing Adjustment Statement or Pro Forma Financial Statements, as applicable.               (b)   In addition to the deliveries contemplated by Section 2.3, at the Closing,  Buyer shall pay:               (i)   to Seller or its designee, by wire transfer of immediately available funds to        an account designated by Seller, an amount equal to the Seller’s Pro Rata Percentage of the        Adjusted Initial Amount less the Escrow Amount and less the EE Realty Payoff Amount;               (ii)  to each Minority Shareholder, by wire transfer of immediately available        funds to an account designated by each such Minority Shareholder, an amount equal to        such Minority Shareholder’s Pro Rata Percentage of the Adjusted Initial Amount; and               (iii) to the Escrow Agent, by wire transfer of immediately available funds to the        Escrow Account, the Escrow Amount.                                        - 17 -  

 

                 (c)   On the Closing Date, the EE Realty Payoff Amount will be deemed to be   paid by Buyer to Seller, then immediately contributed by Seller to EE Realty, Inc. as a capital   contribution, and then paid by EE Realty, Inc. to NTAL in satisfaction of the EE Realty Loan.          2.5  Post-Closing Payment.          (a)   The True-Up Amount shall be calculated based on the determination of the   Adjusted Final Amount as set forth in subsections (b) and (c) of this Section 2.5.  If the True-Up   Amount is a positive number, Buyer shall pay Seller and the Minority Shareholders, or their   respective designees, their Pro Rata Percentages of the True-Up Amount within five (5) Business   Days after the final determination thereof.  If the True-Up Amount is a negative number, (1) Seller   shall pay Buyer an amount in cash equal to the absolute value of the True-Up Amount within five   (5) Business Days after the final determination thereof, and (2) the Seller may recoup the Minority   Shareholders’ Pro Rata Percentages of such True-Up Amount from the Minority Shareholders;   provided that, in the sole discretion of Buyer, such amount may be paid from the Escrowed Funds,   in which case the Buyer and Seller shall jointly instruct the Escrow Agent by executing and   delivering a certificate to the Escrow Agent to pay to Buyer such amount from the Escrowed   Funds.  Any payments required to be made by either party pursuant to this Section 2.5(a) shall (i)   be made by wire transfer of immediately available funds and (ii) include interest on the amount   required to be paid at the Applicable Rate, compounded annually on the basis of a year of 365   days, from (and including) the Closing Date to (but excluding) the date such payment is made.          (b)   No later than ninety (90) days after the Closing Date, Buyer shall deliver to Seller   a statement (the “Updated Adjustment Statement”) consisting of the proposed Final Financial   Statements and Buyer's calculations of the Final Adjustment, the DAC Adjustment, the RBC   Adjustment, the Company Distribution Adjustment, the Company Transaction Expenses, all as of   the Adjustment Time, and the Adjusted Final Amount based thereon.  The Updated Adjustment   Statement shall be (i) in the form of the Example Calculation, (ii) accompanied by work papers  and other supporting documentation with respect to the calculation of the amounts set forth  thereon; and (iii) accompanied by a written certificate of the chief financial or accounting officer  of the Company certifying that the Updated Adjustment Statement (x) was prepared in good faith,  (y) is based upon the Books and Records, and (z) was prepared in accordance with the Specified  Accounting Principles. In furtherance of such preparation, Seller will make reasonably available  the employees of Seller and its Affiliates to Buyer and its Representatives to the extent such  employees are responsible for or knowledgeable about the preparation of the Updated Adjustment  Statement and shall provide access to all documentation, records and other information of Seller  and its Affiliates as Buyer or any of its Representatives may reasonably request to the extent  reasonably relevant to the preparation of the Updated Adjustment Statement; provided, that such   access does not unreasonably interfere with the conduct of the business of Seller and its Affiliates.          (c)   (i)   Seller shall have forty-five (45) days from the date on which the Updated        Adjustment Statement is delivered to it to review the calculations of the Final Adjustment,        each component thereof, and the Adjusted Final Amount based thereon (the “Review         Period”).  In furtherance of such review, Buyer and the Company will make reasonably         available the employees of Buyer, the Company and its Subsidiaries to Seller and its         Representatives to the extent such employees are responsible for or knowledgeable about         the preparation of the Updated Adjustment Statement and shall provide access to all                                        - 18 -  

 

                documentation, records and other information of Buyer, the Company and its Subsidiaries  as Seller or any of its Representatives may reasonably request to the extent reasonably  relevant to the preparation of the Updated Adjustment Statement; provided, that such  access does not unreasonably interfere with the conduct of the business of Buyer or the  Company.         (ii)  If Seller believes that the Updated Adjustment Statement (including any  amount or computation set forth therein) contains mathematical errors, deviates from the  Example Calculation or was not prepared in accordance with the Specified Accounting  Principles, Seller may, on or prior to the last day of the Review Period, deliver a notice to  Buyer setting forth, in reasonable detail, each such disputed item or amount and the basis  for Seller’s disagreement therewith (the “Dispute Notice”).  The Dispute Notice shall set  forth, with respect to each disputed item, Seller’s position as to the correct amount or  computation that should have been included in the Updated Adjustment Statement and as  to the Adjusted Final Amount.         (iii) If no Dispute Notice is received by Buyer with respect to any item in the  Updated Adjustment Statement on or prior to the last day of the Review Period, the amount  or computation with respect to such item as set forth in the Updated Adjustment Statement,  including the RBC Adjustment, shall be deemed accepted by Seller, whereupon the amount  or computation of such item or items shall be final and binding on the parties.  For purposes  of this Section 2.5, “final and binding” shall mean that the applicable determination shall  have the same preclusive effect for all purposes as a determination embodied in a final  judgment, no longer subject to appeal and entered by a Court of competent jurisdiction  after full and fair litigation on the merits.         (iv)  For a period of ten (10) Business Days beginning on the date that Buyer  receives a Dispute Notice, if any, Buyer and Seller shall endeavor in good faith to resolve  by mutual agreement all matters identified in the Dispute Notice.  In the event that the  parties are unable to resolve by mutual agreement any matter in the Dispute Notice within  such ten (10) Business Day period, Buyer or Seller may engage Deloitte, or if Deloitte is  unwilling or unable to serve, another accounting firm of national reputation, as mutually  agreed by the parties hereto (the “Independent Accounting Firm”), to make a determination  with respect to all matters in dispute.         (v)   Buyer and Seller will direct the Independent Accounting Firm to render a  determination within sixty (60) days after its retention, and Buyer, Seller and their  respective employees and agents will cooperate with the Independent Accounting Firm  during its engagement.  Buyer, on the one hand, and Seller, on the other hand, shall  promptly (and in any event within ten (10) Business Days) after the Independent  Accounting Firm’s engagement, each submit to the Independent Accounting Firm their  respective computations of the disputed items identified in the Dispute Notice and  information, arguments and support for their respective positions, and shall concurrently  deliver a copy of such materials to the other party.  Each party shall then be given an  opportunity to supplement the information, arguments and support included in its initial  submission with one additional submission, delivered concurrently to the Independent  Accounting Firm and the other party, to respond to any arguments or positions taken by                                 - 19 -  

 

         the other party in such other party’s initial submission, which supplemental information        shall be submitted to the Independent Accounting Firm (with a copy thereof to the other        party) within five (5) Business Days after the first date on which both parties have        submitted their respective initial submissions to the Independent Accounting Firm.  The        Independent Accounting Firm shall thereafter be permitted to request additional or        clarifying information from the parties, and each of the parties shall cooperate and shall        cause their Representatives to cooperate with such requests of the Independent Accounting        Firm, provided that both parties are copied on all written communications and allowed to        participate in all discussion with the Independent Accounting Firm.  The Independent        Accounting Firm shall determine, based solely on the materials so presented by the parties        and upon information received in response to such requests for additional or clarifying        information and not by independent review, only those issues in dispute specifically set        forth in the Dispute Notice and shall render a written report to Buyer and Seller (the        “Adjustment Report”) in which the Independent Accounting Firm shall, after considering        all matters set forth in the Dispute Notice, determine what adjustments, if any, should be        made to the amounts and computations set forth in the Updated Adjustment Statement        solely as to the disputed items and shall determine the appropriate Adjusted Final Amount        on that basis.               (vi)  The Adjustment Report shall set forth, in reasonable detail, the Independent        Accounting Firm’s determination with respect to each of the disputed items or amounts        specified in the Dispute Notice, and the revisions, if any, to be made to the Updated        Adjustment Statement, together with supporting calculations.  In resolving any disputed        item, the Independent Accounting Firm (i) shall be bound to the principles of this Section        2.5 and the terms of this Agreement, (ii) shall limit its review to matters specifically set        forth in the Dispute Notice the basis of which are mathematical errors or failure of Buyer        to prepare the Updated Adjustment Statement and in accordance with the Example        Calculation and the Specified Accounting Principles and (iii) shall not assign a value to        any item higher than the highest value for such item claimed by either party or less than        the lowest value for such item claimed by either party.                 (vii) All fees and expenses relating to the work of the Independent Accounting        Firm shall be shared equally by Buyer and Seller.  The Adjustment Report, absent fraud,        shall be final and binding upon Buyer and Seller, and shall be deemed a final arbitration        award that is binding on each of Buyer and Seller, and no party shall seek further recourse        to Courts, other tribunals or otherwise, other than to enforce the Adjustment Report or to        adjudicate any fraud claims.               (viii) Any adjustments pursuant to this Section 2.5 shall be reflected in the        Purchase Price for all Tax purposes.          2.6   Escrow Account.                 (a)   The Escrow Amount, together with any income earned thereon as provided  in the Escrow Agreement net of any applicable Taxes (the “Escrowed Funds”), shall be held by  the Escrow Agent pursuant to the Escrow Agreement as a source of funds for amounts owing to  Buyer under Section 2.5 and Article IX.  Each of Buyer and Seller shall cooperate to give the                                       - 20 -  

 

   Escrow Agent timely instructions to implement any distributions from the Escrow Account as  contemplated by Sections 2.5 and 2.6 and Article IX.               (b)   Within three (3) Business Days following the date that is eighteen (18)  months following the Closing Date (the “Escrow Release Date”), Buyer and Seller shall jointly  instruct the Escrow Agent by executing and delivering a certificate to the Escrow Agent to pay to  Seller from the Escrowed Funds, by wire transfer in immediately available funds and on the terms  and subject to the conditions of this Agreement and the Escrow Agreement, an amount equal to  (i) any remaining portion of the Escrowed Funds as of the Escrow Release Date minus (ii) the  Escrow Holdback Amount, if any, as of the Escrow Release Date.  Thereafter, Buyer shall  promptly provide Seller with notice upon Buyer’s reasonable and good faith determination that  any portion of the Escrow Holdback Amount will not be used to satisfy a claim made by a Buyer  Indemnified Person for indemnification under Article IX, and within three (3) Business Days  following Seller’s receipt of such notice, Buyer and Seller shall jointly instruct the Escrow Agent  by executing and delivering a certificate to the Escrow Agent to pay to Seller from the Escrowed  Funds, by wire transfer in immediately available funds and on the terms and subject to the  conditions of this Agreement and the Escrow Agreement, an amount equal to such portion of the  Escrow Holdback Amount.  For purposes hereof, “Escrow Holdback Amount” shall mean the good  faith aggregate amount, as reasonably determined by Buyer, of all claims for indemnification set  forth in any demand for indemnification made by a Buyer Indemnified Person to Seller pursuant  to and in strict compliance with Article IX (whether disputed or undisputed) on or prior to the  Escrow Release Date that are outstanding as of the Escrow Release Date.                                   ARTICLE III.        REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES   Except as set forth in the Seller Disclosure Schedule delivered by the Seller Parties to Buyer in  connection with the execution of this Agreement, (i) each of the Minority Shareholders severally  and not jointly represents and warrants to Buyer, as of the date hereof and as of the Closing Date,  as expressly specified in Section 3.5 of this Article III, and (ii) except where such representation  and warranty is specifically made by the Minority Shareholders, Seller hereby represents and  warrants to Buyer, as of the date hereof and as of the Closing Date, as follows:         3.1  Organization and Qualification.         (a)   The Seller, the Company and each Subsidiary of the Company is a corporation or  limited liability company duly incorporated or organized, validly existing and in good standing  under the Law of the jurisdiction of its organization or incorporation and each (i) has all the  requisite corporate or limited liability company power and authority to own, lease and operate its  properties and to carry on its business as it is now being conducted and (ii) is duly qualified to do  business and is in good standing in each of the jurisdictions in which the ownership, operation or  leasing of its properties and assets and the conduct of its business requires it to be so qualified,  except where the failure to be so qualified would not reasonably be expected to have a Company  Material Adverse Effect.         3.2  Organizational Documents.  Seller has made available to Buyer a true, complete and  correct copy of the Organizational Documents of the Seller, the Company and each Subsidiary of                                       - 21 -  

 

   the Company, each as amended. None of the Seller, the Company nor any Subsidiary of the  Company is in violation of its Organizational Documents in any material respect.  The  Organizational Documents of the Seller, the Company and the Subsidiaries of the Company that  have been so delivered are in full force and effect. Seller has made available to Buyer a true,  complete and correct copy of the trust agreements and other Organizational Documents of each  trust that is a shareholder of Seller, as amended, and such agreements and other documents are in  full force and effect.         3.3  Capitalization.         (a)   The Membership Interests constitute 100% of the total issued and outstanding  equity interests in the Company.  Except as set forth in Section 3.3(a) of the Seller Disclosure  Schedule, no other equity interests or other voting securities of the Company are issued, reserved  for issuance or outstanding. The Membership Interests have been duly authorized and validly  issued, fully paid and non-assessable.  Seller owns beneficially and of record, and has good and  valid title to, the Membership Interests, free and clear of all Liens.  Upon consummation of the  transactions contemplated hereby, Seller shall convey to Buyer all of the Membership Interests  free and clear of all Liens.           (b)   The Membership Interests were issued in compliance with applicable Law.  The  Membership Interests were not issued in violation of the Organizational Documents of the  Company or any other agreement, arrangement or commitment to which Seller or the Company is  a party and are not subject to or in violation of any preemptive or similar rights of any person.           (c)   Except as set forth in Section 3.3(c) of the Seller Disclosure Schedule, there are no  (i) outstanding securities or obligations convertible into or exchangeable for membership interests  of the Company, (ii) outstanding or authorized securities, options, warrants, call rights or other  similar rights obligating the Company to issue, transfer or sell or cause to be issued, transferred or  sold any membership interests in the Company or (iii) contracts or other agreements to which the  Company or any Seller is a party relating to the voting, issuance, purchase, redemption,  registration, repurchase, sale or transfer of any membership interests in the Company.  Except as  set forth in Section 3.3(c) of the Seller Disclosure Schedule, neither Seller nor the Company has  granted any preemptive rights, rights of first refusal (other than as set forth in the Organizational  Documents of the Company) or other similar rights with respect to the Membership Interests or  other interests in the Company.         (d)   Except as set forth in Section 3.3(d) of the Seller Disclosure Schedule, since  January 1, 2017, there has been no capital withdrawal from the Company or any of its Subsidiaries.   There are no contracts or other oral or written agreements in place that allow any equity owner of  the Company or any of its Subsidiaries to withdraw any equity or capital of the Company or any  of its Subsidiaries.         3.4  Subsidiaries.           (a)   Section 3.4(a) of the Seller Disclosure Schedule sets forth a list of the names and  jurisdictions of incorporation or organization of each Subsidiary of the Company.                                         - 22 -  

 

         (b)   Except as set forth in Section 3.4(b)(i) of the Seller Disclosure Schedule, (i) all  issued and outstanding shares or other equity interests of each Wholly-Owned Subsidiary of the  Company have been duly authorized and validly issued, are fully paid and are owned directly or  indirectly by the Company free and clear of any Liens, and (ii) all issued and outstanding shares  or other equity interests of EEI and each Insurance Subsidiary have been duly authorized and  validly issued, are fully paid and are owned beneficially and of record by the shareholders and in  the amount set forth in Schedule 3.4(b)(ii), free and clear of all Liens.         (c)   None of the Subsidiaries of the Company own any Membership Interests or  Minority-Owned Shares. Except as set forth in Section 3.4(c) of the Seller Disclosure Schedule,  none of the outstanding shares or other equity interests of any Subsidiary of the Company are  subject to, nor were they issued in violation of, any purchase option, call option, right of first  refusal, first offer, co-sale or participation, preemptive right, subscription right or any similar right.  Except as set forth in Section 3.4(c) of the Seller Disclosure Schedule, there are no outstanding  securities, options, warrants, calls, rights, convertible or exchangeable securities or contracts or  obligations of any kind (contingent or otherwise) to which any Subsidiary of the Company is a  party or by which it is bound obligating such Subsidiary to issue, deliver or sell additional shares  of capital stock or other voting securities of such Subsidiary or obligating such Subsidiary to issue,  grant, extend or enter into any such security, option, warrant, call, right, contract or obligation.  Except as set forth in the Organizational Documents of each Subsidiary of the Company, there are  no (i) outstanding obligations of any Subsidiary of the Company to repurchase, redeem or  otherwise acquire, directly or indirectly, any shares of capital stock (or options or warrants to  acquire any such shares) of such Subsidiary, and (ii) outstanding or authorized securities, options,  warrants, call rights or other similar rights obligating such Subsidiary to issue, transfer or sell or  cause to be issued, transferred or sold any equity interests in such Subsidiary.  Except for  Investment Assets and its Subsidiaries, the Company does not own any shares of capital stock of  or other voting or equity interests (including any securities exercisable or exchangeable for or  convertible into shares of capital stock of or other voting or equity interests in) in any other Person.         3.5  Authority; Enforceability.         (a)   Seller has the requisite corporate power and authority to execute and deliver this  Agreement, each other Transaction Document to which it is a party and each instrument required  to be executed and delivered by it prior to or at the Closing and to perform its obligations hereunder  and thereunder and to consummate the transactions contemplated hereby and thereby. The  execution and delivery by the Seller of this Agreement, each other Transaction Document and each  instrument required to be executed and delivered by it prior to or at the Closing, the performance  of its obligations hereunder and thereunder and the consummation of the transactions contemplated  hereby and thereby have been, or (with respect to Transaction Documents and instruments that  will be executed and delivered after the date of this Agreement) will be, duly and validly authorized  by all necessary corporate action on the part of Seller no later than the Closing Date, and no other  corporate or similar proceedings on the part of Seller are necessary to authorize this Agreement,  any Transaction Document to which it is a party or any instrument required to be executed and  delivered by it prior to or at the Closing or the consummation of transactions contemplated hereby  or thereby.  Each of the Transaction Documents to which Seller is or will be a party have been or,  with respect to the Transaction Documents to be executed and delivered at Closing, will be, duly  and validly executed and delivered by Seller and, assuming the due authorization, execution and                                       - 23 -  

 

   delivery hereof by the other parties hereto or thereto, constitute legal, valid and binding obligations  of Seller, enforceable against it in accordance with its terms, except that (i) such enforcement may  be subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,  moratorium and other similar Law relating to or affecting creditors’ rights generally, and (ii) the  remedy of specific performance and injunctive and other forms of equitable relief may be subject  to equitable defenses and to the discretion of the Court before which any Proceeding therefor may  be brought (the “Enforceability Exceptions”). Seller has obtained approval from its shareholders  to enter into this Agreement and any Transaction Documents executed and delivered on the date  of this Agreement.  On or before the Closing Date, Seller will have obtained approval from its  shareholders to enter into the other Transaction Documents and to consummate the transactions  contemplated hereby and thereby.         (b)   Each Minority Shareholder hereby represents and warrants that (i) it has the  requisite power and authority to execute and deliver this Agreement, each other Transaction  Document to which it is a party and each instrument to be executed and delivered by it prior to or  at the Closing and to perform its obligations hereunder and thereunder and to consummate the  transactions contemplated hereby and thereby, (ii) each Transaction Document to which such  Minority Shareholder is or will be a party has been or, with respect to the Transaction Documents  to be executed and delivered at Closing, will be,  duly and validly executed and delivered by such  Minority Shareholder and, assuming the due authorization, execution and delivery hereof by the  other parties hereto or thereto, constitute legal, valid and binding obligations of such Minority  Shareholder, enforceable against it in accordance with its terms, subject to the Enforceability  Exceptions.         (c)   Each trustee of the JCE Trust is the duly appointed and acting trustee of the JCE  Trust and such trustees are currently the only trustees of the JCE Trust.  The JCE Trust has  previously delivered to Buyer a true and complete copy of each agreement that establishes the JCE  Trust, which documents have not been amended since the date of such delivery.  The JCE Trust is  validly existing under the laws of the State of Texas.  The trustees of the JCE Trust have the  capacity, power and authority on behalf of the JCE Trust to enter into this Agreement and the other  Transaction Documents to be executed and delivered by the trustees pursuant to this Agreement  in the trustees’ fiduciary capacity on behalf of the JCE Trust, to perform the trustees’ obligations  hereunder and thereunder on behalf of the JCE Trust, and to sell to Buyer the JCE Trust’s Minority- Owned Shares for the consideration provided in Section 2.1(b), in each case without the consent  or action of any other person.  Since the creation of the JCE Trust, no steps have been taken to  liquidate, dissolve, or otherwise adversely affect the organization, existence or operation of the  JCE Trust.  The execution, delivery and performance of the Transaction Documents to which the  JCE Trust is a party have been or, with respect to the Transaction Documents to be executed and  delivered at Closing, will be, duly authorized by all necessary action on the part of the trustees of  the JCE Trust in compliance with governing or applicable agreements, instruments, documents,  duties and applicable Law.  On or prior to the date hereof, the trustees of the JCE Trust have  delivered to Buyer an executed copy of the applicable Certificate of Trust, and the representations  made in the Certificate of Trust are hereby incorporated by reference.                                        - 24 -  

 

           3.6  No Conflict; Required Filings and Consents.            (a)   Except as set forth on Section 3.6(a) of the Seller Disclosure Schedule, the   execution and delivery by the Seller Parties of this Agreement, the other Transaction Documents   to which such Person is party or any instrument required by this Agreement to be executed and   delivered by any Seller Party on or prior to the Closing do not, and the performance of this  Agreement, the other Transaction Documents to which such Person is a party and any instrument  required by this Agreement to be executed and delivered by it on or prior to the Closing do not and   will not, (i) conflict with, require a consent or notice under or violate the Organizational   Documents of the Seller Parties, the Company or any of its Subsidiaries, (ii) with or without notice   or the passage of time or both, conflict with, require a consent or notice under or violate any Law,   Permit or Order applicable to the Company or any of its Subsidiaries or by which any of their   properties, rights or assets is bound or affected, or (iii) with or without notice or the passage of   time or both, violate, conflict with or result in a breach of any provision of, or constitute a default   (or an event which, with the giving of notice, the passage of time or otherwise would constitute a   default) under or entitle any Person to terminate, accelerate or cause a breach or default of, or result   in the creation of any Lien upon any of the properties or assets of the Company or any of its   Subsidiaries under, or create any right of acceleration, termination, vesting, payment, exercise,   suspension, revocation or cancellation of the loss of any right or benefit under any contract,   mortgage, lien, lease, agreement, indenture, trust, instrument, order, judgment or decree to which   the Company or any of its Subsidiaries is a party or which is binding upon the Company or any of   its Subsidiaries or upon any of the assets of any of the foregoing.  The JCE Trust hereby represents   and warrants that the execution and delivery by the JCE Trust of this Agreement, the other   Transaction Documents to which it is a party or any instrument required by this Agreement to be   executed and delivered by the JCE Trust on or prior to the Closing do not, and the performance of   this Agreement, the other Transaction Documents to which it is a party and any instrument required   by this Agreement to be executed and delivered by it on or prior to the Closing do not and will not,   conflict with, require a consent or notice under or violate the underlying trust agreement or other   similar governing instrument.          (b)   No Governmental Approval or Filing with any Governmental Authority is required   to be obtained or made by the Company, its Subsidiaries or any Seller Party in connection with the   consummation of the transactions contemplated hereby, except (i) for compliance with the   applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR   Act”), (ii) Filings with Insurance Regulators and other Filings and approvals that, in each case of   this clause (ii) are listed on Section 3.6(b) of the Seller Disclosure Schedule (the consents,   approvals, Orders, authorizations, acknowledgements and Filings required under or in connection   with this clause (ii), the “Required Governmental Authorizations”), (iii) Filings with Insurance   Regulators for approval or non-disapproval of the Special Dividend and (iv) as may be necessary   as a result of any facts or circumstances relating to Buyer and its Affiliates.           (c)  Section 3.6(c) of the Seller Disclosure Schedule sets forth a true and complete list    of each Regulated Subsidiary of the Company and, for each such Regulated Subsidiary, its    jurisdiction of incorporation or organization and each jurisdiction where it is licensed by any    Insurance Regulator and its material Permits.                                         - 25 -  

 

         3.7  Material Contracts.         (a)   Section 3.7(a) of the Seller Disclosure Schedule sets forth a true and complete list  as of the date hereof of all Material Contracts to which the Company or any of its Subsidiaries is  a party or is otherwise bound. As used herein, “Material Contracts” means all of the following:               (i)   any agreement for the employment of, or any offer of employment to, any        officer, Employee or other individual on a full-time basis, which provides for annual        payments (excluding any incentive payments or commissions) in excess of $100,000, but        excluding offer letters for the at will employment of individuals listed on Section 3.17(a)        of the Seller Disclosure Schedule;                             (ii)  contracts (other than Reinsurance Contracts and contracts covered by        Section 3.7(a)(iii) or agreements set forth in Section 3.23 of the Seller Disclosure Schedule)        providing for the provision of goods and services involving expenditures or payables in        excess of $75,000 in the aggregate during the last trailing twelve months ended December        31, 2017, other than contracts listed elsewhere in Section 3.7(a) of the Seller Disclosure        Schedule;                 (iii) any contract with any current Independent Producer, provided that Section        3.7(a)(iii) of the Seller Disclosure Schedule need only list the identities of such        Independent Producers by reference with Section 3.11(a) of the Seller Disclosure Schedule;               (iv)  any network agreement pursuant to which the Company or any of its        Subsidiaries obtains or leases access to any provider network of a third party (but        excluding, for purposes of clarification, any such networks accessed through any Employee        Plan) and any customer account agreement to which the Company or any of its Subsidiaries        derives revenues in excess of $75,000 on an annualized basis;               (v)   credit agreements, mortgages, loan agreements, indentures, letters of credit,        swap agreements and any other agreements, in each case relating to Indebtedness or other        borrowing of money or extension of credit by the Company or its Subsidiaries and each        agreement guaranteeing, or providing security for, Indebtedness or mortgaging, pledging        or otherwise placing a Lien on the assets of the Company or any of its Subsidiaries;               (vi)  each contract containing (A) a restriction on the ability of the Company or        any of its Subsidiaries to solicit specified customers or prospective customers for the        purchase, renewal, lapse, or amendment of an Insurance Contract, or (B) covenants limiting        in any way the freedom of the Company or any Subsidiary of the Company to compete in        any line of business or in the marketing, selling or administration of any Insurance Contract        and which is not terminable on ninety (90) days’ notice or less by the Company or any        Subsidiary of the Company without restriction, liability or penalty, in each case that would        be legally binding on the Company or any Affiliate following the consummation of the        transactions contemplated hereby;                 (vii) leases, subleases, licenses or similar contracts (A) requiring payments to or        from the Company or any of its Subsidiaries in excess of $75,000 per annum representing                                       - 26 -  

 

         an interest in or in respect of any material rights, assets or property, but excluding contracts        for commercial generally available Software for an annual fee of less than $75,000, or (B)        relating to any Real Property;                (viii) any license or similar contract to which the Company or any of its       Subsidiaries is a party or by which any of them is otherwise bound restricting or granting       rights to use or practice rights under Intellectual Property that is material to the business of       the Company and its Subsidiaries, but in each case excluding contracts for commercial       generally available Software for an annual fee of less than $75,000;                (ix)  any contract pursuant to which the Company or any Subsidiary of the        Company is appointed a third party administrator, insurance agent, managing general agent        or other insurance producer or that relates to insurance policy administration, claims, or       underwriting;                (x)   any contract with a custodian or otherwise relating to custodial services with        respect to assets of the Company or any Subsidiary of the Company;                (xi)  any contract or agreement relating to any material interest rate, derivatives        or hedging transaction, other than Investment Assets;               (xii) any investment advisory agreement or any other contract relating to        investment management, investment advisor or subadvisory services;               (xiii) any contract relating to the allocation or sharing of Taxes, costs, or        expenses;                (xiv) any contract relating to cybersecurity or information technology security        services;                (xv)  any contract pursuant to which any material function of the Company’s or        any of its Subsidiaries’ business is outsourced or otherwise performed by an unaffiliated        Person;                (xvi) any contract for goods, products or services that are material to the operation        of the Company’s or any of its Subsidiaries’ business; and               (xvii) any contract that relates to the acquisition or disposition of any material        business or operation of the Company or any of its Subsidiaries entered into since January        1, 2016, or any other similar contract that includes an ongoing material indemnification        obligation or guarantee of the Company or any of its Subsidiaries.         (b)   True and complete copies of all Material Contracts, including all amendments  thereto, have been made available to Buyer by Seller. Each Material Contract is in full force and  effect, is a valid and binding obligation of the Company or a Subsidiary of the Company and, to  the Knowledge of the Seller Parties, of each other party thereto and is enforceable in accordance  with its terms against the Company or a Subsidiary of the Company and, to the Knowledge of the  Seller Parties, against each other party to such Material Contract, subject in each case to the                                       - 27 -  

 

     Enforceability Exceptions. Neither the Company or, if applicable, a Subsidiary of the Company,   nor, to the Knowledge of the Seller Parties, any other party to any such Material Contract is in   material default, breach or violation of any Material Contract and no party has given written notice   to the Company, and Subsidiary or any Seller Party of any material default, breach or violation.    Neither the Company nor any of its Subsidiaries has received written or, to the Knowledge of the   Seller Parties, oral notice of cancellation of any Material Contract, and, except as set forth in   Section 3.7(b) of the Seller Disclosure Schedule, the Material Contracts do not contain any   provision that would allow any party to a Material Contract to (i) terminate the agreement, or (ii)   increase any amount payable thereunder, in each case as a result solely of the consummation of   the transactions contemplated by this Agreement.          3.8  Compliance with Law; Permits.            (a)   The Company and its Subsidiaries are and have been conducting their respective   businesses in compliance in all material respects with applicable Law of any Governmental   Authority applicable to the Company or its Subsidiaries.  Since January 1, 2016, none of the   Company or any of its Subsidiaries (i) has committed any breach or violation of applicable Law   that has resulted in, or that will more likely than not result in, any material penalty, fine,   assessment, damages, suspension or loss of any material Permit, or any other material adverse   remedial action with respect to the Company or its Subsidiaries, taken as a whole, (ii) has received   any written notice from any Governmental Authority or paid or incurred any penalty or fine   imposed by a Governmental Authority, in each case, regarding any actual or alleged material   violation of, or failure to comply with, any applicable Law, or (iii) to the Knowledge of the Seller   Parties, is under investigation, examination or audit with respect to any material violation of any   applicable Law, in the case of each item set forth in this clause (iii), other than any such item that   has been generally cured or otherwise resolved to the reasonable satisfaction of such Governmental   Authority, or that is no longer being pursued by such Governmental Authority following a response   by the Company or its Subsidiaries.           (b)   Except as set forth in Section 3.8(b) of the Seller Disclosure Schedule, to the   Knowledge of the Seller Parties, all material deficiencies or violations in all reports of   examinations of the affairs of any Regulated Subsidiary (including financial, market conduct and   similar examinations) issued by any Insurance Regulator to a Regulated Subsidiary on or after  January 1, 2016 have been resolved to the reasonable satisfaction of the Insurance Regulator that  noted such deficiencies or violations.          (c)   Except as set forth in Section 3.8(c) of the Seller Disclosure Schedule, since   January 1, 2016, each Regulated Subsidiary has filed all material reports, statements, documents,   registrations, filings or submissions required to be filed by such Regulated Subsidiary with any   Governmental Authority. All such registrations, filings and submissions were in compliance in all   material respects with applicable Law when filed or as amended or supplemented, and no material   deficiencies have been asserted by any Governmental Authority with respect to such registrations,   filings or submissions that have not been satisfied.  Seller has made available to Buyer true and   complete copies of all such reports, statements, documents, registrations, filings or submissions   filed with any Governmental Authority since January 1, 2016 other than renewals of Permits in   the ordinary course of business.                                         - 28 -  

 

         (d)   The Company and its Subsidiaries hold all Permits required under applicable Law  and necessary in connection with the conduct of their businesses.  All such Permits are valid and  in full force and effect in accordance with their terms, and the Company and its Subsidiaries are,  and at all times since January 1, 2016 have been, in compliance in all material respects with the  terms and requirements of each such Permit. Since January 1, 2016, none of the Company or any  of its Subsidiaries has received any written or, to the Knowledge of the Seller Parties, oral notice  from any Governmental Authority regarding any (i) actual, alleged, or potential material violation  of, or failure to comply with, the terms or requirements of any such Permit, or (ii) actual or  proposed revocation, suspension or termination of, or material modification to, any such Permit.   Neither the Company nor any Subsidiary is in default under, and no condition exists that with  notice or lapse of time or both would constitute default under, any such Permit, and no such Permit  will be terminated or impaired or become terminable, in whole or in part, as a result of the  transactions contemplated hereby.  Section 3.8(d) of the Seller Disclosure Schedule sets forth by  state those Certificates of Authority to transact insurance included in the Permits.         (e)   Seller has previously made available to Buyer the Social Security Death Master  File-related state protocols and any other state protocols of the Company and any of its Subsidiaries  related to Unclaimed Property Matters and their effective dates, which the Company or any of its  Subsidiaries use to determine the payment of life insurance or other benefits and amounts under  Insurance Contracts.  The Company or its applicable Subsidiary administers all such Insurance  Contracts in accordance with these protocols and applicable Law and is not currently under any  audit with respect to such matters. Seller has made available to Buyer (i) all workpapers,  estimations, analyses and reviews of amounts as may be or become due under the terms of the  Insurance Policies or otherwise by the Insurance Subsidiaries with respect to the Social Security  Death Master File-related review processes, (ii) true and correct copies of all written  correspondence between the Company or any of its Subsidiaries and any Governmental Authority  or any Person acting on behalf of a Governmental Authority since January 1, 2016 regarding any  pending or threatened Proceedings relating to Unclaimed Property Matters, (iii) true and correct  copies of all correspondence with any contractual counterparties relating to Unclaimed Property  Matters and (iv) a schedule of the balance sheet accruals made and maintained by the Company  and any of its Subsidiaries at and as of December 31, 2017, with respect to Unclaimed Property  Matters.  There are no orders, decrees, injunctions, judgments, or settlement agreements issued by,  entered before, or agreed to with any arbitrator or Governmental Authority outstanding against the  Company or any of its Subsidiaries or any of their assets, properties or businesses relating to any  Unclaimed Property Matters and the Company and its Subsidiaries are not under any audit with  respect to such matters.         (f)   Except as set forth on Schedule 3.8(f) of the Seller Disclosure Schedule, in the last  three (3) years, (i) to the Knowledge of the Seller Parties, no allegations of sexual harassment or  misconduct have been made against any current or former Employee, and (ii) none of the Seller  Parties, the Company or any Subsidiary of the Company has entered into any settlement  agreements related to allegations of sexual harassment or misconduct by any current or former  Employee.                                        - 29 -  

 

           3.9  Financial Statements.          (a)   The Company has made available to Buyer true, correct and complete copies of (i)   the audited annual statutory financial statements of each Insurance Subsidiary, together with the   report of such company’s independent auditors thereon, as of and for the years ended   December 31, 2016 and December 31, 2017 as filed with the Insurance Regulator of the state of   jurisdiction of each such Insurance Subsidiary, and (ii) the unaudited statutory financial statements   of each such Insurance Subsidiary as of and for the nine (9) months ended September 30, 2018   (the financial statements for the period ending on September 30, 2018, the “Most Recent Statutory   Statement” and, collectively, the “Statutory Statements”). The Statutory Statements were prepared   in accordance with SAP applicable to each Insurance Subsidiary consistently applied throughout   all such periods and fairly present in all material respects the financial position, admitted assets,   liabilities and capital and surplus of each Insurance Subsidiary at the respective dates, and the   results of operations, changes in surplus, and cash flows of the applicable Insurance Subsidiary for   the periods covered thereby, subject, in the case of the Statutory Statements as of and for the nine   months ended September 30, 2018, to the absence of full footnote disclosures and other   presentation items.           (b)   Seller has made available to Buyer true, correct and complete copies of (i) the   audited consolidated annual financial statements of the Company and its Subsidiaries as of and for   the year ended December 31, 2017, (ii) the unaudited consolidated annual financial statement of   the Company and its Subsidiaries as of and for the year ended December 31, 2016, and (iii) the   unaudited consolidated financial statement of the Company and its Subsidiaries as of and for the   nine months period ended September 30, 2018 (the financial statement for the period ending on   September 30, 2018, the “Most Recent GAAP Statement”, and clauses (i) and (ii) of this Section   3.9(b), collectively, the “Consolidated Statements”).  The Consolidated Statements were prepared   in accordance with generally accepted accounting principles in the United States (“GAAP”),   consistently applied throughout all such periods and fairly present in all material respects the   financial position of the Company and its Subsidiaries at the respective dates.          (c)   The Reserves of the Insurance Subsidiaries as of September 30, 2018 recorded in   the Most Recent Statutory Statement were determined: (i) in accordance with generally accepted   actuarial standards consistently applied, (ii) in accordance with SAP and applicable Law, (iii) in   accordance with the Specified Accounting Principles and (iv) based on actuarial assumptions   consistent with or more conservative than those called for in relevant provisions of the Insurance   Contracts. For clarity, Seller makes no representation, warranty or guarantee under this Agreement   that the Reserves held by or on behalf of the Insurance Subsidiaries are or will be sufficient for the   purposes for which they were established.          (d)   Seller has made available all analyses and reports relating to the risk-based capital  calculations of each Insurance Subsidiary submitted by such Insurance Subsidiary since January  1, 2016, to the Insurance Regulator in each state in which such analyses and reports rules are  required to be filed (the “RBC Reports”).  The RBC Reports were prepared in accordance with   SAP applicable to the Insurance Subsidiaries and the applicable RBC instructions and were true   and correct in all material respects on and as of the date filed with each such Insurance Regulator.    No Insurance Regulator has notified either Insurance Subsidiary of any inaccuracy in any RBC   Report.  The Company and each of its Subsidiaries is solvent.                                        - 30 -  

 

           (e)   Section 3.9(e) of the Seller Disclosure Schedule sets forth a true and complete list   of all outstanding Indebtedness, if any.  None of the Company and its Subsidiaries is in default,   and no waiver of default is presently in effect, in the payment of any principal or interest on any   such Indebtedness.          (f)   The Books and Records (i) are true, complete and correct in all material respects,   (ii) have been maintained in all material respects in accordance with sound business practices, any   applicable record keeping or maintenance requirements in the Material Contracts, Insurance  Contracts and Reinsurance Contracts, and applicable Law, (iii) accurately present and reflect in all  material respects all of the business of the Company and its Subsidiaries and all transactions and  actions related thereto, (iv) to the Knowledge of the Seller Parties, have been prepared using  processes and procedures for which there are no material weaknesses or significant deficiencies in  internal controls over financial reporting that adversely affect the ability of Seller to accurately  present and reflect in all material respects the business of the Company and its Subsidiaries and  other transactions and actions related thereto, and (v) contain no material Data Input Inaccuracies.          (g)   The Company and its Subsidiaries have devised and maintained systems of internal   accounting controls with respect to its business and the business of the Insurance Subsidiaries that   are reasonably sufficient to provide reasonable assurances that (i) all transactions are executed in   accordance with management’s general or specific authorization, (ii) all transactions are recorded   as necessary to permit the preparation of financial statements in conformity with SAP applicable   to the Insurance Subsidiaries or GAAP, as applicable, and to maintain proper accountability for   items, (iii) access to its property and assets is permitted only in accordance with management’s   general or specific authorization and (iv) recorded accountability for assets is compared with the   existing assets at reasonable intervals and appropriate action is taken with respect to any   differences.            3.10 Insurance Business.           (a)   Except as set forth in Section 3.10(a) of the Seller Disclosure Schedule, any   application form, form of insurance policy, written advertising material, rate or rule utilized by the   Company or its Subsidiaries, the use or issuance of which requires filing or approval, has been   appropriately filed, and, if required, approved by the Insurance Regulator of any state in which   such application forms, forms of insurance policies, advertising materials and rates or rules are   required to be filed and, if required, approved or not objected to by such authorities within the   period provided for approval or objection, except for failures to effect such filings or secure such   approvals, which would not be material to the Company and its Subsidiaries, taken as a whole. All   such application forms, forms of insurance policies, advertising materials and rates or rules are   utilized in compliance in all material respects with applicable Law and within the scope of the   approvals (if any) received with respect thereto. No material deficiencies have been asserted by   any Governmental Authority with respect to any such filings that have not been cured or otherwise   resolved.  The Insurance Contracts have been administered in accordance with the terms of such   policies and in compliance with applicable Law, in each case in all material respects.  All amounts   owed (that are not being disputed in good faith) under any Insurance Contracts have been paid in   all material respects in accordance with their terms.  Except as provided under the express terms  of the Insurance Contracts or otherwise provided under applicable Law, there are no agreements  or commitments, written or otherwise, regarding any alterations to any applicable cost of insurance                                        - 31 -  

 

   charges, credited interest rates, insurance policy premiums, features or other similar charges or  rates with respect to any of the Insurance Contracts. Seller has made available to Buyer true and  complete copies of specimen forms of Insurance Contracts that are in-force or are actively being  marketed by the Company and its Subsidiaries.  Such specimen forms are true, correct and  complete copies of the policies forms on which the Insurance Contracts are issued.  Such policy  forms are representative of the Insurance Contracts, except for variations that, individually or in  the aggregate, would not reasonably be expected to be material to the Insurance Contracts or  materially affect the valuation, projection or risk profile of the Insurance Contracts.           (b)   Since January 1, 2016, the Company and its Subsidiaries have timely paid all  guaranty fund assessments that have been due, claimed or asserted by, or are the subject of any  voluntary contribution commitment to, any state guaranty fund or association or any Insurance  Regulator in any jurisdiction in which the Company and its Subsidiaries operate their respective  businesses.  Except for regular periodic assessments in the ordinary course of business or  assessments based on developments that are publicly known within the insurance industry, no  material claim or assessment is pending or, to the Knowledge of the Seller Parties, threatened  against the Company or any Affiliate by any state insurance guaranty association in connection  with such association’s fund relating to insolvent insurers.         (c)   Seller has made available to Buyer true and complete copies of all underwriting  manuals (including each amendment thereto) utilized by any Subsidiary of the Company with  respect to the business of such Subsidiary since January 1, 2016.  The underwriting standards and  ratings applied by each such Subsidiary since such date with respect to the Insurance Contracts  issued by such Subsidiary have conformed in all material respects to those contained in the  applicable underwriting policies as in effect at the time such Insurance Contracts were  underwritten.         (d)   Seller has provided Buyer information relating to the Insurance Subsidiaries’  setting of any Non-Guaranteed Elements as in effect as of the date hereof and copies of the  following information and analyses related to the Insurance Contracts as of the date such  information and analyses were prepared: (i) current and projected cost of insurance charges and  charges for mortality and administration of the Insurance Contracts; (ii) current and projected  credited interest rates; and (iii) minutes of meetings of the Board of Directors of each Insurance  Subsidiary (and any committee thereof) held since January 1, 2016 as the same pertained to  crediting rates, cost of insurance rates or other Non-Guaranteed Elements specifically on or in  respect of the Insurance Contracts, including therewith supporting materials or actuarial analyses  provided thereto in connection with its assessment of such proposed changes.  Since January 1,  2016, except (i) as set forth in Section 3.10(d) of the Seller Disclosure Schedule, or (ii) with respect  to crediting rates applicable to the Insurance Contracts, neither Insurance Subsidiary has changed  the “cost of insurance” or similar charges or other Non-Guaranteed Elements on or in respect of  the Insurance Contracts and, as of the date hereof, has no agreements or commitments, written or  otherwise, regarding credited interest rates to be paid with respect to any of the Insurance  Contracts.         (e)   Neither Insurance Subsidiary is “commercially domiciled” in any jurisdiction.   Neither Insurance Company (i) has issued or reinsured any Insurance Contract the policy value of                                        - 32 -  

 

   which varies with the investment performance of a separate account or sub account thereof, or (ii)  owns or maintains any separate account applicable to the Insurance Contracts.         (f)   The Seller has made available to Buyer a true and complete copy of all actuarial  reports and opinions prepared by actuaries, independent or otherwise, with respect to the Company  or its Subsidiaries, since January 1, 2016, set forth in Section 3.10(f) of the Seller Disclosure  Schedule, and the material attachments, addenda, supplements and modifications thereto set forth  in Section 3.10(f) of the Seller Disclosure Schedule (collectively, the “Company Actuarial  Analyses”).  Solely with respect to the Company Actuarial Analyses, to the Knowledge of the  Seller Parties, (i) each such Company Actuarial Analysis was based upon, in all material respects,  an accurate inventory of Insurance Contracts in force at the relevant time of preparation and (ii)  was prepared in conformity in all material respects with appropriate standards and procedures as  prepared from time to time by the Actuarial Standards Board in effect at such time, consistently  applied (except as may be noted therein).          3.11 Producers; Sale Practices.          (a)   Section 3.11(a) of the Seller Disclosure Schedule sets forth a true and correct list  of (i) current Independent Producers of the Company or any of its Subsidiaries and the gross  premium volume produced by the business of the Company and its Subsidiaries in respect of each  such Independent Producer for the twelve (12) months ended December 31, 2017, and (ii) each  Independent Producer of the Company or any of its Subsidiaries (other than current Independent  Producers) that is entitled to receive commissions from the Company or any of its Subsidiaries.          (b)   To the Knowledge of the Seller Parties, each Independent Producer was duly and  appropriately appointed by the applicable Regulated Subsidiary to act as a producer for such  Regulated Subsidiary at the time such Independent Producer negotiated, placed, marketed, wrote,  sold, produced or solicited any of the currently in-force insurance policies of such Regulated  Subsidiary for which it was the producer to the extent required by applicable Law.  To the  Knowledge of the Seller Parties, each Independent Producer at such time was duly licensed as  required by applicable Insurance Law (for the type of business written, sold, produced or solicited  on behalf of the applicable Regulated Subsidiary), except for such failures to be so licensed which  have been cured, which have been resolved or settled through agreements with applicable  Governmental Authorities, which are barred by an applicable statute of limitations or which would  not be material to the Company and its Subsidiaries, taken as a whole.          (c)   Since January 1, 2016, none of the Company or any of its Regulated Subsidiaries  has received any written notice from any Governmental Authority that an Independent Producer  is in material violation of any applicable Law applicable to the writing, sale, production or  solicitation of insurance policies for the Regulated Subsidiaries.         (d)   Seller has made available to Buyer (i) the standard forms of agreements used in  connection with the business of any Regulated Subsidiary for Independent Producers since January  1, 2013, and (ii) true, accurate and complete copies of any agreements in force on the date hereof  between the Company or any of its Subsidiaries and any Independent Producer that is substantially  different from both such standard forms of agreements and other standard forms of agreements  used by the Company or any of its Subsidiaries prior to January 1, 2013. Except as set forth in                                       - 33 -  

 

     Section 3.11(d) of the Seller Disclosure Schedule or in such standard forms, neither the Company   nor any of its Affiliates has any compensation plans or programs for the payment of compensation   to Independent Producers other than commissions based on gross premium volume produced and   volume-based bonus arrangements.  To the Knowledge of the Seller Parties, no Independent   Producer has materially breached the terms of any agency or broker contract with or for the benefit   of any Regulated Subsidiary.           3.12 Existing Reinsurance Contracts.           (a)   Section 3.12(a) of the Seller Disclosure Schedule lists each reinsurance agreement   to which any Insurance Subsidiary is a party and under which such Insurance Subsidiary has ceded   or retroceded any risks in respect of the business of the Company and its Subsidiaries and with   respect to which such Insurance Subsidiary has any outstanding ceded reserves, as well as each   material marketing agreement, administrative services agreement and any other agreement that is   related to each such reinsurance agreement (the “Ceded Reinsurance Contracts”).  The applicable   Insurance Subsidiary is entitled to take full credit in its Statutory Statements pursuant to applicable   Law for all the Ceded Reinsurance Contracts. Except as set forth on Section 3.12(a) of the Seller   Disclosure Schedules, since January 1, 2016, no Insurance Subsidiary has received a written denial   of any material claim from the reinsurer under any of the Ceded Reinsurance Contracts.          (b)   Section 3.12(b) of the Seller Disclosure Schedule lists each reinsurance agreement   to which an Insurance Subsidiary is a party and under which such Insurance Subsidiary has   assumed any risks in respect of the business of the Insurance Subsidiary and with respect to which   such Insurance Subsidiary has any outstanding assumed reserves (the “Assumed Reinsurance   Contracts” and, together with the Ceded Reinsurance Contracts, the “Reinsurance Contracts”).    The applicable Insurance Subsidiary has received all necessary approvals (or non-disapprovals)   from applicable Governmental Authorities for each Assumed Reinsurance Contract and the   transactions contemplated thereby.          (c)   True and complete copies of all Reinsurance Contracts, including all amendments   thereto, have been made available to Buyer by Seller.  Each of the Reinsurance Contracts   constitutes a valid and binding obligation of the applicable Insurance Subsidiary and, to the   Knowledge of the Seller Parties, each other party thereto, enforceable against the applicable   Insurance Subsidiary and, to the Knowledge of the Seller Parties, each other party thereto in   accordance with its terms, subject to the Enforceability Exceptions.  No Insurance Subsidiary has   given notice, or received notice from a counterparty under any such contract, of termination,   recapture, rescission, acceleration or breach (provisional or otherwise) in respect of any   Reinsurance Contract.  There exists no material breach or event of default with respect to any   Reinsurance Contract on the part of any Insurance Subsidiary or, to the Knowledge of the Seller   Parties, any other party thereto.  No Reinsurance Contract contains any provision providing that  the reinsurer may terminate, recapture, rescind, accelerate or declare the ceding company in breach  under such agreement by reason of the transactions contemplated by this Agreement or the other  Transaction Documents.         (d)   Since January 1, 2016, there has not been any dispute with respect to any material  amounts recoverable or payable by the Company or any of its Affiliates pursuant to any                                         - 34 -  

 

     Reinsurance Contract.  All amounts owed (that are not being disputed in good faith) under any   Reinsurance Contracts have been paid in accordance with their terms in all material respects.          3.13 No Undisclosed Liabilities.  Except for the liabilities:  (i) set forth on, reflected in or   reserved against on the Most Recent Quarterly Statements or the Most Recent Statutory   Statements; (ii) set forth in Section 3.13 of the Seller Disclosure Schedule; or (iii) incurred in the   ordinary course of business consistent with past practice since September 30, 2018 and which does   not exceed $75,000, neither the Company nor any of its Subsidiaries (other than Insurance   Subsidiaries) is subject to any liability of a type that would be required to be reflected on the   Consolidated Statements in accordance with GAAP, consistently applied, and neither Insurance   Subsidiary is subject to any liability of a type that would be required to be reflected on the Statutory   Statements in accordance with SAP applicable to it, consistently applied.          3.14 Absence of Certain Changes or Events.  Except as set forth in Section 3.14 of the   Seller Disclosure Schedule, since June 30, 2018 to the date hereof, the Company and its   Subsidiaries have conducted their business in the ordinary course of business consistent with past   practice, and there has not been any fact, circumstance, condition, event, or change that constitutes,   or will constitute, individually or in the aggregate, a Company Material Adverse Effect.  Without   limiting the generality of the foregoing, from June 30, 2018 to the date hereof, neither the Company   nor any Subsidiary of the Company has, except as set forth in Section 3.14 of the Seller Disclosure   Schedule, taken any action or failed to take any action that would have resulted in a breach of   Section 5.1(a), (b), (d), (e), (g), (h), (i), (o), (p), (u), (v), or, as it relates to such subsections, (x).          3.15 Absence of Litigation, Claims and Orders.  Except as set forth in Section 3.15 of the   Seller Disclosure Schedule (i) there are no Proceedings pending or, to the Knowledge of the Seller   Parties, threatened against the Company or any of its Subsidiaries, and (ii) there are no Orders   outstanding to which the Company or any of its Subsidiaries or any of its or their respective   properties, rights or assets is subject.  Seller has delivered or made available to Buyer copies of all   pleadings related to each Proceeding and Order listed in Section 3.15 of the Seller Disclosure   Schedule.          3.16 Employee Benefit Plans.            (a)   Section 3.16(a) of the Seller Disclosure Schedule sets forth a complete list of each   Employee Plan.  Each Employee Plan is sponsored by NTALife Management, Inc.          (b)   Each Employee Plan has been established, operated and administered in material  compliance with its terms, ERISA, the Code and other applicable Law, and the Company and its  Subsidiaries and their ERISA Affiliates have satisfied in all material respects all of their  obligations with respect to each Employee Plan in accordance with its terms, ERISA, the Code  and other applicable Law.  Each Employee Plan that is a “nonqualified deferred compensation  plan” (as defined under Section 409A of the Code) has been maintained and operated in material  compliance with Section 409A of the Code. The Company and its Subsidiaries have complied in  all material respects with all applicable disclosure, reporting and other requirements under  applicable Law applicable to any Employee Plan.  Neither the Company nor any of its Subsidiaries  nor, to the Knowledge of the Seller Parties, any other “disqualified person” or “party in interest”  (as defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect to                                        - 35 -  

 

     an Employee Plan has engaged in a prohibited transaction that would subject the Company or its   Subsidiaries to a Tax or penalty imposed under Section 4975 of the Code or Sections 409, 502(i),   (j) or (l) of ERISA.  None of the Company, any of its Subsidiaries or any of their ERISA Affiliates   has maintained, contributed to (or been required to contribute to) or otherwise incurred any liability   with respect to any Employee Plan under (i) Title IV of ERISA, (ii) a “multiemployer plan” (as   defined in Section 3(37) of ERISA), (iii) a “multiple employer plan” (within the meaning of   Section 413 of the Code), or (iv) a “multiple employer welfare arrangement” (as defined in Section   3(40) of ERISA).          (c)   Except as set forth in Section 3.16(c) of the Seller Disclosure Schedule, neither the   Company nor any of its Subsidiaries has any obligation to provide health benefits to any Employee   following termination of employment, except continuation coverage required under   Section 4980B of the Code (or equivalent state Law) with the full cost of such coverage to be   borne by the qualified beneficiary (as defined in Section 4980B of the Code).          (d)   The Seller has made available to Buyer true and complete copies of the following   documents relating to the Employee Plans:  (i) all current Employee Plan documents, including   any documents related to any funding medium; (ii) the three most recently filed Forms 5500 (with   attachments) for each Employee Plan for which a Form 5500 is required to be filed; (iii) for each   Employee Plan intended to be Tax-qualified, the most recent IRS determination, advisory or   opinion letter with respect to such Employee Plan under Section 401(a) of the Code; (iv) the current  summary plan description and all summaries of material modifications thereto for each Employee  Plan for which a summary plan description or summary of material modifications is required; (v)   any contract with an Employee Plan’s record keepers, custodians, brokers, investment managers,    advisors or other third parties; and (vi) all material written correspondence with a Governmental   Authority relating thereto.          (e)   To the Knowledge of Seller Parties, full payment has been timely made, or   otherwise properly accrued on the Books and Records of the Company and its Subsidiaries, of all   amounts that the Company and its Subsidiaries are required under the terms of an Employee Plan   to have paid as contributions to such Employee Plan on or prior to the date hereof (excluding any   amounts not yet due) and the contribution requirements, on a prorated basis, for the current year   have been made or otherwise properly accrued on the Financial Statements through the Closing   Date.          (f)   Other than routine claims for benefits in the ordinary course of business, no   Proceeding is pending or, to the Knowledge of Seller Parties, threatened with respect to any   Employee Plan. No Employee Plan is the subject of a voluntary correction, amnesty, or compliance   filing with a Governmental Authority.          (g)   Except as set forth on Section 3.16(g) of the Seller Disclosure Schedule, neither the   execution of this Agreement nor the consummation of the transactions contemplated hereby will   (individually or together with the occurrence of any other event): (i) entitle any current or former   Employee, officer, director, leased employee or independent contractor of either the Company or   any of its Subsidiaries to severance, change-in-control or retention pay or any other payment, (ii)   accelerate the time of payment, vesting or funding, or increase the amount or value of any   compensation due to such person, (iii) result in “excess parachute payments” within the meaning                                        - 36 -  

 

     of Section 280G(b) of the Code, or (iv) require a “gross-up” or other payment to any “disqualified  individual” within the meaning of Section 280G(c) of the Code.          3.17 Labor Matters.            (a)   Section 3.17(a) of the Seller Disclosure Schedule contains a true, complete and   correct list of each Employee as of the date hereof, including each such Employee’s employer,   name, hire date and job title, current annual salary or hourly rate of pay (whichever is applicable),   along with such Employee’s 2017 bonus, estimated 2018 bonus and total commissions, part-time,   full-time or temporary status, accrued unused vacation benefits, leave of absence status (including   FMLA and disability), and service credited for purposes of vesting and eligibility to participate   under the Employee Plans.  Section 3.17(a) of the Disclosure Schedule identifies any Employee   who is not performing substantial services relating to the principal business operations of the   Company or the Subsidiaries.  Except as listed on Section 3.17(a) of the Seller Disclosure   Schedule, each Employee may be terminated at will by his or her employer without penalty or any   continuing obligations, except for any accrued benefits under the Employee Plan or any statutory   obligations to former employees.            (b)   Neither the Company nor any of the Subsidiaries of the Company is a party to, or   bound by, any collective bargaining agreement, contract or other agreement or understanding with   a labor union or labor organization. Neither the Company nor any of the Subsidiaries of the   Company is or has been during the past three (3) years subject to a strike, work stoppage or material   labor dispute. No labor organization or group of current Employees has made a pending demand   for recognition or certification.  To the Knowledge of the Seller Parties, no organizational efforts   with respect to the formation of a collective bargaining unit are being or have been made or   threatened involving Employees.          (c)   The Company and each of its Subsidiaries is and has been in material compliance   with all applicable Law pertaining to employment and employment practices, including those   relating to labor relations.  There are no pending or, to the Knowledge of the Seller Parties,   threatened charges or complaints against the Company or any Subsidiary of the Company before   any Governmental Authority regarding employment discrimination, safety or other employment-  related charges or complaints, wage and hour claims, unemployment compensation claims,   workers’ compensation claims or any other claims arising from or relating to the employment of   any of the Employees or relationship of the Company or its Subsidiaries with any independent   contractor.          (d)   Each of the Company and its Subsidiaries is in compliance with its obligations   pursuant to the Worker Adjustment Retraining and Notification Act, 29 U.S.C. § 2101 et seq. (as   amended from time to time, “WARN” and, collectively with any similar state or local law, the   “WARN Acts”) and in all material respects with all other notification obligations arising under   any statute or otherwise, in each case to the extent affecting, in whole or in part, any site of   employment, facility, operating unit or Employee.  Neither the Company nor any of its Subsidiaries   has engaged in any transaction or engaged in layoffs, terminations or relocations sufficient in   number to trigger any WARN Act obligation. No former Employee has suffered an “employment   loss” (as defined in WARN) in the ninety (90) days prior to the date hereof.                                         - 37 -  

 

         3.18 Real Property.           (a)   Section 3.18(a) of the Seller Disclosure Schedule sets forth a (i) correct street  address of each parcel of real property in which the Company or any Subsidiary of the Company  holds an ownership interest, other than any real estate interests associated with Investment Assets  owned by the Company or its Subsidiaries (the “Owned Real Property”), and (ii) list of all real  property leases to which the Company or any Subsidiary of Company is a party (whether as a  (sub)lessor, (sub)lessee, guarantor or otherwise) (the “Company Real Property Leases”; with all  real property in which the Company or any of its Subsidiaries hold a leasehold interest, whether  as lessee or sublessee, being the “Leased Real Property”; and the Leased Real Property and Owned  Real Property, collectively, being the “Real Property”) and the street address with respect to the  Company Real Property Leases.  Except for the Owned Real Property and the Company Real  Property Leases identified in Section 3.18(a) of the Seller Disclosure Schedule and any real estate  interests associated with Investment Assets owned by the Company or its Subsidiaries, neither the  Company nor any Subsidiary of the Company owns any interest (fee, leasehold or otherwise) in  any real property and neither the Company nor any Subsidiary of the Company has entered into  any leases, arrangements, licenses or other agreements relating to the use, occupancy, sale, option,  disposition or alienation of all or any portion of the Owned Real Property.  Except as set forth in  Section 3.18(a) of the Seller Disclosure Schedule, the Company and its Subsidiaries are in  possession of the Real Property and are entitled to use such Real Property for its intended use.          (b)   Except as set forth in Section 3.18(b) of the Seller Disclosure Schedule, the  Company and its Subsidiaries have good fee simple title to the Owned Real Property, and a valid  leasehold interest in the Leased Real Property, free and clear of any Liens other than Permitted  Liens.           (c)   Each Company Real Property Lease is in full force and effect and enforceable by  the Company or one of its Subsidiaries, as applicable, in accordance with its terms, subject to the  Enforceability Exceptions.  Since January 1, 2016, neither the Company nor any of its Subsidiaries  has received any written notice of default with respect to any Company Real Property Lease, and  since January 1, 2016, no event has occurred and no condition exists that, with notice or lapse of  time or both, would constitute a default by the Company or its Subsidiaries or, to the Knowledge  of the Seller Parties, any other party thereto, under any of the Company Real Property Leases.   Except as set forth in Section 3.18(c) of the Seller Disclosure Schedule, neither the Company nor  any of its Subsidiaries has assigned or placed any Lien upon any Real Property.         (d)   Seller or a Subsidiary of Seller (other than the Company or any of its Subsidiaries)  owns all right, title and interest in and to the Keller Springs Property, subject to no mortgage other  than the EE Realty Loan.  Seller has delivered or made available to Buyer true, complete and  correct copies of the deeds and other instruments (as recorded) by which Seller or such Subsidiary  of Seller acquired the Keller Springs Property, and copies of all title insurance policies, opinions,  abstracts, surveys, site and building plans, environmental, property condition and engineering  reports in the possession of Seller or any Subsidiary of Seller and relating to the Keller Springs  Property.                                        - 38 -  

 

           3.19 Taxes.           (a)   Seller, the Company and its Subsidiaries have timely filed (after giving effect to   applicable extensions) with the appropriate Governmental Authority all material Tax Returns   required to be filed by or with respect to the Company or its Subsidiaries, and all such Tax Returns   are true, correct and complete in all material respects.  Seller, the Company or its Subsidiaries have   timely paid or caused to be paid all Taxes shown as due and owing on any such Tax Returns and   all other Taxes due and owing by the Company or any Subsidiary or by Seller with respect to the   Company and its Subsidiaries.          (b)   Seller, the Company and its Subsidiaries have complied in all material respects with   their obligations under applicable Law to withhold Taxes from payments to Employees, agents,   independent contractors, lenders and members, and all such Taxes have been timely paid to the   relevant Governmental Authority or properly set aside in accounts for such purpose.  Neither the   Company nor any of its Subsidiaries will be required to include any item of income in, or exclude   any item of deduction from, taxable income for any taxable period (or portion thereof) ending after   the Closing Date as a result of any (i) change in method of accounting under Section 481 of the   Code (or any corresponding provision or state, local or non-U.S. Law) elected, requested, made or   imposed prior to the Closing, (ii) installment sale or open transaction made on or prior to the   Closing Date, (iii) election under Section 108(i) of the Code (or similar provision of state, local or  non-U.S. Law), (iv) change in the basis for determining any item referred to in Section 807(c) of  the Code (within the meaning of Section 807(f) of the Code) with respect to any taxable period (or  portion thereof) ending on or prior to the Closing Date, or (v) intercompany transaction or excess  loss account described in the Treasury Regulations under Section 1502 of the Code (or any  corresponding provision of Law).         (c)   There are no Liens for Taxes upon any assets of the Company or any of its  Subsidiaries, other than Permitted Liens.         (d)   No audits or other administrative or judicial actions are in progress or, to the  Knowledge of the Seller Parties, threatened in writing with regard to any material Taxes for which  the Company or any of its Subsidiaries is or may become liable.         (e)   Neither the Company nor any of its Subsidiaries has participated in any “listed  transaction” within the meaning of Section 1.6011-4(b)(2) of the Treasury Regulations.          (f)   Neither the Company nor any of its Subsidiaries has been a member of an affiliated   group filing a consolidated U.S. federal income Tax Return (other than a group consisting of   NTAL and NTANY and another group the common parent of which was the Seller) or has any   liability for the Taxes of any Person (other than the Seller, the Company or any of the Company’s   Subsidiaries) under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,   local, or non-U.S. Law), or as a transferee or successor.  Except as set forth on Section 3.19(f) of   the Sellers Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to,   bound by or has any obligation under any Tax allocation, Tax sharing, Tax indemnity or similar   agreement, arrangement or understanding (“Tax Agreement”) which will be effective following   the Closing Date.                                         - 39 -  

 

           (g)   Neither the Company nor any of its Subsidiaries has distributed stock of another   Person, or has had its stock distributed to another Person, in a transaction that was purported or   intended to be governed in whole or in part by Section 355 of the Code or Section 361 of the Code.          (h)   Neither the Company nor any of its Subsidiaries has granted any written waiver of   any statute of limitations relating to Taxes that remains in effect, and no power of attorney granted   by the Company prior to the Closing with respect to any such Taxes will be in effect following the   Closing. No Person has received or applied for a Tax ruling or entered into a closing agreement   pursuant to Section 7121 of the Code (or any similar provision of state, local or non-U.S. Law)   that would be binding upon the Company or any of its Subsidiaries after the Closing Date.          (i)   Neither the Company nor any of its Subsidiaries has received from any taxing   authority any written notice of proposed adjustment, deficiency, underpayment of Taxes or any   other such written notice which has not been satisfied by payment or been withdrawn.          (j)   The Company and its Subsidiaries have properly accrued or reserved for the ACA   Taxes for which they are responsible for payment either directly to a Governmental Authority or   to a third party under their contractual relationship as a liability on the relevant Financial   Statements in accordance with SAP applicable to the Insurance Subsidiaries, consistently applied.            (k)   The Tax treatment of each Insurance Contract under applicable Law is not, and,   since the time of issuance (or subsequent modification) has not been, less favorable to the  purchaser, policyholder or intended beneficiaries thereof than the Tax treatment (i) that was  purported to apply in any written materials provided by the Company or any of its Subsidiaries to  the purchaser (or policyholder) at the time of issuance (or any subsequent modification of such  Insurance Contract), or (ii) for which such Insurance Contract was designed to qualify at the time  of issuance (or subsequent modification).  For purposes of this Section 3.19(k), the provisions of   applicable Law relating to the Tax treatment of the Insurance Contracts include, but are not limited   to, Sections 72, 79, 101, 401-409A, 412, 415, 417, 419, 419A, 430-436, 457, 501, 505, 817, 1035,   1275, 7702, 7702A and 7702B of the Code. Neither the Company nor any of its Subsidiaries has   entered into any agreement or is involved in any discussions or negotiations with the Internal   Revenue Service or any other Tax Authority, or otherwise has requested relief, regarding the Tax   treatment of the Insurance Contracts under applicable Law, including any failure of any Insurance   Contract to meet the requirements of Sections 72, 79, 101, 401-409A, 412, 415, 417, 419, 419A,   430-436, 457, 501, 505, 817, 1035, 1275, 7702, 7702A and 7702B of the Code.  Neither the   Company nor any of its Subsidiaries is a party to or has received notice of any federal, state, local   or foreign audits or other administrative or judicial Proceedings with regard to the Tax treatment   of any Insurance Contract, or of any claims by the purchasers, policyholders or intended   beneficiaries of the Insurance Contracts regarding the Tax treatment of (i) the Insurance Contracts   or (ii) any plan or arrangement in connection with which such Insurance Contracts were purchased   or have been administered. Neither the Company nor any of its Subsidiaries is a party to any “hold   harmless” indemnification agreement, Tax Agreement or similar agreement under which the   Company or any of its Subsidiaries is liable for the Tax treatment of (i) the Insurance Contracts or  (ii) any plan or arrangement in connection with which such Insurance Contracts were purchased  or have been administered.                                         - 40 -  

 

         (l)   (i) All life Insurance Contracts that are subject neither to Section 101(f) nor to  Section 7702 of the Code qualify as life insurance contracts for purposes of the Code, (ii) all life  Insurance Contracts that are subject to Section 101(f) of the Code satisfy the requirements of that  section and otherwise qualify as life insurance contracts for purposes of the Code, and (iii) all life  Insurance Contracts that are subject to Section 7702 of the Code satisfy the requirements of Section  7702(a) of the Code and otherwise qualify as life insurance contracts for purposes of the Code.   None of the life Insurance Contracts is a “modified endowment contract” within the meaning of  Section 7702A of the Code, except for any life Insurance Contract that is being administered as a  “modified endowment contract” and with respect to which the policyholder consented in writing  to the treatment of such contract as a “modified endowment contract” and has not acted to revoke  such consent. The Company and its Subsidiaries have complied with all Tax reporting,  withholding, and disclosure requirements applicable to the Insurance Contracts and, in particular,  but without limitation, has reported distributions under the Insurance Contracts in compliance in  all respects with all applicable requirements of the Code, Treasury Regulations, and forms issued  by the Internal Revenue Service.  The Company and its Subsidiaries have maintained the  information necessary to determine the Insurance Contracts’ qualification for any applicable Tax  treatment under the Code, to monitor the Insurance Contracts for treatment as “modified  endowment contracts” (if applicable), and to facilitate compliance with the Tax reporting,  withholding, and disclosure requirements applicable to the Insurance Contracts in the manner  required by the Internal Revenue Service.         (m)   Each Insurance Contract that is subject to Section 817 of the Code complies with,  and, at all times since issuance, has complied with, the diversification requirements applicable  thereto in all material respects, and the applicable Insurance Subsidiary is treated for federal Tax  purposes as the owner of the assets underlying such Insurance Contract.         (n)   Seller directly owns one hundred percent (100%) of the equity interests of the  Company.  The Company directly owns in excess of ninety percent (90%) of the total voting power  and value of the stock of EEI and one hundred percent (100%) of the stock of each Subsidiary of  the Company other than EEI and the Insurance Subsidiaries.  EEI directly or indirectly owns one  hundred percent (100%) of the stock of NTAL and NTANY.         (o)   The Company is a disregarded entity under Section 301.7701-3 of the Treasury  Regulations.         (p)   In connection with the restructuring of Seller and its Subsidiaries that occurred at  the end of 2015, Seller did not file Form 1122 with regard to making a consolidated return election  to allow it and its subsidiaries to file a consolidated return for U.S. federal income tax  purposes.  However, Seller represents that, if it was required to file Form 1122 in order to allow  Seller to file such consolidated returns, it (i) qualifies for automatic relief under Rev. Proc. 2014- 24 and (ii) has documented in its files the conditions described in sections 3.02, 3.03, 3.04, and  3.05 of Revenue Procedure 2014-24, so that, pursuant to Treasury Regulations Section 1.1502- 75(b) and Revenue Procedure 2014-24, the Seller affiliated group is treated as if it properly filed  Internal Revenue Service Forms 1122 and thus the members of the Seller affiliated group were  allowed to join in the making of a consolidated return for 2015 and subsequent taxable years.                                          - 41 -  

 

           3.20 Intellectual Property and Technology.           (a)   The Company and its Subsidiaries own or have the right to use pursuant to license,   sublicense, agreement, or permission all Intellectual Property necessary for the operation of their   business as presently conducted (the “Company Intellectual Property Rights”).  Section 3.20(a) of   the Seller Disclosure Schedule sets forth, as of the date hereof, all registered trademarks, service   marks and trade dress and all applications for trademarks, service marks and trade dress; all   registered copyrights and all applications for copyrights; all patents and patent applications; and   all Internet domain names owned by the Company or its Subsidiaries (the “Scheduled Company   Intellectual Property”).  With respect to each item of the Company Intellectual Property Rights,   except as set forth in Section 3.20(a) of the Seller Disclosure Schedule: (i) the Company or a   Subsidiary of the Company possesses all right, title, and interest in and to the item, free and clear   of any Lien, license, royalty or other restriction other than those licenses, royalties or other   restrictions provided for in any applicable instrument granting such item to the Company or its   Subsidiaries; and (ii) none of the Company’s or any Company Subsidiary’s rights will be   terminated or impaired, or become terminable, in whole or in part, as a result of the transactions   contemplated hereby.  With respect to each item of the Scheduled Company Intellectual Property,   except as set forth in Section 3.20(a) of the Seller Disclosure Schedule, to the Knowledge of the   Seller Parties, the Company’s and its Subsidiaries’ rights are valid and enforceable, and all filings   required to maintain the validity thereof have been made.          (b)   Except as set forth in Section 3.20(b) of the Seller Disclosure Schedule and since   January 1, 2016, none of Seller, the Company or any Subsidiary of the Company has received any   written notice that the Company’s or any of its Subsidiaries’ use of the Company Intellectual   Property Rights has infringed, misappropriated, diluted or otherwise violated any Intellectual   Property rights owned by third parties.  To the Knowledge of the Seller Parties, the operation by   the Company and its Subsidiaries of their business does not and has not infringed, misappropriated,   diluted or otherwise violated the Intellectual Property rights owned by any third party.  Except as   set forth in Section 3.20(b) of the Seller Disclosure Schedule and since January 1, 2016, neither   the Company nor any of its Subsidiaries has made any claim against any third party alleging   infringement, misappropriation, dilution or other violation of any Company Intellectual Property   Rights.          (c)   All Employees and consultants who contributed to the discovery or development   of any Company Intellectual Property Rights did so either (i) within the scope of his or her   employment or (ii) pursuant to written agreements assigning all Intellectual Property arising  therefrom to the Company or a Subsidiary of the Company.          (d)   Except as set forth in Section 3.20(d) of the Seller Disclosure Schedule, the use and   dissemination by the Company and its Subsidiaries of Personal Information of consumers of its   services or users of any websites operated by the Company or its Subsidiaries are in compliance,   in all material respects, with all applicable privacy policies and terms of use and applicable Law.   The Company and its Subsidiaries use commercially reasonable measures to protect the Personal   Information that is collected and maintained by them and to require that any third party providing   services to the Company or any of its Subsidiaries has established reasonable safeguards with   respect to Personal Information collected by such party.  Since January 1, 2016, except as set forth   in Section 3.20(d) of the Seller Disclosure Schedule, to the Knowledge of the Seller Parties, there                                        - 42 -  

 

     has been no breach in the safeguards for such consumer information.  The Company and its   Subsidiaries use commercially reasonable measures to protect the confidentiality of the Company   Intellectual Property Rights.  Since January 1, 2016, to the Knowledge of the Seller Parties, except  as set forth in Section 3.20(d) of the Seller Disclosure Schedule, there has been no breach in the   safeguards for such confidential Company Intellectual Property Rights.          (e)   Section 3.20(e) of the Seller Disclosure Schedule lists all material Computer   Programs owned or used by the Company or any of its Subsidiaries; provided, that “material”   Computer Programs excludes all shrink-wrap and off-the-shelf Computer Programs.          (f)   The IT Systems (i) operate as necessary for the conduct of the business of the   Company and its Subsidiaries in all material respects, and (ii) to the Knowledge of the Seller   Parties, do not contain any “malware” or critical vulnerabilities that would reasonably be expected   to interfere with the ability of Buyer to conduct the business of the Company and its Subsidiaries   as currently conducted.  Since January 1, 2016, to the Knowledge of the Seller Parties, there have   been no material adverse events affecting the IT Systems that have caused a material impact on   the Company’s and any of its Subsidiaries’ operation of their respective businesses. The Company   and its Subsidiaries have implemented, maintain, and comply with commercially reasonable   business continuity and backup and disaster recovery plans and procedures with respect to the IT  Systems.  Since January 1, 2016, there has been no failure, unauthorized access or use, or other  adverse event affecting any of the IT Systems that has caused or will likely cause any material   disruption to the conduct of the business of the Company or any of its Subsidiaries.            3.21 Insurance. Seller has made available to Buyer a true and complete list of all   insurance policies covering the assets, business, equipment, properties, operations, Employees,   consultants, directors, officers and managers of the Company and its Subsidiaries.  There is no   claim by the Company or any of its Subsidiaries currently pending under any of such policies as   to which coverage has been questioned, denied or disputed by the insurers of such policies.  All   premiums payable under all such policies have been timely paid, and the Company and its   Subsidiaries are otherwise in compliance with the terms of such policies in all material respects.    To the Knowledge of the Seller Parties, since the time any such policies were last issued or   renewed, there has not been any threatened termination of, material premium increase with respect   to, or alteration of coverage under, any such policies.          3.22 Environmental Matters.            (a)   Except as set forth in Section 3.22(a) of the Seller Disclosure Schedule, (i) none of   the Company or any of its Subsidiaries is in violation in any material respect of any Environmental   Laws or has violated in any material respect in the past any Environmental Laws; (ii) the Company   and its Subsidiaries have obtained and are in compliance in all material respects with all required   Environmental Permits and have been in the past in compliance in all material respects with such   Permits; and (iii) there are no actions, Orders, written claims or written notices pending or issued   to or, to the Knowledge of the Seller Parties, threatened against the Company or any of its   Subsidiaries alleging violations of or liability under any Environmental Laws or otherwise   concerning the Release or management of Hazardous Substances.                                         - 43 -  

 

           (b)   To the Knowledge of the Seller Parties, there are no actions, activities,   circumstances, facts, conditions, events or incidents, including the presence of any Hazardous   Substances, that would be reasonably likely to form the basis of an obligation pursuant to   applicable Environmental Laws against the Company or any of its Subsidiaries or, to the   Knowledge of the Seller Parties, against any Person whose liability for such obligation the   Company or any of its Subsidiaries has or may have retained or assumed either contractually or by  operation of applicable Law.          (c)   For purposes of this Agreement:                (i)   “Environmental Laws” means any Laws (including common law) of the        United States federal, state, local, non-United States, or any other Governmental Authority,        relating to (A) Releases or threatened Releases of Hazardous Substances or materials        containing Hazardous Substances; (B) the manufacture, handling, transport, use, treatment,        storage, emission, discharge, or disposal of Hazardous Substances or materials containing        Hazardous Substances; or (C) pollution or protection of the environment or of human health        and safety as such is affected by Hazardous Substances or materials containing Hazardous        Substances.                 (ii)  “Environmental Permits” means any Permit, consent, license, registration,         approval, notification or any other authorization pursuant to Environmental Laws.                 (iii) “Hazardous Substances” means (A) those substances, materials or wastes         defined as toxic, hazardous, acutely hazardous, pollutants or contaminants in, or regulated        under, the following United States federal statutes and any analogous foreign or state        statutes, and all Regulations thereunder:  the Hazardous Materials Transportation Act, the        Resource Conservation and Recovery Act, the Comprehensive Environmental Response,        Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the        Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean         Air Act; (B) petroleum and petroleum products, including crude oil and any fractions         thereof; (C) natural gas, synthetic gas, and any mixtures thereof; and (D) polychlorinated         biphenyls, asbestos, molds that would reasonably be expected to have an adverse effect on         human health and urea formaldehyde foam insulation.                (iv)  “Release” means any release, spilling, leaking, pumping, pouring,         discharging, emitting, emptying, escaping, leaching, injecting, dumping, disposing or         migrating into or through the indoor or outdoor environment.          3.23 Affiliated Transactions.            (a)   Section 3.23(a) of the Seller Disclosure Schedule sets forth a complete and correct   list of all agreements, contracts, commitments, arrangements or transactions (but excluding any   Employee Plan) between Seller or any director, officer, manager, or Affiliate of Seller (other than   the Company or its Subsidiaries) or any Minority Shareholder, on one hand, and the Company or   any of its Subsidiaries, on the other hand (“Intercompany Agreements”).  The Company and its   Subsidiaries have complied in all material respects with all applicable disclosure, reporting or other                                         - 44 -  

 

   requirements, including any such requirements under applicable Law, applying to the  Intercompany Agreements.           (b)   The Company or a Subsidiary of the Company has acknowledged certain pledges  of future commissions granted by various Independent Producers to an Affiliate of Seller (other  than the Company and its Subsidiaries) as collateral for funds advanced by the pledgee to such  Independent Producer.  Section 3.23(b) of the Seller Disclosure Schedule sets forth a complete and  correct list of such pledges, including the Independent Producer pledging such commissions and  the Affiliate of Seller advancing such funds. For the avoidance of doubt, “Intercompany  Agreements” is not intended to encompass the acknowledgment of such pledges.         (c)   Section 3.23(c) of the Seller Disclosure Schedule sets forth a complete and correct  list of all agreements, contracts, commitments, arrangements or transactions (but excluding any  Employee Plan) between the Company or any Subsidiary of the Company, on one hand, and any  other Subsidiary of the Company, on the other hand.  Any such agreement, contract, commitment,  arrangement or transaction involving any Insurance Subsidiary is on arms’-length terms and has  been approved by the applicable Insurance Regulator.           3.24 Assets.           (a)   Except as set forth on Section 3.24(a) of the Seller Disclosure Schedule, the  Company and each of its Subsidiaries has valid title to, or a valid leasehold interest in or other  valid and enforceable rights to use, all assets, rights, properties and services necessary to operate  the businesses of the Company and each of its Subsidiaries as currently operated consistent with  past practices, free and clear of all Liens, other than Permitted Liens.  Except for property and  assets disposed of in the ordinary course consistent with past practice and in compliance with  Section 5.1, the Company and its Subsidiaries will as of the Closing own or have the right to use  all of the assets necessary for the conduct of their business as currently conducted.         (b)   Except as set forth on Section 3.24(b) of the Seller Disclosure Schedule and subject  to receipt of the governmental approvals contemplated under Section 3.6(b) (including the  Required Governmental Authorizations) and Section 4.3, the assets, rights, properties and services  transferred to Buyer and its Affiliates pursuant to this Agreement and the other Transaction  Documents will, as of the Closing, comprise assets, rights, properties and services that are  sufficient to permit Buyer to operate the business of the Company and its Subsidiaries immediately  following the Closing Date in substantially the same manner as such business is being operated as  of the date hereof.         3.25  Investment Assets.         (a)   Section 3.25(a)(i) of the Seller Disclosure Schedule sets forth a true, complete and  correct list of all Investment Assets held by the Company and its Subsidiaries as of September 30,  2018 and as of the close of business on the Business Day immediately preceding the date hereof,  with information included therein as to the Book Value and fair market value of such Investment  Assets as of each such date.  Except as set forth in Section 3.25(a)(ii) of the Seller Disclosure  Schedule, the Company or its applicable Subsidiary has valid title to all such Investment Assets  held by it, free and clear of all Liens, other than Permitted Liens.                                        - 45 -  

 

           (b)   Section 3.25(b) of the Seller Disclosure Schedule sets forth a true, complete and   correct copy of the investment guidelines of the Company as in effect on the date hereof (the   “Investment Guidelines”).  All Investment Assets of the Insurance Subsidiaries comply in all   material respects with the Investment Guidelines and with applicable Law governing admittance   of assets for such Insurance Subsidiary.  The Company and its Subsidiaries have not taken, or   omitted to take, any action which would cause any Investment Asset held thereby to be subject to   any valid offset, defense or counterclaim against the right of the Company or such Subsidiary to   enforce the terms of such assets. To the Knowledge of the Seller Parties, except as set forth on   Section 3.25(b) of the Seller Disclosure Schedule, as of the date hereof, no such Investment Asset   is in arrears or default in the payment of principal or interest or dividends or has been otherwise   been impaired, other than temporarily impaired, in accordance with the Specified Accounting   Principles.          (c)   Seller has provided to Buyer (i) a written statement of the derivatives policies for   the Company and each Subsidiary of the Company, as applicable, including any derivative use   plan or hedging guideline, in effect as of the date hereof, which policies are in compliance with   applicable Law in all material  respects, and (ii) true and correct copies of the asset/liability   matching and impairment policies of the Company and each Subsidiary of the Company, as   applicable, as in effect as of the date hereof.          3.26 Policy and Valuation Data.  Section 3.26 of the Seller Disclosure Schedule lists the   Policy and Valuation Data provided to Buyer by Seller on or before the date of this Agreement.    The Policy and Valuation Data was (i) obtained from the Books and Records of the Company and   its Subsidiaries, including Books and Records relating to the Insurance Contracts, and generated   from the same underlying sources and systems that were utilized by the Insurance Subsidiaries to   prepare the Statutory Statements and the Company to prepare the Consolidated Statements, (ii)   based upon an inventory of in force Insurance Contracts that were issued by the Insurance   Subsidiaries that was complete in all material respects, and (iii) accurate and complete in all   material respects on the date provided; provided, that the Seller Parties make no representation or   warranty with respect to any projections or forecasts therein other than that the model(s) and   assumptions on the basis of which such projections or forecasts were prepared were prepared in   good faith, are consistent in all material respects with United States actuarial principles  promulgated by the Actuarial Standards Board, and are based upon informed judgment. The Seller  Parties further represent that, as of the Closing Date, they are not aware of any omissions, errors,   changes or discrepancies in the Policy and Valuation Data which would materially affect the   information contained in the Policy and Valuation Data.  Seller acknowledges that Buyer has relied   on the foregoing representations in entering into this Agreement.  For the avoidance of doubt,   nothing in this Section 3.26 shall be construed as a warranty by the Seller Parties to Buyer with   respect to the future experience of the Insurance Contracts or the associated liabilities.          3.27  Bank Accounts; Power of Attorney.  Section 3.27 of the Seller Disclosure   Schedules sets forth a list of the bank names, locations and account numbers of all bank and safe  deposit box accounts of the Company and each of its Subsidiaries, including any custodial accounts  for securities owned by the Company or any of its Subsidiaries, and the names of all persons  authorized to draw thereon or to have access thereto.  Section 3.27 of the Seller Disclosure   Schedule also sets forth the names of all persons, if any, holding powers of attorney from the                                         - 46 -  

 

     Company or any Subsidiary of the Company and a summary statement of the terms thereof.  A   true, accurate and complete copy of each such power of attorney has been made available to Buyer.          3.28 Privacy and Data Security.  (i) The Company and its Subsidiaries have in place (A)   administrative, technical and physical safeguards designed to protect against the destruction, loss,   or alteration of Personal Information, (B) reasonable security measures designed to protect   Personal Information, and (C) privacy policies and procedures, all of which safeguards, measures   and policies and procedures described in (A) – (C) above meet or exceed the requirements of   applicable Law; (ii) the Company and each of its Subsidiaries have complied with applicable Law   in all material respects and with all applicable contractual privacy obligations and their respective   internal privacy policies and guidelines relating to the collection, storage, use and transfer of   Personal Information; (iii) neither the Company nor any of its Subsidiaries is, or, during the   preceding three (3) years, has been, under investigation or audit, by any private party or   Governmental Authority, arising out of an actual or alleged data privacy or security incident nor,   to the Knowledge of the Seller Parties, has any private party or Governmental Authority alleged   any breach of contract or non-compliance with Law related to a data privacy or security matter,   and (iv) since January 1, 2016, there has been (x) to the Knowledge of the Seller Parties, no   unauthorized access, use, disclosure or transfer of any Personal Information in the possession,   custody or control of the Company, any of its Subsidiaries, or a contractor or agent acting on behalf   of the Company or any of its Subsidiaries, and (y) no claim communicated to the Company or any   if its Subsidiaries in writing from any affected individual nor any written request or inspection   from any Governmental Authority that will likely give rise or has given rise to any liability under   applicable Law in relation to data protection, data security or privacy.          3.29 Brokers. No broker, financial advisor, finder or investment banker or other Person   is entitled to any broker’s, financial advisor’s, finder’s or other fee or commission in connection   with the transactions contemplated by this Agreement based upon arrangements made by or on   behalf of the Company, and any such fee, if any, shall be payable by Seller.                                    ARTICLE IV.                 REPRESENTATIONS AND WARRANTIES OF BUYER    Buyer hereby represents and warrants to Seller, as of the date hereof and as of the Closing, as   follows:          4.1  Organization.  Buyer is a corporation duly organized, validly existing and in good   standing under the Law of the jurisdiction of its organization and (i) has all the requisite corporate   power and authority to own, lease and operate its properties and to carry on its business as it is  now being conducted and (ii) is duly qualified to do business and is in good standing in each  jurisdiction in which the ownership, operation or leasing of its properties and assets and the  conduct of its business requires it to be so qualified, except where the failure to be so qualified  would not reasonably be expected to have a Buyer Material Adverse Effect.          4.2  Authority; Enforceability.  Buyer has all necessary corporate power and authority to   execute and deliver this Agreement, each other Transaction Document to which it is a party and   each instrument required to be executed and delivered by it prior to or at the Closing and to perform   its obligations hereunder and thereunder and to consummate the transactions contemplated hereby                                        - 47 -  

 

   and thereby. The execution and delivery by Buyer of this Agreement, each other Transaction  Document to which it is a party and each instrument required hereby to be executed and delivered  by Buyer prior to or at the Closing, the performance of its obligations hereunder and thereunder  and the consummation of the transactions contemplated hereby and thereby have been duly and  validly authorized by all necessary action on the part of Buyer, and no other corporate or similar  proceedings on the part of Buyer are necessary to authorize this Agreement, any other Transaction  Document to which  it is a party or any instrument required to be executed and delivered by it prior  to or at the Closing or the consummation of the transactions contemplated hereby or thereby. Each  of the Transaction Documents to which Buyer is or will be a party have been or, with respect to  the Transaction Documents to be executed and delivered at Closing, will be, duly and validly  executed and delivered by Buyer and, assuming the due authorization, execution and delivery  hereof by the other parties hereto or thereto, constitute a legal, valid and binding obligation of each  of Buyer, enforceable against Buyer in accordance with its terms, subject to the Enforceability  Exceptions.         4.3  No Conflict; Required Filings and Consents. The execution and delivery by Buyer  of this Agreement, the other Transaction Documents to which it is a party or any instrument  required by this Agreement to be executed and delivered by it on or prior to the Closing do not,  and the performance of this Agreement, the other Transaction Documents to which it is a party  and any instrument required by this Agreement to be executed and delivered by Buyer on or prior  to the Closing do not and will not, (i) conflict with or violate the articles of incorporation or bylaws  of Buyer, (ii) conflict with or violate in any respect any Law, Permit or Order applicable to Buyer  or by which any of its properties, rights or assets is bound or affected, or (iii) with or without notice  or the passage of time or both, violate, conflict with or result in a breach of any provision of, or  constitute a default (or an event which, with the giving of notice, the passage of time or otherwise  would constitute a default) under or entitle any Person to terminate, accelerate or cause a breach  or default of, or result in the creation of any Lien upon any of the properties or assets of Buyer  under, or create any right of acceleration, termination, vesting, payment, exercise, suspension,  revocation or cancellation of the loss of any right or benefit under any contract, mortgage, lien,  lease, agreement, indenture, trust, instrument, order, judgment or decree to which Buyer is a party  or which is binding upon Buyer or upon any of the assets of any of the foregoing, except (a) for  compliance with the applicable requirements of the HSR Act, (b) filings with Insurance Regulators  and other Filings and approvals that, in each case of this clause (b) are listed on Section 4.3 of the  Buyer Disclosure Schedule.          4.4  Absence of Litigation, Claims and Orders.  There are no claims pending or, to the  Knowledge of Buyer, threatened on behalf of or against Buyer that (i) challenges (a) the validity  of this Agreement or any other Transaction Document to which it is a party or (b) any action taken  or to be taken by it pursuant to this Agreement or any other Transaction Documents to which it is  a party or in connection with the transactions contemplated hereby and thereby, or (ii) could have  a Buyer Material Adverse Effect.          4.5  Sufficient Funds. As of the Closing Date, Buyer will have immediately available  funds sufficient to pay the aggregate Purchase Price and any other payments contemplated in this  Agreement and to pay all fees and expenses related to the transactions contemplated by this  Agreement.                                         - 48 -  

 

           4.6  Brokers.  Except for Guggenheim Securities, LLC, no broker, financial advisor,   finder or investment banker or other Person is entitled to any broker’s, financial advisor’s, finder’s   or other fee or commission in connection with the transactions contemplated by this Agreement   based upon arrangements made by or on behalf of Buyer.          4.7   Investment Purpose. Buyer is acquiring the Membership Interests and Minority-  Owned Shares solely for its own account for investment purposes and not with a view to, or for   offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Membership   Interests and Minority-Owned Shares are not registered under the Securities Act of 1933, as   amended, or any state securities laws, and that the Membership Interests and Minority-Owned  Shares may not be transferred or sold except pursuant to the registration provisions of the  Securities Act of 1933, as amended or pursuant to an applicable exemption therefrom and subject  to state securities laws and regulations, as applicable.                                      ARTICLE V.                            PRE-CLOSING COVENANTS          5.1  Conduct of Business Pending the Closing.  During the period from the date of this   Agreement and continuing through the Closing Date or the earlier termination of this Agreement   pursuant to Section 7.1 hereof, except as expressly contemplated by this Agreement, as set forth   in Section 5.1 of the Seller Disclosure Schedule or with the prior written consent of Buyer, which   consent shall not be unreasonably withheld, conditioned, or delayed, the Seller Parties shall, and   shall cause the Company and its Subsidiaries to, (x) carry on their business in the ordinary course   consistent with past practices, except to the extent otherwise contemplated by this Agreement   (such as actions taken pursuant to this Agreement to facilitate funding of the Special Dividend),   and (y) to the extent consistent therewith, use commercially reasonable efforts to maintain the   current business, significant business relationships and goodwill of their business with   policyholders, Employees, Independent Producers and other customers, suppliers and service   providers of and to the Company and its Subsidiaries, and with the Governmental Authorities with   jurisdiction over the Company and its Subsidiaries.  Without limiting the generality of the   foregoing, except as expressly contemplated by this Agreement or as set forth in Section 5.1 of the   Seller Disclosure Schedule, the Seller Parties shall not with respect to the Company or its   Subsidiaries, and the Seller Parties shall not permit the Company or any of its Subsidiaries, without  the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned,  or delayed, to:                (a)   amend its Organizational Documents;                (b)   (i) issue, sell, transfer, grant, pledge or otherwise encumber any shares or   other interests representing equity interests in the Company or any of its Subsidiaries, any other   voting securities, or nay securities convertible into or exchangeable for any such interests, in each   case relating to equity interests in the Company or any of its Subsidiaries, (ii) issue, sell, grant or   accelerate the timing of payment or vesting of any option, warrant, convertible or exchangeable   security, subscription, call, or other agreement or right of any kind to purchase or otherwise acquire   (including by exchange or conversion) any ownership interest in the Company or any of its   Subsidiaries; (iii) directly or indirectly, purchase, redeem or acquire any equity interest (including   Membership Interests or Minority-Owned Shares) or any other ownership interest in the Company                                        - 49 -  

 

   or any of its Subsidiaries; (iv) change the authorized or issued equity of the Company or any of its  Subsidiaries; (v) effect any recapitalization, reclassification, unit split, combination or similar  change in the capitalization of the Company or any of its Subsidiaries; or (vi) enter into any  contracts, agreements or arrangements to issue, redeem, acquire or sell any equity interests or any  other ownership interests in the Company or any of its Subsidiaries;                (c)   (i) sell, transfer, encumber or otherwise dispose of Investment Assets other  than consistent with the Investment Guidelines; (ii) sell, terminate, transfer, exclusively license,  encumber or otherwise dispose of any other material assets of the Company or its Subsidiaries; or  (iii) permit the acquisition of any assets that would be material to the Company or its Subsidiaries;                (d)   make or authorize any capital expenditures that are, in the aggregate, in  excess of $75,000;               (e)   make any change in the accounting, actuarial, payment, pricing, marketing,  price or premium discounting (with respect to new or renewal business), reserving, risk  management, underwriting or claims administration policies, practices, standards or principles, or  make any change in the Investment Guidelines, or fail to manage its Investment Assets in  compliance with the Investment Guidelines, in each case except as may be required by GAAP,  SAP applicable to the Insurance Subsidiaries or applicable Law;               (f)   adopt a plan of complete or partial liquidation, dissolution, merger,  consolidation, or recapitalization of the Company or any Subsidiary of the Company;               (g)   hire any new employee who would be an Employee, except any employee  with annual base compensation of less than $75,000 and who is terminable at-will, but only to the  extent that the Employee is hired  in the ordinary course of business consistent with past practice  (and Buyer shall be provided reasonable notice thereof);               (h)   establish, amend or modify any Employee Plan, other than as required to  comply with a change in applicable Law or as otherwise contemplated by this Article V;               (i)   (i) promise, grant or agree to increase the base salary (or wages), target  incentive opportunity or severance pay of, or any benefits paid or payable to, any Employee,  including making any grant or award of equity compensation, or accelerate the vesting of any  compensation or benefit, other than in the ordinary course of business consistent with past practice,  as required by applicable Law or an Employee Plan in-force as of the date hereof, or as specifically  provided for in this Agreement; (ii) enter into or amend any employment, consulting,  indemnification, severance or termination agreement with any Employee other than agreements  providing for at will employment entered into in the ordinary course of business with total annual  compensation of less than $75,000 or termination of at will employment in the ordinary course of  business; or (iii) loan or advance any money or other property to any Employee;               (j)   terminate any Employee, except in the ordinary course of business  consistent with past practice for performance-related reasons (including fraud or willful  misconduct) (and Buyer shall be provided reasonable notice thereof);                                         - 50 -  

 

                 (k)   incur, assume or guarantee any Indebtedness or guarantee the obligations of   another Person, or make any loans, advances or capital contributions to, or investments in, any   other Person other than investments made in accordance with the Investment Guidelines that   constitute Investment Assets;                (l)   declare, set aside or pay any dividends or other distributions (other than   declaration of the Special Dividend payment of Unregulated Distributions), or make any capital   contributions to any of the Subsidiaries of the Company, or permit any equity holder of the   Company or any of its Subsidiaries to withdraw any equity or capital of the Company or any of its   Subsidiaries (other than Unregulated Distributions); provided that the Company provides Buyer   written notice of each Unregulated Distribution (i) within five (5) Business Days following   payment thereof and, (ii) in any case, no later than three (3) Business Days prior to the Closing   Date;                 (m)   acquire (by merger, consolidation, acquisition of stock or assets,   reinsurance or otherwise) any other Person or substantially all of the assets of any other Person or   any division thereof;                (n)   amend, waive any rights or delegate performance under, or assign, transfer,   terminate or extend any Material Contract or Reinsurance Contract (other than contracts that   terminate pursuant to their terms), or enter into any contract that would be a Material Contract or   Reinsurance Contract if in effect on the date hereof;                (o)   outside of the ordinary course of business consistent with past practice, (i)   enter into any agreement with any Independent Producer, or (ii) amend, waive any rights or   delegate performance under, or assign, transfer or terminate any existing agreement with any   Independent Producer;                 (p)   pay, settle or compromise any Proceeding or threatened Proceeding, except   claims under policies and certificates of insurance within applicable policy limits and in the   ordinary course of business consistent with past practice;                (q)   except in connection with claims management activities in the ordinary   course of business consistent with past practice, (i) forgive, cancel or compromise any debt or  claim, (ii) waive or release any right, of material value, or (iii) fail to pay or satisfy when due any  material liability (other than any such liability that is being contested in good faith);                (r)   acquire any real property or any direct or indirect interest in real property,  other than security interests in real property included in the Investment Assets;                (s)   abandon, modify, waive, terminate or allow to lapse any material Permit of  the Company or any of its Subsidiaries unless such Permit has ceased to be necessary for the  conduct of the business of the Company or any of its Subsidiaries under applicable Law;               (t)   amend or modify any policy form on which Insurance Contracts are written  or approved to be written;                                          - 51 -  

 

                 (u)    (i) make, amend, or revoke any material election related to Taxes, (ii) settle  or compromise any Tax liability or surrender any right to claim a Tax refund, offset, or other  reduction in Tax liability, (iii) enter into any closing agreement related to Taxes, (iv) consent to  any extension or waiver of the limitations period applicable to any Tax claim or assessment,  (v) change any Tax period, any Tax accounting method or the basis for determining any item  referred to in Section 807(c) of the Code, (vi) amend any Tax Return or file any claim for Tax  refunds, or (vii) make a request for a written ruling of a Governmental Authority relating to Taxes;                (v)   enter into any new line of business or, except in the ordinary course of   business consistent with past practice, launch, market, issue or agree to issue any new products or   make material modifications or additions to the terms and conditions of the Insurance Contracts;                 (w)   terminate, cancel or amend, or cause the termination, cancellation or   amendment of, any material insurance coverage (and any surety bonds, letters of credit, cash   collateral or other deposits related thereto required to be maintained with respect to such coverage),   maintained by or for the benefit of the Company or any of its Subsidiaries that is not replaced with   comparable insurance coverage; or                (x)   authorize or enter into any agreement in furtherance of any of the foregoing.          5.2  Access to Information; Confidentiality.                (a)   Prior to the Closing Date, the Seller Parties will provide Buyer and its   Representatives with reasonable access, including access upon reasonable notice at reasonable   times during normal business hours, to all of the Books and Records and all of the properties and   Employees of the Company and its Subsidiaries and, during such period, the Seller Parties shall   and shall cause the Company and its Subsidiaries to furnish to Buyer such information concerning   the business, properties, financial condition, operations and senior personnel of the Company and   its Subsidiaries as Buyer may from time to time reasonably request, other than any such properties,   books, contracts, records and information that (i) are subject to an attorney-client or other legal   privilege that might be impaired by such disclosure or (ii) are subject to an obligation of   confidentiality; provided, that (x) in the case of clause (i) the Seller Parties will use their   commercially reasonable efforts to take such action (such as entering into a joint defense   agreement or other arrangement to avoid loss of the attorney-client privilege) with respect to such   books, records, contracts, properties and information as is necessary to permit disclosure to Buyer   and Buyer’s Representatives and (y) in the case of clause (ii) the Seller Parties shall notify Buyer   promptly if any information is being withheld in reliance on clause (ii) and the Seller Parties shall   use commercially reasonable efforts to obtain a waiver of the applicable obligation.  All requests   for access or information pursuant to this Section 5.2(a) shall be directed to such Person or Persons   as Seller shall designate.                  (b)   From and after the date hereof, Buyer and its Affiliates (including, from and   after the Closing, the Company and its Subsidiaries), on one hand, and the Seller Parties and their   Affiliates (including, prior to the Closing, the Company and its Subsidiaries), on the other hand,  shall and shall cause their respective Affiliates and Representatives to treat confidentially all non-  public, confidential or proprietary information, including all notes, analyses, compilations, studies,   copies and other documents which contain or otherwise reflect such information, provided to it by                                        - 52 -  

 

     or on behalf of the other party in connection with the transactions contemplated hereby regarding   such other party’s business and operations and all information provided under the Transaction   Documents including the terms of the Transaction Documents, which confidential information   may also include Personal Information (the “Confidential Information”).  All Confidential   Information provided by or on behalf of a party to the other party shall be used by such other party   and its applicable Affiliates solely for the purposes of performing its obligations under the   Transaction Documents and, except as may be required in carrying out the transaction   contemplated hereby, shall not be disclosed to any third party (and, in the event of any disclosure   to any third party as may be required to carry out the transactions contemplated hereby, such third   party shall be informed by the disclosing party of the confidential nature of such information and   instructed to keep such information confidential).  Additionally, Confidential Information may be   shared by either party on a need-to-know basis with its officers, directors, Employees, Affiliates,   third party service providers, auditors, attorneys, or consultants, or in connection with the dispute   resolution process specified in this Agreement.  The restrictions set forth in this Section 5.2(b)   shall not be applicable to any Confidential Information: (i) that is publicly available when provided   or thereafter becomes publicly available, other than through a breach of any Transaction Document   or any other confidentiality obligation, or that is independently derived by any party without the   use of any information provided by the other party in connection with the transactions   contemplated hereby or otherwise; (ii) that is required to be disclosed in any legal or regulatory   proceeding, investigation, audit, examination, subpoena, civil investigative demand or other   similar process, or by operation of Law (with the relief from the requirements of this Section 5.2(b)   only applying for the purposes of such disclosure); provided, that (x) the disclosing party shall   provide the party whose information will be disclosed with prompt advance written notice of such   requirement such that the party whose information will be disclosed may seek a protective order   or other appropriate remedy to protect its interest, (y) the disclosing party shall reasonably   cooperate with such party and, if a protective order or other remedy is not obtained, shall only  disclose such information as is necessary to be disclosed and (z) the disclosing party shall inform  any recipient of such information of the confidential nature of such information and shall instruct  the recipient to keep such information confidential; or (iii) where the party seeking to disclose has  received the prior written consent of the party providing the information.          5.3  Governmental Approvals and Filings; Third Party Consents.                  (a)   Subject to the terms and conditions hereof, each of Buyer and Seller shall   use its reasonable best efforts, and shall cooperate fully with each other, (i) to take, or cause to be   taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to   consummate and make effective, as soon as practicable after the date hereof, the transactions   contemplated by the Transaction Documents and (ii) to obtain as promptly as practicable all   necessary Permits, Orders or other consents, approvals or authorizations of Governmental   Authorities necessary in connection with the consummation of the transactions contemplated by   hereby; provided that (A) Buyer shall be responsible for all filing and application fees payable to   Governmental Authorities, including any fees payable to the Insurance Regulators in Illinois,   Texas and New York and for any actuarial services associated with requesting approval of the   Special Dividend, and (B) except as expressly covered by other provisions of this Agreement,   Seller shall be responsible for costs (including any license or other fees and expenses) associated   with obtaining any such consents or waivers from such other third parties.  In connection therewith,   Seller and Buyer shall make and cause their respective Affiliates to make all legally required filings                                        - 53 -  

 

     as promptly as practicable in order to facilitate prompt consummation of the transactions   contemplated hereby, shall provide and shall cause their respective Affiliates to provide such   information and communications to Governmental Authorities as such Governmental Authorities   may request, shall take and shall cause their respective Affiliates to use their reasonable best efforts   to (x) avoid any Proceedings by any Governmental Authority with respect to the transactions   contemplated hereby, and (y) defend or contest in good faith any Proceeding by any third party   (other than any Governmental Authority), whether judicial or administrative, challenging any of   the transactions contemplated hereby, or that could otherwise prevent, impede, interfere with,   hinder or delay in any material respect the consummation of the transactions contemplated thereby.    Each of the parties shall use reasonable best efforts to provide to the other party copies of all   applications or other communications to Governmental Authorities in connection with this   Agreement in advance of the filing or submission thereof; provided, that neither party shall be   required to provide the other with any information or materials that are commercially sensitive,   contain personal information about an officer or director or are legally privileged.                (b)   Without limiting the generality of the foregoing, as promptly as reasonably   practicable following the date hereof, (i) Buyer shall, and shall cause its applicable Affiliates to,   file with all applicable Insurance Regulators the Filings and requests for approval listed in   Section 4.3 of the Buyer Disclosure Schedule and any other pre-acquisition notifications on “Form   E” or similar market share notifications to be filed in each jurisdiction where required by applicable   Law with respect to the transactions contemplated hereby, in each case which Filings and requests   shall be complete and shall include all required exhibits, (ii) Seller shall, and shall cause its   applicable Affiliates to, file with all applicable Insurance Regulators the Filings and requests for   approval listed in Section 3.6(b) of the Seller Disclosure Schedule (except to the extent such Filing   is being prepared by Buyer pursuant to the foregoing clause (i)), in each case which Filings and   requests shall be complete and shall include all required exhibits, (iii) Seller shall cause NTAL to   file for approval of the Special Dividend in an aggregate amount that would cause NTAL’s RBC   Ratio (after payment of such amount) to be at least 425% on a pro forma basis giving effect to the   transactions contemplated hereby, to be declared and paid, after the Closing Date, by NTAL, with   the Insurance Regulator of the State of Texas, in connection with the filing of the “Form A”   Acquisition of Control Statement to be filed in accordance with clause (i) above, and (iv) Buyer   and Seller shall make an appropriate Filing of a notification and report form pursuant to the HSR   Act with the Federal Trade Commission and the Antitrust Division of the United States   Department of Justice with respect to the transactions contemplated hereby and requesting early   termination of the waiting period under the HSR Act.  Buyer and Seller shall, upon request, furnish   each other with all information concerning themselves, their respective Affiliates, directors,   officers and shareholders and members, as applicable, and such other matters as may be reasonably   necessary or advisable in connection with the preparation of any statement, Filing, notice or   application made by or on their behalf to any Governmental Authority in connection with the   transactions contemplated by the Transaction Documents; provided, in no event will any party be   required to disclose to the other party any information to the extent prohibited by applicable Law.    A reasonable time prior to furnishing any written materials to any Insurance Regulator or other   Governmental Authority in connection with the transactions contemplated hereby, the filing party   shall use reasonable best efforts to furnish the other party with a copy thereof, and such other party  shall have a reasonable opportunity to provide comments thereon, which comments shall be  considered by the filing party in good faith; provided, in no event will any party be required to   disclose to the other party any information to the extent prohibited by applicable Law. Each party                                        - 54 -  

 

     shall give to the other party prompt written notice if it or any of its Affiliates receives any notice   or other communication from any Insurance Regulator or other Governmental Authority in   connection with the transactions contemplated by the Transaction Documents and, in the case of   any such notice or communication that is in writing, shall promptly furnish the other party with a   copy thereof. If any Governmental Authority requires that a hearing be held in connection with  any such approval, each party shall use its reasonable best efforts to arrange for such hearing to be  held promptly after the notice that such hearing is required has been received by such party. Each  party shall give to the other party reasonable prior written notice of the time and place when any  meetings, telephone calls, or other conferences may be held by it with any Governmental Authority  in connection with the transactions contemplated by the Transaction Documents (other than  telephone calls regarding routine administrative matters), and the other party shall have the right  to have a representative or representatives attend or otherwise participate in any such meeting,  telephone call, or other conference unless the relevant Governmental Authority does not consent  to attendance or participation by such other party’s representative or such attendance or  participation is prohibited by applicable Law.               (c)   Without limiting the foregoing, each of Buyer and Seller shall use its  reasonable best efforts to avoid each and every impediment under any antitrust Law, insurance  Law or other applicable Law that may be asserted by any Governmental Authority with respect to  this Agreement and the transactions contemplated hereby so as to enable the Closing to occur as  promptly as practicable, including, without limitation, any actions requested by any Governmental  Authority that are necessary or appropriate to (i) obtain all consents and exemptions and secure  the expiration or termination of any applicable waiting period under the HSR Act; (ii) resolve any  objections that may be asserted by any Governmental Authority with respect to the transactions  contemplated hereby; and (iii) prevent the entry of, and have vacated, lifted, reversed or  overturned, any Order that would prevent, prohibit, restrict or delay the consummation of the  transactions contemplated hereby.  Notwithstanding anything to the contrary in this Agreement,  no party shall be obligated to take or refrain from taking any action or to become subject to any  condition, limitation, restriction or requirement, in each case that is imposed by a Governmental  Authority on such party or its Affiliates in connection with the pursuit of the consent or approval  of a Governmental Authority for the transactions contemplated hereby, that would reasonably be  expected to result in a Burdensome Condition.               (d)   Seller shall, and shall cause the Company and its Subsidiaries to, use  reasonable best efforts to obtain, prior to the Closing, any consent or waiver from any third party  (other than a Governmental Authority) that is required for the Company to consummate the  transactions contemplated by this Agreement and that is necessary in order to ensure that the  Material Contracts and Reinsurance Contracts will not be terminated as a result of consummating  the transactions contemplated by this Agreement.  Buyer shall, and shall cause each of its Affiliates  to, cooperate with the Company and its Subsidiaries at the Company’s request to assist the  Company and its Subsidiaries in obtaining such consents or waivers. Each of Buyer and Seller  shall bear its own and its Affiliates’ internal costs to obtain such consents and waivers, and the  costs payable to third parties for obtaining such consents and waivers shall be borne equally by  Buyer and Seller.          5.4  Notification of Certain Matters. Between the date of this Agreement and the Closing   Date, each party shall give prompt notice to the other parties at such time that such party becomes                                        - 55 -  

 

   aware of the occurrence, or nonoccurrence, of any event which, if existing, occurring or known on  the date hereof should have been so disclosed, or which is necessary to correct any information in  the Seller Disclosure Schedule or the Buyer Disclosure Schedule; provided, however, that for  purposes of determining the rights and obligations of the parties under this Agreement, any such  supplemental disclosure by any party shall not be deemed to have been disclosed as of the date  hereof, to constitute a part of, or an amendment or supplement to the Seller Disclosure Schedule  or the Buyer Disclosure Schedule (as applicable), or to cure any breach or inaccuracy of a  representation, warranty, covenant, condition or agreement as of the date hereof unless so agreed  to in writing by the other party.  Notwithstanding the previous sentence, if (i) the matter so  disclosed is in respect of an event occurring or a matter arising after the date hereof and would  result in the Seller Parties’ inability to satisfy the condition to Closing set forth in Section 6.2(a)  (as expressly acknowledged by the Seller Parties in the notice to Buyer of such matter and in the  certificate required to be delivered under Section 2.3(a)(vi)), and (ii) Buyer waives compliance  with any failure to fulfill such condition and elects to close, then the Seller Disclosure Schedule  shall be deemed to have been updated to include the matter so disclosed and Buyer shall not have  any claim for indemnity hereunder with respect to such breach.         5.5  Interim Financial Statements.         (a)   From the date hereof until the Closing Date or earlier termination of this  Agreement, Seller shall deliver to Buyer true and complete copies of the unaudited and audited  financial statements of the Company and its Subsidiaries when and as prepared in the ordinary  course of business, consistent with past practice, together with any applicable actuarial opinion  thereon.           (b)   From the date hereof until the Closing Date, Seller will forward to Buyer copies of  all monthly or quarterly investment advisor reports prepared for the Regulated Subsidiaries  regarding the Investment Assets, in each case within five (5) Business Days following receipt of  such reports by the Regulated Subsidiaries. At least three (3) Business Days prior to the Closing  Date, Seller shall deliver to Buyer a true, complete and correct list of all Investment Assets of the  Company and its Subsidiaries with information included therein as to the Book Value and fair  market value of such Investment Assets calculated in a manner consistent with the calculations  with respect to such assets in Section 3.25(a)(i) of the Seller Disclosure Schedule, in each case, as  of the close of business on a day requested by Buyer in a written notice that is delivered to Seller  at least five (5) Business Days prior to the Closing Date.         (c)   From the Closing Date until the seventh (7th) anniversary of the Closing Date, at  the request of Buyer, Seller shall deliver to Buyer true and complete copies of the unaudited and  audited financial statements of the Seller as prepared in the ordinary course of business, consistent  with past practice.         5.6  Public Announcements. Buyer and the Seller Parties shall mutually agree on the  form and timing of an initial joint press release to be issued with respect to this Agreement and the  transactions contemplated hereby. In addition, prior to the Closing Date, Buyer and the Seller  Parties shall consult with and obtain the approval of Buyer and Seller before issuing any press  release or making any other public disclosure with respect to this Agreement or the transactions  contemplated hereby and shall not issue any such press release or make any such public disclosure                                       - 56 -  

 

   prior to such consultation and approval (except as may be required by Law, in which event the  Person proposing to issue such press release or make such public disclosure shall use its reasonable  best efforts to consult in good faith with the other party before issuing any such press release or  making any such public disclosure and shall cooperate to limit the scope of disclosure to the  minimal amount of information required by Law).         5.7  Further Assurances. On and after the Closing Date, Seller and Buyer shall, and shall  cause their respective Affiliates to, use commercially reasonable efforts to execute and deliver, or  shall cause to be executed and delivered, such documents, certificates, agreements and other  writings and shall take, or shall cause to be taken, such further actions as may be reasonably  required or requested by any party to carry out the provisions of the Transaction Documents and  consummate or implement expeditiously the transactions contemplated by the Transaction  Documents.         5.8  Delivery of Books and Records. At the Closing, Seller shall cause all Books and  Records in the possession of Seller or any of Seller’s Affiliates to be delivered to Buyer (or a  Person designated by Buyer) in the manner (and in the case of physical Books and Records at the  location(s)) reasonably requested by Buyer, in all cases to the extent not located at an office of the  Company.         5.9  Access to Books and Records.         (a)   Until the seventh (7th) anniversary of the Closing (provided, that Buyer shall give  30 days’ notice to Seller prior to destroying any records to permit Seller, at its expense, to examine,  duplicate or repossess such books and records), Buyer shall afford promptly to Seller and its  Representatives reasonable access to the books, records, officers, employees, auditors and other  advisors of the Company and its Subsidiaries, and provide information with respect to the  Company and its Subsidiaries in a readily accessible form (including financial information in a  form consistent with the Company’s and its Subsidiaries’ historical practice for the preparation of  such financial information), to the extent reasonably required by Seller for any lawful business  purpose, including litigation, disputes, compliance, financial reporting (including financial audits  of historical information), loss reporting, regulatory and accounting matters, and Buyer shall  reasonably cooperate with Seller and its Representatives, to furnish such books and records and  information and make available such officers, employees, auditors and other advisors of the  Company and its Subsidiaries; provided, that such access does not unreasonably interfere with the  conduct of the business of Buyer, the Company or the Company Subsidiaries.           (b)   Until the seventh (7th) anniversary of the Closing (provided, that Seller shall give  thirty (30) days’ notice to Buyer prior to destroying any records to permit Buyer, at its expense, to  examine, duplicate or repossess such books and records), Seller shall, and shall cause Seller’s  Affiliates to, afford promptly to Buyer and its Representatives reasonable access to the books,  records, officers, employees, auditors and other advisors relating to the Company and its  Subsidiaries, and provide information with respect to the Company and its Subsidiaries in a readily  accessible form (including financial information in a form consistent with Sellers or such  Affiliate’s historical practice for the preparation of such financial information), to the extent  reasonably required by Buyer for any lawful business purpose, including litigation, disputes,  compliance, financial reporting (including financial audits of historical information), loss                                       - 57 -  

 

   reporting, regulatory and accounting matters, and Seller shall, and shall cause its Affiliates to,  reasonably cooperate with Buyer and its Representatives to furnish such books and records and  information and make available such officers, employees, auditors and other advisors with respect  to the Company and its Subsidiaries; provided, that such access does not unreasonably interfere  with the conduct of the business of Seller or Seller’s Affiliates.           5.10 Non-Competition; Non-Solicitation.         (a)   For a period of five (5) years following the Closing Date, the Seller Parties shall  not, and shall cause each of their respective Affiliates not to, engage in the business of selling any  life, health, accident or disability insurance within the United States (“Competing Business”)  through any Independent Producer or otherwise.         (b)   Following the Closing Date, the Seller Parties shall not, and shall cause each of  their respective Affiliates to not (i) initiate, promote or establish any program for the substitution,  surrender, exchange, termination or systematic replacement of all or any portion of the coverage  provided by any Insurance Contract with an insurance policy or coverage written or sold by any  Seller Party or any of its Affiliates, (ii) induce or provide any incentive (financial or otherwise) to  any Independent Producer to terminate its relationship with the Company, (iii) induce or provide  any incentive (financial or otherwise) to any Independent Producer to target or solicit, or cause to  be targeted or solicited (on a systematic basis or otherwise) any holder of an Insurance Contract to  replace all or any portion of the coverage provided by such Insurance Contract with an insurance  policy or coverage written or sold by any Seller Party or any of its Affiliates or (iv) use the list of  holders of Insurance Contracts or information related to pricing or forms of such policies and  contracts or similar proprietary information of the Company or any of its Subsidiaries for any  purpose without Buyer’s prior written consent.         (c)   Notwithstanding anything to the contrary set forth in Section 5.10(a), and without  implication that the following activities otherwise would be subject to the provisions of this  Section 5.10, nothing in Section 5.10(a) shall preclude, prohibit or restrict any Seller Party or any  of its Affiliates from engaging, or require any Seller Party to cause any of its Affiliates not to  engage, in any manner in any of the following:               (i)   making passive investments in the ordinary course of business, including in        a general or separate account of an insurance company, in Persons engaged in a Competing        Business; provided, that the Seller Party or such Affiliate of the Seller Party: (A) does not        have the right to designate a majority of the members of the board of directors or other        governing body of such entity or otherwise to direct the operation or management of any        such entity, (B) is not a participant with any other Person in any group (as such term is        used in Regulation 13D of the Exchange Act) with such right and (C) owns less than 10%       of the outstanding voting securities (including convertible securities) of such entity; or               (ii)  acquiring any business, or acquiring, merging or combining with any Person        (an “Acquired Business”) where the Acquired Business derived more than 10% of its net        operating revenue on a consolidated basis for the most recent fiscal year from a Competing        Business; provided, that within one year after such acquisition, merger or combination,        either (A) such Seller Party or Affiliate of such Seller Party shall have disposed of the                                       - 58 -  

 

           relevant portion of such Acquired Business that engages in the Competing Business or (B)         such Seller Party or Affiliate of such Seller Party shall have modified the Acquired         Business such that the Acquired Business will thereafter derive less than 10% of its net         operating revenue on a consolidated basis from such Competing Business.          (d)   Except as set forth in Section 5.10(d) of the Seller Disclosure Schedule, for a   period of three (3) years following the Closing Date, without the prior written consent of Buyer,   no Seller Party shall, and each Seller Party shall cause its Affiliates to not, whether directly or   indirectly, solicit for employment, employ or contract for the services of any Employee;   provided, that nothing in this Section 5.10(d) shall prohibit a Seller Party or its Affiliates from   engaging in general solicitations not directed at such Persons or from soliciting, employing or   contracting for the services of any such Person whose employment with or engagement by Buyer   or any of its Affiliates (including the Company and its Subsidiaries) has been terminated by   Buyer or its applicable Affiliate or who has otherwise ceased to be employed or engaged by   Buyer or any of its Affiliates (including the Company and its Subsidiaries) for a period of at least   twelve (12) months; provided, further, that nothing in this Section 5.10(d) prohibits Seller or any   Affiliate of Seller from employing a Key Executive under the terms of Section 5.12(h).          5.11 D&O Liabilities.  Prior to Closing, Buyer shall use commercially reasonable efforts   to have available (subject to the payment of premium) director and officer and director “tail   coverage” insurance for the Company and its Subsidiaries with respect to the period prior to  Closing.  Prior to or at the Closing, Seller shall directly pay the insurance company for the all costs  of securing such policy.          5.12 Employee Matters.            (a)   Employees.                      (i)   Excluded Employees. Section 5.12(a) of the Seller Disclosure         Schedule identifies those Employees who will not continue in employment with the         Company or its Subsidiaries from and after the Closing Date and all other employees of         Seller or any Affiliate of Seller (other than the Company and its Subsidiaries) that         participate in any Employee Plan (the “Excluded Employees”).  Within a reasonable period         of time following the execution of this Agreement, Seller shall or shall cause the Company         or the applicable Subsidiary to transfer the employment of the Excluded Employees to the         Seller or one of its Subsidiaries (other than Company or its Subsidiaries).  From and after         the Closing Date, none of the Buyer, its Affiliates, the Company or its Subsidiaries shall         have any liability to or in respect of the Excluded Employees.                      (ii)  Continuing Employees.  For the period of at least twelve (12)         months from and after the Closing Date, Buyer shall provide each Employee (other than         the Excluded Employees) as of the Closing Date (each a “Continuing Employee”) base         compensation and bonus opportunities that, in the aggregate, are comparable to those in         effect for such Continuing Employee immediately prior to the Closing Date.  Seller shall         cause the Company or the applicable Subsidiary to provide to Buyer a completed         Employment Eligibility Verification USCIS Form I-9, verifying the identity and         employment authorization of each Continuing Employee and in the event that any such                                        - 59 -  

 

      documentation is not provided to cooperate with Buyer in obtaining such documentation        from any Continuing Employee, as applicable, in each case, prior to the Closing Date.                     (iii) Prior to, or as of the Closing, Seller shall cause the Company and       each applicable Subsidiary of the Company to pay its employees or accrue on its financial        statements (including the Closing Balance Sheets) all compensation accrued but unpaid as        of the Adjustment Time with respect to Excluded Employees, including wages, business        expense, and other reimbursements and all severance payments whether or not required by       GAAP.         (b)   Company 401(k) Plan.  Effective no later than immediately before the Closing Date and contingent upon the Closing, Seller shall take all actions necessary and appropriate to  terminate the 401(k) plan sponsored or maintained by the Company or its Subsidiaries for the  benefit of the Employees (the “Company 401(k) Plan”) and otherwise terminate the participation  of the Continuing Employees in any other 401(k) plan maintained for the benefit of such  Continuing Employees in accordance with applicable Law and to amend the Company 401(k) Plan  to remove pre-requisites for eligible participants to receive and fully vest in all matching and non- elective employer contributions on the Closing Date, which contributions shall be in an amount  consistent with past practice and as set forth on Section 5.12(b) of the Seller Disclosure Schedule.  No later than the Closing Date, Seller shall cause the Company to contribute to the Company  401(k) Plan all employer and employee contributions with respect to the period before the Closing  as set forth on Section 5.12(b) of the Seller Disclosure Schedule.  Contingent upon the Closing,  Buyer will cause the Continuing Employees who were participants in Company’s 401(k) plan in  which the Continuing Employees participate on the Closing Date to be automatically enrolled in a  401(k) plan sponsored by the Buyer or one of its Affiliates (the “Buyer 401(k) Plan”), which will  occur as soon as administratively practicable following the Closing Date. Following the Closing,  Buyer also agrees to provide each Continuing Employee an opportunity, within a period of time  that will avoid default under an existing participant loan, to make a direct rollover to the Buyer  401(k) Plan of an eligible rollover distribution from the Company 401(k) Plan that includes  promissory notes reflecting such Continuing Employee’s then outstanding participant loans under  the Company 401(k) Plan.         (c)   Employee Benefit Plans and Past Service Credit.  Effective as of the Closing Date, except as provided in Section 5.12(b) above, at the request of Buyer, Seller shall take all actions  necessary and appropriate to terminate the Employee Plans (except as to those obligations further  described in Section 5.20  and Annex E) sponsored or maintained by the Company or its  Subsidiaries and otherwise terminate the participation of the Continuing Employees in any other  Employee Plan maintained for the benefit of such Continuing Employees, and the Continuing  Employees shall, from and after the Closing Date, be eligible to participate in employee plans that  are generally available to similarly situated employees of Buyer. With respect to severance and  vacation benefits and any Employee Plan maintained by Buyer or an Affiliate of Buyer for the  benefit of any Continuing Employee, effective as of the Closing Date, Buyer shall, or shall cause  its Affiliate to, subject to subclause (d) below, recognize all service with the Company of the  Continuing Employee, as if such service were with Buyer, for vesting, eligibility and severance  and vacation accrual rate purposes (but not for any purposes under any defined benefit plan or  eligibility under any retiree life or medical plan), provided, however, such service shall not be  recognized to the extent that such recognition would result in a duplication of benefits.                                       - 60 - 

 

       (d)   Accrued PTO.  To the extent reflected on the Pro Forma Financial Statements,  Buyer shall or shall cause the Company or the appropriate Subsidiary of the Company to credit   each Continuing Employee with the amount of accrued but unused paid time off credited for the   benefit of such Continuing Employee as of the Closing Date.  Each Continuing Employee shall be   entitled to use such time off in accordance with the applicable policies of the Company and its   Subsidiaries as in effect from time to time following the Closing Date.          (e)   COBRA Coverage. Seller will or will cause an Affiliate of Seller to retain liability  for any required continuation coverage pursuant to Code §4980B (“COBRA”) for the Excluded   Employees and their “qualified beneficiaries” (as defined in Code §4980B(g)(1)) with respect to   any “qualifying event” (as defined in Code §4980B(f)(3)) that occurs on or prior to the Closing   Date. Buyer will provide, or cause the Company or a Subsidiary of the Company to provide,   COBRA coverage for the Continuing Employees and their qualified beneficiaries with respect to   “qualifying events” occurring on or after the Closing Date.          (f)   Workers Compensation.  Seller will or will cause an Affiliate of Seller to retain  liability for all the cost of workers’ compensation claims, both medical and disability, for the   Excluded Employees.  Buyer will be, or will cause Company to be, responsible for all workers’   compensation claims for Continuing Employees that relate to loss events occurring before or after   the Closing Date.          (g)   Employees on Leave.  Notwithstanding anything in this Agreement to the contrary,  any Employee who is on long-term, short-term or other authorized leave as of the close of business   on the Closing Date will be a Continuing Employee for all purposes.  Buyer will, and will cause   Company and its Subsidiaries to, comply with applicable Law as to those employees of Company   on leave or on layoff on the Closing Date, including re-employment.           (h)   Existing Employment Agreements.  Seller shall retain all obligations, and shall  reimburse the Company for any amounts payable by the Company, under the Executive   Employment Agreement and any Change of Control Agreement resulting from the termination of   employment of the applicable Key Executive that is the counterparty thereunder; provided that   Seller shall have no obligation to reimburse the Company for any payment owed by the Company   under any Change of Control Agreement in connection with a “Qualifying Termination” of the   applicable Key Executive party to such agreement (i) by the Company without “Cause” or (ii) by   such executive for “Good Reason” (as each such term is defined in the applicable Change of   Control Agreement) after the Closing Date (it being understood, for the avoidance of doubt, that   Seller shall be obligated to reimburse the Company for any payment owed by the Company in   connection with a “Qualifying Termination” of the applicable Key Executive party to such   agreement by such executive voluntarily without “Good Reason” or if any Key Executive becomes  employed with any Seller Party or any of their respective Affiliates prior to the first (1st)  anniversary of the Closing Date).  In the event any Key Executive that is the counterparty to the  Executive Employment Agreement or any Change of Control Agreement accepts an employment  position with or becomes employed by any Seller Party or any Affiliate of any Seller Party during  the twelve (12) months immediately following the Closing Date, the Seller Party shall, and shall  cause its Affiliates to, condition such employment on the waiver of all of the Company’s  obligations under the applicable Executive Employment Agreement or Change of Control  Agreement.  For the avoidance of doubt, the Seller shall retain all obligations and reimburse the                                        - 61 - 

 

     Company for any amounts payable by the Company, and the Company shall have no liability or  other obligation, in each case under the Change of Control Agreement with Earl Fonville relating  to such Key Executive’s discontinuance of employment with the Company and its Subsidiaries.    Notwithstanding anything in this Section 5.12 to the contrary, as of the date of this Agreement,   each Continuing Key Executive has executed an offer letter with Buyer or the Company in a form   reasonably satisfactory to Buyer effective as of and contingent upon the Closing.          (i)   Section 280G Shareholder Approval.  If any payments or benefits payable or   provided by the Company or its Subsidiaries to any person in connection with the transactions   contemplated by this Agreement could be considered “parachute payments” under Section   280G(b)(2) of the Code (“Section 280G Payments”) and could reasonably be expected, absent the   vote described below, to result in the imposition of Taxes under Section 4999 of the Code, then   prior to the Closing Date, the Seller Parties shall cause the Company to take all necessary actions   to seek (and use commercially reasonable efforts to obtain) the approval by the applicable   stockholders, in a manner that satisfies Section 280G(b)(5) of the Code.  The Seller Parties shall   provide Buyer, at least three (3) Business Days prior to delivery to the applicable stockholders,   copies of all documents prepared by the Seller, Company or any Subsidiary of the Company in   connection with this Section 5.12(i) and shall consider in good faith any comments made by Buyer   with respect to such documents.  In the event such vote is required, the Seller Parties will deliver   to Buyer certification that a vote of the applicable stockholders was solicited in accordance with   this Section 5.12(i) and the results of such vote on or prior to the Closing Date.           (j)   Post-Closing Consultation.  Seller shall, and shall cause its Affiliates to, for a period   of ninety (90) days following the Closing Date, make Earl R. Fonville available to Buyer and its   Affiliates (including the Company and the Subsidiaries of the Company) for consulting services   relating to the business of the Company and its Subsidiaries up to a maximum up fifteen (15) hours   per week during such period.   Buyer shall, and shall cause its Affiliates to, for a period of ninety   (90) days following the Closing Date, make Wade Rugenstein available to Seller and its Affiliates   for consulting services relating to the business of Seller and its Affiliates up to a maximum up   fifteen (15) hours per week during such period.           5.13 Real Property Matters.                  (a)   On or before the Closing Date, Buyer and the applicable Affiliate of Seller   shall enter into terminations or amendments of each of the Keller Springs Leases in the forms set   forth on Exhibit B-1, Exhibit B-2, Exhibit B-3 and Exhibit B-4  (as amended, the “Keller Springs   Lease Amendment and Terminations”).                  (b)   The Seller Parties shall cause each Affiliate of Seller (other than the   Company and its Subsidiaries) that leases space at, or otherwise operates out of, the Keller Springs   Property, to vacate such leased premises on or prior to the Closing Date.  The Seller Parties shall   have access to a designated common area of the building for a period of thirty (30) days following   the Closing Date to transition the move of any Seller Party personal property, documents, or   systems which are stored, housed, or maintained in the leased premises at the Closing Date.          5.14 Name Change.  As promptly as practicable (and in no event later than thirty (30)   days) after the Closing Date, Buyer shall file all documents to amend the Organizational                                        - 62 -  

 

   Documents of EEI and all assumed business name filings to change its name and all assumed  names to names that do not include the word “Ellard” or any derivations thereof.         5.15 Release.  If, but only if, the Closing occurs, then each Seller Party hereby forever,  absolutely, unconditionally and irrevocably releases and discharges the Company, its Subsidiaries,  Buyer, and Buyer’s Affiliates from all obligations and liabilities of the Company or any of its  Subsidiaries to such Seller Party, all agreements and understandings of the Company or any of its  Subsidiaries involving such Seller Party, and all rights, claims and causes of action (whether at  law or in equity and whether or not currently known to exist) of such Seller Party against the  Company or any of its Subsidiaries that are a result of, involve or otherwise exist by reason of any  act, omission, fact, circumstance or other matter, cause or thing whatsoever that arose, occurred or  existed before the Closing, including without limitation any indemnification obligations to the  Seller Parties, and  the right to advancement and reimbursement of expenses, pursuant to the  organizational documents of the Company or its Subsidiaries; provided, however, that nothing in  this Section 5.15 waives, releases or restricts in any manner whatsoever any of such Seller Party’s  rights arising out of this Agreement.         5.16 No Shop.           (a)   From the date hereof until the earlier of the Closing and the date that this Agreement  is terminated pursuant to Article VII, the Seller Parties shall not, and shall cause their respective  Affiliates and Representatives not to, directly or indirectly: (i) solicit, initiate, encourage, accept  or facilitate any inquiry, indication of interest, proposal or offer from any person or entity (other  than Buyer or its Affiliates) relating to or in connection with an Alternative Transaction (as defined  below); (ii) participate in, negotiate, discuss, accept or enter into any agreement, arrangement or  understanding with any person (other than Buyer or its Affiliates) relating to, or reasonably  expected to lead to, an Alternative Transaction; (iii) provide information to any Person with respect  to, or otherwise cooperate in any way or assist or participate in connection with, any proposal that  constitutes or could reasonably be expected to lead to an Alternative Transaction or (iv) commit  to, enter into or consummate any Alternative Transaction.         (b)   For purposes hereof, “Alternative Transaction” means any offer or proposal by a  third party for (1) any acquisition or purchase, direct or indirect, of any shares or equity interests  or other security of the Company or any of its Subsidiaries, including any security convertible into  or exercisable or exchangeable for, any shares or equity interests or other security of the Company  or any of its Subsidiaries, or (2) a merger, amalgamation, consolidation, share exchange, business  combination, sale of a portion of the assets, reorganization, recapitalization, liquidation,  dissolution or other similar transaction involving the Company or any of its Subsidiaries.         (c)   Each Seller Party acknowledges and agrees that the restrictions contained herein  are reasonable and necessary to protect Buyer’s legitimate business interest and, if violated, may  cause Buyer irreparable harm for which monetary damages would not be an adequate remedy.   Accordingly, each Seller Party agrees that if any portion of this Section 5.16 is breached, then  Buyer may at its election in any court of competent jurisdiction, and in addition to any other  remedy available to it, obtain specific performance of such provision or enjoin a Seller Party from  engaging in the activities proscribed by this Section 5.16, in each case without any requirement to  post a bond for such purpose.                                       - 63 -  

 

           5.17 Intercompany Agreements.  The Seller Parties shall cause the termination of all   Intercompany Agreements on or prior to the Closing Date, other than the Intercompany   Agreements providing for the renewal commissions described in Section 5.20.  The Seller Parties   shall cause all intercompany balances between Seller or any director, officer, manager, or Affiliate   of Seller (other than the Company or its Subsidiaries) or any Minority Shareholder, on one hand,   and the Company or any of its Subsidiaries, on the other hand, to be paid in full and settled   immediately prior to the Closing.  As of immediately after the Closing, the Company and its   Subsidiaries shall have no further liability for any intercompany balances.          5.18 Bank Accounts.  Prior to the Closing, Seller shall change, effective as of the Closing,   the individuals authorized to draw on or having access to the bank, savings, deposit or custodial   accounts and safe deposit boxes maintained by the Company and its Subsidiaries to the individuals   designated in writing by Buyer.          5.19  Investment Assets.            (a)   From the date hereof until the Closing, Seller shall, within fifteen (15) Business  Days following the end of each calendar month, deliver to Buyer a report (the “Investment Asset   Report” consisting of (a) a list of all Investment Assets of the Company and each Subsidiary of   the Company as of the end of such month, including the Book Value and fair market value of each   such Investment Asset as of such month end; (b) a list of all Investment Assets included in the   prior month’s Investment Asset Report sold or otherwise disposed of by the Company or   applicable Subsidiary of the Company during the preceding month; (c) a list of the Investment   Assets acquired by the Company or any Subsidiary of the Company that have been acquired in the   preceding month; and (d) a list of all Investment Assets of the Company or any Subsidiary of the   Company that are in arrears or in breach or default in the payment of principal or interest or   dividends or are, or should be, classified as non-performing, non-accrual, ninety (90) days past   due, still accruing and doubtful of collections, in foreclosure or any comparable classification, or   are other than temporarily impaired as determined in accordance with the Specified Accounting   Principles.          (b)   Prior to the Closing Date, Seller shall cause the applicable Insurance Subsidiary to   sell, transfer or otherwise dispose of each Excluded Investment to a third party or to Seller’s   designee, which may be Seller or an Affiliate of Seller (provided such designee is not the Company   or a Subsidiary of the Company), in each case in exchange for cash or other assets reasonably   acceptable to Buyer in an amount equal to or greater than the Book Value of such Excluded   Investment or other Investment Asset, as applicable.          (c)   The Seller Parties shall, and shall cause their Subsidiaries to, use commercially   reasonable efforts to cause NTAL to have cash on hand in an amount necessary to fund the Special   Dividend immediately after the Closing Date.  In addition, with respect to the accumulation of   funds to pay the Special Dividend, the Seller Parties shall consult with and consider any   recommendations of Buyer in good faith.          5.20  Retirement Annuity Payments.  Following the Closing Date, Buyer shall (a) cause   the individuals set forth on Annex E to receive all retirement annuity payments vested as of the   Closing Date for all periods thereafter in accordance with the terms of those agreements set forth                                        - 64 -  

 

     on Annex E, and (b) shall cause the Company or its Subsidiaries to provide to such individuals, no   later than the thirtieth (30th) day following the end of each calendar quarter, a report providing   information with respect to such vested retirement annuity payments substantially in the form   attached hereto as Annex E.  Buyer will not, and will cause the Company and its Subsidiaries not   to, intentionally or knowingly take any action that would cause the termination or rolling of the   business associated with the aforementioned vested retirement annuity payments unless necessary   to comply with applicable Law and then only to the extent specifically required by applicable Law;   provided that Buyer will not be prohibited from updating accounts or taking any other action in   response to a rolling of any such business that is initiated by any Person other than Buyer or its   Affiliates (with Affiliates to include the Company and its Subsidiaries) but shall use reasonable   best efforts to attempt to preserve the vested amounts with respect to updated accounts.          5.21  Capitalization of NTANY.  The Seller Parties shall cause NTANY to have capital   and surplus of not less than $7.0 million from the date hereof until the Closing Date.          5.22  Fundamental Seller Obligations.            (a)   Seller will liquidate its assets, and the assets of its then-current Subsidiaries, as and  when necessary to timely satisfy its Fundamental Seller Obligations and Seller will not enter into  any merger, amalgamation, consolidation, share exchange, business combination, dissolution or  reorganization or sell all or substantially all of its assets, unless the successor in interest of Seller  or the purchaser of such assets in any such transaction assumes all Fundamental Seller Obligations.          (b)   For a period of seven (7) years immediately following the Closing Date, in the event   Seller distributes any portion of its assets to any shareholders of Seller, whether by dividend,   distribution, stock redemption, liquidation or otherwise, and if such distribution would reduce the   net assets of Seller and its then-current Subsidiaries to an amount less than the amount of net assets   that would be necessary for Seller to satisfy all Fundamental Seller Obligations then outstanding   or subsequently incurred (as if all such subsequently incurred Fundamental Seller Obligations had   been incurred prior to such distribution and outstanding at the time of such distribution), then Seller   shall be deemed to have made any such distribution (the “Recourse Distribution”) subject to a right   of recoupment and return of such Recourse Distributions after Buyer has exhausted its remedies   against Seller, until the seventh (7th) anniversary of the Closing Date, to Seller to the extent   necessary to satisfy the Fundamental Seller Obligations (the “Distribution Recovery Right”).    Subject to the occurrence of the Closing, Seller hereby assigns the Distribution Recovery Right to   Buyer.  Buyer may exercise the Distribution Recovery Right as necessary to satisfy the  Fundamental Seller Obligations after exhausting Buyer’s remedies against Seller.  For purposes of  this Section and the Letter Agreement, the phrase “Buyer has exhausted its remedies against   Seller,” the phrase “after exhausting Buyer's remedies against Seller,” and similar phrases shall   mean that Buyer has pursued remedies against Seller under the terms of the Purchase Agreement   and Seller has failed to pay any Indemnification Payment in accordance with Section 9.3(e) hereof.    For the avoidance of doubt, whether any distribution constitutes a Recourse Distribution will be   determined, with the benefit of hindsight, by comparing the net assets of Seller, immediately after   giving effect to such distribution, against the aggregate unpaid Fundamental Seller Obligations   that are outstanding at any time between the date of such distribution and the seventh (7th)  anniversary of the Closing Date.                                         - 65 -  

 

                                   ARTICLE VI.                            CONDITIONS PRECEDENT         6.1  Conditions to Each Party’s Obligations.  The obligations of Buyer and Seller to  consummate the transactions contemplated hereby shall be subject to the satisfaction or waiver in  writing at or prior to the Closing of the following conditions:         (a)   No Injunctions or Restraints; Illegality. (i) There shall not be in effect any Order,  injunction (whether temporary, preliminary or permanent) or other legal restraint or prohibition  issued by any Court or Governmental Authority of competent jurisdiction that has the effect of  making the transactions contemplated hereby illegal or otherwise prohibiting the consummation  of the transactions contemplated hereby, and (ii) there shall not be any Law or Order enacted,  entered, enforced or deemed applicable to the transactions contemplated hereby which makes the  consummation of the transactions contemplated hereby illegal.         (b)   Waiting Period. Any required waiting period under the HSR Act shall have expired  or been terminated.         6.2  Conditions to Obligations of Buyer.  The obligations of Buyer to consummate the  transactions contemplated hereby shall be subject to the satisfaction or waiver in writing at or prior  to the Closing of the following additional conditions:         (a)   Representations and Warranties. (i) The Fundamental Representations of the Seller  Parties shall be true and correct on and as of the date of this Agreement and on and as of the  Closing Date in all material respects, and (ii) each of the other representations and warranties of  the Seller Parties contained in this Agreement, disregarding all qualifications and exceptions  contained therein relating to materiality or Company Material Adverse Effect, shall be true and  correct on and as of the date of this Agreement and on and as of the Closing Date with the same  effect as if made on and as of the Closing Date (other than such representations and warranties that  are made as of a specified date, which representations and warranties shall be true and correct as  of such date), in the case of the foregoing clause (ii), except where the failure of any such  representations and warranties to be so true and correct would not reasonably be expected to have,  individually or in the aggregate, a Company Material Adverse Effect;         (b)   Covenants and Agreements. The Seller Parties shall have performed and complied  in all material respects with all covenants and agreements required by this Agreement to be  performed or complied with by it or them on or prior to the Closing Date;         (c)   Closing Deliveries.  Seller shall have delivered or caused to be delivered to Buyer  each of the documents required to be delivered pursuant to Section 2.3(a);         (d)   No Litigation.  No Proceeding shall be pending or threatened before any  Governmental Authority that could reasonably be expected to prevent the consummation of the  purchase and sale of the Membership Interests or the Minority-Owned Shares or any other material  transaction contemplated by the Transaction Documents, declare unlawful the transactions  contemplated by this Agreement, cause such transactions to be rescinded or materially and  adversely affect Buyer or the right of Buyer to own, operate or conduct the Company or its                                        - 66 -  

 

   Subsidiaries or their respective businesses, and no Order shall have been issued by any  Governmental Authority that has any of the foregoing effects;         (e)   Approvals.  All consents, approvals or authorizations of, declarations or filings with  or notices to any Governmental Authority required to be obtained or made prior to the Closing  Date in connection with the transactions contemplated hereby, including the Required  Governmental Approvals set forth in Section 3.6(b) of the Seller Disclosure Schedule and those  approvals set forth in Section 4.3 of the Buyer Disclosure Schedule, shall have been obtained or  made and shall be in full force and effect and all waiting periods required by applicable Law shall  have expired or been terminated, in each case without the imposition of a Burdensome Condition  on the Buyer;         (f)   Material Adverse Effect.  Since the date hereof, there shall not have been any  Company Material Adverse Effect;         (g)   Offer Letters.  Wade Rugenstein’s offer letter from  Buyer or the Company has  been executed by such Continuing Key Employee and otherwise is in full force and effect as of  the Closing Date in accordance with Section 5.12(h); provided, however, that this Section 6.2(g)  shall be inapplicable if such Continuing Key Employee dies or becomes disabled on or before the  Closing Date;          (h)   Excluded Investments.  Each Excluded Investment shall have been sold, transferred  or otherwise disposed of in accordance with Section 5.19(b);         (i)   Third Party Consents.  The parties shall have received the consents set forth on  Annex F;          (j)   Material Detrimental Event.  There shall not be any Material Detrimental Event  existing on the Closing Date; and         (k)   Real Estate Matters.  Seller shall have delivered to Buyer evidence that the Keller  Springs Property is (or will be after giving effect to the transaction contemplated by this  Agreement) owned by Seller or an Affiliate of Seller (other than the Company or its Subsidiaries),  free and clear of all Liens.         (l)   Acknowledgment Letter.  The acknowledgment letter dated the date hereof among  the shareholders of Seller, Seller and Buyer shall be in full force and effect.         6.3  Conditions to Obligations of Seller.  The obligations of Seller to consummate the  transactions contemplated hereby shall be subject to the satisfaction or waiver in writing at or prior  to the Closing of the following additional conditions:         (a)   Representations and Warranties. (i) The Fundamental Representations of Buyer  shall be true and correct  on and as of the date of this Agreement and on and as of the Closing Date  in all  material respects, and (ii) each of the other representations and warranties of Buyer contained  in this Agreement (other than the Fundamental Representations), disregarding all qualifications or  exceptions contained therein relating to materiality or Buyer Material Adverse Effect, shall be true  and correct on and as of the date of this Agreement and on and as of the Closing Date with the                                       - 67 -  

 

   same effect as if made on and as of the Closing Date (other than such representations and  warranties that are made as of a specified date, which representations and warranties shall be true  and correct as of such date), in the case of the foregoing clause (ii), except where the failure of any  such representations and warranties to be so true and correct would not reasonably expected to  have, individually or in the aggregate, a Buyer Material Adverse Effect;          (b)   Covenants and Agreements. Buyer shall have performed and complied in all  material respects with all covenants and agreements required by this Agreement to be performed  or complied with by it on or prior to the Closing Date;          (c)   Closing Deliveries.  Buyer shall have delivered or caused to be delivered to the  Seller Parties each of the documents required to be delivered pursuant to Section 2.3(b); and         (d)   Approvals.  All consents, approvals or authorizations of, declarations or filings with  or notices to any Governmental Authority required to be obtained or made prior to the Closing  Date in connection with the transactions contemplated hereby, including the Required  Governmental Approvals set forth in Section 3.6(b) of the Seller Disclosure Schedule and those  set forth in Section 4.3 of the Buyer Disclosure Schedule, shall have been obtained or made and  shall be in full force and effect and all waiting periods required by applicable Law shall have  expired or been terminated.                                   ARTICLE VII.                       TERMINATION PRIOR TO CLOSING         7.1  Termination.  This Agreement may be terminated at any time prior to the Closing:         (a)   by mutual written consent of Buyer and Seller;         (b)   by either Buyer or Seller in writing, if the Closing has not occurred on or prior to  the Outside Date, unless the failure of the Closing to occur has been principally caused by a  material breach of this Agreement by the party seeking to terminate this Agreement.  “Outside  Date” means September 30, 2019; provided, however, that (i) the Outside Date shall be extended  to December 31, 2019 (A) automatically if, prior to September 30, 2019, Buyer has satisfied all  conditions to Closing set forth in Section 6.3 other than obtaining approval from the Insurance  Regulator in New York or Texas as contemplated by Section 5.3 and Buyer has maintained efforts  to obtain such approval, or (B) at the election of Seller, by written notice to Buyer at any point  prior to September 30, 2019;         (c)   by Seller or Buyer in writing, if there shall be any order, injunction or decree of any  Governmental Authority that prohibits or restrains any party from consummating the transactions  contemplated hereby, and such order, injunction or decree shall have become final and non- appealable, unless the fact that such order, injunction or decree has become final and non- appealable has been principally caused by a material breach of this Agreement by the party seeking  to terminate this Agreement; or         (d)   by either Seller or Buyer (but only so long as Seller or Buyer, as applicable, is not  in material breach under this Agreement) in writing, if a breach of any provision of this Agreement  that has been committed by the other party would cause the failure of any mutual condition to                                       - 68 -  

 

   Closing or any condition to Closing for the benefit of the non-breaching party and such breach is  not capable of being cured by the Outside Date.         7.2  Effect of Termination.  If this Agreement is terminated pursuant to Section 7.1, this  Agreement shall become null and void and of no further force and effect without liability of either  party (or any Representative of such party) to the other party to this Agreement; provided, that no  such termination shall relieve a party from liability for any material breach of this Agreement  occurring prior to such termination.  Notwithstanding the foregoing, Section 1.1, Section 5.2(b),  this Section 7.2 and Article IX shall survive termination hereof pursuant to Section 7.1.                                   ARTICLE VIII.                                 TAX MATTERS   The following provisions shall govern the allocation of responsibility as between Buyer and Seller  for certain Tax matters following the Closing Date:         8.1  Responsibility for Filing Tax Returns.           (a)   Filing of Tax Returns.  Seller shall prepare or cause to be prepared and file or cause  to be filed (i) all Tax Returns that include the Company or its Subsidiaries and that are due to be  filed prior to the Closing Date and (ii) all U.S. federal, state and local consolidated, affiliated,  combined or similar Tax Returns that include Seller, the Company and the Company’s Subsidiaries  that relate solely to Pre-Closing Tax Periods.  Buyer shall prepare or cause to be prepared and file  or cause to be filed all other Tax Returns for the Company and its Subsidiaries.  All Tax Returns  that include Pre-Closing Tax Periods shall be prepared in a manner consistent with the Company’s  and its Subsidiaries’ past practice and custom unless otherwise required by applicable Law.          (b)   Review Rights.  Buyer shall provide Seller with drafts of all Tax Returns that Buyer  is obligated to prepare under Section 8.1(a) to the extent such Tax Returns include Pre-Closing  Tax Periods, no later than twenty (20) days prior to the due date for filing thereof.  Seller shall  have the right to review and provide reasonable comments on such Tax Returns during the fifteen  (15) days following the receipt of such Tax Returns, which reasonable comments shall be accepted  by Buyer and reflected in the applicable Tax Return.          8.2  Straddle Periods.  For purposes of this Agreement, whenever it is necessary to  determine the liability for Taxes of the Company and its Subsidiaries for any Straddle Period, the  determination of the Taxes of the Company and its Subsidiaries for the portion of the Straddle  Period including and ending on, and the portion of the Straddle Period beginning immediately  after, the Closing Date shall be determined by assuming that the Straddle Period consisted of two  (2) taxable years or periods, one which ended at the close of the Closing Date and the other which  began at the beginning of the day immediately after the Closing Date, and items of income,  premiums, gain, deduction, loss or credit (or other relevant Tax items) of the Company and its  Subsidiaries for the Straddle Period shall be allocated between such two taxable years or periods  on a “closing of the books basis” by assuming that the books of the Company and its Subsidiaries  were closed at the close of the Closing Date; provided, however, that (i) exemptions, allowances  or deductions that are calculated on an annual basis, such as the deduction for depreciation, and  (ii) periodic Taxes (other than income, franchise/capital, sales, use, or withholding Taxes) such as                                        - 69 -  

 

     real and personal property Taxes, shall be apportioned ratably between such periods based on the   number of days for the portion of the Straddle Period ending on and including the Closing Date,   on the one hand, and the number of days for the portion of the Straddle Period beginning on and   including the day immediately after the Closing Date, on the other hand.          8.3  Tax Covenants.            (a)   Buyer shall not cause or permit the Company or its Subsidiaries to take any action   on the Closing Date that is outside the ordinary course of business, if such action could have the   effect of increasing the Tax liability or reducing any Tax asset of the Company, any Subsidiary of   the Company or Seller in respect of any Pre-Closing Tax Period or increasing the liability of Seller   under this Agreement.          (b)   Buyer covenants that without the prior written consent of Seller it shall not, and   shall not cause or permit its Subsidiaries to, make or change any material Tax election, amend any   Tax Return, take any Tax position on any Tax Return, or compromise or settle any Tax liability,   in each case if such action could have the effect of increasing the Tax liability or reducing any Tax   asset of the Company, any Subsidiary of the Company or Seller in respect of any Pre-Closing Tax   Period or increasing the liability of Seller under this Agreement.           (c)   Seller covenants that without the prior written consent of Buyer it shall not, and   shall not cause or permit its Subsidiaries to, amend any Tax Return or compromise or settle any   Tax liability, in each case if such action could have the effect of increasing the Tax liability or   reducing any Tax asset of the Company, any Subsidiary of the Company or Buyer in respect of   any Post-Closing Tax Period.          (d)   After the Closing Date, Buyer and its Affiliates shall not, without the written   consent of Seller, agree to the waiver or any extension of the statute of limitations relating to any   Taxes of the Company or any of its Subsidiaries for any Pre-Closing Tax Period.         (e)   Any Tax refund received by Buyer or its Subsidiaries that relates to a Pre-Closing  Tax Period of the Company or any Subsidiary of the Company shall be for the account of Seller.  Buyer shall pay or cause to be paid any such refund to Seller within fifteen (15) days after receipt  thereof, reduced by any increase in the federal income taxes owed, in the aggregate, by Buyer or  its Subsidiaries attributable to such refund.  All other Tax refunds that relate to the Company or  any Subsidiary of the Company shall be for the account of Buyer.  Seller shall pay or cause to be  paid any such refund to Buyer within fifteen (15) days after receipt thereof, reduced by any  increase in the federal income taxes owed, in the aggregate, by Seller or its Subsidiaries attributable  to such refund.          8.4   Contests Related to Taxes.  Notwithstanding Section 9.5, in the event Buyer   receives notice of a claim by a Governmental Authority in respect of Taxes of the Company or its   Subsidiaries (other than Taxes imposed under any U.S. federal, state and local consolidated,   affiliated, combined or similar Tax Returns that include Seller, the Company and the Company’s   Subsidiaries) for any Tax period ending on or before the Closing Date (a “Tax Claim”), Buyer   shall give written notice to Seller of such claim; provided, however, that the failure to give such   notice shall not relieve Seller from any obligation under this Agreement unless Seller is actually                                         - 70 -  

 

     harmed by such failure.  Seller shall have the right to defend any Tax Claim for which Seller would   have an indemnification obligation hereunder so long as (i) Seller gives written notice to Buyer   within fifteen (15) Business Days after Buyer has given written notice of the Tax Claim, and (ii)   Seller conducts the defense of the Tax Claim actively and diligently.  Buyer may retain separate   co-counsel at its sole cost and expense and consult in the defense of the Tax Claim. Buyer shall   also be permitted to receive copies of any pleadings, correspondence with the Governmental  Authority or any Court handling the Tax Claim, and other documents filed with the Governmental  Authority or such Court as Buyer may reasonably request related to the Tax Claim and to attend   any and all meetings, hearings and proceedings concerning such Tax Claim. If Seller does not   assume the defense of any Tax Claim (including if Seller does not deliver the notice required by   this Section 8.4), Buyer may defend such Tax Claim at the sole cost and expense of Seller.  In any   such case, Buyer will not consent to a settlement of, or the entry of any judgment arising from, any   such claim without the prior written consent of Seller (such consent not to be unreasonably   withheld, conditioned or delayed).  If Seller conducts the defense of a Tax Claim, Seller will keep   Buyer reasonably informed as to the status of such Tax Claim, including all compromise or   settlement offers.  Seller shall consult with Buyer prior to the settlement of any such Tax Claim   and shall obtain the prior written consent of Buyer prior to the settlement of any such Tax Claim   that would adversely affect Buyer or its Affiliates in any taxable period ending after the Closing   Date (such consent not to be unreasonably withheld, conditioned or delayed).          8.5  Cooperation on Tax Matters.  Buyer and Seller shall cooperate fully, as and to the   extent reasonably requested by the other party, in connection with the filing of Tax Returns   pursuant to this Article VIII and any audit, litigation or other Proceeding with respect to Taxes.   Such cooperation shall include the retention and (upon the other party’s request) the provision of   records and information that are reasonably relevant to any such audit, litigation or other   Proceeding and making Employees available on a mutually convenient basis to provide additional   information and explanation of any material provided hereunder.  Any information obtained   pursuant to this Section 8.5 or pursuant to any other Section hereof providing for the sharing of   information or review of any Tax Return or other schedule relating to Taxes with respect to the   Company or any of its Subsidiaries shall be kept confidential by the parties hereto and their   respective legal and Tax advisors.          8.6  Transfer Taxes.  Any transfer, documentary, sales, use, stamp, registration and other   similar Taxes and fees (including any penalties and interest) incurred in connection with the   transactions contemplated hereby shall be borne equally by Buyer and Seller.          8.7  Section 338(h)(10) Election.                  (a)   Buyer and Seller shall make a joint election under Section 338(h)(10) of the   Code and comparable provisions of state law with respect to each Subsidiary of the Company (a   “Section 338(h)(10) Election”) and shall timely file with the proper authorities executed copies of   Internal Revenue Service Forms 8023 and 8883, and any similar state forms, with respect to each   designated Subsidiary of the Company.                  (b)   As soon as practicable after the Closing Date, but in no event later than 150   days after the Closing Date Buyer shall deliver to Seller a written notice setting forth (with   reasonable specificity) Buyer’s good faith calculation of the aggregate deemed sales price (ADSP)                                        - 71 -  

 

     and adjusted grossed up basis (AGUB) within the meaning of the Treasury Regulations under   Section 338 of the Code and the allocation thereof among the assets of the Company and each   relevant Subsidiary of the Company, as applicable, in accordance with the principles of the   applicable Treasury Regulations, including, but not limited to, Treasury Regulation Sections   1.338-6 and 1.338-7 (the “Buyer’s Allocation”).  Within thirty (30) days after receipt thereof,   Seller shall deliver to Buyer written notice indicating whether Seller disagrees with the Buyer’s   Allocation.  If Seller agrees with the Buyer’s Allocation, or if Seller fails to deliver such written   notice within thirty (30) days the Buyer’s Allocation shall constitute the agreed-upon Allocation   (the “Agreed Allocation”).  If Seller provides timely written notice to Buyer of any disagreement   with the Buyer’s Allocation, the parties shall negotiate in good faith to determine the Agreed   Allocation.  If they do not reach agreement within thirty (30) days after commencing negotiations,   the parties shall promptly submit the items in dispute to a mutually agreed-upon nationally-  recognized accounting firm (or if they cannot mutually agree on such firm, each party shall select   a nationally-recognized accounting firm which two firms shall agree on a third nationally-  recognized accounting firm) (the “Accounting Arbitrator”) to resolve the dispute.  The Accounting   Arbitrator shall determine the Agreed Allocation in accordance with the Treasury Regulations, and   deliver to Buyer and Seller the Agreed Allocation as soon as possible, but not later than the thirtieth   day after the Accounting Arbitrator is instructed to resolve the dispute. Any expenses relating to   the engagement of the Accounting Arbitrator shall be shared equally by the parties.          (c)   Each of the parties shall file or cause to be filed all relevant Tax Returns consistent   with the Agreed Allocation and shall not take any position inconsistent with the Agreed Allocation.                                    ARTICLE IX.                        SURVIVAL AND INDEMNIFICATION          9.1  Survival of Representations and Warranties.  All representations and warranties   made by the Seller Parties and Buyer in this Agreement shall survive the Closing Date and expire   on the date that is eighteen (18) months from the Closing Date; provided, however, that the   representations and warranties set forth in Section 3.19 (Taxes) shall expire on the date that is six   (6) years from the Closing Date and the representations and warranties set forth in Sections 3.1   (Organization and Qualification), 3.3 (Capitalization), 3.4 (Subsidiaries), 3.5 (Authority;   Enforceability), 3.29 (Brokers), 4.1 (Organization), 4.2 (Authority; Enforceability) and 4.6   (Brokers) (the “Fundamental Representations”) shall survive the Closing and expire on the date   that is thirty (30) days after the expiration of the applicable statute of limitations.  The covenants  or other agreements made by the Seller Parties or Buyer in this Agreement which by their terms  contemplate performance prior to the Closing Date shall survive the Closing Date and expire on   the date that is eighteen (18) months from the Closing Date.  The covenants or other agreements   made by the Seller Parties or Buyer which by their terms contemplate performance after the   Closing Date shall survive the Closing and expire on the date that is the earlier of (i) thirty (30)   days after the expiration of the applicable statute of limitations and (ii) the period explicitly   specified therein plus a period of six (6) months.  The period of time a covenant, agreement,   representation or warranty survives the Closing pursuant to this Section 9.1 shall be the “Survival   Period” with respect to such covenant, agreement, representation or warranty.  The parties   acknowledge that the time periods set forth in this Article IX for the assertion of claims under this   Agreement are the result of arms-length negotiation among the parties and that the parties intend   for such time periods to be enforced as agreed by the parties.                                        - 72 -  

 

         9.2  Indemnification.           (a)   Subject to the limitations set forth in this Article IX, each Minority Shareholder  shall, severally and not jointly, indemnify and hold harmless Buyer, its Affiliates (including the  Company and its Subsidiaries) and their respective Representatives (the “Buyer Indemnified  Persons”) from and against Indemnifiable Losses incurred by them arising out of or resulting from  any of the following matters:                 (i)   Any breach of any representation or warranty of such Minority Shareholder        or its trustee contained in Section 3.5; or               (ii)  any breach by such Minority Shareholder of its covenants or obligations        contained in Section 5.10;         (b)   Subject to the limitations set forth in this Article IX, Seller shall indemnify and hold  harmless the Buyer Indemnified Persons from and against Indemnifiable Losses incurred by them  arising out of or resulting from any of the following matters:               (i)   any breach of any representation or warranty of any Seller Party (including        a Minority Shareholder) contained in this Agreement or in any certificate furnished by        Seller pursuant to this Agreement (other than those with respect to any Fundamental        Representation by the Seller Parties);                (ii)  any breach of any representation or warranty of any Fundamental        Representation of any Seller Party (including a Minority Shareholder) made in this        Agreement or in any certificate furnished by Seller pursuant to this Agreement with respect        thereto;               (iii) any breach or nonfulfillment by Seller of its covenants or agreements        contained in this Agreement or any other Transaction Document;                (iv)  any Excluded Liabilities; and               (v)   the amount by which the final proceeds received by the Company and its        Subsidiaries in respect of the mortgage loan for the real property in Yermo, California is        less than the unpaid principal and accrued interest for such loan.          (c)   Subject to the limitations set forth in this Article IX, Buyer shall indemnify and  hold harmless the Seller Parties, their Affiliates and their respective Representatives, successors  and permitted assigns (the “Seller Indemnified Persons”) from and against any Indemnifiable  Losses incurred by them arising out of or resulting from any of the following matters:               (i)   any breach of any representation or warranty of Buyer contained in this        Agreement or in any certificate furnished by Buyer pursuant to this Agreement (other than        with respect to any Fundamental Representations by Buyer);                                         - 73 -  

 

               (ii)  any breach of any representation or warranty of any Fundamental        Representation of Buyer made in this Agreement or in any certificate furnished by Buyer        pursuant to this Agreement with respect thereto; or               (iii) any breach or nonfulfillment by Buyer of its covenants or agreements        contained in this Agreement or any other Transaction Document.                 (d)   For purposes of determining whether any representation or warranty has  been breached and the amount of the Indemnifiable Losses under this Article IX, each  representation and warranty contained in this Agreement (other than the first sentence of Section  3.14) shall be read without regard to any materiality, Company Material Adverse Effect or Buyer  Material Adverse Effect qualifier contained therein.         9.3  Certain Limitations.           (a)   No party shall be obligated to indemnify and hold harmless its respective  Indemnitees under the R&W Indemnifications (i) unless and until the aggregate amount of all  Indemnifiable Losses of the Indemnitees under such R&W Indemnifications, as the case may be,  exceeds $2,000,000 (the “Deductible”), at which point such Indemnitor shall be liable to its  respective Indemnitees for the value of the Indemnitee’s claims under the applicable R&W  Indemnifications, for amounts in excess of the Deductible, subject to the limitations set forth in  this Article IX.  No party shall be obligated to indemnify and hold harmless its respective  Indemnitees under the R&W Indemnities, as the case may be, for any individual Indemnifiable  Loss, series of related Indemnifiable Losses, which does not exceed $50,000 (which Indemnifiable  Loss(es) shall not be counted toward the Deductible).  Except in the case of fraud, intentional  misrepresentation, or intentional concealment, the maximum aggregate liability of Seller for any  and all Indemnifiable Losses under Section 9.2(b)(i) shall be the Escrow Amount.  Except in the  case of fraud, intentional misrepresentation, or intentional concealment, the maximum aggregate  liability of Buyer for any and all Indemnifiable Losses under Section 9.2(c)(i), shall be  $20,000,000.           (b)   Except in the case of fraud, intentional misrepresentation, or intentional  concealment, the maximum aggregate liability of Seller, on the one hand, and Buyer on the other  hand, to their respective Indemnitees for any and all Indemnifiable Losses under Section 9.2(b)(ii),  in the case of Seller, or Section 9.2(c)(ii), in the case of Buyer, shall be an amount equal to one  hundred percent (100%) the Purchase Price.         (c)   Except in the case of fraud, intentional misrepresentation, or intentional  concealment, the maximum aggregate liability of any Minority Shareholder to its Indemnitees for  any and all Indemnifiable Losses under Section 9.2(a)(i) shall be one hundred percent (100%) of  such Minority Shareholder's Pro Rata Percentage of the Purchase Price.         (d)   The representations, warranties and covenants of the Seller Parties, and the Buyer  Indemnified Persons’ rights to indemnification with respect thereto, shall not be affected or  deemed waived by reason of (and the Buyer Indemnified Persons shall be deemed to have relied  upon the representations and warranties of the Seller Parties set forth herein notwithstanding) (i)  any investigation made by or on behalf of any of the Buyer Indemnified Persons (including any of                                        - 74 -  

 

   their Representatives) or by reason of the fact that any of the Buyer Indemnified Persons or their  Representatives knew or should have known that any such representation or warranty is, was or  might be inaccurate, regardless of whether such investigation was made or such knowledge was  obtained before or after the execution and delivery of this Agreement or (ii) Buyer’s waiver of any  condition set forth in Article VI.         (e)   Once an Indemnifiable Loss is agreed to by the Indemnitor or finally adjudicated  to be payable pursuant to this Article IX, the Indemnitor shall satisfy its obligations within ten (10)  Business Days; provided, that subject to Section 9.7 hereof, the sole and exclusive remedy of Buyer  Indemnified Persons for Indemnifiable Losses pursuant to Section 9.2(b)(i) (other than actions or  claims based on fraud, intentional misrepresentation, intentional misconduct or intentional  concealment) will be to make a claim in respect of, and to the extent of, the Escrowed Funds, in  accordance with the terms of Section 2.6, this Article IX and the Escrow Agreement, and at such  time that the Escrowed Funds is reduced to zero, the Buyer Indemnified Persons will have no  further right to indemnification under Section 9.2(b)(i) (other than actions or claims based on  fraud, intentional misrepresentation, or intentional concealment).  Any indemnification of a Buyer  Indemnified Person pursuant to Section 9.2(a) or Section 9.2(b) (ii), (iii), (iv) or (v), subject to the  terms and limitations herein, may be made, in Buyer’s discretion, directly against the applicable  Seller Parties or, to the extent available, against the Escrowed Funds.         9.4  Definitions.  As used in this Agreement:         (a)   “Indemnitee” means any Person entitled to indemnification under this Agreement;         (b)   “Indemnitor” means any Person required to provide indemnification under this  Agreement;         (c)   “Indemnifiable Losses” means any and all damages, losses, liabilities, obligations,  costs and expenses (including reasonable attorneys’ fees and expenses), and any claim properly  paid to a third party in connection with a Third Party Claim, provided, that Indemnifiable Losses  shall exclude punitive, consequential, special and indirect damages (including any damages based  on any type of multiple), and provided, further, that Indemnifiable Losses may include damages  for (or calculated on the basis of) lost profits or diminution of value to the extent that such lost  profits or diminution of value are within the reasonable contemplation of the parties and are the  direct and reasonably foreseeable consequence of the breach or alleged breach giving rise to the  claim on which such Indemnifiable Losses are based and can be proven with reasonable certainty.         (d)   “Indemnity Payment” means any amount of Indemnifiable Losses required to be  paid pursuant to this Agreement; and         (e)   “Third Party Claim” means any claim, action, suit, or proceeding made or brought  by any Person that is not an Indemnitee.         9.5  Procedures for Third Party Claims.           (a)   If any Indemnitee receives notice of assertion or commencement of any Third Party  Claim against such Indemnitee in respect of which an Indemnitor may be obligated to provide  indemnification under this Agreement, the Indemnitee shall give such Indemnitor reasonably                                       - 75 -  

 

     prompt written notice (but in no event later than thirty (30) days after becoming aware) thereof   and such notice shall include a reasonable description of the claim and any documentation of the   Third Party Claim and, to the extent identifiable, an estimate of the Indemnifiable Loss and shall   reference the specific sections of this Agreement that form the basis of such claim; provided, that   no delay on the part of the Indemnitee in notifying any Indemnitor shall relieve the Indemnitor   from any obligation hereunder unless (and then solely to the extent) the Indemnitor is actually   prejudiced by such delay (except that the Indemnitor shall not be liable for any expenses incurred   during the period in which the Indemnitee failed to give such notice).  Thereafter, the Indemnitee   shall deliver to the Indemnitor, promptly after the Indemnitee’s receipt thereof, copies of all notices   and documents (including court papers) received by the Indemnitee relating to the Third Party   Claim.           (b)   Subject to this Section 9.5(b), the Indemnitor shall be entitled to participate in the   defense of any Third Party Claim and, if it so chooses, to assume the defense thereof with counsel   selected by the Indemnitor that is reasonably acceptable to the Indemnitee.  Should the Indemnitor   so elect to assume the defense of a Third Party Claim, the Indemnitor shall not as long as it   conducts such defense be liable to the Indemnitee for legal expenses subsequently incurred by the   Indemnitee in connection with the defense thereof except as set forth in the next sentence.  If the   Indemnitor assumes such defense, the Indemnitee shall have the right to participate in the defense   thereof and to employ counsel, at its own expense, separate from the counsel employed by the   Indemnitor; provided, that Indemnitee shall have the right to assume the defense and/or receive   reimbursement from Indemnitor for the costs and expense of such separate counsel if (i)   Indemnitor and Indemnitee are both named parties to the proceedings and Indemnitee shall have   concluded in good faith that representation of both parties by the same counsel would be   inappropriate due to actual or reasonably foreseeable differing interests between them or the   availability to Indemnitee of one or more defenses or counterclaims that are inconsistent with one   or more of those that may be available to Indemnitor in respect thereof or (ii) Indemnitor fails to   diligently defend a Third Party Claim for which it has assumed defense.  The Indemnitor shall be   liable for the reasonable fees and expenses of counsel employed by the Indemnitee for any period  during which the Indemnitor has not assumed the defense thereof (other than during any period in  which the Indemnitee shall have not yet given notice of the Third Party Claim as provided above).   In no event shall the Indemnitee’s right to indemnification for a Third Party Claim be adversely  affected by its assumption of the defense of such Third Party Claim.  All of the parties hereto shall  reasonably cooperate in the defense of any Third Party Claim.  Such cooperation shall include the  retention and (upon request) the provision to the other of reasonably requested records and  information that are relevant to such Third Party Claim, and making employees reasonably  available on a mutually convenient basis to provide additional information and explanation of any  material provided hereunder.  Whether or not the Indemnitor shall have assumed the defense of a  Third Party Claim, the Indemnitee shall not pay, settle, compromise or discharge, such Third Party  Claim without the Indemnitor’s prior written consent (which consent shall not be unreasonably  withheld, conditioned or delayed).  If the Indemnitor has assumed the defense of a Third Party  Claim, the Indemnitor may only pay, settle, compromise or discharge a Third Party Claim with the  Indemnitee’s prior written consent (which consent shall not be unreasonably withheld, conditioned  or delayed); provided, that the Indemnitor may pay, settle, compromise or discharge such a Third   Party Claim without the written consent of the Indemnitee if such settlement (i) includes a release   of the Indemnitee from all liability in respect of such Third Party Claim, (ii) does not subject the   Indemnitee to any injunctive relief or other equitable remedy, (iii) does not include a statement or                                        - 76 -  

 

     admission of fault, culpability or failure to act by or on behalf of the Indemnitee and (iv) only   involves the payment of monetary damages by the Indemnitor.          9.6  Direct Claims.  The Indemnitor will have a period of thirty (30) days within which   to respond in writing to any written claim by an Indemnitee on account of an Indemnifiable Loss   that does not result from a Third Party Claim.  If the Indemnitor does not so respond within such   thirty (30) day period, the Indemnitor will be deemed to have rejected such claim, in which event   the Indemnitee will be entitled to pursue such remedies as may be available to the Indemnitee.          9.7  Adjustment to Purchase Price.  The parties agree that any indemnification payments   made pursuant to this Agreement shall be treated for income Tax purposes as an adjustment to the   Purchase Price, unless otherwise required by applicable Law.                                     ARTICLE X.                                 MISCELLANEOUS          10.1 Amendment.  This Agreement may not be amended other than in an instrument in   writing signed by all of the parties hereto; provided any amendment to this Agreement that does  not negatively impact the rights of the Minority Shareholders will be enforceable if in writing and  signed by both of Buyer and Seller.          10.2 Waiver.  Any party hereto may extend the time for the performance of any of the   obligations or other acts required to be performed by another party hereunder, waive any   inaccuracies in the representations and warranties of another party contained herein or in any   document delivered pursuant hereto and waive compliance with any of such party’s agreements or   conditions contained herein.  Any such extension or waiver shall be valid only if set forth in an   instrument in writing signed by the party or parties to be bound thereby.          10.3 Expenses.  Except as otherwise expressly provided herein, the parties shall pay their   own fees and expenses (including attorneys’ and accountants’ fees and expenses) in connection   with the negotiation of this Agreement, the performance of its obligations hereunder and the   consummation of the transactions contemplated by this Agreement (whether consummated or not).          10.4 Notices.  All notices or other communications which are required or permitted   hereunder shall be in writing and sufficient if delivered personally, sent by nationally recognized   overnight courier or by registered or certified mail (postage prepaid, return receipt requested), or   sent by email, as follows:                (a)   If to Buyer:                      Horace Mann Educators Corporation                              1 Horace Mann Place                     Springfield, IL 62715                    Attention:  Donald M. Carley, SVP & General Counsel                    Email:  Donald.Carley@horacemann.com                                            - 77 -  

 

                       with a copy (which shall not constitute notice) to:                        Eversheds Sutherland (US) LLP        700 Sixth Street, NW, Suite 700        Washington, DC 20001        Attention: Ling Ling        E-mail:    lingling@eversheds-sutherland.com        Telephone: 202-383-0236                (b)   If to Seller:         Ellard Family Holdings, Inc.        5001 Spring Valley Road, Suite 1040E        Dallas, TX 75244        Attention:  Betty Jo Ellard, President        E-mail: ellard@sbcglobal.net            Telephone: 972-982-8250                        with a copy (which shall not constitute notice) to:                        Winstead PC         2728 N. Harwood Drive, #500         Dallas, TX 75201         Attn:  Tom Helfand        E-mail: thelfand@winstead.com            Attn:  Andrew Ostapko         E-mail: aostapko@winstead.com                   (c)   If to Ellard:          c/o Ellard Family Holdings, Inc.         5001 Spring Valley Road, Suite 1040E         Dallas, TX 75244         Attention:  Betty Jo Ellard, President         E-mail: ellard@sbcglobal.net          Telephone: 972-982-8250            with a copy (which shall not constitute notice) to:                        Winstead PC         2728 N. Harwood Drive, #500         Dallas, TX 75201         Attn:  Tom Helfand        E-mail: thelfand@winstead.com            Attn:  Andrew Ostapko                             - 78 -  

 

                  E-mail: aostapko@winstead.com              (d)   If to the JCE Trust:                    c/o Ellard Family Holdings, Inc.                   5001 Spring Valley Road, Suite 1040E                   Dallas, TX 75244                   Attention:  Betty Jo Ellard, President                   E-mail: ellard@sbcglobal.net                   Telephone: 972-982-8250              with a copy (which shall not constitute notice) to:                     Winstead PC                    2728 N. Harwood Drive, #500                    Dallas, TX 75201                    Attn:  Tom Helfand                   E-mail: thelfand@winstead.com                   Attn:  Andrew Ostapko                   E-mail: aostapko@winstead.com  or to such other address as the party to whom notice is to be given may have furnished to the other  parties in writing in accordance with this Section 10.4. All such notices or communications shall  be deemed to be received (i) in the case of personal delivery, nationally recognized overnight  courier or registered or certified mail, on the date of such delivery and (ii) in the case of email,  upon confirmed receipt.         10.5  Specific Performance.  The Seller Parties acknowledge and agree that Buyer could  be damaged irreparably in the event any of the provisions of this Agreement are not performed in  accordance with their specific terms or any provisions are breached and that any breach of this  Agreement by the Seller Parties may not be adequately compensated by monetary  damages.  Accordingly, the Seller Parties agree that, in addition to any other right or remedy to  which Buyer may be entitled (subject to the limitations herein), at Law or in equity, it will be  entitled to enforce any provision of this Agreement by a decree of specific performance and to  temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches  of the provisions of this Agreement, without posting any bond or other undertaking.  Buyer  acknowledges and agrees that the Seller Parties could be damaged irreparably in the event any of  the provisions of this Agreement are not performed in accordance with their specific terms or any  provisions are breached and that any breach of this Agreement by Buyer may not be adequately  compensated by monetary damages.  Accordingly, Buyer agrees that, in addition to any other right  or remedy to which the Seller Parties may be entitled (subject to the limitations herein), at Law or  in equity, the Seller Parties will be entitled to enforce any provision of this Agreement by a decree  of specific performance and to temporary, preliminary and permanent injunctive relief to prevent  breaches or threatened breaches of the provisions of this Agreement, without posting any bond or  other undertaking.                                        - 79 - 

 

       10.6 Interpretation.  When a reference is made in this Agreement to a Section, Exhibit,   Annex or Schedule, such reference shall be to a Section of, or an Exhibit, Annex or Schedule to,   this Agreement unless otherwise indicated.  Any fact or item disclosed in any section of each of   the Buyer Disclosure Schedule and Seller Disclosure Schedule shall be deemed disclosed in all   other sections of such Disclosure Schedule to the extent the applicability of such fact or item to   such other section of such Disclosure Schedule is reasonably apparent.  Disclosure of any item in  the Buyer Disclosure Schedule or the Seller Disclosure Schedule, as the case may be, shall not be  deemed an admission that such item represents a material item, fact, exception of fact, event or  circumstance or that occurrence or non-occurrence of any change or effect related to such item   would, individually or in the aggregate, reasonably be expected to have a Company Material   Adverse Effect or Buyer Material Adverse Effect  The table of contents, articles, titles and   headings contained in this Agreement are for reference purposes only and shall not affect in any   way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes”   or “including” are used in this Agreement, they shall be deemed to be followed by the words   “without limitation.”  Whenever the singular is used herein, the same shall include the plural, and   whenever the plural is used herein, the same shall include the singular, where appropriate.   Whenever the word “Dollars” or the “$” sign appear in this Agreement, they shall be construed to   mean United States Dollars, and all transactions under this Agreement shall be in United States   Dollars.  This Agreement has been fully negotiated by the parties hereto and shall not be construed   by any Governmental Authority against either party by virtue of the fact that such party was the   drafting party.          10.7 Severability.  If any term or provision of this Agreement is invalid, illegal or   incapable of being enforced by any rule of Law or public policy, all other terms and provisions of   this Agreement shall remain in full force and effect so long as the economic or legal substance of   the transactions contemplated hereby is not affected in any manner adverse to the parties. Upon   such determination that any term or provision is invalid, illegal or incapable of being enforced, the   parties hereto shall negotiate in good faith to amend or otherwise modify this Agreement so as to   effect the original intent of the parties as closely as possible in a mutually acceptable manner such   that the transactions contemplated hereby are fulfilled to the extent possible.          10.8 Entire Agreement; Third Party Beneficiaries.  This Agreement and the Transaction   Documents (including all exhibits and schedules hereto and thereto) and other documents and   instruments delivered in connection herewith constitute the entire agreement and supersede all   prior representations, agreements, understandings and undertakings, whether written or oral,   among the parties, or any of them, with respect to the subject matter hereof and thereof, and no   party is relying on any other prior oral or written representations, agreements, understandings or   undertakings with respect to the subject matter hereof and thereof.  Except as set forth in Article   IX with respect to the Buyer Indemnified Persons and the Seller Indemnified Persons, nothing in   this Agreement, express or implied, is intended or shall be construed to confer upon any Person   other than the parties hereto any right, remedy or claim under or by reason of this Agreement.          10.9 Assignment.  Except as set forth in Section 2.1(b), this Agreement and the rights and   obligations hereunder may not be assigned without the prior written consent of each of the parties   hereto.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit   of and be enforceable by the parties and their respective successors and permitted assigns.                                         - 80 - 

 

           10.10 Failure or Indulgence Not Waiver; Remedies Cumulative  No failure or delay on   the part of any party hereto in the exercise of any right hereunder will impair such right or be   construed to be a waiver of, or acquiescence in, any breach of any representation, warranty,   covenant or agreement herein, nor will any single or partial exercise of any such right preclude   any other (or further) exercise thereof or of any other right.  Any and all remedies herein expressly   conferred upon a party will be deemed cumulative with and not exclusive of any other remedy   conferred hereby, or by Law or equity upon such party, and the exercise by a party of any one   remedy will not preclude the exercise of any other remedy.          10.11 Governing Law.  This Agreement and any dispute arising hereunder shall be   governed by, and construed in accordance with, the laws of the State of Delaware, regardless of   the laws that might otherwise govern under applicable principles of conflicts of laws thereof.          10.12 Jurisdiction; Enforcement.                (a)   Each of the parties hereto hereby irrevocably and unconditionally submits   to the exclusive jurisdiction of any Court of the United States or the Delaware Court of Chancery,   which in either case is located in the State of Delaware (each, an “Delaware Court”) for purposes   of enforcing this Agreement or determining any claim arising from or related to the transactions   contemplated by this Agreement.  In any such action, suit or other proceeding, each of the parties   hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a   defense or otherwise any claim that it is not subject to the jurisdiction of any such Delaware Court,  that such action, suit or other proceeding is not subject to the jurisdiction of any such Delaware  Court, that such action, suit or other proceeding is brought in an inconvenient forum or that the  venue of such action, suit or other proceeding is improper; provided, that nothing set forth in this   sentence shall prohibit any of the parties hereto from removing any matter from one Delaware   Court to another Delaware Court.  Each of the parties hereto also agrees that any final and   unappealable judgment against a party hereto in connection with any action, suit or other   proceeding will be conclusive and binding on such party and that such award or judgment may be   enforced in any Court of competent jurisdiction, either within or outside of the United States.  A   certified or exemplified copy of such award or judgment will be conclusive evidence of the fact   and amount of such award or judgment.  Any process or other paper to be served in connection   with any action or proceeding under this Agreement shall, if delivered or sent in accordance with   Section 10.4, constitute good, proper and sufficient service thereof.                  (b)   EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY   WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY AND   ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED   TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH   PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT   OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR   OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF   LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS   AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH   WAIVER VOLUNTARILY AND (IV) IT HAS BEEN        INDUCED TO ENTER INTO THIS   AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND   CERTIFICATIONS IN THIS SECTION 10.12.                                        - 81 -  

 

           10.13 Certain Limitations.            (a)   Notwithstanding anything to the contrary contained herein, the other Transaction   Documents, the Seller Disclosure Schedule or any of the Schedules, Annexes or Exhibits hereto   or thereto, Buyer acknowledges and agrees that neither the Seller Parties nor any of their Affiliates   (including the Company), nor any Representative of any of them, makes or has made, and Buyer   has not relied on, any representation or warranty to Buyer, oral or written, express or implied, other   than as expressly set forth in Article III or any certificate delivered by the Seller Parties pursuant   to this Agreement.            (b)   Notwithstanding anything to the contrary contained in this Agreement, the other   Transaction Documents, the Buyer Disclosure Schedule or any of the Schedules, Annexes or   Exhibits hereto or thereto, the Seller Parties acknowledge and agree that neither Buyer nor any of   its Affiliates, nor any Representative of any of them, makes or has made, and the Seller Parties   have not relied on, any representation or warranty to the Seller Parties, oral or written, express or   implied, other than as expressly set forth in Article IV or any certificate delivered by Buyer   pursuant to this Agreement.          10.14 Counterparts.  This Agreement may be executed in one or more counterparts   (including by facsimile transmission or electronic transmission in portable document format (pdf)),   which when taken together shall constitute one and the same agreement.          10.15 Post-Closing Representation.  The parties acknowledge and agree that Winstead PC   (“Winstead”) has acted as counsel to the Company and one or more of its Subsidiaries prior to the   Closing Date.  Buyer expressly and knowingly consents to Winstead representing the Seller Parties   in any matter after the Closing that is or may be adverse to Buyer, the Company or the Company’s   Subsidiaries, including any matter arising out of this Agreement or any Transaction Document.    This consent constitutes an advance waiver of any conflict of interest claim against Winstead as a   result of such firm representing the Company or any of its Subsidiaries in connection with the   transactions contemplated hereby.  In addition, Buyer, on behalf of itself and the Company,   expressly and knowingly (a) acknowledges and agrees that all attorney-client privileged   communications between Winstead, on the one hand, and the Seller Parties, the Company or any   of the Company’s Subsidiaries (or any of their respective officers, directors, members, and   employees) on the other hand, to the extent arising in connection with the negotiation,   documentation and consummation of the transactions contemplated hereby are subject to the sole   and absolute control of the Seller Parties, (b) waives any and all rights to obtain or otherwise   control the disclosure of such communications, and (c) covenants and agrees not to assert any   rights whatsoever with respect to such communications, other than any rights customarily available  to an adverse party arising under applicable Law to obtain disclosure of such communications by  legal process.  The parties further agree that notwithstanding any law or rules to the contrary, all  confidential communications described in clause (a) of this Section 10.15 will, at the discretion of   Seller, remain privileged after the Closing and such privilege shall belong to Seller and not the   Company or any of its Subsidiaries unless finally adjudicated to be not privileged by a court of   law or unless waived under applicable Law.  Notwithstanding the foregoing, in the event that a   dispute arises between the Buyer, the Company or their Affiliates and a third party (other than a   party to this Agreement or any of their respective Affiliates) after the Closing, the Company may   assert the attorney-client privilege to prevent disclosure of confidential communications by                                        - 82 -  

 

   Winstead to such third party or the use thereof by Winstead in connection with its representation  of a party in such dispute; provided, however, that the Buyer and the Company may not waive  such privilege without the prior written consent of the Seller Parties.                          [Remainder of this page intentionally left blank]                                           - 83 -  

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the  date first written above by their respective officers thereunto duly authorized.                                 HORACE MANN EDUC       ORS CORPORATION                                 By:                                Name:   mita Z   s                                Title: ,Preside .nd Chief Executive Officer                                  ELLARD FAMILY HOLDINGS, INC.                                 By:                                 Name: Betty Jo Ellard                                Title: President                                  BRIAN M. ELLARD                                  THE JCE EXEMPT TRUST                                 By:                                 Name: J. Chad Ellard                                Title: Co-Trustee                                 By:                                 Name: James T. Langham, Jr.                                Title: Co-Trustee                                 By:                                 Name: John D. Furst                                Title: Co-Trustee                                [Signature Page to Purchase Agreement]  

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the  date first written above by their respective officers thereunto duly authorized.                                 HORACE MANN EDUCATORS CORPORATION                                 By:                                Name:                                Title:                                  ELLARD FAMILY HOLDINGS, INC.                                 By:                                Name: Betty Jo • lard                                Title: President                                  BRIAN M. ELLARD                                  THE JCE Er  l‘/IPT TRUST                                  Name: J. Cha                                Title: Co-Trustee                                 By:           ..-                                Name: J  e     angham, Jr.                                Title: Co-Trustee                                 By:      •     'D.                                Name: Jo 4 D. Furst                                Title: Co- rustee                                [Signature Page to Purchase Agreement]  

 

                           EXHIBIT A   FORM OF ESCROW AGREEMENT                             [See attached.]                EXHIBIT A-1                

 

                                                                                                                   Exhibit A                                                                       ESCROW AGREEMENT                This Escrow Agreement dated as of ________, 2019 (the “Escrow Agreement”), is  entered into by and among Horace Mann Educators Corporation, a Delaware corporation  (“Buyer”), Ellard Family Holdings, Inc., a Nevada corporation (“Seller”), and [_______], a  [________] banking corporation, as escrow agent (“Escrow Agent”).                                                                            RECITALS:    A.    Buyer, Seller, Brian M. Ellard (“Ellard”), and The JCE Exempt Trust (the “Trust” and  together with Ellard, the “Minority Shareholders,” and the Minority Shareholders, together with  Seller, the “Seller Parties”) are parties to that certain Purchase Agreement, dated as of December  10, 2018 (the “Purchase Agreement”).    B.    Pursuant to the Purchase Agreement, Buyer, on behalf of the Seller, shall cause to be  deposited Twenty Million Dollars ($20,000,000.00) (the “Escrow Amount”) with Escrow Agent.    C.    The purpose of the Escrow Amount is to secure certain obligations of the Seller Parties as  contemplated by the Purchase Agreement.     D.    The execution and delivery of this Escrow Agreement is a condition precedent to the  obligations of the parties to the Purchase Agreement to consummate the transactions  contemplated by the Purchase Agreement.    E.    Buyer and Seller (individually, a “Party”, and collectively, the “Parties”) desire to  appoint Escrow Agent as the escrow agent pursuant to this Escrow Agreement, and Escrow  Agent desires to accept such appointment pursuant to this Escrow Agreement.    F.    Capitalized terms used but not defined herein shall have the meaning set forth in the  Purchase Agreement.                                  AGREEMENT:               In consideration of the promises and agreements of the Parties and Escrow Agent  and for other good and valuable consideration, the receipt and sufficiency of which is hereby  acknowledged, the Parties and Escrow Agent agree as follows:                                       Section 1.                                   APPOINTMENT               The Parties hereby appoint Escrow Agent as their escrow agent for the purposes  set forth herein, and Escrow Agent hereby accepts such appointment under the terms and  conditions set forth herein.  

 

                                    Section 2.                                  ESCROW DEPOSIT         2.1   Receipt of Escrow Amount.  At the Closing, Buyer shall, on behalf of the Seller,   deliver the Escrow Amount to Escrow Agent by wire transfer in immediately available funds  pursuant to Section 2.4(b)(iii) of the Purchase Agreement. Escrow Agent agrees to accept such  sums for deposit in escrow pursuant to the provisions of this Escrow Agreement and agrees to  promptly acknowledge to Buyer and Seller its receipt of the Escrow Amount. The Escrow  Amount together with any interest, income or profits earned thereon (“Income”) as a result of the  investment of the Escrow Amount in accordance with Section 2.2 hereof is hereafter referred to  as the “Escrow Fund”.          2.2   Separate Account; Investments.                 (a)   Escrow Agent shall establish a separate account (the “Escrow Account”)        to hold the Escrow Fund. The Escrow Account shall be established by Escrow Agent at        its office located at the notice address set forth in Section 5.3 in which to hold the Escrow        Fund and any securities in which the Escrow Fund, from time to time, be invested.        Escrow Agent shall keep appropriate records to reflect the current value from time to        time of the Escrow Fund. Such records shall include appropriate adjustments for        disbursements, Income earned and losses incurred.                (b)   During the term of this Escrow Agreement, the Escrow Fund shall be        invested and reinvested by Escrow Agent in such investments (i) as shall from time to        time be (a) selected by Seller with respect to, in each case, eligible investments in        accordance with the investment guidelines set forth on the attached Exhibit A, which may        be amended from time to time by joint written consent of the Parties (such investments,        “Eligible Investments”), or (b) jointly selected by the Parties with respect to, in each case,        any investments that are not Eligible Investments (“Other Investments”), and (ii) which        are investments the Escrow Agent is able to hold.  The Escrow Agent shall have no        liability for any loss sustained as a result of any investment selected as indicated in the        previous sentence or made pursuant to the instructions of the Seller with respect to        Eligible Investments or the joint instructions of the Parties with respect to investments        that are not Eligible Investments, as a result of any liquidation of any investment prior to        its maturity or for failure of the Seller or the Parties, as the case may be, to give the        Escrow Agent instructions or joint instructions, as the case may be, to invest or reinvest        the Escrow Fund.  In the absence of written instructions from Seller with respect to        Eligible Investments, or joint written instructions from the Parties with respect to Other        Investments, as to the investment of the Escrow Fund, the Escrow Fund shall be held        uninvested.         2.3   Releases from the Escrow Fund. Upon receipt by Escrow Agent of a joint written  instruction in the form of Exhibit B hereto that is jointly executed by an Authorized Person from  each Party (a “Joint Instruction”), Escrow Agent shall promptly distribute from the Escrow  Account an amount of funds in accordance with such Joint Instruction by wire transfer in  immediately available funds.  Any such distribution shall be made first from funds immediately  available in the Escrow Account (if any) and, with respect to the remaining balance of such                                      2                                        

 

 distribution amount for which funds are not immediately available in the Escrow Account (the   “Liquidation Amount”), Escrow Agent shall liquidate such investments in the Escrow Account,   as Escrow Agent may select in its sole discretion in accordance with current market practices, as   needed for there to be immediately available funds in the Escrow Account in an amount equal to   or greater than the Liquidation Amount.  The Escrow Fund will only be distributed to an   authorized account listed in Exhibit C, which may be amended from time to time in writing by   the Parties.          2.4   Income Tax Allocation and Reporting.  Escrow Agent does not have any interest   in the Escrow Fund but is serving as escrow holder only and as having possession of the Escrow  Fund only for purposes of this Agreement.  All Income earned from investment of the Escrow  Amount shall, as of the end of each calendar, be reported as having been earned by Seller,   whether or not such Income was disbursed during such calendar year, and Seller shall take into   account for tax purposes all such Income and shall be entitled to any related deductions, credits   and losses.  No later than fifteen (15) days following the end of each calendar quarter in which   Income is earned on the Escrow Amount, the Escrow Agent shall distribute funds in the Escrow   Account to Seller in an amount equal to the net amount of such Income during such calendar   quarter, by wire transfer to the authorized account of Seller set forth on Exhibit C. Any payments   of Income from the Escrow Account shall be subject to withholding regulations then in force   with respect to United States taxes.  The Seller will provide Escrow Agent with appropriate   executed and correct Internal Revenue Forms W-9, W-8 or W-8BEN-E, as the case may be, for  U.S. tax purposes, and will inform Escrow Agent as to the proper allocation of Income in respect   of the Escrow Fund for annual and periodic tax and other reporting purposes.  It is understood   that Escrow Agent shall be responsible for tax reporting only with respect to Income earned on   investment of funds that are a part of the Escrow Fund and is not responsible for any other tax   reporting.          2.5   Termination.  This Escrow Agreement shall terminate upon the earlier to occur of   (i) distribution or disbursement by Escrow Agent of the entire Escrow Fund in accordance with   the terms hereof, and (ii) upon receipt by Escrow Agent of a joint notice of termination signed by   an Authorized Person from each Party. Upon such receipt by Escrow Agent, Escrow Agent shall   promptly deliver the Escrow Fund, less the amount of fees, costs and expenses or other  obligations owed to Escrow Agent, as directed by the Parties in such joint notice of termination.           2.6   Authorized Persons. In connection with the execution of this Escrow Agreement,   each Party shall deliver to Escrow Agent an authorized persons’ form (an “Authorized Persons   Form”) in the form of Exhibit D-1, in the case of Buyer, and Exhibit D-2, in the case of Seller,   which shall provide for the incumbency and specimen signature of at least two (2) officers or   other representatives of such Party authorized to act for and give and receive notices, requests  and instructions on behalf of such Party in connection with this Escrow Agreement (each such  officer or other representative, an “Authorized Person”).  From time to time, a Party may revise   their respective Authorized Persons Form by delivering to Escrow Agent a revised Authorized   Persons Form, which shall include the changes made to the previously given Authorized Persons   Form (a “Revised Authorized Persons Form”). However, Escrow Agent shall be entitled to rely   conclusively on the then-current Authorized Persons Form until Escrow Agent acknowledges  receipt of the Revised Authorized Persons Form to an applicable Authorized Person.                                       3                                         

 

                                     Section 3.                              DUTIES OF ESCROW AGENT           3.1   Scope of Responsibility.  Notwithstanding any provision to the contrary, Escrow   Agent is obligated only to perform the duties specifically set forth in this Escrow Agreement,   which shall be deemed purely ministerial in nature.  Under no circumstances will Escrow Agent   be deemed to be a fiduciary to any Party or any other person under this Escrow Agreement.    Escrow Agent will not be responsible or liable for the failure of any Party to perform in   accordance with this Escrow Agreement. Escrow Agent shall neither be responsible for, nor   chargeable with, knowledge of the terms and conditions of any other agreement, instrument, or   document other than this Escrow Agreement, whether or not an original or a copy of such   agreement has been provided to Escrow Agent; and Escrow Agent shall have no duty to know or   inquire as to the performance or nonperformance of any provision of any such agreement,   instrument, or document, and Escrow Agent has no duties or obligations with respect thereto.    This Escrow Agreement sets forth all matters pertinent to the escrow contemplated hereunder,   and no additional obligations of Escrow Agent shall be inferred or implied from the terms of this   Escrow Agreement or any other agreement.           3.2   Attorneys and Agents.  Escrow Agent shall be entitled to rely on and shall not be   liable for any action taken or omitted to be taken in good faith by Escrow Agent in accordance   with the written advice of legal counsel retained or consulted by Escrow Agent.  Escrow Agent   shall be reimbursed as set forth in Section 4.1 for any and all reasonable compensation   (reasonable fees, expenses and other costs) paid and/or reimbursed to such counsel.  Escrow   Agent may perform any and all of its duties through its agents, representatives, attorneys,   custodians, and/or nominees.          3.3   Reliance.  Escrow Agent shall not be liable for any action taken or not taken by it   in accordance with the direction or consent of the Parties or their respective agents,   representatives, successors, or assigns.  Escrow Agent shall not be liable for acting upon any   notice, request, consent, direction, requisition, certificate, order, affidavit, letter, or other paper or   document believed by it in good faith to be genuine and correct and to have been signed or sent   by the proper person or persons, without further inquiry into the person’s or persons’ authority.            3.4   No Financial Obligation.  No provision of this Escrow Agreement shall require   Escrow Agent to risk or advance its own funds or otherwise incur any financial liability or   potential financial liability in the performance of its duties or the exercise of its rights under this   Escrow Agreement.          3.5   Security Call Back.  In the event a Party provides its wiring instructions after the   date of this Escrow Agreement, whether in writing, by facsimile, by email or otherwise, Escrow   Agent may seek confirmation of such instructions by telephone call-back to the person or  persons designated on the applicable Authorized Persons Form and Escrow Agent may in good  faith rely upon the confirmation of anyone purporting to be the person or persons so designated.                  3.6   Statements.  The Escrow Agent shall provide to the Parties statements (not less   frequently than monthly) reflecting activity in the Escrow Account for the preceding period.  No   statement need be provided for periods in which no Escrow Account activity occurred.  Each                                       4                                         

 

 such statement shall be deemed to be correct and final upon receipt thereof by the Parties unless   Escrow Agent is notified in writing to the contrary within thirty (30) Business Days of the date   of such statement.  A “Business Day” shall mean any day on which Escrow Agent is open for   business.                                       Section 4.                       PROVISIONS CONCERNING ESCROW AGENT          4.1   Indemnification.  Buyer and Seller jointly and severally agree to indemnify,   defend and hold harmless Escrow Agent from and against any and all loss, liability, cost, damage   and expense, including, without limitation, reasonable attorneys’ fees and expenses or other   reasonable professional fees and expenses which Escrow Agent may suffer or incur by reason of   any action, claim or proceeding brought against Escrow Agent, arising out of or relating in any   way to this Escrow Agreement or any transaction to which this Escrow Agreement relates, unless   such loss, liability, cost, damage or expense shall have been finally adjudicated to have been   directly caused by the bad faith, willful misconduct or gross negligence of Escrow Agent. The   provisions of this Section 4.1 shall survive the resignation or removal of Escrow Agent and the   termination of this Escrow Agreement.              4.2   Limitation of Liability.  ESCROW AGENT SHALL NOT BE LIABLE,   DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES   ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES,   LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE   DIRECTLY RESULTED FROM ESCROW AGENT’S BAD FAITH, GROSS NEGLIGENCE   OR WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT OR CONSEQUENTIAL   DAMAGES OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT   LIMITATION LOST PROFITS), EVEN IF ESCROW AGENT HAS BEEN ADVISED OF   THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE   FORM OF ACTION.          4.3   Resignation or Removal.  Escrow Agent may resign by furnishing written notice   of its resignation to the Parties, and the Parties may remove Escrow Agent by furnishing to   Escrow Agent a joint written notice of its removal along with payment of all fees and expenses   to which it is entitled through the date of termination.  Such resignation or removal, as the case   may be, shall be effective thirty (30) days after the delivery of such notice or upon the earlier   appointment of a successor escrow agent, and Escrow Agent’s sole responsibility thereafter shall  be to safely keep the Escrow Fund and to deliver the same to a successor escrow agent as shall  be appointed by the Parties, as evidenced by a joint written notice filed with Escrow Agent or in  accordance with a court order.  If the Parties have failed to appoint a successor escrow agent  prior to the expiration of thirty (30) days following the delivery of such notice of resignation or  removal, Escrow Agent may petition any court of competent jurisdiction for the appointment of a   successor escrow agent or for other appropriate relief, and any such resulting appointment shall   be binding upon the Parties.          4.4   Compensation.  Escrow Agent shall be entitled to compensation for its services as   stated in the fee schedule attached hereto as Exhibit E.  The fee agreed upon for the services   rendered hereunder is intended as full compensation for Escrow Agent’s services as   contemplated by this Escrow Agreement; provided, however, that in the event that the conditions                                       5                                         

 

 for the disbursement of funds under this Escrow Agreement are not fulfilled, or Escrow Agent is  required or requested to render any service not contemplated in this Escrow Agreement, or there   is any assignment of interest in the subject matter of this Escrow Agreement, or any material   modification hereof, or if any material controversy arises hereunder, or Escrow Agent is made a   party to any litigation pertaining to this Escrow Agreement or the subject matter hereof, then   Escrow Agent shall be compensated for such extraordinary services and reimbursed for all costs   and expenses, including reasonable attorneys’ fees and expenses, occasioned by any such delay,   controversy, litigation or event.  Buyer and Seller jointly and severally agree to pay the Escrow   Agent all fees, costs and expenses set forth on Exhibit E or otherwise arising under this Escrow   Agreement. Notwithstanding the foregoing, Buyer and Seller agree that, as between Buyer and   Seller, the amounts payable under this Section 4.4 shall be paid 50% by the Buyer on the one   hand, and 50% by the Seller on the other hand.  If any amount due to Escrow Agent hereunder is   not paid within thirty (30) days of the date due, Escrow Agent, in its sole discretion may charge  interest on such amount up to the highest rate permitted by applicable law.            4.5   Disagreements.  If any conflict, disagreement or dispute arises between, among,   or involving any of the parties hereto concerning the meaning or validity of any provision   hereunder or concerning any other matter relating to this Escrow Agreement, or Escrow Agent is   in doubt as to the action to be taken hereunder, Escrow Agent is authorized to retain the Escrow   Fund until Escrow Agent (i) receives a Final Determination directing delivery of the Escrow   Fund, in which event Escrow Agent shall be authorized to disburse the Escrow Fund promptly in   accordance with such Final Determination, or (ii) receives a written agreement executed by each   party involved in such disagreement or dispute directing delivery of the Escrow Fund, in which   event Escrow Agent shall be authorized to disburse the Escrow Fund promptly in accordance   with such agreement.  Escrow Agent shall be entitled to act on any such agreement or Final   Determination without further question, inquiry, or consent.  A “Final Determination” shall mean   a non-appealable order or decree of any court of competent jurisdiction or a final non-appealable   arbitration decision directing delivery of the Escrow Fund, certified as true and correct by the   Party delivering it to Escrow Agent, with a copy of such Final Determination sent concurrently   to the other Party.          4.6   Merger or Consolidation.  Any corporation or association into which Escrow   Agent may be converted or merged, or with which it may be consolidated, or to which it may sell   or transfer all or substantially all of its corporate trust business and assets as a whole or   substantially as a whole, or any corporation or association resulting from any such conversion,   sale, merger, consolidation or transfer to which Escrow Agent is a party, shall be and become the   successor escrow agent under this Escrow Agreement and shall have and succeed to the rights,  powers, duties, immunities and privileges as its predecessor, without the execution or filing of  any instrument or paper or the performance of any further act.  Escrow Agent shall promptly   provide notice of such merger, consolidation, sale or transfer to the Parties.          4.7   Attachment of Escrow Fund; Compliance with Legal Orders.  In the event that   any Escrow Fund shall be attached, garnished or levied upon by any court order, or the delivery   thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall   be made or entered by any court order affecting the Escrow Fund, Escrow Agent shall   immediately provide notice to Buyer and Seller and is hereby expressly authorized, in its sole   discretion, to obey and comply with all writs, orders or decrees so entered or issued, or which it                                       6                                         

 

 is advised by legal counsel of its own choosing is binding upon it, whether with or without   jurisdiction.  In the event that Escrow Agent obeys or complies with any such writ, order or   decree it shall not be liable to any of the Parties or to any other person, firm or corporation,   should, by reason of such compliance notwithstanding, such writ, order or decree be   subsequently reversed, modified, annulled, set aside or vacated.                                         Section 5.                                   MISCELLANEOUS          5.1   Successors and Assigns.  This Escrow Agreement shall be binding on and inure to   the benefit of the Parties and Escrow Agent and their respective successors and permitted   assigns. No other persons shall have any rights under this Escrow Agreement.  No assignment of  the interest of any of the Parties shall be binding unless and until written notice of such  assignment shall be delivered to the other Party and Escrow Agent and shall require the prior   written consent of the other Party and Escrow Agent (such consent not to be unreasonably   withheld). Any attempted assignment in violation of this Section 5.1 shall be void.          5.2   Escheat.  The Parties acknowledge that under applicable state law, property which   is presumed abandoned may under certain circumstances escheat to the applicable state.  Escrow   Agent shall have no liability to the Parties, their respective heirs, legal representatives,   successors and assigns, or any other party, should any or all of the Escrow Fund escheat by   operation of law.          5.3   Notices.  All notices, requests, demands, waivers and other communications   required or permitted to be given under this Escrow Agreement shall be in writing and shall be  deemed to have been duly given if (i) delivered personally, (ii) mailed by first-class, registered or  certified mail, return receipt requested, postage prepaid, (iii) sent by next-day or overnight mail  or delivery or (iv) sent by email, addressed as follows:                     if to Seller, to:                     Ellard Family Holdings, Inc.                    [____________]                    [____________]                    Attn:  [____________]                    Email: [____________]                                                    With a copy (which shall not constitute notice) to:                                        Winstead PC                    2728 N. Harwood Drive, #500                    Dallas, TX 75201                    Attn:  Tom Helfand                    Email: thelfand@winstead.com                      Attn:  Andrew Ostapko                     Email: aostapko@winstead.com                                                             7                                         

 

                                              if to Buyer, to:                                          Horace Mann Educators Corporation                              1 Horace Mann Place                     Springfield, IL 62715                    Attention:  Donald M. Carley, SVP & General Counsel                    Email:  Donald.Carley@horacemann.com                                         with a copy (which shall not constitute notice) to:                                        Eversheds Sutherland (US) LLP                    700 Sixth Street, NW, Suite 700                    Washington, DC 20001                    Attention: Ling Ling                    Email: lingling@eversheds-sutherland.com                    Telephone: 202-383-0236                                         if to Escrow Agent, to:                     [____________]                    [____________]                    [____________]                    Attn:  [____________]                    Email: [____________]                                              if to Escrow Agent, to:                     [____________]                    [____________]                    [____________]                    Attn:  [____________]                    Email: [____________]                                           or, in each case, at such other address as may be specified in writing to the other parties hereto.         All such notices, requests, demands, waivers and other communications shall be deemed  to have been received (a) if by personal delivery, on the day after such delivery, (b) if by  certified or registered mail, on the third (3rd) Business Day after the mailing thereof, (c) if by  next-day or overnight mail or delivery, on the day delivered, and (d) if by Email upon  confirmation of transmission by the transmitting equipment if sent during normal business hours  of the recipient, and on the next Business Day if sent after normal business hours of the recipient.                                        8                                         

 

       5.4   Governing Law.  This Escrow Agreement shall be interpreted, construed,   enforced and administered in accordance with the internal substantive laws (and not the choice of   law rules) of the State of Delaware.  Each party hereto hereby submits to the personal   jurisdiction of and each agrees that all proceedings relating hereto shall be brought in courts   located within the State of Delaware.  Each party hereto hereby waives the right to trial by jury   and to assert counterclaims in any such proceedings.  To the extent that in any jurisdiction any   party hereto may be entitled to claim, for itself or its assets, immunity from suit, execution,   attachment (whether before or after judgment) or other legal process, each such party hereby   irrevocably agrees not to claim, and hereby waives, such immunity.  Each party hereto waives   personal service of process and consents to service of process by certified or registered mail,   return receipt requested, directed to it at the address last specified for notices hereunder, and such   service shall be deemed completed three (3) Business Days after the same is so mailed.          5.5   Entire Agreement.  This Escrow Agreement shall constitute the entire agreement   of the parties with respect to the subject matter herein and supersedes all prior oral or written   agreements in regard thereto; provided, however, that the Purchase Agreement shall govern the   relationship between the Buyer and Seller (but not Escrow Agent) with respect to the matters   contemplated thereby.          5.6   Amendment.  This Escrow Agreement may be amended, modified, superseded,   rescinded, or canceled only by a written instrument executed by the Parties and Escrow Agent.          5.7   Waivers.  The failure of any party to this Escrow Agreement at any time or times   to require performance of any provision under this Escrow Agreement shall in no manner affect  the right at a later time to enforce the same performance.  A waiver by any party to this Escrow  Agreement of any such condition or breach of any term, covenant, representation, or warranty  contained in this Escrow Agreement, in any one or more instances, shall neither be construed as  a further or continuing waiver of any such condition or breach nor a waiver of any other  condition or breach of any other term, covenant, representation, or warranty contained in this  Escrow Agreement.         5.8   Headings.  Section headings of this Escrow Agreement have been inserted for   convenience of reference only and shall in no way restrict or otherwise modify any of the terms   or provisions of this Escrow Agreement.          5.9   Counterparts.  This Escrow Agreement may be executed in one or more   counterparts, each of which when executed shall be deemed to be an original, and such   counterparts shall together constitute one and the same instrument. The exchange of a fully   executed Escrow Agreement (in counterparts or otherwise) by fax or PDF shall be sufficient to   bind the parties to the terms and conditions of this Escrow Agreement.          5.10  Force Majeure.  No party to this Escrow Agreement shall be liable to any other   party for losses arising out of, or the inability to perform its obligations under the terms of this   Escrow Agreement, due to acts of God, which shall include, but shall not be limited to, fire,   floods, strikes, mechanical failure, war, riot, nuclear accident, earthquake, terrorist attack,   computer piracy, cyber-terrorism or other acts beyond the control of the parties hereto.                                        9                                         

 

       5.11  Severability.  If any provision of this Escrow Agreement or the application   thereof to any party or circumstance shall be invalid, illegal or unenforceable to any extent, the   remainder of this Escrow Agreement and the application thereof shall not be affected and shall  be enforceable to the fullest extent permitted by law.         5.12  Survival of Certain Provisions.  Sections 2.4, 4.1, 4.4, 5.3, 5.4 and 5.14 hereof   shall survive termination of this Escrow Agreement.          5.13  Representations and Warranties.  Each of the parties hereto represents and   warrants (a) that this Escrow Agreement has been duly authorized, executed and delivered on its   behalf and constitutes its legal, valid and binding obligation, enforceable against it in accordance   with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,   reorganization, moratorium or other debtor relief laws and that certain equitable remedies may   not be available regardless of whether enforcement is sought in equity or at law, and (b) that the   execution, delivery and performance of this Escrow Agreement by it does not and will not  violate any applicable law or regulation.         5.14  USA Patriot Act.  No Party to this Escrow Agreement is (or will be) a person with   whom Escrow Agent is restricted from doing business with under regulations of the Office of   Foreign Asset Control (“OFAC”) of the Department of the Treasury of the United States of   America (including those persons named on OFAC’s Specially Designated and Blocked Persons   list) or under any statute, executive order (including the September 24, 2001 Executive Order   Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to   Commit, or Support Terrorism), or other governmental action, and is not and shall not engage in   any dealings or transactions or otherwise be associated with such persons.  In addition, Buyer   and Seller hereby agree to provide Escrow Agent with any additional information that Escrow   Agent deems necessary from time to time in order to ensure compliance with all applicable laws   concerning money laundering and similar activities. The following notification is provided to   Buyer and Seller pursuant to Section 326 of the USA PATRIOT Act of 2001, 31 U.S.C. Section   5318 (“Patriot Act”):  IMPORTANT INFORMATION ABOUT PROCEDURES FOR   OPENING A NEW ACCOUNT.  To help the government fight the funding of terrorism and   money laundering activities, federal law requires all financial institutions to obtain, verify, and   record information that identifies each person or entity that opens an account, including any   deposit account, treasury management account, loan, other extension of credit, or other financial   services product.  What this means for depositors:  When a depositor opens an account, if such   depositor is an individual, a lender (including Escrow Agent) will ask for such depositor’s name,   taxpayer identification number, residential address, date of birth, and other information that will   allow the lender to identify such depositor, and, if such depositor is not an individual, Escrow   Agent will ask for such depositor’s name, taxpayer identification number, business address, and   other information that will allow the lender to identify such depositor.  Escrow Agent may also   ask, if such depositor is an individual, to see depositor’s driver’s license or other identifying   documents, and, if such depositor is not an individual, to see such depositor’s legal   organizational documents or other identifying documents.  In the event Buyer and/or Seller   violate any of the provisions of the Patriot Act and the regulations thereunder, such event shall   constitute a default hereunder and shall entitle Escrow Agent to exercise all of its rights and   remedies at law or in equity, including but not limited to terminating this Escrow Agreement.                                       10                                        

 

       IN WITNESS WHEREOF, the undersigned have duly executed this Escrow   Agreement as of the date first written above.           HORACE MANN EDUCATORS CORPORATION:       By:                                    Name:   Title:                                  ELLARD FAMILY HOLDINGS, INC.:            By:                                    Name:   Title:                                  [ESCROW AGENT]      By:                                    Name:   Title:                         [Signature Page to Escrow Agreement]     

 

                                                                                                             EXHIBIT A                                                               INVESTMENT GUIDELINES                                                          “Eligible Investments” means (i) obligations issued or guaranteed by the United States of  America or any agency or instrumentality thereof (provided that the full faith and credit  of the United States is pledged in support thereof); (ii) shares of a money market fund  investing only in underlying securities described in clause (i) above; and (iii) [_______].    

 

                                                                                                                 EXHIBIT B                                                               FORM OF JOINT INSTRUCTION      [Date]      [__________], as Escrow Agent   [__________]   Attn.: [_____]    Re:   Joint Instruction    Ladies and Gentlemen:           Horace Mann Educators Corporation, a Delaware corporation (“Buyer”), and   Ellard Family Holdings, Inc., a Nevada corporation (“Seller”), under the Escrow   Agreement dated as of [______], 2019, among the Buyer, Seller and [________], as   Escrow Agent (the “Escrow Agreement”), request and authorize the Escrow Agent to   withdraw  funds  in  an  amount  equal  to  $[●]  from  Escrow  Account  #  [_______]  (the   “Escrow Account”) and to transfer such funds in accordance with the directions set forth   below:       1.    Pursuant to Section 2.3 of the Escrow Agreement and Sections 2.6(a) and   [2.5(a)][2.6(b)][9.3(e)] of the Purchase Agreement, the Buyer and Seller hereby jointly   instruct the Escrow Agent to withdraw funds in an amount equal to $[●] from the Escrow   Account.  Pursuant to Section 2.3 of the Escrow Agreement, to the extent there are not   sufficient funds immediately available in the Escrow Account to make such withdrawal   (the “Liquidation Amount”), the Buyer and Seller hereby jointly instruct the Escrow   Agent to liquidate such investments in the Escrow Account, as the Escrow Agent may   select in its sole discretion in accordance with current market practices, as needed for   there to be immediately available funds in the Escrow Account in an amount equal to or  greater than the Liquidation Amount.        2.    Transfer Directions:            Transferee: [Account of the Buyer/Seller]                Location of Account:_____________________________                Account No.:___________________________________]                     Capitalized terms used but not otherwise defined herein shall have the meaning   specified in the Escrow Agreement.        

 

                                                                            Very truly yours,                                           HORACE MANN EDUCATORS CORPORATION:     By:                                   Name:  Title:                                 ELLARD FAMILY HOLDINGS, INC.:        By:                                   Name:  Title:  

 

                                                                                                                                                     EXHIBIT C                                                                                                        AUTHORIZED ACCOUNTS                                                                     Authorized Account of Seller                                                                                                                    Bank Account Number:      Bank Name:                Account Name:             Fed Wire ABA Routing Number:                                                                                                                                                                                   Authorized Account of Buyer                                                                                                                        Bank Account Number:       Bank Name:                 Account Name:              Fed Wire ABA Routing Number:    

 

                                                                                                          EXHIBIT D-1                                                     CERTIFICATE AS TO AUTHORIZED SIGNATURES                                        The specimen signatures shown below are the specimen signatures of the individuals who  have been designated as authorized representatives of Buyer and are authorized to initiate  and approve transactions of all types for the escrow account or accounts established  under the Escrow Agreement to which this Exhibit D-1 is attached on behalf of Buyer.                Name / Title                         Specimen Signature     ________________________________      ________________________________                 Name                                Signature                      ________________________________                 Title                                          ________________________________      ________________________________                 Name                                Signature                      ________________________________                 Title                                          ________________________________      ________________________________                 Name                                Signature                      ________________________________                 Title                                                                                                                     

 

                                                                                                          EXHIBIT D-2                                                     CERTIFICATE AS TO AUTHORIZED SIGNATURES    The specimen signatures shown below are the specimen signatures of Seller’s  representatives who are authorized to initiate and approve transactions of all types for the  escrow account or accounts established under the Escrow Agreement to which this  Exhibit D-2 is attached on behalf of Seller.                   Name                              Specimen Signature     ________________________________      ________________________________                 Name                                Signature                      ________________________________                 Title                                                                                                   ________________________________      ________________________________                 Name                                Signature                      ________________________________                 Title                                                                                                                      _______________________________      ________________________________                 Name                                Signature                      ________________________________                 Title  

 

                                                             EXHIBIT E                FEES OF ESCROW AGENT                                 

 

                                        EXHIBIT B   KELLER SPRINGS LEASE AMENDMENT AND TERMINATIONS                           [See attached]                                                EXHIBIT B-1  

 

                                                                         Exhibit B-1        FIRST AMENDMENT AND EXTENSION TO LEASE AGREEMENT          This First Amendment to the Lease Agreement (“Amendment”) is entered into on   __________________, 2019, by and between EE Realty, Inc. a Texas limited liability   company, (hereinafter called “Landlord”) and NTALife Management, Inc., a Texas   corporation (“Tenant”).          WHEREAS, Landlord entered into that certain Office Lease Agreement with National   Teachers Associates, Inc. (“NTA”), dated January 1, 2015 (the “Original Lease”), demising   certain premises known as 4949 Keller Springs Road, Addison, TX 75001, containing 62,207   square feet, (the “Keller Springs Premises”); and          WHEREAS, NTA assigned the Original Lease to Tenant, and Tenant assumed the   Original Lease from NTA, pursuant to an Assignment and Assumption Agreement dated as of  January 1, 2016 (the Original Lease as so assigned, the “Lease”);          WHEREAS, concurrently with the execution and delivery of the Original Lease, certain   affiliates of NTA also entered into leases with the Landlord with respect to the remaining   portions of the Keller Springs Premises (the “Concurrent Leases”);           WHEREAS, on the date hereof, the Concurrent Leases are being terminated in full; and          WHEREAS, by this Amendment, Landlord and Tenant desire to amend the Lease to (i)   state that the premises leased and demised to the Tenant shall consist of the entirety of the Keller   Springs Premises, (ii) to extend the initial term of the Lease and (iii) amend certain other terms   and conditions of the Lease, in each case set forth herein.          NOW, THEREFORE, in consideration of the mutual covenants and promises   contained herein and other good and valuable consideration, the receipt and sufficiency   of which is hereby acknowledged, Landlord and Tenant agree to amend the Lease as   follows:       1. Defined Terms.  Except as otherwise provided herein, the capitalized terms used herein         shall have the same meanings as provided such terms in the Lease.               2. The Leased Premises and Terms (if there is a conflict between the Agreement and this         Amendment, this Amendment shall prevail):             (a)   Rentable Area:  62,207 rentable square feet (consisting of entire Keller Springs               Premises)                        (b)   Annual Rent and cost per square foot (“sq. ft.”)                Year 1 (2019)     $1,213,036.50     ($19.50/sq. ft.)              Year 2 (2020)     $1,213,036.50     ($19.50/sq. ft.)                                        EXHIBIT B-2  

 

      Year 3 (2021)           $1,213,036.50     ($19.50/sq. ft.)              Year 4 (2022)     $1,213,036.50     ($19.50/sq. ft.)              Year 5 (2023)     $1,213,036.50     ($19.50/sq. ft.)         (b)   Monthly Rental Installments: $101,086.37        (c)  Lease Term:  Through [●],1 subject to renewal pursuant to Section 2A of the             Lease        (d)  Rental escalation: none        (e)  Lease is a full service lease.  In connection therewith, Landlord’s obligations shall            include, without limitation, (x) all services and obligations specified in the Lease,            inclusive of Sections 5 and 8 thereof, and (y) to the extent not already specified in            the Lease, all of the following:              (i) Repairs and Maintenance:  Landlord will maintain in good repair and working            order at its cost and expense the roof, foundation, HVAC, parking and common            areas, plumbing, elevators, fire protection sprinkler, life safety, electrical and            mechanical systems, structural soundness of external walls, doors, corridors,            windows, and paving outside the building, landscaping, and will provide pest            eradication, snow/ice removal and similar repair and maintenance items,             (ii) Taxes: Landlord will pay all real estate taxes, assessments and similar charges            for the Premises. Tenant will pay personal property taxes on its personal property             (iii) Utilities: Landlord will pay for all Utilities including electric, water, gas,            sewer, telephone/internet and garbage disposal             (iv) Services: Landlord will provide janitorial services 5 days per week excluding            holidays, elevator service at all times, the services identified in clause (i) above            and will be responsible for replacement of light bulbs.             (v) Insurance: Landlord will be responsible for insurance of the building and            related structure. Tenant will be responsible for insurance related to its equipment,            furniture and other personal items       (f)   Parking: as set forth in Section 10A of the Lease        (g)  Security Deposit:  None        (h)  Broker(s):  None        (i)   Permitted Use: As set forth in the Lease, including general business offices and             ancillary uses with access seven (7) days per week, twenty four (24) hours per day  1 NTD:  To reflect fifth anniversary of closing date.                                       EXHIBIT B-3  

 

(j)   Vending Machines: Tenant will receive any commissions from the sale of food       and beverages from vending machines contained within the Premises.  (k)   Signage:  Landlord, at Landlord’s expense, shall provide Building signage and       lettering for the Tenant.  (l)   Address for notices and payments are as follows:        Landlord:         EE Realty, Inc                          4949 Keller Springs Road                          Addison, TX 75001         With Payments to: EE Realty, Inc                          4949 Keller Springs Road                          Addison, TX 75001         Tenant:           NTALife Management, Inc.                           4949 Keller Springs Road                          Addison, TX 75001                          Attn:          With a copy to:   Horace Mann Service Corporation                          1 Horace Mann Plaza                          Springfield, IL 62715-0001                          Attn:  Chief Procurement Officer   (m)   As of the date hereof, Landlord confirms it has not received any written notice       from any governmental agencies and has no actual knowledge that the Premises       are in violation of: (i) any federal or local government requirements regarding the       sprinkler system; (ii) Title III of the Americans with Disabilities Act; or (iii) any       applicable Environmental Laws with respect to Hazardous Materials, it being       acknowledged that Environmental Laws shall mean any federal, state or local       laws, ordinance, permits or regulations, or any common law, regarding health,       safety, radioactive materials, hazardous materials or the environment, each as       amended, and any regulations promulgated thereunder, guidance and directives       issued with respect thereto, or policies adopted by the applicable authorities       thereunder.  Additionally, except for reasonable quantities of Hazardous       Materials used in connection with the operation, maintenance or repair of the       Premises, which Hazardous Materials shall be used, stored and disposed of in       accordance with all Environmental Laws, Landlord shall not introduce any       Hazardous Materials in or about the Premises.  Landlord shall indemnify and      hold harmless Tenant, its employees, and agents, of and from any and all      remediation costs (expressly excluding any special, indirect or consequential       damages) directly related to Hazardous Materials introduced by Landlord in or       about the common areas of the Premises in violation of Environmental Laws.                                EXHIBIT B-4  

 

                 (n)   End of Lease: The premises shall be surrendered in the same order and condition         in which they currently exist on the date of this Agreement excluding reasonable         wear and tear. Landlord shall accept the released premises “As Is.” Landlord         shall allow Tenant to remove any of its personal property or moveable trade         fixtures, furnishings and equipment from the premises.   (o)   The Landlord represents and warrants, to its current and actual knowledge, that:        (i) the Leased Premises are structurally sound and in good repair and operating        condition, normal wear and tear excepted, and without limiting the foregoing,        Landlord has maintained and repaired the Leased Premises consistent with its        obligations for maintenance and repair under the Lease; (ii) the Leased Premises        include the right of ingress and egress (legal and practical) over public rights-of-        way or valid and existing private easements; (iii) sewer and other utility services         to the Leased Premises are available, have been completed, installed and paid for         (and all connections for such services are paid for); (iv) the Leased Premises are         in compliance with all applicable laws relating to building codes (inclusive of         ADA compliance and having obtained necessary permits and certificates of         occupancy), zoning and land use in respect of the Leased Premises, and in         compliance with all covenants and other restrictions applicable to the Leased         Premises, and the Landlord has not received since January 1, 2016, any written         notice alleging such a violation of applicable law or of such covenants or other         restrictions; (v) there is no pending: (A) condemnation or eminent domain         proceeding or litigation affecting any of the Leased Premises, or (B) civil or         administrative proceeding challenging any use or operation of any of the Leased         Premises; and (vi) Landlord has not received written notice of any outstanding         requirements or recommendations by fire underwriters or rating boards,         insurance companies or holders of mortgages or other security interests requiring         or recommending any repairs or work to be done with reference to the Leased         Premises.  Subject to the representations in the foregoing Section 2(m) and this         Section 2(o), the Tenant accepts the Leased Premises in an “as-is” condition.    (p)   During the term of the Lease, Landlord shall maintain property and liability         insurance in accordance with customary market standards (and in all events at no         less than full replacement cost value as to property insurance).    (q)   Except as specifically amended hereby, the Lease shall remain in full force and         effect in accordance with its terms.                                      <Signatures on the Following Page>                                                        EXHIBIT B-5  

 

   Landlord                                  Tenant   EE Realty, Inc.                           NTALife Management, Inc.     By:____________________________           By: __________________________     Name: _________________________           Name: _______________________    Its: ____________________________         Its: __________________________                                                                                                                                          By: __________________________                                               Name: _______________________                                             Its: __________________________                                                                                                                               EXHIBIT B-6  

 

                                                                          Exhibit B-2                                                                                                           LEASE TERMINATION AGREEMENT      This Lease Termination Agreement (the “Agreement”) is made as of the ___ day of _______ by  and between EE Realty, a Texas corporation (hereinafter referred to as “Landlord”), and  NTA  Life Business Group Services, Inc., a Texas corporation (“Tenant”).                                     WITNESSETH:           WHEREAS, Landlord entered into that certain Office Lease Agreement with Tenant  dated January 1, 2015 (the “Original Lease”), demising certain premises known as 4949 Keller  Springs Road, Addison, TX 75001, containing 62,207 square feet, (the “Leased Premises”); and                  WHEREAS, by this Agreement Landlord and Tenant desire to terminate the Lease as of  11:59P.M. on __________ (“Early Lease Termination Date”) on the terms and conditions set  forth herein.             NOW, THEREFORE, in consideration of the mutual covenants and premises contained  herein and other good and valuable consideration, the receipt and sufficiency of which is hereby  acknowledged, Landlord and Tenant herein agree to terminate the Lease as follows:           1.         Defined Terms.  Except as otherwise provided herein, the capitalized terms used              herein shall have the same meanings as provided such terms in the Lease.                 2.         The Leased Premises.                       (a)  The Lease shall terminate at 11:59P.M. on the Early Lease Termination Date.                         (b)  Notwithstanding anything to the contrary in the Lease or this Agreement,              Tenant shall have no further obligations with respect to the Leased Premises              commencing the day immediately following the Early Lease Termination Date,              and the Lease shall terminate and all rights, obligations, and liabilities of the              parties hereunder with respect to the Leased Premises shall be released and             discharged.                       4.    Mutual Release.                           (a)   Effective on the Early Lease Termination Date, Landlord releases Tenant and              its guarantors, officers, directors, agents, employees and shareholders from any              and all obligations, liabilities, claims, rights or causes of action arising out of,              with respect to, or in connection with the Lease and/or the Leased Premises,                                       EXHIBIT B-7  

 

                 excluding only the obligations of Tenant under this Agreement.       (b)    Effective on the Early Lease Termination Date, Tenant releases Landlord   and its respective officers, directors, agents, employees, partners, members and   shareholders from any and all obligations, liabilities, claims, rights, actions or   causes of action arising out of, with respect to, or in connection with the Lease  and/or the Leased Premises, excluding only the obligations of Landlord under this  Agreement.                                  [Signature page follows]                                           EXHIBIT B-8  

 

                                                                                     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease Termination  Agreement as of the date and year first above written.            Landlord                                        Tenant  EE Realty, Inc.                                 NTA Life Business Group                                                  Services, Inc.    By:____________________________                 By: __________________________     Name: _________________________                 Name: _______________________    Its: ____________________________               Its: __________________________                                                                                                                                                        EXHIBIT B-9  

 

                                                                       Exhibit B-3                          LEASE TERMINATION AGREEMENT     This Lease Termination Agreement (the “Agreement”) is made as of the ___ day of ________ by  and between EE Realty, a Texas corporation (hereinafter referred to as “Landlord”) and  EE  Micronix, Inc., a Texas corporation (“Tenant”).                                     WITNESSETH:           WHEREAS, Landlord entered into that certain Office Lease Agreement with Tenant  dated January 1, 2015 (the “Original Lease”), demising certain premises known as 4949 Keller  Springs Road, Addison, TX 75001, containing 62,207 square feet, (the “Leased Premises”); and                  WHEREAS, by this Agreement Landlord and Tenant desire to terminate the Lease as of  11:59P.M. on __________ (“Early Lease Termination Date”) on the terms and conditions set  forth herein.             NOW, THEREFORE, in consideration of the mutual covenants and premises contained  herein and other good and valuable consideration, the receipt and sufficiency of which is hereby  acknowledged, Landlord and Tenant herein agree to terminate the Lease as follows:           1.         Defined Terms.  Except as otherwise provided herein, the capitalized terms used              herein shall have the same meanings as provided such terms in the Lease.                 2.         The Leased Premises.                       (a)  The Lease shall terminate at 11:59P.M. on the Early Lease Termination Date.                         (b)  Notwithstanding anything to the contrary in the Lease or this Agreement,              Tenant shall have no further obligations with respect to the Leased Premises              commencing the day immediately following the Early Lease Termination Date,              and the Lease shall terminate and all rights, obligations, and liabilities of the              parties hereunder with respect to the Leased Premises shall be released and              discharged.            3.    Mutual Release.                           (a)   Effective on the Early Lease Termination Date, Landlord releases Tenant and              its guarantors, officers, directors, agents, employees and shareholders from any              and all obligations, liabilities, claims, rights or causes of action arising out of,              with respect to, or in connection with the Lease and/or the Leased Premises,              excluding only the obligations of Tenant under this Agreement.                             (b)    Effective on the Early Lease Termination Date, Tenant releases Landlord              and its respective officers, directors, agents, employees, partners, members and                                      EXHIBIT B-10  

 

                shareholders from any and all obligations, liabilities, claims, rights, actions or  causes of action arising out of, with respect to, or in connection with the Lease  and/or the Leased Premises, excluding only the obligations of Landlord under this  Agreement.                                                 [Signature page follows]                                                                     EXHIBIT B-11  

 

           IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease Termination  Agreement as of the date and year first above written.            Landlord                                        Tenant  EE Realty, Inc.                                 EE Micronix, Inc.    By:____________________________                 By: __________________________     Name: _________________________                 Name: _______________________    Its: ____________________________               Its: __________________________                                                                                                                                       EXHIBIT B-12  

 

                                                                       Exhibit B-4                          LEASE TERMINATION AGREEMENT      This Lease Termination Agreement (the “Agreement”) is made as of the ___ day of _______ by  and between EE Realty, a Texas corporation (hereinafter referred to as “Landlord”), and  National Teachers Associates Life Insurance Company, a Texas-domiciled life insurance  company (“Tenant”).                                     WITNESSETH:           WHEREAS, Landlord entered into that certain Office Lease Agreement with Tenant  dated January 1, 2015 (the “Original Lease”), demising certain premises known as 4949 Keller  Springs Road, Addison, TX 75001, containing 62,207 square feet, (the “Leased Premises”); and                  WHEREAS, by this Agreement Landlord and Tenant desire to terminate the Lease as of  11:59P.M. on __________ (“Early Lease Termination Date”) on the terms and conditions set  forth herein.             NOW, THEREFORE, in consideration of the mutual covenants and premises contained  herein and other good and valuable consideration, the receipt and sufficiency of which is hereby  acknowledged, Landlord and Tenant herein agree to terminate the Lease as follows:           1.         Defined Terms.  Except as otherwise provided herein, the capitalized terms used              herein shall have the same meanings as provided such terms in the Lease.                 2.         The Leased Premises.                       (a)  The Lease shall terminate at 11:59P.M. on the Early Lease Termination Date.                         (b)  Notwithstanding anything to the contrary in the Lease or this Agreement,              Tenant shall have no further obligations with respect to the Leased Premises              commencing the day immediately following the Early Lease Termination Date,              and the Lease shall terminate and all rights, obligations, and liabilities of the              parties hereunder with respect to the Leased Premises shall be released and              discharged.                        4.    Mutual Release.                           (a)   Effective on the Early Lease Termination Date, Landlord releases Tenant and              its guarantors, officers, directors, agents, employees and shareholders from any              and all obligations, liabilities, claims, rights or causes of action arising out of,              with respect to, or in connection with the Lease and/or the Leased Premises,              excluding only the obligations of Tenant under this Agreement.                             (b)    Effective on the Early Lease Termination Date, Tenant releases Landlord                                      EXHIBIT B-13  

 

                and its respective officers, directors, agents, employees, partners, members and  shareholders from any and all obligations, liabilities, claims, rights, actions or  causes of action arising out of, with respect to, or in connection with the Lease  and/or the Leased Premises, excluding only the obligations of Landlord under this  Agreement.                                  [Signature page follows]                                        EXHIBIT B-14  

 

                                                                                     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease Termination  Agreement as of the date and year first above written.            Landlord                                        Tenant  EE Realty, Inc.                                 National Teachers Associates Life                                                  Insurance Company    By:____________________________                 By: __________________________     Name: _________________________                 Name: _______________________    Its: ____________________________               Its: __________________________                                                                                                                        EXHIBIT B-15  

 

                                     ANNEX A                            EXAMPLE CALCULATION2                  Price Adjustment Example                                                                                                      Estimated Consolidated GAAP Net Income            $24,000,000            Estimated Deferred Acquisition Cost Adjustment             $2,600,000    RBC Adjustment                                             $6,210,000    Company Distribution Adjustment                            $2,000,000    Company Transaction Expenses Adjustment                    $5,000,000    Total                                           $15,810,000                                                                         Estimated Adjustment                               $8,190,000                                                                         Base Price                                       $405,000,000                                                                         Adjusted Initial Amount                          $413,190,000                                                                                              RBC Adjustment Example                                                                                                                  6/30/2018  Closing Date       Δ Pre-Close  CAL RBC               $14,858,000  $16,100,000          $1,242,000                                                              500%                                     RBC Adjustment       $6,210,000                                                      2 NTD:  Other than Base Price and June 30, 2018 CAL RBC numbers, all values are hypothetical.                                      ANNEX A-1    

 

                                  ANNEX B                            EXCLUDED INVESTMENTS   RCR Taylor Land, LP  InSite Hospitality Fund, LLC                                       ANNEX B-1    

 

                                  ANNEX C                         KEY INDEPENDENT PRODUCERS   Agent Code  Name  24          TOBIAS, STEPHEN  583         ACEY, TERRI  1576        COSTANTINO, CARL  3442        ALLEN, RYAN  4041        RYAN, KRYSTAL  5005        ARAGONA, GILDO  7059        PHILLIPS, MICHAEL  10681       BRANT, WILLIAM  12540       CAMP, BEATRICE  15313       COMPEAU, CHRISTINA  15400       CONVERSE, STANTON  23910       ENGLAND, JOHN  27470       FARMER, JAMES  29150       FRASER, DAVID  31470       GISCLAIR III, NOLAN  31850       GOFF, JARROD  32560       GRAYSON, MENDEL  34120       HAMILTON, DAVID  35771       HENSEL, TIMOTHY  53392       LOWTHER, KEVIN  57010       MICKLE, ANTOINE  57420       MINNICK, MATTHEW  58571       MOSHER, BRET  71661       POWERS, SASHA  71942       PRITCHETT, RACHELL  72231       SCANLAN, RACHAEL  75650       ROSE, FRANCESCA  90721       VOLKERT-VANDERWALL, MARINA  94440       WILSON, DIANE  100235      EASLEY, JASON  100318      WILCOX, GEOFFREY  100410      MAGER, SUE  100445      BIGLEY, ALIZABETH  100524      DILLON, CRAIG  100531      ROTHGANGEL, ANDREA  100546      RODIGHIERO, BRANDON  100613      MOORE, CHARLES  100619      WILKES, GEOFFREY  100724      FOX, LUCAS  100822      SISSON, KIMBERLY                                       ANNEX C-1    

 

                               ANNEX D                    SPECIFIED ACCOUNTING PRINCIPLES    •  RBC calculations will be based on the RBC instructions and factors applicable to an    Insurance Subsidiary as in effect at the time of determination. •  GAAP accrual for employee salary and benefits (including PTO) on the Closing Date    shall be consistent with the methodologies for accrual for such benefits utilized in the    Company’s June 30, 2018, consolidated financial statements.                                   ANNEX D-1                 

 

                                  ANNEX E                         RENEWAL COMMISSION REPORT    Betty Jo Ellard, Brian Mark Ellard, Joe Chadwick Ellard, Raymond J. Martin, Jr., and James T.  Langham, Jr. shall be entitled to receive retirement annuity payments pursuant to the following  agreements:      •  The Employment Agreement by and between EE Holdings, Inc., certain of its controlled       subsidiary corporations, and Bill J. Ellard, dated May 13, 2008, as amended pursuant to       that certain Amendment dated March 2010.     •  The Amended and Restated Employment Agreement by and between EE  Holdings, Inc.,       certain of its controlled subsidiary corporations, and Brian M. Ellard, dated May 13,       2008, as amended pursuant to that certain Amendment dated May 13, 2008, as amended       pursuant to Amendment No.1, dated April 21, 2015.     •  The Employment Agreement by and between EE Holdings, Inc., certain of its controlled       subsidiary corporations, and J. Chadwick Ellard, dated July 1, 2015, as amended pursuant       to that certain Amendment dated May 13, 2008, as amended pursuant to Amendment No.       1, dated November 30, 2018.     •  The Amended and Restated Employment Agreement by and between EE Holdings, Inc ,       certain of its controlled subsidiary corporations, and Raymond J. Martin, Jr., dated May 13,       2008, as amended pursuant to that certain Amendment dated May 13, 2008, as amended       pursuant to that Executive Transition Agreement, dated April 21, 2015.     •  The Amended and Restated Employment Agreement by and between EE Holdings, Inc ,       certain of its controlled subsidiary corporations, and James T. Langham, Jr., dated May 13,       2008, as amended pursuant to that certain Amendment dated May 13, 2008, as amended       pursuant to that Executive Transition Agreement, dated April 21, 2015.   Renewal commissions will be reported using the following form of report:                                       ANNEX E-1                

 

                                 Summary Statement National Teacher Associates, Inc.                        Statement Period:  DATE 1 - DATE 2 Agent/Agency Details Name:                 AGENT NAME SSN/TIN:              XXX-XX-XXXX Writing No:           #####, ##### Account Summary Current Account Balances                             Prior Account Balances                     Commissions Due: $        -                     Commissions Due: $         -               Secure/Unsecure Advance: $       -               Secure/Unsecure Advance: $       -                    Other Indebtedness: $       -                    Other Indebtedness: $       -   Commissions Paid             Current        YTD             Current Period Policy Count                              $$$$$$      $$$$$$                     #######  Commissions Paid - Period Detail                       Method        Payment Date     Amount                       ACH           DATE             $$$$$$                       ACH           DATE             $$$$$$                       ACH           DATE             $$$$$$                                 Total Paid - Current $$$$$$            Total Paid - YTD $$$$$$$  Commissions Payable by Components                                                      Current        YTD                                     First Year        $$$$$       $$$$$                                     Renewal          $$$$$$      $$$$$$                                     Total            $$$$$$      $$$$$$  Commissions Payable by Product Category                                First Year               Renewal                   Total                          Current        YTD       Current       YTD        Current       YTD Accident                      $$$$$       $$$$$       $$$$$       $$$$$       $$$$$        $$$$$ Cancer                        $$$$$       $$$$$       $$$$$       $$$$$       $$$$$        $$$$$ Disability Income             $$$$$       $$$$$       $$$$$       $$$$$       $$$$$        $$$$$ Heart                         $$$$$       $$$$$       $$$$$       $$$$$       $$$$$        $$$$$ Term Life                     $$$$$       $$$$$       $$$$$       $$$$$       $$$$$        $$$$$ Whole Life                    $$$$$       $$$$$       $$$$$       $$$$$       $$$$$        $$$$$  Total                 $          -  $                 - $                 - $                 - $                 - $                    -  Account Activity Account Type          Previous Balance       Current Increases       Current Decreases Closing Balance Commissions Payable   $          -               $$$$$                   $$$$$$      $$$$$$                  Paid                                                    $$$$$  Secure/Unsecure Advance $        -               $                 -     $                 - $$$$$  Other Indebtedness    $          -               $                 -     $                 - $$$$$                                               ANNEX E-2                   

 

                                  ANNEX F                             THIRD-PARTY CONSENTS   Consent for a change of control of the Company or its applicable Subsidiary under the following  contracts:      •  Enterprise Cyber Insurance Policy, dated April 1, 2018, by and between Freedom       Specialty Insurance Company and Ellard Enterprises, Inc.     •  Insurance Company Management Liability Policy, dated April 1, 2018, by and between       Capitol Specialty Insurance Corporation and Ellard Family Holdings, Inc.     •  Executive Plus Directors and Officers Liability Policy, dated April 1, 2018, by and       between RLI Insurance Company and Ellard Family Holdings, Inc.     •  Workers’ Compensation and Employers’ Liability Insurance Policy, dated April 1, 2018,       by and between Federal Insurance Company and Ellard Enterprises, Inc.                                      ANNEX F-1                

 

    BILL J. AND BETTY JO ELLARD SECURE TRUST B GST NON-EXEMPT                                   A TEXAS TRUST                       UNANIMOUS CONSENT OF THE CO-TRUSTEES                                 NOVEMBER 30, 2018          The undersigned being all of the Co-Trustees of the Bill J. and Betty Jo Ellard Secure Trust B GST  Non-Exempt (“Trust B”), a Texas trust, do hereby consent to the adoption of the following resolutions as   of the date hereof with the same force and effect as if such resolutions were approved and adopted at a duly   constituted meeting:          WHEREAS, on October 4, 2018, the Co-Trustees unanimously adopted a resolution approving   NTA Life Enterprises, LLC (“NTA”), Ellard Family Holdings, Inc. (“EFH”), and Betty Jo Ellard (“Ellard”)   entering into that certain Memorandum of Understanding (the “MOU”) for the sale of NTA to Horace Mann   Educators Corporation (“Horace Mann”); and           WHEREAS,  the Co-Trustees have reviewed, with the assistance of counsel, consultants and  advisors, a purchase agreement by and between EFH, Brian M. Ellard, and the JCE Exempt Trust, on the  one hand, and Horace Mann, on the other hand (the “Purchase Agreement”), by which Horace Mann would   acquire NTA and its subsidiaries, including all ownership interests in Ellard Enterprises, Inc. and other   direct and indirect subsidiaries of NTA, and an acknowledgment letter among Horace Mann, EFH, and the   shareholders of EFH (the “Acknowledgment Letter”) (collectively, the “Transaction”); and          WHEREAS, pursuant to the provisions of Article VIII, Section 8.6(B) of the Bill J. and Betty Jo   Ellard Secure Trust Agreement Dated June 5, 2008, as Amended, the sale of any Ellard Business Interest   shall require the unanimous consent of the Co-Trustees which may not be delegated by a Co-Trustee; and          WHEREAS, the undersigned Co-Trustees deem it to be advisable and in the best interests of Trust   B and its beneficiaries, both present and future, to approve and direct EFH (and others as may be necessary   to affect the Transaction) to enter into and execute the Purchase Agreement, effect Horace Mann’s   acquisition of NTA and its subsidiaries (collectively considered Ellard Business Interests), and take such   actions as may be necessary to consummate the Transaction.          NOW, THEREFORE LET IT BE RESOLVED, that the Co-Trustees approve the sale of the   Ellard Business Interests by EFH, as contemplated by the Purchase Agreement and summarized in the   Executive Summary attached hereto as Exhibit A; and          RESOLVED FURTHER, that the form, terms and provisions of the Purchase Agreement and   Acknowledgment Letter be, and hereby are, ratified, confirmed and approved in all respects.           IN WITNESS WHEREOF, the undersigned Co-Trustees have hereunto subscribed their names   as of the date first written above in attestation to the accuracy of the foregoing written consent and of their   approval of all actions taken as recited therein.    ____________________________________      ____________________________________    Betty Jo Ellard, Co-Trustee               James T. Langham, Jr., Co-Trustee    ____________________________________      ____________________________________    Brian M. Ellard, Co-Trustee               Raymond J. Martin, Jr., Co-Trustee                                      ANNEX F-2  

 

       BILL J. AND BETTY JO ELLARD SECURE TRUST B GST EXEMPT                                   A TEXAS TRUST                       UNANIMOUS CONSENT OF THE CO-TRUSTEES                                 NOVEMBER 30, 2018          The undersigned being all of the Co-Trustees of the Bill J. and Betty Jo Ellard Secure Trust B GST  Exempt (“Trust B Exempt”), a Texas trust, do hereby consent to the adoption of the following resolutions   as of the date hereof with the same force and effect as if such resolutions were approved and adopted at a   duly constituted meeting:          WHEREAS, on October 4, 2018, the Co-Trustees unanimously adopted a resolution approving   NTA Life Enterprises, LLC (“NTA”), Ellard Family Holdings, Inc. (“EFH”), and Betty Jo Ellard (“Ellard”)   entering into that certain Memorandum of Understanding (the “MOU”) for the sale of NTA to Horace Mann   Educators Corporation (“Horace Mann”); and           WHEREAS,  the Co-Trustees have reviewed, with the assistance of counsel, consultants and  advisors, a purchase agreement by and between EFH, Brian M. Ellard, and the JCE Exempt Trust, on the  one hand, and Horace Mann, on the other hand (the “Purchase Agreement”), by which Horace Mann would   acquire NTA and its subsidiaries, including all ownership interests in Ellard Enterprises, Inc. and other   direct and indirect subsidiaries of NTA, and an acknowledgment letter among Horace Mann, EFH, and the   shareholders of EFH (the “Acknowledgment Letter”) (collectively, the “Transaction”); and          WHEREAS, pursuant to the provisions of Article VIII, Section 8.6(B) of the Bill J. and Betty Jo   Ellard Secure Trust Agreement Dated June 5, 2008, as Amended, the sale of any Ellard Business Interest   shall require the unanimous consent of the Co-Trustees which may not be delegated by a Co-Trustee; and          WHEREAS, the undersigned Co-Trustees deem it to be advisable and in the best interests of Trust   B Exempt and its beneficiaries, both present and future, to approve and direct EFH (and others as may be   necessary to affect the Transaction) to enter into and execute the Purchase Agreement, effect Horace   Mann’s acquisition of NTA and its subsidiaries (collectively considered Ellard Business Interests), and take   such actions as may be necessary to consummate the Transaction.          NOW, THEREFORE LET IT BE RESOLVED, that the Co-Trustees approve the sale of the   Ellard Business Interests by EFH, as contemplated by the Purchase Agreement and summarized in the   Executive Summary attached hereto as Exhibit A; and          RESOLVED FURTHER, that the form, terms and provisions of the Purchase Agreement and   Acknowledgment Letter be, and hereby are, ratified, confirmed and approved in all respects.           IN WITNESS WHEREOF, the undersigned Co-Trustees have hereunto subscribed their names   as of the date first written above in attestation to the accuracy of the foregoing written consent and of their   approval of all actions taken as recited therein.    ____________________________________      ____________________________________    Betty Jo Ellard, Co-Trustee               James T. Langham, Jr., Co-Trustee    ____________________________________      ____________________________________    Brian M. Ellard, Co-Trustee               Raymond J. Martin, Jr., Co-Trustee                                       ANNEX F-3

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