Document:

exhbit1014

    Execution Version                       STOCK PURCHASE AGREEMENT  BY AND AMONG  INDEPENDENCE CAPITAL CORP.,  INDEPENDENCE HOLDING COMPANY  AND  HORACE MANN EDUCATORS CORPORATION  DATED AS OF JULY 14, 2021       

 

     - i -    TABLE OF CONTENTS  Page  ARTICLE I. DEFINITIONS ......................................................................................................................... 1  1.1 Certain Definitions ..................................................................................................................... 1  1.2 Table of Defined Terms ........................................................................................................... 15  ARTICLE II. PURCHASE AND SALE ..................................................................................................... 17  2.1 Purchase and Sale of the Shares ............................................................................................... 17  2.2 Closing ..................................................................................................................................... 17  2.3 Closing Deliveries .................................................................................................................... 18  2.4 Payment at Closing. ................................................................................................................. 19  2.5 Post-Closing Payment .............................................................................................................. 20  2.6 Earn-Out Payment. ................................................................................................................... 23  ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER ................... 24  3.1 Organization and Qualification ................................................................................................ 24  3.2 Organizational Documents ....................................................................................................... 25  3.3 Capitalization. .......................................................................................................................... 25  3.4 Subsidiaries .............................................................................................................................. 26  3.5 Authority; Enforceability. ........................................................................................................ 27  3.6 No Conflict; Required Filings and Consents. .......................................................................... 27  3.7 Material Contracts. ................................................................................................................... 28  3.8 Compliance with Law; Permits. ............................................................................................... 30  3.9 Financial Statements. ............................................................................................................... 32  3.10 Insurance Business. .................................................................................................................. 34  3.11 Producers; Sale Practices; Third Party Administrators. ........................................................... 35  3.12 Existing Reinsurance Contracts. .............................................................................................. 36  3.13 No Undisclosed Liabilities ....................................................................................................... 37  3.14 Absence of Certain Changes or Events .................................................................................... 38  3.15 Absence of Litigation, Claims and Orders ............................................................................... 38  3.16 Employee Benefit Plans. .......................................................................................................... 38  3.17 Labor Matters. .......................................................................................................................... 40  3.18 Real Property. ........................................................................................................................... 41  3.19 Taxes. ....................................................................................................................................... 41  3.20 Intellectual Property and Technology. ..................................................................................... 44  3.21 Insurance .................................................................................................................................. 46  3.22 Environmental Matters. ............................................................................................................ 46  3.23 Affiliated Transactions ............................................................................................................. 47  3.24 Assets ....................................................................................................................................... 48  3.25 Investment Assets..................................................................................................................... 48  3.26 Actuarial Data .......................................................................................................................... 49  3.27 Bank Accounts; Power of Attorney ......................................................................................... 49  3.28 Privacy and Data Security ........................................................................................................ 49  3.29 Brokers ..................................................................................................................................... 50  3.30 CARES Act .............................................................................................................................. 50  ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER ............................................... 50  4.1 Organization ............................................................................................................................. 50  4.2 Authority; Enforceability ......................................................................................................... 50  

 

  TABLE OF CONTENTS  (continued)  Page   - ii -    4.3 No Conflict; Required Filings and Consents ........................................................................... 51  4.4 Absence of Litigation, Claims and Orders ............................................................................... 51  4.5 Sufficient Funds ....................................................................................................................... 51  4.6 Brokers ..................................................................................................................................... 51  4.7 Investment Purpose .................................................................................................................. 51  4.8 Tax Election ............................................................................................................................. 52  ARTICLE V. COVENANTS ...................................................................................................................... 52  5.1 Conduct of Business Pending the Closing ............................................................................... 52  5.2 Access to Information; Confidentiality. ................................................................................... 55  5.3 Governmental Approvals and Filings; Third Party Consents; Third Party Audit. ................... 56  5.4 Notification of Certain Matters ................................................................................................ 59  5.5 Interim Financial Statements.................................................................................................... 59  5.6 Public Announcements............................................................................................................. 60  5.7 Further Assurances ................................................................................................................... 60  5.8 Delivery of Books and Records ............................................................................................... 60  5.9 Access to Books and Records .................................................................................................. 60  5.10 Non-Competition; Non-Solicitation ......................................................................................... 61  5.11 D&O Liabilities ........................................................................................................................ 62  5.12 Employee Matters .................................................................................................................... 62  5.13 Release ..................................................................................................................................... 64  5.14 No Shop .................................................................................................................................... 64  5.15 Intercompany Agreements ....................................................................................................... 65  5.16 Bank Accounts ......................................................................................................................... 66  5.17 Investment Assets..................................................................................................................... 66  5.18 Transaction Expenses. .............................................................................................................. 66  5.19 PolicyPro Software................................................................................................................... 66  5.20 Reinsurance Agreements. ......................................................................................................... 66  5.21 Voting Agreement. ................................................................................................................... 67  5.22 Escrow Agreement. .................................................................................................................. 67  5.23 Transition Services Agreement. ............................................................................................... 67  ARTICLE VI. CONDITIONS PRECEDENT ............................................................................................. 68  6.1 Conditions to Each Party’s Obligations ................................................................................... 68  6.2 Conditions to Obligations of Buyer ......................................................................................... 68  6.3 Conditions to Obligations of Parent and Seller ........................................................................ 69  ARTICLE VII. TERMINATION PRIOR TO CLOSING ........................................................................... 70  7.1 Termination .............................................................................................................................. 70  7.2 Effect of Termination ............................................................................................................... 71  ARTICLE VIII. TAX MATTERS ............................................................................................................... 71  8.1 Responsibility for Filing Tax Returns. ..................................................................................... 71  8.2 Straddle Periods ....................................................................................................................... 72  8.3 Tax Covenants. ......................................................................................................................... 72  8.4 Contests Related to Taxes ........................................................................................................ 73  8.5 Cooperation on Tax Matters..................................................................................................... 73  8.6 Transfer Taxes .......................................................................................................................... 74  

 

  TABLE OF CONTENTS  (continued)  Page   - iii -    8.7 Section 338(h)(10) Election ..................................................................................................... 74  ARTICLE IX. SURVIVAL AND INDEMNIFICATION .......................................................................... 75  9.1 Survival of Representations and Warranties ............................................................................ 75  9.2 Indemnification. ....................................................................................................................... 75  9.3 Certain Limitations................................................................................................................... 76  9.4 Definitions.  As used in this Agreement: ................................................................................. 77  9.5 Procedures for Third Party Claims ........................................................................................... 77  9.6 Direct Claims ........................................................................................................................... 79  9.7 Adjustment to Purchase Price .................................................................................................. 79  9.8 Exclusive Remedy .................................................................................................................... 79  ARTICLE X. MISCELLANEOUS ............................................................................................................. 79  10.1 Amendment .............................................................................................................................. 79  10.2 Waiver ...................................................................................................................................... 79  10.3 Expenses ................................................................................................................................... 79  10.4 Notices...................................................................................................................................... 80  10.5 Specific Performance ............................................................................................................... 81  10.6 Interpretation ............................................................................................................................ 81  10.7 Severability .............................................................................................................................. 82  10.8 Entire Agreement; Third Party Beneficiaries ........................................................................... 82  10.9 Assignment ............................................................................................................................... 82  10.10 Failure or Indulgence Not Waiver; Remedies Cumulative ...................................................... 82  10.11 Governing Law......................................................................................................................... 82  10.12 Jurisdiction; Enforcement. ....................................................................................................... 83  10.13 Certain Limitations................................................................................................................... 83  10.14 Counterparts ............................................................................................................................. 84    

 

       - iv -    Error! Unknown document property name.    EXHIBITS    Exhibit A — Voting Agreement      ANNEXES    Annex A — Key Employees  Annex B — LA County Policies  Annex C — Specified Accounting Principles  Annex D — Pro Forma Closing Statement  Annex E — Third Party Consents  Annex F — Reinsured Business Statutory Earnings  Annex G — Company Statutory Earnings    Parent Disclosure Schedule  Buyer Disclosure Schedule    

 

      Error! Unknown document property name.  STOCK PURCHASE AGREEMENT  This STOCK PURCHASE AGREEMENT, dated as of July 14, 2021 (this  “Agreement”), is by and among HORACE MANN EDUCATORS CORPORATION, a Delaware  corporation (“Buyer”), INDEPENDENCE HOLDING COMPANY, a Delaware corporation  (“Parent”) and INDEPENDENCE CAPITAL CORP., a Delaware corporation (“Seller”).   RECITALS  WHEREAS, Parent directly owns one hundred percent (100%) of the issued and  outstanding capital stock of Seller, which directly owns one hundred percent (100%) of the issued  and outstanding shares of common stock, par value $60,000 per share (the “Shares”) of Madison  National Life Insurance Company, Inc., an insurance company organized under the laws of the  State of Wisconsin (the “Company”);   WHEREAS, the Company owns one hundred percent (100%) of the outstanding equity  interests of The Abacus Group, LLC, a Georgia limited liability company (“Abacus” and such  equity interests, the “Abacus Membership Interests”);  WHEREAS, each of (a) the board of directors of Buyer, (b) the board of directors of Seller,  (c) the board of directors of Parent, and (d) the board of directors of the Company has approved  this Agreement and the transactions contemplated hereby, upon the terms and subject to the  conditions set forth in this Agreement;  WHEREAS, upon the terms and subject to the conditions set forth in this Agreement,  Buyer desires to purchase from Seller, and Seller desires to, and Parent desires to cause Seller to,  sell to Buyer, all of the Shares;   WHEREAS, as a material inducement to the willingness of Buyer to enter into this  Agreement, each of the employees set forth on Annex A (the “Key Employees”) has entered into  an employment arrangement with the Company, which employment arrangements are conditional  upon and effective upon the Closing (the “New Employment Arrangements”); and (ii) the Seller  has delivered to Purchaser a voting and support agreement, executed by certain beneficial owners  and/or holders of record of shares of common stock of Parent (the “Stockholders”), in the form  attached hereto as Exhibit A (the “Voting Agreement”), pursuant to which each such Stockholder  has agreed to vote in favor of the Parent Voting Matters;   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:  

 

     - 2 -    “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 Statutory Book Value” means, as of any date of determination, an amount equal  to the sum of (a) the capital and surplus of the Company as of such date, as would be required to  be reflected in line 38, column 1, plus (b) the asset valuation reserve of the Company as of such  date as would be required to be reflected in line 24.01, column 1 (in each case of (a) and (b), in the  “Liabilities, Surplus and Other Funds” section of the National Association of Insurance  Commissioners statement blank used to prepare the Company’s balance sheet in the most recent  statutory financial statement filed by the Company with the Wisconsin Office of the Commissioner  of Insurance) minus (c) the Deferred Tax Asset as of such date (which, for the avoidance doubt,  shall not be offset by the Deferred Tax Loss as of such date), in each case, to the extent applicable,  as adjusted to give effect to (i) the transactions contemplated by the SSL Reinsurance Agreement  and the IAIC Reinsurance Agreement, and (ii) the transactions contemplated herein to occur on or  prior to the Closing.  “Adjusted Statutory Book Value Deficit” means the amount, if any, by which (i) for  purposes of the Closing Payment, the Adjusted Statutory Book Value Target for purposes of the  Closing Payment exceeds the Adjusted Statutory Book Value estimated as of the Effective Time  pursuant to Section 2.4, and (ii) for purposes of the Final Closing Payment, the Adjusted Statutory  Book Value Target exceeds the Adjusted Statutory Book Value, each determined as of the  Effective Time pursuant to Section 2.5.  “Adjusted Statutory Book Value Surplus” means the amount, if any, by which (i) for  purposes of the Closing Payment, the Adjusted Statutory Book Value estimated as of the Effective  Time pursuant to Section 2.4 exceeds the Adjusted Statutory Book Value Target for purposes of  the Closing Payment, and (ii) for purposes of the Final Closing Payment, the Adjusted Statutory  Book Value exceeds the Adjusted Statutory Book Value Target, each determined as of the  Effective Time pursuant to Section 2.5.  “Adjusted Statutory Book Value Target” means, $88,000,000 for purposes of determining  the Closing Payment as of the Closing Date, provided that for purposes of determining the Final  Closing Payment, the Adjusted Statutory Book Value Target shall be calculated using an amount  that is the greater of $88,000,000 and the amount of surplus that would at least result in the  Company having an RBC Ratio of 807% after taking into account the transactions contemplated  to occur on or prior to the Closing.      “Affiliate” means, with respect to a specified Person at the time of determination, 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.  For purposes of this definition, the  term “control” (including its correlative meanings “controlled by” and “under common control  with”) means possession, directly or indirectly, of power to direct or cause the direction of  management or policies (whether through ownership of voting securities, by contract or  

 

     - 3 -    otherwise). For the avoidance of doubt, unless otherwise specified herein, the Company and  Abacus shall each be deemed an “Affiliate” of Parent and Seller (and not Buyer) prior to the  Closing, and shall each be deemed an “Affiliate” of Buyer (and not Parent or Seller) from and after  the Closing.  “Applicable Rate” means an interest rate equal to 1.5% per annum.  “Authorized Control Level RBC” means with respect to the Company as of any date of  determination, its authorized control level risk based capital, as defined in Wis. Admin. Code §  Ins 51.01(3) as in effect on the date of determination and calculated in accordance with the  Specified Accounting Principles.    “Base Price” means $172,500,000.   “Book Value” means, as of any date, (i) with respect to any Investment Asset held by the  Company, 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 Company (assuming such date was the  end of an annual period) determined in accordance with SAP applicable to the Company,  consistently applied and (ii) with respect to any Investment Asset held by Abacus, the carrying  value thereof as would be set forth, as of such date, in the balance sheet of Abacus, 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 Abacus, or  (ii) Parent or any of Parent’s Affiliates to the extent relating to the Company or Abacus, in each  case, whether or not in the custody of the Company, Abacus, Parent or any of Parent’s Affiliates,  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 Abacus (including agreements with Independent  Producers), Tax records (including Tax Returns of the Company and Abacus), disclosure and other  documents and filings required under applicable Law, financial records, and compliance records  relating to the Company and Abacus, 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 Abacus.    “Burdensome Condition” means any arrangement, condition or restriction imposed by any  Governmental Authority on Buyer, the Company or Abacus as a condition of such Governmental  Authority’s approval of the transactions contemplated by this Agreement (i) to offer, sell or hold  separate or agree to offer, sell, divest or discontinue, before or after the Closing Date, any  properties, assets, business or licenses of Buyer, its Affiliates or the Company or Abacus, (ii) to  fund or commit to fund any capital contribution to or for the benefit of the Company, (iii) to limit  the declaration and payment of ordinary dividends,  (iv) that requires Buyer or any of its Affiliates  to commence, threaten or otherwise seek to commence any Proceeding against a Governmental  Authority, (v) that, individually or in the aggregate, are materially adverse to the combined  businesses of Buyer, the Company and their respective Subsidiaries, taken as a whole, following  

 

     - 4 -    the Closing, or (vi) that is reasonably likely to have a material negative effect on or impairment of  the economic benefits that, as of the date hereof, Buyer reasonably expects 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” means the business conducted by the Company and Abacus prior to the  Closing, including the underwriting, issuance, sale, renewal, administration and servicing of the  insurance policies of the Company and its related business.       “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 Stamford, Connecticut.  “Buyer Disclosure Schedule” means the Buyer Disclosure Schedule delivered by Buyer to  Seller concurrently with the execution of this Agreement.  “Buyer Expenses” means all fees and expenses incurred or payable by or on behalf of  Buyer or its Affiliates in connection with this Agreement and the transactions contemplated  hereby, including all legal, accounting, financial advisory, consulting, finders and all other fees  and expenses.  “Buyer Material Adverse Effect” means any fact, circumstance, condition, event,  development, occurrence, change or effect that has had, or would reasonably be expected to 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.  “CARES Act” means the Coronavirus Aid, Relief and Economic Security Act, as signed  into law by the President of the United States on March 27, 2020, and the Continuing  Appropriations Act, 2021 and Other Extensions Act, as signed into law by the President of the  United States on December 27, 2020.  “Closing Indebtedness” means the Indebtedness of the Company and Abacus as of the  Closing, which amount, for the avoidance of doubt, is to be expressed as a positive number.  “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.  “Company Material Adverse Effect” means any fact, circumstance, condition, event,  development, occurrence, change or effect that has had, or would reasonably be expected to have,  individually or in the aggregate, (a) a material adverse effect on the business, capitalization,  operations, results of operations, properties, assets, liabilities or condition (financial or other) of  the Company or Abacus, 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 general changes in interest rates or equity prices); (ii) any matter affecting  the life and health insurance industries in which the Company or Abacus 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  

 

     - 5 -    announcement of the transactions contemplated hereby; except in the case of clauses (i) through  (iv), to the extent such changes or effects affect 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 Parent or Seller  to perform its obligations  under this Agreement or to consummate the transactions contemplated by this Agreement.    “Company Statutory Earnings” means an amount equal to the net income of the Company  as set forth on Line 35, Column 1, Page 4 (“Summary of Operations”) of the audited annual  statutory financial statement of the Company for the calendar year ended on December 31, 2023  as filed with the Insurance Regulator in the Company’s domiciliary jurisdiction, minus the Net  Investment Income Adjustment. The line, column, and page references are based on the  Company’s 2020 annual statement and shall be such corresponding line, column, and page number  of the Company’s 2023 annual statement.  An example calculation of Company Statutory Earnings  using 2020 data is included on Annex G.  “Computer Programs” means currently existing and available prior versions retired since  January 1, 2018 of (i) computer programs or other Software owned or used by or licensed to the  Company or Abacus, 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 Abacus, (iii) parameter settings and configuration settings with respect to the items  described in each of (i)-(ii), (iv) 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 Abacus, and (v) 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)–(iv).  “Confidentiality Agreement” means the Mutual Non-Disclosure Agreement among Buyer,  the Company and SSL, dated August 13, 2020, as amended on March 23, 2021.   “Court” means any court or arbitration tribunal of the United States, any domestic state,  any foreign country and any political subdivision or agency thereof.  “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 Abacus  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).  “Deferred Tax Asset” means, as of any date of determination, the gross deferred tax assets,  reduced by any statutory valuation allowances and any nonadmitted deferred tax assets, of the  Company as of such date as would be reported in footnote 9.A.1. in the Notes to Financial  Statements in the National Association of Insurance Commissioners statement blank used to  

 

     - 6 -    prepare the Company’s balance sheet in the most recent statutory financial statement filed by the  Company with the Wisconsin Office of the Commissioner of Insurance.  “Deferred Tax Loss” means, as of any date of determination, the deferred tax liabilities of  the Company as of such date as would be reported in footnote 9.A.1. in the Notes to Financial  Statements in the National Association of Insurance Commissioners statement blank used to  prepare the Company’s balance sheet in the most recent statutory financial statement filed by the  Company with the Wisconsin Office of the Commissioner of Insurance.  “Developer” means Realized Solutions Inc., a Connecticut corporation.    “Earn-Out End Date” means December 31, 2023.  “Employee” means any employee of the Company or Abacus.  “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 the Company 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 Abacus under Section 414 of the Code.  “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.  “Excluded Employees” means .  “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 Parent 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.  

 

     - 7 -    “Excluded Liabilities” means all Liabilities in respect of (i) Indemnified Taxes, (ii)  Excluded Employee Liabilities, (iii) any Reorganization and any ownership or operation of any  Person that was a Subsidiary of the Company prior to the date hereof, (iv) any Security Breach at  the Company or Abacus or at a third party service provider (including any third-party  administrators) to which the Company or Abacus provides or has ever provided Personal  Information or other confidential information that is known to have occurred on or prior to the  Closing Date, whenever or however arising, including any Security Breach identified in the Parent  Disclosure Schedule, (v) the FCE and RSA Liabilities or any Proceedings or Orders set forth or  required to be set forth on Section 3.15 of the Parent Disclosure Schedule, or any other Action,  fine or penalties by or imposed by any Governmental Authority against Buyer or its Affiliates  (including the Company and Abacus following Closing) relating to acts, omissions, or occurrences  by the Company or Abacus or their representatives occurring prior to Closing, (vi) the Reinsurance  Transactions Excluded Liabilities and (vii) any claim that the PolicyPro Software or its intended  use infringes or misappropriates the intellectual property or other proprietary rights of any other  Person or any other claim or dispute against the Company or Abacus (or, following the Closing,  Buyer or its Affiliates) in connection with or challenging the ownership of or right to use the  PolicyPro Software and all related pre-existing works therein and other deliverables under the  Software Agreements.  “FCE and RSA Liabilities” means any and all awards, judgments, fines, penalties,  expenses, interest and other costs imposed, relating to (i) the litigation between the Company and  its Affiliates and FCE Benefits Administrators, Inc. pending in the United States District Court,  Northern District of Texas, Dallas Division and disclosed on Section 3.15 of the Parent Disclosure  Schedule, or (ii) the Regulatory Settlement Agreement, including any failure to materially comply  with the terms thereof.   “Filing” means any registration, petition, statement, application, schedule, form,  declaration, notice, notification, report, submission or other filing.  “Financial Statements” means, collectively, the Statutory Statements and the Consolidated  Statements.  “GAAP” means generally accepted accounting principles consistently applied.  “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.   “IAIC” means Independence American Insurance Company, a Delaware corporation.   “Indebtedness” means, without duplication, the Company’s and Abacus’ (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  

 

     - 8 -    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, (iv) all indebtedness secured by a Lien to  secure all or part of the purchase price of the property subject to such Lien, (v) deferred revenue,  (vi) self-insurance accruals, (vii) all Liabilities with respect to accrued but unpaid bonus payments,  accrued or owed by the Company as of the Closing in respect of any performance period (or portion  thereof) prior to and up to the Closing, together with the employer portion of any Taxes arising  therefrom, to the extent not included in the Transaction Expenses, (viii) all Liabilities with respect  to accrued but unused vacation time, flexible time-off and sick pay to which any Employee is  entitled pursuant to the policies applicable to such Employee immediately prior to the Closing,   (ix) all obligations with respect to the net current Tax liabilities of the Company that are allocable  to any taxable year (or portion thereof) ending on (and including), or prior to, the Closing Date  (treating for purposes of this Agreement the taxable year of the Company that includes the Closing  Date as closing on (and including) the Closing Date), and (x) guarantees of any of the foregoing.    “Indemnified Taxes” means, except to the extent taken into account in determining the  Purchase Price as finally determined pursuant to Section 2.5, (a) any and all Taxes imposed on or  with respect to the Company or Abacus for any Pre-Closing Tax Period, (b) Taxes of any other  Person for which the Company or Abacus becomes liable (i) as the result of being a member of an  affiliated, combined, unitary, consolidated or similar group, (ii) as a transferee or successor, by  contract or otherwise or (iii) under any Tax allocation, Tax sharing, Tax indemnity or similar  agreement (excluding any commercial agreement entered into in the ordinary course of business  and not primarily relating to Taxes), in each case of clauses (i)-(iii), as a result of a relationship or  arrangement in existence prior to the Closing Date, (c) Taxes attributable to any increase in the  transition amount under section 13517(c)(3) of the Tax Cuts and Jobs Act, P.L. No. 115-97 as a  result of any Tax adjustment to such amount after the date hereof, and (d) Transfer Taxes. For  purposes of this Agreement, whenever it is necessary to determine the portion of any Taxes  imposed on or with respect to the Company or Abacus for the Straddle Period, the amount of any  real property, personal property or similar ad valorem Taxes which are imposed on a periodic basis  shall be determined ratably on a per diem basis, and the amount of any other Taxes that are  allocable to the Pre-Closing Tax Period shall be determined based on an interim closing of the  books of the Company or Abacus as of the Closing Date and, to the extent relevant, in accordance  with the provisions of Treasury Regulations Section 1.1502-76(b)(1)(ii)(A) and (B) (and similar  provisions of state, local or non-U.S. Law).  “Independent Producer” means any Person, other than the Company, Abacus or any  Employee, engaged in the solicitation, negotiation, effectuation, marketing, sale or placement of  any insurance policy underwritten by the Company or of any other products or services marketed,  sold or provided by the Company or Abacus.  “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.  

 

     - 9 -    “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 or Abacus.  “Knowledge” means, with respect to Parent or Seller, the actual knowledge, after  reasonable inquiry, of those Persons listed in Section 1.1(a) of the Parent Disclosure Schedule,  and, with respect to Buyer, the actual knowledge, after reasonable inquiry, of those Persons listed  in Section 1.1(a) of the Buyer Disclosure Schedule.    “LA County Policies” means all insurance policies or related business issued by the  Company that are described on Annex B.  “LA County Policies Excess Loss” means any excess loss in respect of the LA County  Policies, determined and calculated in accordance with Annex B.   “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.  

 

     - 10 -    “Lien” means any mortgage, deed of trust, pledge, hypothecation, security interest,  encumbrance, claim, lien or charge of any kind.   “Material Independent Producers” means the ten (10) largest Independent Producers  (determined by reference to gross premium volume on Insurance Contracts placed by such  Independent Producers in aggregate for the (i) six (6) months ended June 30, 2021, and (ii) the  twelve (12) months ended December 31, 2020 and December 31, 2019) that have produced at least  80% of the Company’s business in each of such period.    “NAIC” means the National Association of Insurance Commissioners.   “Net Investment Income Adjustment” has the meaning set forth in Annex G.    “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 the Company can unilaterally change,  each as applicable under the Insurance Contracts.  “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.  “Parent Disclosure Schedule” means the Parent Disclosure Schedule delivered by Parent  to Buyer concurrently with the execution of this Agreement.  “Parent Voting Matters” means, collectively, the approval of (i) the transactions  contemplated hereby, and (ii) any other matters required by applicable Law to be approved or  adopted by the Stockholders to effect the transactions contemplated hereby.  “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 Abacus 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 Abacus.  “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).  

 

     - 11 -    “Personal Information” means any of the following categories of information, in any  format whether written, electronic, or otherwise: (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 personally identifiable information in the  possession of or applicable to the Company that is protected by applicable Law related to data  security and privacy, such as the following identifiers to the extent protected by applicable Law:  name, signature, address, social security number, telephone number or other unique identifier, (iii)  information in the possession of or applicable to the Company that can be used to authenticate an  individual that is protected by applicable Law related to data security and privacy, such as the  following identifiers to the extent protected by applicable Law: including passwords or PINs,  biometric data, unique identification numbers, answer to security questions, or other personal  identifiers, or (iv) any “protected health information” in the possession of or applicable to the  Company as such term is defined under the Health Insurance Portability and Accountability Act  of 1996, as amended and the rules and regulations issued thereunder.  “PolicyPro Software” means all Software Programs, Covered Software and Deliverables  (each as defined in the Software Agreements), including for the platform referred to as “PolicyPro”  and “MNL Customer Portal” and other commonly used names to describe the same, under the  Software Agreements.     “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.  “Proceeding” means any legal, administrative, arbitral or other proceeding, suit, claim,  investigation, demand, complaint, hearing, dispute or other action by or before any Governmental  Authority, mediator or arbitrator.  “Prorated Portion” means the percentage derived by dividing (a) the amount by which  Company Statutory Earnings exceed $15,250,000 by (b) $1,250,000.  “RBC Ratio” means with respect to the Company as of any date of determination the ratio  of its “total adjusted capital” as defined in Wis. Admin. Code § Ins 51.01(23) as in effect on the  date of determination and calculated in accordance with the Specified Accounting Principles over  its Authorized Control Level RBC.  “Regulation” means any rule, regulation, policy or interpretation (regarding such rule,  regulation or policy) of any Governmental Authority.  “Regulatory Settlement Agreement” means that certain Regulatory Settlement Agreement  by and among the Company and the states and other jurisdictions party thereto, executed by the  Company on June 25, 2020.   

 

     - 12 -    “Reinsured Business Statutory Earnings” means, for any calendar year, the amount  calculated pursuant to Annex F.  “Reinsurance Transactions Excluded Liabilities” means (i) all extra-contractual Liabilities  relating to the business covered under the SSL Reinsurance Agreement or the IAIC Reinsurance  Agreement, including for consequential, exemplary, punitive, compensatory, special, statutory or  regulatory damages (or fines, penalties, forfeitures or similar charges of a penal or disciplinary  nature) or any other form of extra-contractual damages or liability arising from any alleged or  actual act, error or omission (whether or not intentional, in bad faith or otherwise) of either ceding  company thereunder, their respective Affiliates, or Parent and any of its Affiliates (including the  Company and Abacus before Closing) including relating to (a) the marketing, underwriting,  production, sale, issuance, cancellation or administration (through any third party administrator or  otherwise) of such reinsured business, (b) the investigation, defense, trial, settlement or handling  of claims, benefits or payments arising out of, under or with respect to such reinsured business, (c)  the failure to pay, or the delay in payment, of benefits, claims or any other amounts due or alleged  to be due under or in connection with such reinsured business or errors in calculating or  administering the payment of, benefits, claims or any other amounts due or alleged to be due under  or in connection with such reinsured business, (d) any ex-gratia payment made with respect to such  reinsured business, (e) the failure of any such reinsured business to comply with the requirements  of applicable Law or to provide the purchaser, policyholder, account holder or other holder or  intended beneficiaries thereof with Tax treatment under the Code that is the same as or more  favorable than the Tax treatment under the Code, (ii) any costs of the Company to establish and  maintain one or more trust accounts pursuant to SSL Reinsurance Agreement or the IAIC  Reinsurance Agreement, or in respect of any security account, control account or similar accounts  relating to the business reinsured under the SSL Reinsurance Agreement or the IAIC Reinsurance  Agreement, (iii) any costs or expenses in incurred by the Company in any enforcing any of its  rights or any obligations of the applicable counterparty under the SSL Reinsurance Agreement or  the IAIC Reinsurance Agreement, (iv) any Liability or losses other than arising from the reinsured  business that are assumed, suffered or incurred by the Company under the SSL Reinsurance  Agreement or the IAIC Reinsurance Agreement, and (v) any negative Reinsured Business  Statutory Earnings; provided however, that the Reinsurance Transaction Excluded Liabilities will  not include any Liabilities which directly arise from and after the Closing Date out of the failure  of the Company or Buyer to comply with (1) the applicable reinsurance treaties relating to the  foregoing (unless such failure is due to any breach of obligation by Parent or its Affiliates) or (2)  applicable Law.    “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.  “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.  

 

     - 13 -    “SEC” means the Securities and Exchange Commission.  “Schedules” means collectively the Parent Disclosure Schedules and the Buyer Disclosure  Schedules.   “Security Breach” means any actual or reported (i) loss or misuse (by any means) of  Personal Information, (ii) unauthorized access to any IT System that compromises the privacy or  security of Personal Information, (iii) inadvertent, unauthorized and/or unlawful processing of  Personal Information, or (iv) other act or omission that compromises or may compromise the  security, confidentiality or integrity of Personal Information or the security or operation of any IT  System.  “Seller Party” means Parent, Seller and any of their Affiliates that is or will be a party to a  Transaction Document; provided, however, that none of the Stockholders will be a Seller Party  hereunder.  “Software” means all computer software, including but not limited to application software,  system software, firmware, middleware, mobile digital applications, application programing  interfaces (APIs) and other software interfaces, software development kits (SDKs), assemblers,  applets, compilers and binary libraries including all source code and object code versions and  materials pertaining thereto of any and all of the foregoing, in any and all forms and media, and  all related documentation.  “Software Agreements” means collectively, (i) that certain Master Services Agreement,  dated August 15, 2016, by and between the Company and the Developer, (ii) that certain Software  Development Agreement, dated June 27, 2018, by and between the Company and the Developer,  (iii) that certain Software Maintenance Agreement effective July 1, 2021 by and between the  Company and the Developer, and (iv) any other agreements between the Company and the  Developer in respect of Software, corrections, improvements, updates and releases thereof.  “Specified Accounting Principles” means the principles, practices and methodologies set  forth on Annex C.  “SSL” means Standard Security Life Insurance Company of New York, a New York  domiciled insurance company.   “SSL Stock Purchase Agreement” means that certain Stock Purchase Agreement, dated as  of April 14, 2021, by and among Parent, Seller and Reliance Standard Life Insurance Company.  “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.  

 

     - 14 -    “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.   “TPA Audit” means one or more audits performed by one or more third parties engaged  by Buyer following Closing with respect to any of the third party administrators of the Company  that were acting as third party administrators of the Company on or prior to the Closing Date.     “Transaction Documents” means this Agreement, the Transition Services Agreement and  such other instruments and agreements required by this Agreement to be executed and delivered  hereunder.  For the avoidance of doubt, the SSL Stock Purchase Agreement, the SSL Reinsurance  Agreement and the IAIC Reinsurance Agreements will not be deemed Transaction Documents  hereunder.  “Transaction Expenses” means the sum, without duplication, of the following and to the  extent not included in Indebtedness: (i) all fees and expenses incurred or payable by or on behalf  of the Company or Abacus which are incurred by or on behalf of the Company or Abacus prior to,  and remain unpaid at, the Closing in connection with this Agreement and the transactions  contemplated hereby, including all legal, accounting, financial advisory, regulatory or consent  fees, consulting, finders and all other fees and expenses (in each case whether or not billed or  invoiced prior to the Closing); (ii) any unpaid bonus, retention, change-in-control, transaction or  similar payment obligations, or any severance payments, of the Company or Abacus to any Person  resulting from, or in connection with, the transactions contemplated hereby or any commitment  made prior to the Closing by the Company or Abacus to make any bonus, retention, change-in- control, transaction or similar payments to any Person (regardless of when payment is due); (iii)  all unpaid Transaction Payroll Taxes related to the payment Transaction Expenses described in  clause (ii) above; (iv) all unpaid Transfer Taxes, and (v) the cost of purchasing the tail policy  referred to in Section 5.11, all to the extent not otherwise unaccrued. For purposes of clarity,  “Transaction Expenses” shall be calculated prior to giving effect to any payment of such amounts  by or on behalf of Parent, Seller, the Company, Abacus or Buyer in connection with or following  the Closing.  “Transaction Payroll Taxes” means the employer portion of any payroll or similar Taxes,  including employment insurance contributions and premiums incurred by the Company prior to  the Closing in connection with any bonuses, retention, change-in-control or similar payments in  connection with the transactions contemplated hereby, and any employment taxes due from the  

 

     - 15 -    Company on or after the Closing Date resulting from exercise of options or stock appreciation rights that  the Employees have as of the Closing Date.  “Transfer Taxes” means all sales, use, transfer, valued added, goods and services, gross  receipts, excise, conveyance, documentary, stamp duty, recording, registration and other similar  Taxes, charges and fees (including any penalties, interest and additions to Tax) incurred in  connection with the Transactions, whether payable by Parent, Seller, the Company, Abacus or  Buyer.   “Transition Services Agreement” means the Transition Services Agreement by and  between Buyer and Parent to be entered into at Closing pursuant to Section 5.23.  “Treasury Regulations” means all proposed, temporary and final regulations promulgated  under the Code, as such regulations may be amended from time to time.  “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 Abacus, 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.  1.2 Table of Defined Terms. Terms that are not defined in Section 1.1 have the meanings  set forth in the following Sections:  Abacus ...........................................................................................................  Recitals   Abacus Membership Interests .......................................................................  Recitals   Abacus Purchase Date ...................................................................................  3.3(d)  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 .................................................................................  5.14(b)  Assumed Reinsurance Contracts ...................................................................  3.12(b)  Audited Financials Delivery Date .................................................................  5.22  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  Closing Payment ...........................................................................................  2.4(b)(i)  Closing Statement .........................................................................................  2.5(b)  COBRA .........................................................................................................  5.12(f)  

 

     - 16 -    Company .......................................................................................................  Recitals  Company 401(k) Plan ...................................................................................  5.12(b)  Company Actuarial Analyses ........................................................................  3.26  Company Employee Plan ..............................................................................   Company Intellectual Property Rights ..........................................................   3.16(a)  3.20(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)(i)  Deductible .....................................................................................................  9.3(a)  Definitive Consent Statement .......................................................................  5.3(e)  Delaware Court .............................................................................................  10.12(a)  Dispositions ...................................................................................................  Recitals  Dispute Notice ...............................................................................................  2.5(c)(ii)  Distribution Recovery Right .........................................................................  5.18(b)  Earn-Out Payment .........................................................................................  2.6(b)  Effective Time ...............................................................................................  2.2  Effective Time ...............................................................................................  3.17(a)  Enforceability Exceptions .............................................................................  3.5  Environmental Laws .....................................................................................  3.22(c)(i)  Environmental Permits ..................................................................................  3.22(c)(ii)  Estimated Closing Statement ........................................................................  2.4(a)  Final Closing Payment ..................................................................................  2.5(b)  Fundamental Representations .......................................................................  9.1  Hazardous Substances ...................................................................................  3.22(c)(iii)  HSR Act ........................................................................................................  3.6(b)  IAIC Reinsurance Agreement .......................................................................  5.20  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)  Interested Party .............................................................................................  3.23(c)  Investment Asset Report ...............................................................................  5.17  Investment Guidelines ...................................................................................  3.25(b)  Key Employees .............................................................................................  Recitals  Leased Real Property ....................................................................................  3.18(a)  Material Contracts .........................................................................................  3.7(a)  Most Recent Statutory Statement ..................................................................  3.9(a)  New Employment Arrangements ..................................................................  Recitals  Outside Date ..................................................................................................  7.1(b)  Parent ............................................................................................................  Preamble  Parent Board ..................................................................................................  Recitals  

 

     - 17 -    Parent Common Stock ..................................................................................  3.3(e)  Parent Indemnified Persons ..........................................................................  9.2(c)  Preliminary Consent Statement .....................................................................  5.3(e)  Pro Forma Closing Statement .......................................................................  2.4(a)  Purchase Price ...............................................................................................  2.1  RBC Reports .................................................................................................  3.9(d)  Recourse Distribution ...................................................................................  5.18(b)  Reinsurance Contracts ...................................................................................  3.12(b)  Release ..........................................................................................................  3.22(c)(iv)  Reorganizations .............................................................................................  3.4(a)  Required Governmental Authorizations .......................................................  3.6(b)  Review Period ...............................................................................................  2.5(c)(i)  Scheduled Company Intellectual Property ....................................................  3.20(a)  Section 338(h)(10) Election ..........................................................................  8.7(a)  Seller .............................................................................................................  Preamble  Shareholder Approval ...................................................................................  5.3(e)  Shares ............................................................................................................  Recitals  SSL Reinsurance Agreement ........................................................................  5.20  Statutory Statements .....................................................................................  3.9(a)  Stockholder ...................................................................................................  Recitals  Survival Period ..............................................................................................  9.1  Tax Agreement ..............................................................................................  3.19(f)  Tax Claim ......................................................................................................  8.4  Third-Party Claim .........................................................................................  9.4(e)  Voting Agreement .........................................................................................  Recitals  WARN ..........................................................................................................  3.17(d)  WARN Acts ..................................................................................................  3.17(d)    ARTICLE II.  PURCHASE AND SALE  2.1 Purchase and Sale of the Shares. Upon the terms and subject to the conditions of this  Agreement, Parent agrees to cause Seller to sell to Buyer, and Buyer agrees to purchase from  Seller, all of the Shares, free and clear of any Liens, for an aggregate purchase price (the “Purchase  Price”) in cash equal to (i) the Base Price, as adjusted pursuant to Section 2.4 and Section 2.5, and  (ii) the contingent right to receive the Earn-Out Payment that may become payable as provided in  Section 2.6; provided that, upon written notice to Parent prior to the Closing Date, Buyer may  assign its right to receive the Shares to any Affiliate of Buyer by designating such Affiliate in such  notice.  2.2 Closing.  The closing of the purchase and sale of the 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 the later of (i) the first  Business Day of the calendar quarter immediately following the calendar quarter 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  

 

     - 18 -    conditions at the Closing) in accordance with this Agreement (the “Condition Satisfaction”), and  (ii) the first Business Day following the twentieth (20th) calendar day following the date on which  the Definitive Schedule 14C was mailed to the Parent stockholders; provided, however, that if the  Closing would otherwise occur on the date specified in the foregoing (i), if the Condition  Satisfaction occurs less than thirty (30) days prior to the end of a calendar quarter, then, at Buyer’s  sole option, the Closing shall take place on the first Business Day of the second calendar quarter  immediately following the calendar quarter 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,  provided; further, that in each case the Closing shall not occur before January 1, 2022, 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 12:00:01 a.m.,  Eastern Time, on the date on which the Closing occurs (such date and time are herein referred to  as the “Closing Date”).  The Closing shall, for purposes of preparing the Estimated Closing  Statement and Closing Statement, and calculating all amounts required to be calculated therein, be  deemed effective as of 12:00:01 a.m., Eastern Time, on the first calendar day of the month in which  the Closing occurs, and such date and time are herein referred to as the “Effective Time”.  2.3 Closing Deliveries.    (a) At the Closing, Parent shall deliver or cause to be delivered to Buyer:  (i) certificates representing the Shares, duly endorsed in blank or accompanied  by sufficient instruments of transfer and bearing all requisite stock transfer stamps;  (ii) counterparts of each Transaction Document other than this Agreement to  which a Seller Party is a party, duly executed by such Seller Party;   (iii) a duly executed “certificate of non-foreign status”, in a form reasonably  acceptable to Buyer, that complies with the requirements of the Treasury Regulations under  Section 1445(b)(2) of the Code;   (iv) a certificate of an officer of Parent and Seller executed by authorized senior  officers of Parent and Seller, dated as of the Closing Date, certifying as to Parent’s and  Seller’s compliance with the conditions set forth in Section 6.2(a) and Section 6.2(b) and  the satisfaction of the other condition set forth in Section 6.2;  (v) a certificate of an officer of Parent in the form reasonably acceptable to the  Buyer executed by an authorized senior officer of Parent, 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 Parent Disclosure Schedule, but updated as of the date  of such certificate;  (vi) a certificate of good standing or equivalent certificate from the applicable  jurisdiction of incorporation or formation of the Company and Abacus;   (vii) resignations of those directors, managers and officers of the Company and  Abacus designated by Buyer prior to Closing as of the Effective Time;   

 

     - 19 -    (viii) two (2) originally signed copies of 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 the Company and Abacus, and signed by Parent  and its appropriate Affiliates in accordance with the IRS instructions to such form;  (ix) evidence reasonably satisfactory to Buyer demonstrating that the Company  is in direct possession of or has access through an escrow arrangement to the source code  and object code of the PolicyPro Software and all deliverables set forth in the Software  Agreements; and  (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 Parent:  (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 senior 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);  (iii) a certificate of good standing from the applicable jurisdiction of  incorporation or formation of Buyer; and  (iv) two (2) original counterpart signatures to the IRS Form 8023 referenced in  Section 2.3(a)(viii) above.  2.4 Payment at Closing.  (a) No later than ten (10) Business Days prior to the anticipated Closing Date,  Parent shall cause to be prepared and delivered to Buyer a statement (the “Estimated Closing  Statement”) consisting of (i) an estimated balance sheet of the Company as of the Effective Time,  prepared in accordance with the Specified Accounting Principles and taking into account the  transactions contemplated by this Agreement that are to occur at or immediately prior to the  Closing, (ii) a good faith estimated calculation (in reasonable detail) of the amount of the Adjusted  Statutory Book Value as of the Effective Time, Closing Indebtedness and Transaction Expenses  each as of the Closing Date, derived from such estimated balance sheet, and (iii) the amount of  any adjustment to the Base Price to arrive at the Closing Payment pursuant to Section 2.4(b).  The  Estimated Closing Statement shall be (i) in the same format as set forth in Annex D (the “Pro  Forma Closing Statement”); (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 Parent certifying that the Estimated  Closing Statement (x) was prepared in good faith, (y) is derived from the Books and Records, and  (z) was prepared in accordance with the Specified Accounting Principles and this Section 2.4.  If  Buyer believes that the Estimated Closing Statement (including any amount or computation set  forth therein) contain errors, deviates from the Pro Forma Closing Statement or was not prepared  in accordance with the Specified Accounting Principles or this Section 2.4, Buyer may, on or prior  to the second (2nd) Business Day prior to the anticipated Closing Date, deliver a notice to Parent  

 

     - 20 -    setting forth, in reasonable detail, each such disputed item or amount and the basis for Buyer’s  disagreement therewith, and for the period from Parent’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  Estimated Closing Statement.    (b) In addition to the deliveries contemplated by Section 2.3, at the Closing,  Buyer shall pay to Seller, by wire transfer of immediately available funds to an account designated  by Seller, an amount equal to (i) the Base Price, plus (ii) any Adjusted Statutory Book Value  Surplus, minus (iii) any Adjusted Statutory Book Value Deficit, minus (v) the Closing  Indebtedness (without duplication of amounts that are specific components of, and cause a  reduction to, Adjusted Statutory Book Value as of the Effective Time), minus (vi) any Transaction  Expenses (without duplication of amounts that are specific components of, and cause a reduction  to, Adjusted Statutory Book Value as of the Effective Time) (the “Closing Payment”).  2.5 Post-Closing Payment.  (a) In the event that the Final Closing Payment as finally determined pursuant to  subsections (b) and (c) of this Section 2.5 is greater than the Closing Payment, Buyer shall pay  Seller an amount in cash equal to the difference within five (5) Business Days after the final  determination thereof.  In the event that the Final Closing Payment as finally determined pursuant  to subsections (b) and (c) of this Section 2.5 is less than the Closing Payment, Seller shall, and  Parent shall cause Seller to, pay Buyer an amount in cash equal to the difference within five (5)  Business Days after the final determination thereof.  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 one hundred twenty (120) days after the Closing Date, Buyer shall  deliver to Parent a statement (the “Closing Statement”) consisting of (i) a balance sheet of the  Company as of the Effective Time, prepared in accordance with the Specified Accounting  Principles and taking into account the transactions contemplated by this Agreement that are to  occur at or immediately prior to the Closing, (ii) a calculation (in reasonable detail) of the amount  of the Adjusted Statutory Book Value, the Adjusted Statutory Book Value Target, each as of the  Effective Time, Closing Indebtedness and Transaction Expenses each as of the Closing Date,  derived from such balance sheet (provided that for purposes of such calculation, the Adjusted  Statutory Book Value will reflect any payment of Closing Indebtedness or Transaction Expenses  made by the Company between the Effective Time and the Closing) and (iii) the items of  adjustment to the Base Price to arrive at the Closing Payment pursuant to Section 2.4(b) based on  the Closing Statement as of the Effective Time (the amount based thereon, the “Final Closing  Payment”).  The Closing Statement shall be (i) in the same format as the Pro Forma Closing  Statement; (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 Closing Statement (x)  was prepared in good faith, (y) is derived from the Books and Records, and (z) was prepared in  accordance with the Specified Accounting Principles and this Section 2.5.  In furtherance of such  preparation, Parent will make reasonably available the employees of Parent and its Affiliates to  

 

     - 21 -    Buyer and Buyer’s Representatives to the extent such employees are responsible for or  knowledgeable about the preparation of the Closing Statement and shall provide access to all  documentation, records and other information of Parent and its Affiliates as Buyer or any of its  Representatives may reasonably request to the extent reasonably relevant to the preparation of the  Closing Statement; provided, that such access does not unreasonably interfere with the conduct of  the business of Parent and its Affiliates.  (c) (i) Parent shall have forty-five (45) days from the date on which the Closing  Statement is delivered to it to review the calculations of the Adjusted Statutory Book Value,  Adjusted Statutory Book Value Target, Closing Indebtedness and Transaction Expenses  and the Final Closing Payment 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 Abacus to Parent and Parent’s Representatives to the extent such  employees are responsible for or knowledgeable about the preparation of the Closing  Statement and shall provide access to all documentation, records and other information of  Buyer, the Company and Abacus as Parent or any of its Representatives may reasonably  request to the extent reasonably relevant to the preparation of the Closing Statement;  provided, that such access does not unreasonably interfere with the conduct of the business  of Buyer, the Company or Abacus.  (ii) If Parent believes that the Closing Statement (including any amount or  computation set forth therein) contains errors, deviates from the Pro Forma Closing  Statement or was not prepared in accordance with the Specified Accounting Principles,  Parent 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  Parent’s disagreement therewith (the “Dispute Notice”).  The Dispute Notice shall set forth,  with respect to each disputed item, Parent’s position as to the correct amount or  computation that should have been included in the Closing Statement and as to the Final  Closing Payment.  (iii) If no Dispute Notice is received by Buyer with respect to any item in the  Closing 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 Closing Statement shall be deemed  accepted by Parent, 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 Parent 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 Parent may engage Ernst & Young, or if Ernst  & Young 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  

 

     - 22 -    determination with respect to the matters identified in the Dispute Notice that are still in  dispute.    (v) Buyer and Parent will direct the Independent Accounting Firm to render a  determination within sixty (60) days after its retention, and Buyer, Parent and their  respective employees and agents will cooperate with the Independent Accounting Firm  during its engagement.  Buyer, on the one hand, and Parent, 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  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 Parent (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 Closing Statement solely as to the  disputed items and shall determine the appropriate Final Closing Payment 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 Closing  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 errors or failure of Buyer to prepare the Closing  Statement in accordance with the Pro Forma Closing Statement 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 Parent.  The Adjustment Report, absent fraud,  

 

     - 23 -    shall be final and binding upon Buyer, Parent and Seller, and shall be deemed a final  arbitration award that is binding on each of Buyer, Parent 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 Earn-Out Payment.    (a) Subject to the terms of this Section 2.6, Seller shall be eligible to receive an  earn-out payment described in Section 2.6(b) if the Company achieves the statutory earnings target  set forth below.  Any such earn-out payment shall be calculated as of the Earn-Out End Date and  payable in accordance with this Section 2.6.     (b) Buyer shall provide Seller written notice of Buyer’s calculation of the  following amount (the “Earn-Out Payment”) within fifteen (15) days following the date on which  the Company’s audited annual statutory financial statement for the calendar year ended on  December 31, 2023 is filed with the Insurance Regulator in the Company’s domiciliary  jurisdiction:  (i) if the Company Statutory Earnings do not exceed $15,250,000, zero;   (ii) if the Company Statutory Earnings exceed $15,250,000 but are less  than $16,500,000, an amount equal to the product of (y) the Prorated Portion and  (z) $12,500,000; and  (iii) if the Company Statutory Earnings equal or exceed $16,500,000,  $12,500,000.   The Earn-Out Payment, if any, will be payable to Seller by wire transfer of immediately available  funds to bank account designated by Seller no later than the fifth (5th) Business Day following the  notice delivered by Buyer pursuant to this Section 2.6(b).    (c) Notwithstanding anything herein to the contrary, to the extent that Buyer is  entitled to payment of Indemnifiable Losses under Article IX, on or prior to the Earn-Out Payment  date, Buyer may deduct the amount of such Indemnifiable Losses from the Earn-Out Payment  payable by Buyer to Seller up to the Earn-Out Payment.  (d) Buyer shall provide its documentation in support of its calculation of the  Earn-Out Payment to the Seller at the time of its notice to the Seller of its calculation delivered  under Section 2.6(b), and the Seller 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 Seller does not timely object, Buyer’s calculation of the Earn-Out Payment shall be  binding and conclusive.  If the Seller objects on a timely basis, the calculation of the Earn-Out  Payment shall not be binding and conclusive, and Buyer and the Seller shall negotiate in good faith  to resolve the Sellers’ objections.  If Buyer and Seller resolve such objections, the amount they  

 

     - 24 -    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 Seller’s objections, Buyer and Seller shall cause  the calculation of the Earn-Out Payment, and all documents related thereto, to be submitted to the  Independent Accounting Firm and the procedures, timelines and expense allocations set forth in  Section 2.5 with respect to the resolution of the Closing Payment shall be followed to obtain final  resolution of such Earn-Out Payment.  (e) Any increase or decrease in the Earn-Out Payment to be paid to Seller  determined pursuant to Section 2.6(d) shall be made within three (3) Business Days after such  payment has been finally determined.    (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 in a commercially reasonable manner,  and Buyer shall not 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, the provisions of this Section 2.6(f) shall  not (x) require Buyer or any Affiliate of Buyer (including the Company) to continue any line of  business or service conducted or offered by the Company as of any date or (y) limit Buyer or any  Affiliate of Buyer (including the Company) from modifying or changing any aspect of the  Company’s Business.  (g) Any Earn-Out Payment pursuant to this Section 2.6 shall be reflected in the  Purchase Price for all Tax purposes.  (h) Parent and Seller each acknowledges that the contingent right of Seller to  receive the Earn-Out Payment, if any, pursuant to this Section 2.6 (i) is speculative in nature and  not guaranteed; (ii) is solely a contractual right and is not a security for purposes of any federal or  state securities laws (and shall confer upon Seller only the rights of a general, unsecured creditor  under applicable Law); (iii) will not be represented by any form of certificate or instrument;  (iv) does not give Parent or Seller any dividend rights, voting rights, liquidation rights, preemptive  rights or other rights of holders of equity securities; and (v) is not assignable or otherwise  transferable by Seller.      ARTICLE III.  REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER  Except as set forth in the Parent Disclosure Schedule, Parent and Seller hereby jointly and  severally represent and warrant to Buyer, as of the date hereof and as of the Closing Date, as  follows:  3.1 Organization and Qualification.  (a) Each of Parent, Seller, the Company and Abacus 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  

 

     - 25 -    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.  (b) Neither the Company nor Abacus is required to be registered as an “investment  company” within the meaning of the Investment Company Act and neither the Company nor  Abacus is relying on the exception from the definition of “investment company” in Section 3(c)(1)  or 3(c)(7) of the Investment Company Act of 1940, as amended, and the rules and regulations  promulgated thereunder.  Abacus is duly licensed as an insurance producer in all jurisdictions  relevant to the conduct of its Business.  3.2 Organizational Documents.  Parent has made available to Buyer a true, complete  and correct copy of the Organizational Documents of Parent, Seller, the Company and Abacus,  each as amended.  None of Parent, Seller, the Company nor Abacus is in violation of its  Organizational Documents.  The Organizational Documents of Parent, Seller, the Company and  Abacus that have been so delivered are in full force and effect.   3.3 Capitalization.  (a) The issued and outstanding capital stock of the Company consists of 60 shares of  common stock, $60,000 par value per share, which constitute all of the Shares.  No other equity  interests or other voting securities of the Company are issued, reserved for issuance or outstanding.  The Shares 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 Shares, free and clear of all  Liens.  Upon consummation of the transactions contemplated hereby, Seller shall, and Parent shall  cause Seller to, convey to Buyer, and Buyer shall own, all of the Shares free and clear of all Liens.    (b) The Shares were issued in compliance with applicable Law.  The Shares 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) There are no (i) outstanding securities or obligations convertible into or  exchangeable for capital stock 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 capital stock in the Company or (iii) contracts or other  agreements to which the Company or any of its Affiliates is a party relating to the voting, issuance,  purchase, redemption, registration, repurchase, sale or transfer of any capital stock in the  Company.  There are no 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 Shares or  other interests in the Company.  (d) Except as set forth in Section 3.3(d) of the Parent Disclosure Schedule, since  January 1, 2018, there has been no distribution from the Company and since January 1, 2020 (the  “Abacus Purchase Date”) there has been no distribution from Abacus.  There are no contracts or  

 

     - 26 -    other oral or written agreements in place that allow any equity owner of the Company or Abacus  to withdraw any equity or capital of the Company or Abacus.  (e) Each of the Stockholders is the “beneficial owner” (within the meaning of Rule  13d-3 under the Exchange Act) and/or holder of record of certain shares of common stock, par  value $1.00 per share, of Parent (the “Parent Common Stock”), and each such Stockholder has the  right to vote, or to cause to be voted, the shares of Parent Common Stock set forth under the  heading “Shares Held of Record or Beneficially” in respect of such Stockholder on the signature  page of the Voting Agreement.  The vote of the Parent Common Stock held by the Stockholders  in favor of the Parent Voting Matters will be sufficient to approve or adopt (i) this Agreement and  the transactions contemplated hereby, and (ii) any other matters required by applicable Law to be  approved or adopted by the Stockholders to effect the transactions contemplated hereby.  3.4 Subsidiaries.    (a) The issued and outstanding equity interests of Abacus consist of one thousand five  hundred (1,500) units, which constitute all of the Abacus Membership Interests.  Except for  Abacus, the Company has no Subsidiaries and, except as contemplated by the immediately  following sentence, the Company has not had any Subsidiaries since January 1, 2016.  Section  3.4(a) of the Parent Disclosure Schedule sets forth a description of any reorganizations since  January 1, 2016 pursuant to which any former Subsidiary of the Company was contributed,  distributed or transferred to any Affiliate of the Company (the “Reorganizations”).  The  Reorganizations were effectuated in accordance with applicable Law and the Organizational  Documents of the Persons involved, and the Company has no outstanding Liabilities relating to  the Reorganizations or the ownership of any former Subsidiary.   (b) The Abacus Membership Interests have been duly authorized and validly issued,  are fully paid and are owned beneficially and of record directly by the Company, and the Company  has good and valid title to the Abacus Membership Interests, free and clear of any Liens.  (c) None of the outstanding equity interests of Abacus 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. 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 Abacus is a party or by which it is  bound obligating Abacus to issue, deliver or sell additional shares of capital stock or other voting  securities of Abacus or obligating Abacus 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 Abacus, there are no (i) outstanding obligations of Abacus to repurchase, redeem or  otherwise acquire, directly or indirectly, any shares of capital stock (or options or warrants to  acquire any such shares) of Abacus, or (ii) outstanding or authorized securities, options, warrants,  call rights or other similar rights obligating Abacus to issue, transfer or sell or cause to be issued,  transferred or sold any equity interests in Abacus.  Except for Investment Assets and Abacus, 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.  

 

     - 27 -    3.5 Authority; Enforceability.  Each of Parent and Seller has the requisite corporate  power and authority to execute and deliver this Agreement, and each of Parent, Seller and each  Seller Party has the requisite corporate power and authority to execute and deliver 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 Parent and Seller of this Agreement, and of Parent, Seller and each Seller Party of 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 Parent, Seller  or such Seller Party no later than the Closing Date, and no other corporate or similar proceedings  on the part of Parent, Seller, any Seller Party or any of their Affiliates 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 Parent, Seller or  any Seller Party 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 Parent,  Seller or such Seller Party and, assuming the due authorization, execution and delivery hereof by  the other parties hereto or thereto, constitute legal, valid and binding obligations of Parent, Seller  or such Seller Party, 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”).  Parent, Seller and each  Seller Party has obtained any necessary approvals from its shareholders to enter into this  Agreement and the other Transaction Documents and to consummate the transactions  contemplated hereby and thereby.  Except as set forth on Section 3.5 of the Parent Disclosure  Schedules, no vote or consent of the holders of any class or series of capital stock or other equity  interest of Parent, Seller or the Company is necessary to approve this Agreement, any other  Transaction Document or the transactions contemplated hereunder or thereunder. Parent has duly  approved this Agreement, any other Transaction Document and the transactions contemplated  hereunder or thereunder.  3.6 No Conflict; Required Filings and Consents.    (a) Except as set forth on Section 3.6(a) of the Parent Disclosure Schedules, the  execution and delivery by Parent and Seller of this Agreement, and by Parent, Seller and other  Seller Parties of the other Transaction Documents to which such Person is party or any instrument  required by this Agreement to be executed and delivered by Parent, Seller or 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 vote, consent or notice (including a vote of the holders of any class or series of capital stock or  

 

     - 28 -    any other equity interest) under or violate the Organizational Documents of Parent, Seller, the  Seller Parties or the Company or Abacus, (ii) with or without notice or the passage of time or both,  conflict with, require a consent or notice under or violate in any material respect any Law, Permit  or Order applicable to Parent, any Seller Party, the Company or Abacus 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 material default  of, or result in the creation of any Lien upon any of the properties or assets of the Company or  Abacus 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 Abacus is a party or which is binding upon the Company or Abacus or upon any  of the assets of any of the foregoing.  (b) No Governmental Approval or Filing with any Governmental Authority is required  to be obtained or made by the Company, Abacus, Parent, Seller or any Seller Party in connection  with the consummation of the transactions contemplated by this Agreement, except (i) for  compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements  Act of 1976 (the “HSR Act”), and (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 Parent Disclosure  Schedule (the consents, approvals, Orders, authorizations, acknowledgements and Filings required  under or in connection with this clause (ii), the “Required Governmental Authorizations”).  3.7 Material Contracts.  (a) Section 3.7(a) of the Parent Disclosure Schedule sets forth a true and complete list  of each contract, agreement, commitment, arrangement, plan, lease, license or other instrument  (whether or not reduced to writing) in force as of the date hereof to which the Company or Abacus  is a party or by which any of its assets are bound (and any amendments, supplements and  modifications thereto), in each case, that:  (i) is 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 $75,000;     (ii) (other than Reinsurance Contracts and contracts covered by Section 3.7(a)(iii) or  agreements set forth in Section 3.23 of the Parent Disclosure Schedule) provides 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, 2020;     (iii) is with any Material Independent Producer;  (iv) is a network agreement pursuant to which the Company or Abacus 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 Abacus derives revenues in excess of $75,000 on an annualized basis;  

 

     - 29 -    (v) is a credit agreement, mortgage, loan agreement, indenture, letter of credit, swap  agreement and any other agreement, in each case relating to Indebtedness or other borrowing of  money or extension of credit and each agreement guaranteeing, or providing security for,  Indebtedness or mortgaging, pledging or otherwise placing a Lien on the assets of the Company  or Abacus;  (vi) contains (A) a restriction on the ability of the Company or Abacus to solicit  specified customers or prospective customers for the purchase, renewal, lapse, or amendment of  an Insurance Contract, (B) a restriction on the payment of dividends in respect of the capital stock  of the Company or Abacus, or (C) covenants limiting in any way the freedom of the Company or  Abacus 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 Abacus without restriction, liability or penalty, in each case that would be legally binding on  the Company or Abacus following the consummation of the transactions contemplated hereby;     (vii) (A) requires payments to or from the Company or Abacus in excess of $75,000 per  annum representing 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) relates to any Leased Real Property;   (viii) restricts or grants rights to use or practice rights under Intellectual Property that is  material to the Business of the Company or Abacus, but in each case excluding contracts for  commercial generally available Software for an annual fee of less than $75,000, or relates to  cybersecurity or information technology security services;   (ix) is a contract which provides for annual payments in excess of $75,000 pursuant to  which any material function of the Company’s or Abacus’ business is outsourced or otherwise  performed by an unaffiliated Person, or is a contract pursuant to which the Company or Abacus  has appointed or is appointed a third party administrator, managing general agent or other Material  Independent Producer or that relates to insurance policy administration, claims, or underwriting,  or is a third party administration or other insurance policy administration agreement relating to the  Insurance Contracts;   (x) is with a custodian or otherwise relating to custodial services with respect to assets  of the Company or Abacus;   (xi) relates to any material interest rate, derivatives or hedging transaction, or is an  investment advisory agreement or any other contract relating to investment management,  investment advisor or subadvisory services;  (xii) relates to the allocation or sharing of Taxes, costs, or expenses;   (xiii) is a joint venture, investment, partnership, stockholder, limited liability or other  similar contract;   (xiv) is with a Governmental Authority or relates to any settlement of any Proceeding;  

 

     - 30 -    (xv) is a contract that is material to the Company’s or Abacus’ operation or as to which  the consequences of its existence or a default, a nonrenewal or a termination thereof would,  individually or in the aggregate, reasonably be expected to have a Company Material Adverse  Effect;   (xvi) except for contracts that are terminable within ninety (90) days, contracts that  require the consent of, or grant a termination right to, any party thereto in connection with the  consummation of the transactions contemplated hereby; and  (xvii) relates to the acquisition or disposition of any material business or operation of the  Company or Abacus, or any other similar contract that includes an ongoing material  indemnification obligation or guarantee of the Company or Abacus (all such instruments,  collectively, the “Material Contracts”).   (b) True and complete copies of all Material Contracts, including all amendments  thereto, have been made available to Buyer by Parent. Each Material Contract is in full force and  effect, is a valid and binding obligation of the Company or Abacus, to the Knowledge of Parent or  Seller, of each other party thereto and is enforceable in accordance with its terms against the  Company or Abacus and, to the Knowledge of Parent or Seller, against each other party to such  Material Contract, subject in each case to the Enforceability Exceptions. Neither the Company,  Abacus, nor, to the Knowledge of Parent or Seller, 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 or Abacus of any material default, breach or violation.  Neither the  Company nor Abacus has received written or, to the Knowledge of Parent or Seller, oral notice of  cancellation of any Material Contract, and, except as set forth in Section 3.7(b) of the Parent  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 Abacus 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 Abacus.  Neither the Company, since January 1, 2018, nor Abacus,  since the Abacus Purchase Date, (i) has committed any breach or violation of applicable Law that  has resulted in, or would reasonably be expected in the future to 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 Abacus, 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) is under investigation, examination or audit  with respect to any violation of any applicable Law.    (b) All material deficiencies or violations in all reports of examinations of the affairs  of the Company or Abacus (including financial, market conduct and similar examinations) issued  by any Insurance Regulator to the Company on or after January 1, 2016 or to Abacus on or after  

 

     - 31 -    the Abacus Purchase Date have been resolved, to the Knowledge of Parent or Seller, to the  reasonable satisfaction of the Insurance Regulator that noted such deficiencies or violations.  The  Company is in full compliance with its obligations under the Regulatory Settlement Agreement,  and the Company has implemented a compliance plan that, based on the Company’s discussions  with the relevant regulators to date, satisfies the concerns and exceptions noted in such agreement.   Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially  delay or materially impair the consummation of the transactions contemplated hereby, Parent and  Seller are in compliance with all Laws applicable to Parent and Seller, respectively.  (c) Except as set forth on Section 3.8(c) of the Parent Disclosure Schedules, the  Company, since January 1, 2018, and Abacus, since the Abacus Purchase Date, have each filed all  material reports, statements, documents, registrations, filings or submissions required to be filed  by such Person 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.  Parent 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, 2018  with respect to the Company and since the Abacus Purchase Date with respect to Abacus, other  than renewals of Permits and other registrations, filings and submissions made in the ordinary  course of business.  (d) The Company and Abacus hold all material 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 each of the Company, since January 1,  2018, and Abacus, since the Abacus Purchase Date, has been in compliance in all material respects  with the terms and requirements of each such Permit.  Except as set forth on Section 3.8(d) of the  Parent Disclosure Schedules, neither the Company, since January 1, 2018,  nor Abacus, since the  Abacus Purchase Date, has received any written or, to the Knowledge of Parent or Seller, 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 Abacus is in material default under, and to the Knowledge of Parent or  Seller, no condition exists that with notice or lapse of time or both would constitute material 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 Parent  Disclosure Schedule sets forth a true and complete list of each jurisdiction where each of the  Company and Abacus is licensed by any Insurance Regulator and its material Permits.  (e) Parent has previously made available to Buyer the Social Security Death Master  File-related state protocols and any other state protocols of the Company and Abacus related to  Unclaimed Property Matters and their effective dates, which the Company or Abacus use to  determine the payment of life insurance or other benefits and amounts under Insurance Contracts.   The Company or Abacus, if applicable, 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. Parent 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  

 

     - 32 -    Company or Abacus with respect to the Social Security Death Master File-related review processes  or other resources which meet state requirements, (ii) true and correct copies of all written  correspondence between the Company or Abacus and any Governmental Authority or any Person  acting on behalf of a Governmental Authority since January 1, 2016, with respect to the Company,  and the Abacus Purchase Date with respect to Abacus, regarding any pending or, to the Knowledge  of Parent or Seller, 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 Abacus at and as of December 31, 2020, 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 Abacus or any of their assets, properties or businesses relating to any Unclaimed  Property Matters, and the Company and Abacus are not under any audit with respect to such  matters.  (f) In the last five (5) years, (i) to the Knowledge of Parent or Seller, no allegations of  harassment or other misconduct have been made against any Employee or former Employee (while  an employee of the Company or Abacus), and (ii) neither the Company nor Abacus has entered  into any settlement agreements related to allegations of harassment or other misconduct by any  Employee or former Employee.  3.9 Financial Statements.  (a) Parent has made available to Buyer true, correct and complete copies of (i) the  annual statutory financial statement of the Company, together with the report of the Company’s  independent auditors thereon, as of and for the years ended December 31, 2018, 2019 and 2020,  and (ii) the quarterly statutory financial statement of the Company as of and for the three (3) month  period ended March 31, 2021, in each case of (i) and (ii), as filed with the Wisconsin Office of the  Commissioner of Insurance (the financial statements for the period ending on March 31, 2021, the  “Most Recent Statutory Statement” and, collectively with the statements set forth in clause (i), the  “Statutory Statements”). The Statutory Statements were prepared from the Books and Records of  the Company and in accordance with applicable Law and SAP applicable to the Company  consistently applied throughout all such periods and fairly present in all material respects the  financial position, admitted assets, liabilities and capital and surplus of the Company at the  respective dates, and the results of operations, changes in surplus, and cash flows of the Company  for the periods covered thereby, subject, in the Most Recent Statutory Statement, to the absence of  full footnote disclosures and other presentation items. No deficiency has been asserted by any  Governmental Authority with respect to any Statutory Statement.  (b) Parent has made available to Buyer true, correct and complete copies of (i) the  unaudited consolidated annual financial statements of the Company and Abacus as of and for the  year ended December 31, 2020, (ii) the unaudited consolidated financial statement of the Company  and Abacus as of and for the three (3) month period ended March 31, 2021 (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 Abacus at the respective dates.  

 

     - 33 -    (c) The Reserves of the Company as of March 31, 2021 recorded in the Most Recent  Statutory Statement and otherwise recorded in the Statutory Statements were determined: (i) in  accordance with generally accepted actuarial standards consistently applied and were fairly stated,  in accordance with sound actuarial provisions in effect as of the date of such Statutory Statements,  (ii) in accordance with SAP and applicable Law, and (iii) based on actuarial assumptions consistent  with or more conservative than those called for in relevant provisions of the Insurance Contracts.  For clarity, Parent and Seller make no representation, warranty or guarantee under this Agreement  that the Reserves held by or on behalf of the Company are or will be sufficient for the purposes  for which they were established.  (d) Parent has made available all analyses and reports relating to the risk-based capital  calculations of the Company submitted by the Company since January 1, 2020, to the Insurance  Regulator in each state in which such analyses and reports are required to be filed (the “RBC  Reports”).  The RBC Reports were prepared in accordance with SAP applicable to the Company  and the applicable risk-based capital instructions and were true and correct on and as of the date  filed with each such Insurance Regulator.  No Insurance Regulator has notified the Company of  any inaccuracy in any RBC Report.  Each of the Company and Abacus is solvent.  (e) Section 3.9(e) of the Parent Disclosure Schedule sets forth a true and complete list  of all outstanding Indebtedness, if any.  Neither the Company nor Abacus is in default, nor is any  waiver of default 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 Abacus and all transactions and actions  related thereto, (iv) 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 Parent and Seller to accurately present and reflect in all material  respects the Business of the Company and Abacus and other transactions and actions related  thereto, and (v) contain no material Data Input Inaccuracies.  (g) Each of the Company and Abacus have devised and maintained systems of internal  accounting controls with respect to its business 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 Company, 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.   (h) No representation or warranty or other statement made by Parent and Seller in this  Agreement, the Parent Disclosure Schedule, any supplement to the Parent Disclosure Schedule,  the certificate delivered pursuant to Section 2.3(a)(iv), or otherwise in connection with the  

 

     - 34 -    transactions contemplated by this Agreement contains any untrue statement of material fact or  omits to state a material fact necessary to make the statements in this Agreement or therein, in light  of the circumstances they were made, not misleading.  (i) The Pro Forma Closing Statement was (i) derived from, prepared using and in all  material respects consistent with, the Books and Records, (ii) determined in accordance with SAP,  applied on a consistent basis with the periods presented in the Statutory Statements (except to the  extent of any adjustments to SAP expressly embedded in the Accounting Principles), and, subject  to such adjustments, fairly presents, in all material respects, the statutory financial position,  admitted assets, liabilities and capital and surplus of the Company as of December 31, 2020, and  (iii) prepared in accordance with the Specified Accounting Principles.   3.10 Insurance Business.   (a) Any application form, form of insurance policy, written advertising material, rate  or rule utilized by the Business, 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 Abacus, 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 in all material respects with applicable Law.  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  charges, credited interest rates, insurance policy premiums, features or other similar charges or  rates with respect to any of the Insurance Contracts. Parent has made available to Buyer true and  complete copies of specimen forms of all Insurance Contracts that are in-force or are actively being  marketed by the Company and Abacus.  Such specimen forms are true, correct and complete copies  of the policy 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, 2018, the Company has 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 operates its business.  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  

 

     - 35 -    Parent or Seller, 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) Parent has made available to Buyer true and complete copies of all underwriting  manuals (including each amendment thereto) utilized by the Company with respect to its Business  of since January 1, 2018.  The underwriting standards and ratings applied by the Company since  such date with respect to the Insurance Contracts 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) Parent has provided Buyer information relating to the Company’s 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 the Company (and any committee thereof) held  since January 1, 2018 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, 2018, except (i) as set forth in Section 3.10(d) of the  Parent Disclosure Schedule, or (ii) with respect to crediting rates applicable to the Insurance  Contracts, the Company has not 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) The Company is not “commercially domiciled” in any jurisdiction.  The Company  (i) has not issued or reinsured any Insurance Contract the policy value of which varies with the  investment performance of a separate account or sub account thereof, or (ii) has not owned or  maintained any separate account.  3.11 Producers; Sale Practices; Third Party Administrators.   (a) Section 3.11(a) of the Parent Disclosure Schedule sets forth a true and correct list,  to the Knowledge of Parent or Seller, of each Material Independent Producer of the Company and  the gross premium volume produced by the Business of the Company in respect of each such  Material Independent Producer for the twelve (12) months ended December 31, 2020.   (b) Each Independent Producer was duly and appropriately appointed by the Company  to act as a producer for the Company at the time such Independent Producer negotiated, placed,  marketed, wrote, sold, produced or solicited any of the Insurance Contracts for which it was the  producer to the extent required by applicable Law.  To the Knowledge of Parent or Seller, 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 Company), 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.   

 

     - 36 -    (c) Since January 1, 2018, the Company has not received 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  Company.  (d) Except as set forth in Section 3.11(d) of the Parent Disclosure Schedule, Parent has  made available to Buyer (i) the standard forms of agreements used in connection with the business  of the Company for Independent Producers since January 1, 2015, and (ii) true, accurate and  complete copies of any agreements in force on the date hereof between the Company and any  Material Independent Producer that is substantially different from both such standard forms of  agreements and other standard forms of agreements used by the Company since January 1, 2015.   Except as set forth in Section 3.11(d) of the Parent Disclosure Schedule or in such standard forms,  the Company does not have 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. No Independent Producer has materially breached the terms  of any agency or broker contract with or for the benefit of the Company.  To the Knowledge of  Parent or Seller, no Independent Producer or any Affiliate of such Independent Producer has any  right to (i) receive any payment based on the profitability or financial performance of any of the  Insurance Contracts or (ii) that requires the Company to reinsure or otherwise transfer the  economic benefits of the Insurance Contracts (or any portion thereof) to any Person.  (e) Except as set forth in Section 3.11(e) of the Parent Disclosure Schedule, to the  Knowledge of Parent or Seller, since January 1, 2018, (i) each third party administrator that  serviced, managed, adjusted or administered insurance business for the Company or performed  any other action for or on behalf of the Company, at the time such Person serviced, managed,  adjusted or administered such business or performed such action, was duly licensed and appointed  as required by Law (for the type of business managed or administered on behalf of the Company)  in the particular jurisdiction in which such third party administrator serviced, managed, adjusted  or administered such business or performed such action and (ii) no such third party administrator  was or is in violation (or with or without notice or lapse of time or both, would be or would have  been in violation) of any term or provision of any Law applicable to the servicing, administration,  adjustment or management of insurance business for the Company, except for such failures to be  licensed or such violations which have been cured, resolved or settled through agreements with  applicable Governmental Authorities.   3.12 Existing Reinsurance Contracts.   (a) Section 3.12(a) of the Parent Disclosure Schedule lists each reinsurance agreement  to which the Company is a party and under which the Company has ceded or retroceded any risks  in respect of the Business of the Company and with respect to which the Company 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 Company is in compliance with all statutory accounting principles,  including risk transfer requirements under the Ceded Reinsurance Contracts and 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 Parent Disclosure Schedules, since January  1, 2018, the Company has not received a written denial of any material claim from the reinsurer  

 

     - 37 -    under any of the Ceded Reinsurance Contracts.  All rights and obligations of the Company under  its ceded reinsurance relating to the “Coinsured Policies” ceded by it to National Guardian Life  Insurance Company under that certain Coinsurance and Administrative Services Agreement dated  July 31, 2015 between such parties have been transferred to National Guardian Life Insurance  Company, and, under the terms of such Coinsurance and Administrative Services Agreement, there  is no residual liability under such ceded reinsurance or the coverage provided thereunder retained  by the Company.  (b) Section 3.12(b) of the Parent Disclosure Schedule lists each reinsurance agreement  to which the Company is a party and under which the Company has assumed any risks and with  respect to which the Company has any outstanding assumed reserves (the “Assumed Reinsurance  Contracts” and, together with the Ceded Reinsurance Contracts, the “Reinsurance Contracts”).   The Company 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 Parent.  Each of the Reinsurance Contracts  constitutes a valid and binding obligation of the Company and, to the Knowledge of Parent or  Seller, each other party thereto, enforceable against the Company and, to the Knowledge of Parent  or Seller, each other party thereto in accordance with its terms, subject to the Enforceability  Exceptions.  The Company has not 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.  The Company has not, and to the Knowledge  of Parent or Seller, none of the other parties to the Reinsurance Contracts have, violated any  provision of, or committed or failed to perform any act, and no event or condition exists, which  with or without notice, lapse of time or both would constitute a default under the provisions of,  any Reinsurance Contract.  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. None of the Company or, to the Knowledge of Parent or Seller, any  ceding company or reinsurer under any Reinsurance Contract is insolvent or the subject of a  rehabilitation, liquidation, conservatorship, receivership, bankruptcy or similar proceeding and the  financial condition of any such ceding company or reinsurer is not impaired to the extent that a  default thereunder is reasonably anticipated.  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  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 Statutory Statements; (ii) set forth in Section 3.13 of the  Parent Disclosure Schedule; or (iii) incurred in the ordinary course of business consistent with past  practice since January 1, 2021 and which does not exceed $100,000, neither the Company nor  

 

     - 38 -    Abacus is subject to any liability, whether absolute, accrued, contingent or otherwise and whether  due or to become due.  3.14 Absence of Certain Changes or Events.  Except as set forth in Section 3.14 of the  Parent Disclosure Schedule, since January 1, 2021 to the date hereof, the Company and Abacus  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 would  reasonably be expected to constitute, individually or in the aggregate, a Company Material  Adverse Effect.  Without limiting the generality of the foregoing, from April 1, 2021 to the date  hereof, neither the Company nor Abacus has, except as set forth in Section 3.14 of the Parent  Disclosure Schedule, 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 April 1, 2021.   3.15 Absence of Litigation, Claims and Orders.  Except as set forth in Section 3.15 of the  Parent Disclosure Schedule (i) there are no Proceedings pending or, to the Knowledge of Parent  or Seller, threatened against the Company or Abacus, and (ii) there are no Orders outstanding to  which the Company or Abacus or any of its or their respective properties, rights or assets is subject.    3.16 Employee Benefit Plans.    (a) Section 3.16(a) of the Parent Disclosure Schedule sets forth a complete list of each  Employee Plan sponsored by the Company or Abacus (a “Company Employee Plan”) and  identifies the sponsor of each.    (b) Each Company 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 Abacus and their ERISA Affiliates have satisfied in all material respects all of their obligations  for Employees with respect to each  Company Employee Plan in accordance with its terms, ERISA,  the Code and other applicable Law.  Each  Company Employee Plan that is intended to be Tax- qualified has received a favorable opinion letter from the IRS or is entitled to rely on a favorable  determination letter from the IRS, or has filed a timely application therefor and no event has  occurred since the date of the most recent determination letter that has not been revoked or  application therefor relating to any such Company Employee Plan that would reasonably be likely  to cause the loss of such qualification status of such Company Employee Plan.  With respect to  covered Employees, each Company 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 Abacus have complied in all  material respects with all applicable disclosure, reporting and other requirements under applicable  Law applicable to any Company Employee Plan.  Neither the Company nor Abacus nor, to the  Knowledge of Parent or Seller, 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 a Company  Employee Plan has engaged in a prohibited transaction that would subject the Company or Abacus  to a Tax or penalty imposed under Section 4975 of the Code or Sections 409, 502(i), (j) or (l) of  ERISA.  Neither the Company nor Abacus has maintained, contributed to (or been required to  contribute to) or otherwise incurred any liability with respect to any Company 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  

 

     - 39 -    employer welfare arrangement” (as defined in Section 3(40) of ERISA). Neither the Company nor  Abacus has or will, as a result of the execution of this Agreement or the consummation of the  transactions contemplated under this Agreement, have any liability with respect to any Employee  Plan sponsored, maintained or contributed by an ERISA Affiliate of the Company or Abacus.  (c) Except as set forth in Section 3.16(c) of the Parent Disclosure Schedule, neither the  Company nor Abacus 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) Parent has made available to Buyer true and complete copies of the following  documents relating to Employee Plans: (i) all current Company Employee Plan documents,  including any documents related to any funding medium; (ii) the three most recently filed Forms  5500 (with attachments) for each such Company Employee Plan for which a Form 5500 is required  to be filed; (iii) for each such 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 such Company Employee Plan for which a summary plan description or summary  of material modifications is required; (v) any contract with such Company 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) Full payment has been timely made, or otherwise properly accrued on the Books  and Records of the Company and Abacus, of all amounts that the Company or Abacus 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,  have been made or otherwise properly accrued on the Financial Statements and Pro Forma Closing  Statement and will be properly made or accrued through the Closing Date on the Estimated Closing  Statement and Closing Statement.  (f) Other than routine claims for benefits in the ordinary course of business, no  Proceeding is pending or, to the Knowledge of Parent or Seller, threatened with respect to any  Company Employee Plan for any Employee. 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 Parent 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 Abacus 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, or (iii) require a “gross-up” or other payment to any “disqualified  individual” within the meaning of Section 280G(c) of the Code. Neither the execution of this  Agreement nor the consummation of the transactions contemplated hereby could result in the  payment of any amount that could, individually or in the combination with any other such payment,  constitute an “excess parachute payment” within the meaning of Section 280G(b) of the Code.  

 

     - 40 -    3.17 Labor Matters.    (a) Section 3.17(a) of the Parent 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 2020 bonus, total commissions, part-time, full-time or temporary  status, accrued unused vacation benefits, leave of absence status (including FMLA and disability),  exempt or non-exempt status under the Fair Labor Standards Act, immigration status, and service  credited for purposes of vesting and eligibility to participate under the Employee Plans (the  “Employee Census”). The Employee Census as updated pursuant to Section 5.12(a) shall be true,  complete and correct as of the Closing Date.  Section 3.17(a) of the Disclosure Schedule identifies  any individual employed by Parent or an Affiliate of Parent (other than the Company or Abacus)  who is performing substantial services relating to the principal business operations of the Company  or Abacus.  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  Abacus.  Except as listed on Section 3.17(a) of the Parent 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.  Each Employee is (i) a United States citizen or lawful permanent resident of the United  States or (ii) an alien authorized to work in the United States either specifically for the Company  or Abacus or for any United States employer. The Company or Abacus, as applicable, has  completed a Form I-9 (Employment Eligibility Verification) for each Employee, and each such  Form I-9 has since been updated as required by applicable Law and is correct and complete in all  material respects.  A copy of each such Form I-9 form has been provided to Buyer.  Section 3.17(a)  of the Parent Disclosure Schedule identifies each Employee authorized to work under a visa or  other temporary work authorization, the nature of the visa or work authorization, and the expiration  date of any such visa or work authorization.  (b) Neither the Company nor Abacus 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 Abacus 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  Employees has made a pending demand for recognition or certification.  To the Knowledge of  Parent or Seller, no organizational efforts with respect to the formation of a collective bargaining  unit are being or have been made or threatened involving Employees.  (c) Each of the Company, since January 1, 2018, and Abacus, since the Abacus  Purchase Date, is 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 Parent or Seller, threatened charges or complaints against the Company or Abacus  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 Abacus with any  independent contractor.  

 

     - 41 -    (d) Each of the Company and Abacus is in compliance in all material respects 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 Abacus 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.  3.18 Real Property.    (a) Section 3.18(a) of the Parent Disclosure Schedule sets forth a list of all real property  leases to which the Company or Abacus 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 Abacus hold a leasehold interest, whether as lessee or sublessee, being the “Leased Real  Property”) and the street address with respect to the Company Real Property Leases.  Except for  Investment Assets, neither the Company nor Abacus owns any interest (fee, leasehold or  otherwise) in any real property.  Except as set forth in Section 3.18(a) of the Parent Disclosure  Schedule, the Company or Abacus has a valid leasehold interest in the Leased Real Property, free  and clear of any Liens other than Permitted Lien, and enjoys peaceful and undisturbed possession  of the Leased Real Property.    (b) Each Company Real Property Lease is in full force and effect and enforceable by  the Company or Abacus, as applicable, in accordance with its terms, subject to the Enforceability  Exceptions.  Since January 1, 2018, with respect to the Company and since the Abacus Purchase  Date with respect to Abacus, neither the Company nor Abacus has received any written notice of  default with respect to any Company Real Property Lease, and since January 1, 2018, with respect  to the Company and since the Abacus Purchase Date with respect to Abacus, 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 Abacus or, to the Knowledge of Parent or Seller, any other party thereto, under any  of the Company Real Property Leases.  Neither the Company nor Abacus has assigned or placed  any Lien upon any Leased Real Property.  3.19 Taxes.  (a) Parent, Seller, the Company and Abacus have timely filed (after giving effect to  applicable extensions) with the appropriate Governmental Authority all Tax Returns required to  be filed by or with respect to the Company or Abacus, and all such Tax Returns are true, correct  and complete in all material respects.  Parent, Seller, the Company or Abacus 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 Abacus or by Parent or Seller with respect to the Company and  Abacus.  (b) Parent, Seller, the Company and Abacus 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  

 

     - 42 -    relevant Governmental Authority or properly set aside in accounts for such purpose.  Neither the  Company nor Abacus 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 Abacus, other than  Permitted Liens.  (d) No audits or other administrative or judicial actions are in progress or threatened in  writing with regard to any material Taxes for which the Company or Abacus is or may become  liable.  (e) Neither the Company nor Abacus 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 Abacus has been a member of an affiliated group filing a  consolidated U.S. federal income Tax Return (other than a group the common parent of which was  Parent) or has any liability for the Taxes of any Person (other than Parent, Seller, the Company or  Abacus) 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.  Neither the Company nor Abacus 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.  (g) Neither the Company nor Abacus 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 Abacus 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 or Abacus 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 Abacus after the Closing Date.  (i) Neither the Company nor Abacus 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.  

 

     - 43 -    (j) No written claim has been made by a Governmental Authority in a jurisdiction  where the Company does not file a Tax Return that the Company is or may be subject to taxation  by that jurisdiction in respect of Taxes that would be covered by or the subject of such Tax Return,  which claim has not been fully resolved.  (k) Parent is eligible to make an election under Section 338(h)(10) of the Code and any  corresponding elections under state, local or non-U.S. law with respect to the sale of stock of the  Company, and no consent is required from any third party with respect to such election.  (l) The Company qualifies and, for all years for which the applicable statute of  limitations has not expired, qualified as a non-life insurance company for purpose of the Code and  has been subject to taxation under subchapter L of the Code.  None of the insurance policies issued  or sold by the Company provide “health insurance coverage” as defined by Section 9832 of the  Code.  (m) The Company and Abacus 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 Statutory Statements  in accordance with SAP applicable to the Company, consistently applied.    (n) The Company has not delayed the payment of any payroll or other employment- related Taxes pursuant to Section 2302 of the CARES Act or otherwise.  (o) 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 Abacus 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(o), 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 Abacus 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 Abacus 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 Abacus is a party to any “hold harmless” indemnification agreement, Tax Agreement or similar  agreement under which the Company or Abacus 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.  

 

     - 44 -    (p) (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 has 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 has 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.  (q) 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, and the Company is treated for federal Tax purposes as the owner of the assets underlying  such Insurance Contract.  (r) Abacus is a disregarded entity under Section 301.7701-3 of the Treasury  Regulations and has never made any election under such regulations to treat its tax status and  characterization other than the default status and characterization provided under such regulations.  3.20 Intellectual Property and Technology.   (a) The Company and Abacus 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 Parent 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 Abacus (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 Parent Disclosure Schedule: (i) the Company or Abacus  possesses all right, title, and interest in and to the item, free and clear of any Lien, license, royalty  or other restriction; and (ii) none of the Company’s or Abacus’ 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 Parent Disclosure Schedule, the Company’s and Abacus’ rights are  valid and enforceable, and all filings required to maintain the validity thereof have been made.   Either the Company or Abacus (1) are in possession of all Software Programs and Deliverables  

 

     - 45 -    under (and as defined in) the Software Agreements (including the PolicyPro Software), (2) have  paid in full all development fees and other amounts due and payable to the Developer under the  Software Agreements, (3) are in compliance in all material respects under the Software  Agreements and (4) own the PolicyPro Software free and clear of any Liens.  There has been no  dispute with the Developer under the Software Agreements.   (b) Except as set forth in Section 3.20(b) of the Parent Disclosure Schedule and since  January 1, 2018, none of Parent or any of its Affiliates has received any written notice that the  Company’s or Abacus’ 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 Parent or Seller, the operation by the Company and Abacus 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  Parent Disclosure Schedule and since January 1, 2018, neither the Company nor Abacus 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 Abacus.  (d) Except as set forth in Section 3.20(d) of the Parent Disclosure Schedule, to the  Knowledge of Parent or Seller, the use and dissemination by the Company and Abacus of Personal  Information of consumers of its services or users of any websites operated by the Company or  Abacus are in compliance, in all material respects, with all applicable privacy policies and terms  of use and applicable Law. The Company and Abacus 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 Abacus comply with applicable Law with respect  to safeguarding Personal Information collected by such party.  Since January 1, 2018, except as  set forth in Section 3.20(d) of the Parent Disclosure Schedule, to the Knowledge of Parent or Seller,  there has been no Security Breach in the safeguards for such Personal Information.  The Company  and Abacus use commercially reasonable measures to protect the confidentiality of the Company  Intellectual Property Rights.  Since January 1, 2018, except as set forth in Section 3.20(d) of the  Parent Disclosure Schedule, there has been no breach in the safeguards for such confidential  Company Intellectual Property Rights.  (e) Section 3.20(e) of the Parent Disclosure Schedule lists all material Computer  Programs and Software owned or used by the Company or Abacus, including the PolicyPro  Software; provided, that “material” Computer Programs excludes all shrink-wrap and off-the-shelf  Computer Programs.  Such Computer Programs and Software do not contain any open source or  copyleft software.  Neither the Company nor Abacus is a party to any agreement, which: (i)  restricts the free use, license or disclosure by the Company or Abacus of any source code or object  code relating to any of the Computer Programs and Software owned or purported to be owned by  the Company or Abacus, or (ii) requires the Company or Abacus to (A) include any source code  relating to any of the Company’s or Abacus’ proprietary Computer Programs and Software with  any distribution or delivery (whether physical or on a hosted basis) of such Computer Programs or    

 

     - 46 -    Software or (B) permit any licensee of any Computer Programs or Software owned or purported  to be owned by the Company or Abacus to modify any source code relating to such Software.  (f) The IT Systems (i) operate as necessary for the conduct of the Business of the  Company and Abacus in all material respects, and (ii) to the Knowledge of Parent or Seller, 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 Abacus as currently  conducted.  Since January 1, 2018, there have been no material adverse events affecting the IT  Systems that have caused a material impact on the Company’s and Abacus’ operation of their  respective businesses. The Company and Abacus 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, 2018, 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  Abacus.  3.21 Insurance. Section 3.21 of the Parent Disclosure Schedule sets forth 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 Abacus.   There is no claim by the Company or Abacus currently pending under any of such policies as to  which coverage has been questioned, denied or disputed by the insurers of such policies.  All such  insurance policies are in full force and effect and premiums payable under all such policies have  been timely paid, and the Company and Abacus are otherwise in compliance with the terms of  such policies in all material respects.  To the Knowledge of Parent or Seller, 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. None  of Parent, Seller or the Company or Abacus, nor, to the Knowledge of Parent, any insurer under  such insurance policies, is in violation or breach of, or default under, any provision thereof.   3.22 Environmental Matters.    (a) Except as set forth in Section 3.22(a) of the Parent Disclosure Schedule, (i) neither  of the Company or Abacus 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  Abacus 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 Parent or Seller, threatened against the Company or Abacus alleging  violations of or liability under any Environmental Laws or otherwise concerning the Release or  management of Hazardous Substances.  (b) To the Knowledge of Parent or Seller, 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 Abacus or, to the Knowledge of Parent  or Seller, against any Person whose liability for such obligation the Company or Abacus has or  may have retained or assumed either contractually or by operation of applicable Law.  

 

     - 47 -    (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 Parent Disclosure Schedule sets forth a complete and correct  list of all agreements, contracts, commitments, arrangements or transactions (but excluding any  Employee Plan) between Parent or any Affiliate of Parent (other than the Company or Abacus), or  any of their respective directors, officers or managers, on one hand, and the Company or Abacus,  on the other hand, and no unaffiliated third party (“Intercompany Agreements”).  The Company  and Abacus have complied in all material respects with all applicable disclosure, reporting or other  requirements, including any such requirements under applicable Law, applying to the  Intercompany Agreements.    (b) Section 3.23(b) of the Parent 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 and Abacus.  Any such agreement, contract, commitment,  arrangement or transaction is on arms’-length terms and has been filed with and approved or not  disapproved by the applicable Insurance Regulator if such filing and approval or non-disapproval  is required by applicable Law.    

 

     - 48 -    (c) No employee or director of the Company or any Person owning directly or  indirectly one percent (1%) or more of the Shares (any such person or entity, an “Interested Party”)  or, to the Knowledge of Parent and Seller, any Affiliate or family member of any such Interested  Party is a party to any Contract with or binding upon the Company or Abacus or has any material  interest in any property or assets owned by the Company or Abacus or has engaged in any material  transaction with the Company or Abacus (in each case, other than those related to an Employee  Plan or other ordinary course employment, compensation or incentive arrangements).  3.24 Assets.    (a) Except as set forth on Section 3.24(a) of the Parent Disclosure Schedule, the  Company and Abacus 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 Abacus 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 Abacus 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 Parent 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 or made available 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 Abacus 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 Parent Disclosure Schedule sets forth a true, complete and  correct list of all Investment Assets held by the Company and Abacus as of March 31, 2021 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 Parent Disclosure Schedule,  the Company or Abacus has valid title to all such Investment Assets held by it, free and clear of  all Liens, other than Permitted Liens.  (b) Section 3.25(b) of the Parent 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 Company comply in all material respects  with the Investment Guidelines and with applicable Law governing admittance of assets for the  Company.  The Investment Assets held by the Company that were listed as admitted assets on its  Statutory Statements were qualified as admitted assets of the Company under applicable Law.  The  Company and Abacus 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 Abacus to enforce the terms of such assets. To the Knowledge of  

 

     - 49 -    Parent or Seller, 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) Parent has provided to Buyer (i) a written statement of the derivatives policies for  the Company, 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 as in  effect as of the date hereof.  3.26 Actuarial Data.  Parent 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 the Business, since January 1, 2018, set forth in Section 3.26 of the Parent Disclosure  Schedule, and the material attachments, addenda, supplements and modifications thereto set forth  in Section 3.26 of the Parent Disclosure Schedule (collectively, the “Company Actuarial  Analyses”). Each such Company Actuarial Analysis (i) was based upon the Books and Records  and an accurate inventory of Insurance Contracts in force at the relevant time of preparation and  generated from the same underlying sources and systems that were utilized to prepare the Statutory  Statements, (ii) is complete and accurate in all material respects as of the date thereof, subject to  any limitations and qualifications contained therein and (iii) was prepared in accordance with  sound actuarial principles, is consistent in all material respects with United States actuarial  principles promulgated by the Actuarial Standards Board, and is based upon informed judgment.   No actuary who prepared any of the Company Actuarial Analyses has notified Parent or any of its  Affiliates in writing or, to the Knowledge of Parent or Seller, orally, that any Company Actuarial  Analysis is inaccurate in any material respect.  To the Knowledge of Parent or Seller, there are no  omissions, errors, changes or discrepancies in the actuarial data which would materially affect the  information contained in the Company Actuarial Analyses.    3.27 Bank Accounts; Power of Attorney.  Section 3.27 of the Parent Disclosure Schedule  sets forth a list of the bank names, locations and account numbers of all bank and safe deposit box  accounts of the Company and Abacus, including any custodial accounts for securities owned by  the Company or Abacus, and the names of all persons authorized to draw thereon or to have access  thereto.  Section 3.27 of the Parent Disclosure Schedule also sets forth the names of all persons, if  any, holding powers of attorney from the Company or Abacus 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) To the Knowledge of Parent or Seller, the Company  and Abacus have in place (A) administrative, technical and physical safeguards designed to protect  against the destruction, loss, or alteration of Personal Information, (B) security measures designed  to adequately 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 Abacus have complied with applicable Law  in all material respects, with all applicable contractual privacy obligations in all materials respects,  and their respective internal privacy policies and guidelines in all material respects relating to the  collection, storage, use and transfer of Personal Information; (iii) neither the Company nor Abacus  is, or, since January 1, 2018, has been, under investigation or audit, by any private party or  

 

     - 50 -    Governmental Authority, arising out of an actual or alleged Security Breach nor 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, 2018, there has been (x) to  the Knowledge of Parent or Seller, no unauthorized access, use, disclosure or transfer of any  Personal Information in the possession, custody or control of the Company or Abacus, and (y) no  claim communicated to the Company or Abacus in writing from any affected individual nor any  written request or inspection from any Governmental Authority that, to the Knowledge of the  Company, 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 Parent.  3.30 CARES Act. Neither the Company nor Abacus has either (a) submitted any  application which has not been rescinded, terminated or withdrawn in writing or (b) received any  funds under or incurred any Indebtedness pursuant to the CARES Act or any other economic relief  or stimulus legislation or program passed by the United States Congress or any state legislature in  2020.  ARTICLE IV.  REPRESENTATIONS AND WARRANTIES OF BUYER  Except as set forth in the Buyer Disclosure Schedule, 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  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  

 

     - 51 -    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) challenge (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 amounts payable at Closing under Section 2.4(b) and any other  payments contemplated in this Agreement and to pay all fees and expenses related to the  transactions contemplated by this Agreement.   4.6 Brokers.  Except for Raymond James Financial, Inc., 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 Shares solely for its own account for  investment purposes and not with a view to, or for offer or sale in connection with, any distribution  thereof. Buyer acknowledges that the Shares are not registered under the Securities Act of 1933,  

 

     - 52 -    as amended, or any state securities laws, and that the Shares may not be transferred or sold except  pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an  applicable exemption therefrom and subject to state securities laws and regulations, as applicable.   Purchaser is financially sophisticated and understands the risks relating to the purchase and  ownership of the Shares.   4.8 Tax Election.  Buyer is eligible to make an election under Section 338(h)(10) of the  Code and any corresponding elections under state, local or non-U.S. law with respect to the  purchase of stock of the Company, and no consent is required from any third party with respect to  such election.  ARTICLE V.  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 Parent Disclosure Schedule or with the prior written consent of Buyer, which  consent shall not be unreasonably withheld, conditioned, or delayed, Parent and Seller shall, and  shall cause the Company and Abacus to, (x) carry on the Business of the Company and Abacus in  the ordinary course consistent with past practice, 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 Abacus,  and with the Governmental Authorities with jurisdiction over the Company and Abacus.  Without  limiting the generality of the foregoing, except as expressly contemplated by this Agreement or as  set forth in Section 5.1 of the Parent Disclosure Schedule, Parent shall not with respect to Seller,  the Company or Abacus, Seller shall not with respect to the Company and Abacus, and Parent and  Seller shall not permit the Company or Abacus, without the prior written consent of Buyer, which  consent shall not be unreasonably withheld, conditioned, or delayed, to, directly or indirectly:  (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 Abacus, any other voting securities, or  any securities convertible into or exchangeable for any such interests, in each case relating to  equity interests in the Company or Abacus, (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 Abacus; (iii) directly or indirectly, purchase,  redeem or acquire any equity interest (including Shares) or any other ownership interest in the  Company or Abacus; (iv) change the authorized or issued equity of the Company or Abacus; (v)  effect any recapitalization, reclassification, unit split, combination or similar change in the  capitalization of the Company or Abacus; 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 Abacus;   

 

     - 53 -    (c) (i) sell, transfer, encumber or otherwise dispose of Investment Assets other than in  the ordinary course of business consistent with the Investment Guidelines; (ii) sell, terminate,  transfer, exclusively license, encumber or otherwise dispose of any other material assets of the  Company or Abacus; or (iii) permit the acquisition of any assets that would be material to the  Company or Abacus;   (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 SAP applicable to the  Company or applicable Law;  (f) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation,  or recapitalization of the Company or Abacus;  (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 after  providing Buyer reasonable notice thereof or transfer, reassign or reallocate the employment of  any employee of Seller or any Affiliate of Seller to the Company or Abacus;  (h) establish, amend or modify any Employee Plan, other than as required to comply  with a change in applicable Law;  (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; or (iii) loan or advance any money or  other property to any Employee, except for advancement of expenses in the ordinary course of  business consistent with past practices;  (j) terminate (except in the ordinary course of business consistent with past practice  for performance-related reasons, including fraud or willful misconduct), transfer the employment  of, reassign or reallocate, any Employee;   (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 the ordinary course of business in accordance with the Investment  Guidelines that constitute Investment Assets;  

 

     - 54 -    (l) declare, set aside or pay any dividends or other distributions, or permit any equity  holder of the Company or Abacus to withdraw any equity or capital of the Company or Abacus;    (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 Abacus;  (t) amend or modify any policy form on which Insurance Contracts are written or  approved to be written;   (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 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;   

 

     - 55 -    (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 Abacus 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, Parent shall 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 Abacus and, during such period, Parent shall and shall cause the Company and  Abacus to furnish to Buyer such information concerning the Business, properties, financial  condition, operations and senior personnel of the Company and Abacus 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) Parent shall use 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) Parent  shall notify Buyer promptly if any information is being withheld in reliance on clause (ii) and  Parent shall use commercially reasonable efforts to obtain a waiver of the applicable obligation.    (b) The terms of the Confidentiality Agreement are incorporated herein by reference  and shall continue in full force and effect until the Closing, at which time the obligations under the  Confidentiality Agreement shall automatically terminate.  If for any reason the transactions  contemplated by this Agreement are not consummated, the Confidentiality Agreement shall  continue in full force and effect in accordance with its terms.  From and after the Closing, Buyer  and its Affiliates (including, from and after the Closing, the Company and Abacus), on one hand,  and Parent and its Affiliates, 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 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  

 

     - 56 -    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; Third Party Audit.    (a) Subject to the terms and conditions hereof, each of Buyer, Parent 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  this Agreement.  In connection therewith, Parent and Buyer shall make and cause their respective  Affiliates 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 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 in connection therewith neither party shall be required to  provide the other with any information or materials that are commercially sensitive or the  disclosure of which would violate any of its contractual obligations or obligations with respect to  confidentiality, contain personal information (including personal financial information) about an  

 

     - 57 -    officer, director or control person of such party, are legally privileged or otherwise to the extent  prohibited by applicable Law (collectively, “Sensitive Information”).   (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, (ii) Parent 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 Parent Disclosure Schedule (except to the extent such Filing  is being prepared by Buyer pursuant to the foregoing clause (i)), and (iii) if applicable, Buyer and  Parent 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.  All filing fees payable in connection with the foregoing  shall be borne by the respective filing party incurring such expense.  Buyer and Parent 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, that in connection  therewith neither party shall be required to provide the other with Sensitive Information.  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, that in connection therewith neither party  shall be required to provide the other with Sensitive Information.  Each party 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 (i) non-substantive  scheduling or administrative calls and (ii) accepting any unscheduled telephone call from any  Governmental Authority, or responding to any question during a discussion with any  Governmental Authority that was scheduled for purposes of discussing matters other than the  transactions contemplated hereby), 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  

 

     - 58 -    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, Parent 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); provided, that, in each case, in no event will a party be  obligated to pursue or participate in litigation in connection with the covenants contained in this  Section 5.3 or to respond to any “second request” or other request to provide additional  information.  Notwithstanding anything to the contrary in this Agreement, none of Parent, Seller,  the Company, Abacus, or Buyer shall be obligated to take or refrain from taking any action or to  become subject to any condition, limitation, restriction or requirement, that is imposed by a  Governmental Authority on it 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) Parent shall, and shall cause its Affiliates 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 consummation of the transactions contemplated by this  Agreement and the other Transaction Documents or that is necessary in order to ensure that any  Material Contracts or Reinsurance Contracts will not be terminated as a result of consummating  the transactions contemplated by this Agreement.  Buyer shall, and shall cause its Affiliates to,  cooperate with Parent at Parent’s reasonable request to assist in obtaining such consents or waivers.  Each of Buyer and Parent 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 by Parent and Seller.  In connection therewith, Parent and Seller shall not, and shall cause  the Company and Abacus not to without the prior written consent of Buyer, (a) make any payment  of a consent fee, “profit sharing” payment or other consideration (including increased or  accelerated payments) or concede anything of value, (b) materially amend, supplement or  otherwise modify any such contract or Reinsurance Contracts, or (c) agree or commit to do any of  the foregoing, in each case, for the purposes of giving, obtaining and/or effecting any third-party  consents; provided, however, that Buyer may compel Parent or Seller to cause the Company and  Abacus to take any of the actions referred to in this sentence if such actions are only effective after  the Closing. Parent and Seller shall (and shall cause the Company and Abacus to) keep Buyer  reasonably informed regarding the process of obtaining such third-party consents.  (e) Without in any way limiting the foregoing, as soon as reasonably practicable  following the date hereof, Parent shall (i) obtain the necessary written shareholder consents to  approve the transactions contemplated hereby (the “Shareholder Approval”), (ii) file with the SEC  a preliminary information statement on Schedule 14C with respect to the transactions  

 

     - 59 -    contemplated hereby (the “Preliminary Consent Statement”), and (iii) file with the SEC, and mail  or deliver to the Parent shareholders, a definitive information statement on Schedule 14C with  respect to the transactions contemplated hereby (the “Definitive Consent Statement”). Parent shall  use its reasonable best efforts to have the Preliminary Consent Statement cleared by the staff of  the SEC as promptly as practicable after such filing, and Parent shall thereafter mail or deliver the  Definitive Consent Statement to the Parent shareholders at least twenty (20) calendar days prior to  the anticipated date of Closing. Buyer shall furnish all information concerning Buyer and its  Subsidiaries for inclusion in the Preliminary Consent Statement and Definitive Consent Statement  as may be reasonably requested by Parent, and shall have the right to review in advance, and, to  the extent practicable, to provide comments on, the Preliminary Consent Statement prior to its  filing and the Definitive Consent Statement prior to its and mailing to Parent shareholders.  (f) Prior to Closing Parent and Seller shall and shall cause the Company to maintain  sufficient personnel to perform all claims management functions of the Company in conformity  with industry standards and quality so as to minimize any policyholder complaints and errors.      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 party 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 Parent 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 Parent 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.    5.5 Interim Financial Statements; Investment Reports.  (a) From the date hereof until the Closing Date, Parent shall deliver to Buyer true and  complete copies of the unaudited and audited financial statements of the Company and Abacus  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, Parent will forward to Buyer copies of  all monthly or quarterly investment reports prepared by or for the Company regarding the  Investment Assets, in each case within five (5) Business Days following creation or receipt of such  reports by the Company.  At least three (3) Business Days prior to the Closing Date, Parent shall  deliver to Buyer a true, complete and correct list of all Investment Assets of the Company and  Abacus 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 Parent 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 Parent at least five (5)  Business Days prior to the Closing Date.  

 

     - 60 -    5.6 Public Announcements. Buyer and Parent 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, each party shall consult  with and obtain the approval of the other 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 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, Parent and Buyer shall, and shall  cause their respective Affiliates to, use reasonable best 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.  Parent and  Seller further acknowledge and agree that Buyer will engage in TPA Audits following Closing.    5.8 Delivery of Books and Records. At the Closing, Parent shall cause all Books and  Records in the possession of or reasonably available to Parent or any of Parent’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, to the extent not located at  an office of the Company or Abacus.  5.9 Access to Books and Records.  (a) Until the seventh (7th) anniversary of the Closing (provided, that Buyer shall give  thirty (30) days’ notice to Parent prior to destroying any records to permit Parent, at its expense,  to examine, duplicate or repossess such books and records), Buyer shall afford promptly to Parent  and its Representatives reasonable access to the books, records, officers, employees, auditors and  other advisors of the Company and Abacus, and provide information with respect to the Company  Abacus in a readily accessible form (including financial information in a form consistent with the  Company’s and Abacus’ historical practice for the preparation of such financial information), to  the extent related to periods prior to the Closing and to the extent reasonably required by Parent  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 Parent and Parent’s Representatives, to furnish  such books and records and information and make available such officers, employees, auditors and  other advisors of the Company and Abacus; provided, that such access does not unreasonably  interfere with the conduct of the business of Buyer, the Company or Abacus, and that Parent shall  reimburse Buyer promptly for all reasonable and documented out-of-pocket costs and expenses  incurred in connection with any such request.  (b) Until the seventh (7th) anniversary of the Closing (provided, that Parent shall give  thirty (30) days’ notice to Buyer prior to destroying any records to permit Buyer, at its expense, to  

 

     - 61 -    examine, duplicate or repossess such books and records), Parent shall, and shall cause Parent’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 Abacus, and  provide information with respect to the Company and Abacus in a readily accessible form  (including financial information in a form consistent with Parent’s or such Affiliate’s historical  practice for the preparation of such financial information), to the extent related to periods prior to  the Closing and 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 reporting, regulatory and accounting matters, and Parent shall, and  shall cause its Affiliates to, reasonably cooperate with Buyer and Buyer’s 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 Abacus; provided, that such access  does not unreasonably interfere with the conduct of the business of Parent or Parent’s Affiliates  and that Buyer shall reimburse Parent promptly for all reasonable and documented out-of-pocket  costs and expenses incurred in connection with any such request.    5.10 Non-Competition; Non-Solicitation.  (a) For a period of five (5) years following the Closing Date, Parent shall not, and shall  cause its Affiliates not to, engage in the business of targeting for the sale or administration of any  insurance or financial service product to any public sector employees within the United States or  any customer of the Company as of the date hereof or at any time in the twelve (12) months  preceding the date hereof (“Competing Business”) directly or indirectly through any producer or  otherwise.  (b) Following the Closing Date, Parent shall not, and shall cause its 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 Parent 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 Parent  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 Abacus 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 Parent from engaging,  or require Parent 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 Parent or such Affiliate of Parent: (A) does not have the right to  designate a majority of the members of the board of directors or other governing body of  

 

     - 62 -    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;   (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) Parent or Parent’s applicable Affiliate shall have disposed of the relevant portion  of such Acquired Business that engages in the Competing Business or (B) Parent or  Parent’s applicable Affiliate 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 or;  (iii) Servicing business that represents renewals of existing policies offered  through Specialty Health.  (d) Except as set forth in Section 5.10(d) of the Parent Disclosure Schedule, for a period  of five (5) years following the Closing Date, without the prior written consent of Buyer, Parent  shall not, and shall cause its Affiliates to not, solicit for employment, employ or contract for the  services of any Employee; provided, that nothing in this Section 5.10(d) shall prohibit Parent 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 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  for a period of at least twelve (12) months.  (e) For the avoidance of doubt, notwithstanding the terms of this Section 5.10, the  restrictions set forth in this Section 5.10 will not apply to PetPartners, Inc. or Iguana Capital, Inc.  following closing of the transactions contemplated by the IAIC Reinsurance Agreement and  related stock purchase agreement because such entities will not be Affiliates of the Company.    5.11 D&O Liabilities.  Prior to Closing, Buyer shall use reasonable best efforts to have  available (subject to the payment of premium) director and officer and director “tail coverage”  insurance for the Company and Abacus with respect to the period prior to Closing.  Prior to or at  the Closing, Company shall directly pay the insurance company for all costs of securing such  policy.  5.12 Employee Matters.    (a) Employees.  (i) Continuing Employees.  No earlier than five (5) Business Days prior to the  Closing Date, Parent or Seller shall provide as updated Employee list as of such day with all  information required to be provided under Section 3.17(a) of the Parent Disclosure Schedule.  For  the period of at least six (6) months from and after the Closing Date, Buyer shall provide each  

 

     - 63 -    Employee (other than Excluded Employees) who continues in employment 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.  Parent 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  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.  (ii) Prior to, or as of the Closing, Parent shall cause the Company and Abacus  to pay its Employees or accrue on its financial statements (including for the Estimated Closing  Statement and Closing Statement) all compensation accrued but unpaid as of the Closing Date  with respect to the Employees (including, for the avoidance of doubt the Excluded Employees),  including wages, business expense, and other reimbursements and all severance payments.  (iii) Terminating Employees.  Parent shall cause the Company to terminate the  employment of those Employees identified in Section 5.12(a)(iii) of the Parent Disclosure  Schedule.  Parent shall reimburse the Company for any amounts paid by the Company in respect  of any severance pay or benefits provided to such terminating employees including, without  limitation, any payroll taxes paid by the Company with respect to such severance pay or benefits.    (iv) Employment Agreements.  Parent shall and shall cause the Company to  cooperate with Buyer in negotiating new employment arrangements or amendments to existing  employment agreements with respect to certain Continuing Employees of the Company who are  subject to employment agreements with the Company, including, without limitation, providing  reasonable access to such Employees.  (b) Company 401(k) Plan.  Following the Closing, Parent 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 a 401(k) plan sponsored by Buyer or one of  its Affiliates of an eligible rollover distribution from a 401(k) plan sponsored or maintained by the  Company, Abacus or an ERISA Affiliate for the benefit of the Employees that includes promissory  notes reflecting such Continuing Employee’s then outstanding participant loans under a 401(k)  plan sponsored or maintained by the Company, Abacus or an ERISA Affiliate for the benefit of  the Employees.  (c) Employee Benefit Plans and Past Service Credit.  Effective no later than  immediately prior to the Closing Date, Parent shall take all actions necessary and appropriate to  terminate the participation of the Continuing Employees in any 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  

 

     - 64 -    plan), provided, however, such service shall not be recognized to the extent that such recognition  would result in a duplication of benefits.  (d) Accrued PTO.  To the extent reflected on the Estimated Closing Statement and  Closing Statement, Buyer shall or shall cause the Company or Abacus 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 Abacus as in effect  from time to time following the Closing Date.  (e) COBRA Coverage. Parent will or will cause an Affiliate of Parent to retain liability  for any required continuation coverage pursuant to Code §4980B (“COBRA”) for any 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 Abacus to provide, COBRA coverage for the  Continuing Employees and their qualified beneficiaries with respect to “qualifying events”  occurring on or after the Closing Date.  5.13 Release.  If, but only if, the Closing occurs, then Parent, Seller and their Affiliates  hereby forever, absolutely, unconditionally and irrevocably release and discharge the Company,  Abacus, Buyer, and Buyer’s Affiliates from all obligations and liabilities of the Company or  Abacus to Parent, Seller or any of its Affiliates, all agreements and understandings of the Company  or Abacus involving Parent, Seller or any of their Affiliates, and all rights, claims and causes of  action (whether at law or in equity and whether or not currently known to exist) of Parent, Seller  or any of their Affiliates against the Company or Abacus 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 Parent, Seller or any of their Affiliates, and the right to advancement and  reimbursement of expenses, pursuant to the organizational documents of the Company or Abacus;  provided, however, that nothing in this Section 5.13 waives, releases or restricts in any manner  whatsoever any of Parent’s or Seller’s rights arising out of this Agreement or any of the  Transaction Documents.  5.14 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, Parent and Seller shall not, and shall cause their Affiliates  and its and their respective 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.  

 

     - 65 -    (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 Seller, the Company or Abacus, including any security convertible into or  exercisable or exchangeable for, any shares or equity interests or other security of Seller, the  Company or Abacus, 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 Seller, the Company or Abacus.  (c) Parent and Seller acknowledge and agree 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, Parent and Seller agree that if any portion of this Section 5.14 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 Parent, Seller or their  Affiliates from engaging in the activities proscribed by this Section 5.14, in each case without any  requirement to post a bond for such purpose.  5.15 Intercompany Agreements  (a) Parent shall cause the termination of all Intercompany Agreements on or prior to  the Closing Date.  Parent shall cause all intercompany balances between Parent or any Affiliate of  Parent (other than the Company or Abacus), or any of their respective directors, officers or  managers, on one hand, and the Company or Abacus, 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  Abacus shall have no further liability for any intercompany balances.  Parent shall, and shall use  commercially reasonable efforts to cause the parties to any agreement entered into by (i) a party  unaffiliated with Parent, (ii) the Company or Abacus and (iii) Parent or any Affiliate of Parent  other than the Company or Abacus (including SSL), to enter into one or more new agreements, or  an amendment or assignment of such agreement, such that only the portions of such agreements  that are related to the Company or Abacus will be agreements of the Company or Abacus, as  applicable, following the Closing, and no other Affiliates of Parent will be a party to such  agreements following Closing.  (b) Effective at the time of the Closing, with respect to occurrences taking place from  and after the Closing Date, Parent shall cause the Company and Abacus to cease to be insured by  any insurance policies of Parent, Seller or any of their Affiliates (other than any policies held  directly by the Company or Abacus) or by any of their self-insured programs.  With respect to  events or circumstances relating to the Company or Abacus that occurred or existed prior to the  Closing Date that are covered by occurrence-based third-party liability insurance policies of  Parent, Seller or their Affiliates (other than the Company or Abacus) and any workers’  compensation insurance policies or comparable workers’ compensation self-insurance programs  sponsored by Parent, Seller or their Affiliates and that apply to the locations at which the Company  or Abacus operates their respective businesses, Buyer may, and may cause the Company and  Abacus to, make claims under such policies and programs. Parent and Seller shall provide  reasonable cooperation and assistance in the pursuit of such claims.  With respect to any open  claims against the insurance policies of Parent and Seller or their Affiliates (other than the  Company or Abacus) relating to losses or damages suffered by the Company or Abacus prior to  

 

     - 66 -    the Closing, Parent or Seller shall reasonably assist and cooperate with Buyer in the pursuit and  collection of such claims and remit any net proceeds they realize from such claims to Buyer upon  full and final settlement of such claims.  5.16 Bank Accounts.  Prior to the Closing, Parent 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 Abacus to the  individuals designated in writing by Buyer.  5.17 Investment Assets.  From the date hereof until the Closing, Parent 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 Abacus 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 Abacus  during the preceding month; (c) a list of the Investment Assets acquired by the Company or Abacus  that have been acquired in the preceding month; and (d) a list of all Investment Assets of the  Company or Abacus 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.  5.18 Transaction Expenses.  Parent and Seller shall, or shall cause the Company and  Abacus to, pay all Transaction Expenses prior to the Closing.  5.19 PolicyPro Software.  Prior to the Closing, Parent and Seller shall, and shall cause  the Company and Abacus to, (a) permit Buyer, Buyer’s Affiliates and their respective  Representatives to conduct a full due diligence review of the PolicyPro Software (including the  source code and object code thereof), the Software Agreements and the Developer, (b) cooperate  with Buyer, its Affiliates and their respective Representatives in connection therewith, and (c) at  the request of Buyer, arrange for one or more meetings, and otherwise facilitate continuing  discussions, between the Developer on one hand, and Buyer, its Affiliates and their respective  Representatives on the other.   5.20 Reinsurance Agreements.    (a) Following the date hereof and prior to Closing, Parent and Seller shall  provide to Buyer a copy of (x) the draft form of the “Reinsurance Agreement” (as such term is  defined in the SSL Stock Purchase Agreement) between SSL and the Company with respect to  certain “Excluded Business” (as such term is defined in the SSL Stock Purchase Agreement), and  related trust agreement, administrative services agreement, and any other related agreement thereto  (collectively, the “SSL Reinsurance Agreement”), if any, and (y) the draft form of reinsurance  agreement between Independence American Insurance Company, as ceding company, and the  Company, as reinsurer, as contemplated by that certain Stock Purchase Agreement, dated as of  May 17, 2021, among Parent, AMIC Holdings, Inc. and Iguana Capital, Inc., and related trust  agreement, security account control agreement, administrative services agreement, and any other  

 

     - 67 -    related agreement thereto (the “IAIC Reinsurance Agreement).  To the extent not executed prior  to the date hereof, Parent and Seller shall consider in good faith any reasonable comments of Buyer   in respect of the SSL Reinsurance Agreement, if any, or the IAIC Reinsurance Agreement prior to  execution thereof, and if either the SSL Reinsurance Agreement or the IAIC Reinsurance  Agreement is entered into in a form that, in Buyer’s reasonable opinion, materially alters the  expected economic impacts of such transaction on Buyer and its Affiliates (including the  Company), then the parties shall use their reasonable best efforts to amend this Agreement  (including Annex F) to put Buyer and its Affiliates (including the Company) in the economic  position expected by Buyer.  (b) Notwithstanding anything herein to the contrary, if either the SSL  Reinsurance Agreement, or the IAIC Reinsurance Agreement or both agreements have been  entered into with the Company on or prior to the Closing Date, Buyer and the Company shall  comply in all material respects with the applicable reinsurance treaties, but will otherwise have no  obligation to seek recourse against SSL or IAIC or their respective Affiliates with respect to  Reinsurance Transaction Excluded Liabilities and may seek recourse directly from Parent and  Seller pursuant to Section 9.2(a).  (c) The amount of Reinsured Business Statutory Earnings, positive or negative,  will be settled on a quarterly basis in accordance with Annex F.    5.21 Voting Agreement.  Between the date hereof and the Closing, Parent shall enforce  the terms of the Voting Agreement and will not amend, modify, supplement or terminate the  Voting Agreement without the prior written consent of Buyer.  5.22 Escrow Agreement. For each of the three (3) full calendar years following the  calendar year in which the Closing Date occurs (provided that if the Closing occurs on the first  (1st) Business Day of January 2022, such obligation shall commence with calendar year 2022)  Parent shall provide to Buyer a copy of Parent’s audited financial statements for such calendar  year.  Parent shall deliver the audited financial statements for each such calendar year no later than  April 30th of the subsequent calendar year (each, a “Audited Financials Delivery Date”).  If (i)  Parent fails to deliver its audited financial statements by the date that is ten (10) Business Days  following the applicable Audited Financials Delivery Date, or (ii) or if any audited financial  statements delivered in accordance with this Section 5.22 reflect total net worth of Parent  (determined using only those assets of Parent consisting of cash and marketable securities) of $100  million or less, then in each case Parent shall establish, within thirty (30) days following the  applicable Audited Financials Delivery Date, an escrow account in the name of Parent with  escrowed funds in the amount of $5 million, which escrowed funds shall be held by the escrow  agent as a source of funds for amounts owing to Buyer under Article IX.  Any interest accruing on  such escrowed funds will be for the account of Parent.  Each of Buyer and Seller shall cooperate  to give the escrow agent timely instructions to implement any distributions of such escrowed funds  for amounts owing to Buyer under Article IX.  5.23 Transition Services Agreement.  From the date hereof through the Closing, each of  the Buyer, Seller and Parent shall cooperate and negotiate with each other in good faith and use  reasonable best efforts to determine the form, terms, conditions and provisions of the Transition  Services Agreement for execution and delivery at Closing, including such terms providing for the  

 

     - 68 -    provision of transitional services by Parent or its Affiliates as required or reasonably requested by  Buyer for a period of time following the Closing as required or reasonably requested by Buyer;  provided that the fees chargeable for any individual transitional services shall be limited to Parent’s  reasonable out-of-pocket expenses and at its actual cost without allocation of  overhead expenses  or mark-up and agreed to by Buyer.  ARTICLE VI.  CONDITIONS PRECEDENT  6.1 Conditions to Each Party’s Obligations.  The obligations of Buyer, Parent 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 Parent  and Seller 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) each of the other representations and warranties of Parent and  Seller 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. Parent and Seller shall have performed and complied  in all material respects with each covenant and agreement required by this Agreement to be  performed or complied with by it on or prior to the Closing Date;  (c) Closing Deliveries.  Parent and 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);  

 

     - 69 -    (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 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 Abacus 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 Parent 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;  (f) Material Adverse Effect.  Since the date hereof, there shall not have been any  Company Material Adverse Effect;  (g) Third Party Consents.  The parties shall have received the consents set forth on  Annex E;  (h) Company RBC.  The Company shall have an RBC Ratio as of the end of the  calendar quarter immediately prior to the anticipated Closing Date, and as of the anticipated  Closing Date, equal to or greater than 807%;   (i) Reinsurance Agreements.  Unless neither the SSL Reinsurance Agreement nor the  IAIC Reinsurance Agreement is required to be entered into with the Company, each such  agreement shall have been entered into in a form reasonably acceptable to Buyer.    (j) Parent Shareholder Approval. Approval of the Parent Voting Matters shall have  been obtained, and the Definitive Consent Statement shall have been mailed to shareholders of  Parent in accordance with SEC rules, and all waiting periods required under applicable Law with  respect thereto, including the expiration of any applicable Schedule 14C information statement  notice period, shall have expired or been terminated, without any condition.  6.3 Conditions to Obligations of Parent and Seller.  The obligations of Parent 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 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 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  same effect as if made on and as of the Closing Date (other than such representations and  

 

     - 70 -    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 each covenant and agreement 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 Parent  and Seller each of the documents required to be delivered pursuant to Section 2.3(b);   (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 Shares or any other material transaction contemplated by the Transaction  Documents, declare unlawful the transactions contemplated by this Agreement, or cause such  transactions to be rescinded, and no Order shall have been issued by any Governmental Authority  that has any of the foregoing effects; and  (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 Parent 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, on the one hand, and Parent or Seller, on the  other hand;  (b) by either Buyer, on the one hand, or Parent and Seller, on the other hand, 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 any party seeking to  terminate this Agreement.  “Outside Date” means April 14, 2022; provided, however, that the  Outside Date shall be extended to April 14, 2022 automatically if, prior to April 14, 2022, Buyer  has satisfied all conditions to Closing set forth in Section 6.3 other than obtaining approval from  the Wisconsin Office of the Commissioner of Insurance as contemplated by Section 5.3;  (c) by either Buyer, on the one hand, or Parent and Seller, on the other hand, 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,  

 

     - 71 -    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 Buyer, on the one hand, or Parent and Seller, on the other hand (but only  so long any party seeking to terminate 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 Buyer, in the case  of a termination by Parent and Seller, or by Parent or Seller, in the case of a termination by Buyer,  would cause the failure of any mutual condition to 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 or is not cured within twenty (20) calendar days after the breaching party receives written  notice from the non-breaching party that the non-breaching party intends to terminate this  Agreement pursuant to this Section 7.1(d).  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, Article IX and Article X shall survive termination hereof pursuant to Section 7.1.   Parent and Seller agree that the provisions of this Section 7.2 regarding the payment of a  termination fee and reimbursement of Buyer Expenses are an integral part of the transactions  contemplated by this Agreement and that, without such provisions, Buyer would not have entered  into this Agreement.      ARTICLE VIII.  TAX MATTERS  The following provisions shall govern the allocation of responsibility as between Buyer and Parent  for certain Tax matters following the Closing Date:  8.1 Responsibility for Filing Tax Returns.    (a) Filing of Tax Returns.  Parent shall prepare or cause to be prepared and file or cause  to be filed (i) all Tax Returns that include the Company or Abacus 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 Parent, the Company and Abacus 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 Abacus.  All Tax Returns that include Pre-Closing Tax Periods shall  be prepared in a manner consistent with the Company’s and Abacus’ past practice and custom  unless otherwise required by applicable Law.   (b) Review Rights.  Buyer shall provide Parent 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.  Parent 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.   

 

     - 72 -    8.2 Straddle Periods.  For purposes of this Agreement, whenever it is necessary to  determine the liability for Taxes of the Company and Abacus for any Straddle Period, the  determination of the Taxes of the Company and Abacus 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 Abacus 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 Abacus 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 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 Abacus 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, Abacus or Parent in respect  of any Pre-Closing Tax Period or increasing the liability of Parent under this Agreement.  (b) Buyer covenants that without the prior written consent of Parent 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, Abacus or Parent in respect of any Pre-Closing Tax Period or increasing  the liability of Parent under this Agreement.   (c) Parent 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, Abacus 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 Parent, agree to the waiver or any extension of the statute of limitations relating to any  Taxes of the Company or Abacus 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 Abacus shall be for the account of Parent. Buyer shall pay or cause  to be paid any such refund to Parent 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 Abacus shall be  

 

     - 73 -    for the account of Buyer.  Parent 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 Parent or its Subsidiaries attributable to such refund.  (f) Parent shall, and shall cause Seller, the Company and its Affiliates to, enter  into a written agreement to terminate any Tax Agreement between the Company and Parent at or  prior to Closing and, for the avoidance of doubt, such written agreement shall specifically  terminate any provision of the Tax Agreement that purports to have continued effect after the  termination of such Tax Agreement.  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  Abacus (other than Taxes imposed under any U.S. federal, state and local consolidated, affiliated,  combined or similar Tax Returns that include Parent, the Company and Abacus) for any Tax period  ending on or before the Closing Date (a “Tax Claim”), Buyer shall give written notice to Parent of  such claim; provided, however, that the failure to give such notice shall not relieve Parent from  any obligation under this Agreement unless Parent is actually harmed by such failure.  Parent shall  have the right to defend any Tax Claim for which Parent would have an indemnification obligation  hereunder so long as (i) Parent gives written notice to Buyer within fifteen (15) Business Days  after Buyer has given written notice of the Tax Claim, and (ii) Parent 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 Parent does not assume the defense of any Tax Claim  (including if Parent does not deliver the notice required by this Section 8.4), Buyer may defend  such Tax Claim at the sole cost and expense of Parent.  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 Parent (such consent not to be unreasonably withheld, conditioned or delayed).   If Parent conducts the defense of a Tax Claim, Parent will keep Buyer reasonably informed as to  the status of such Tax Claim, including all compromise or settlement offers.  Parent 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 Parent 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  

 

     - 74 -    Company or Abacus shall be kept confidential by the parties hereto and their respective legal and  Tax advisors.  8.6 Transfer Taxes; Withholding Taxes.  All Transfer Taxes incurred in connection with  the transactions contemplated hereby shall be borne by Parent.  Notwithstanding anything to the  contrary contained in this Agreement, Buyer and the Company (following Closing) shall be  entitled to deduct and withhold from any payment payable pursuant to this Agreement such  amounts as may be required to be deducted and withheld under the Code, or under any provision  Tax Law. Buyer, Parent and Seller shall cooperate, and Parent and Seller shall cause the Company  to cooperate, as reasonably requested by another party to establish any applicable exemption or  reduction to such deduction or withholding, including by providing any applicable withholding  forms or certificates. Amounts deducted and withheld pursuant to this Agreement will be treated  as having been paid to the Person in respect of which such deduction or withholding was made.  8.7 Section 338(h)(10) Election.    (a) Buyer and Parent may make a joint election under Section 338(h)(10) of the  Code and comparable provisions of state law with respect to the Company, Abacus, or both (a  “Section 338(h)(10) Election”) and if elected will 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 and Abacus, as applicable.   (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 Parent a written notice setting forth (with  reasonable specificity) Buyer’s good faith calculation of the aggregate deemed sales price (ADSP)  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 Abacus,  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, Parent shall deliver to Buyer written notice indicating  whether Parent disagrees with the Buyer’s Allocation.  If Parent agrees with the Buyer’s  Allocation, or if Parent fails to deliver such written notice within thirty (30) days the Buyer’s  Allocation shall constitute the agreed-upon Allocation (the “Agreed Allocation”).  If Parent  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 Parent  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.  

 

     - 75 -    ARTICLE IX.  SURVIVAL AND INDEMNIFICATION  9.1 Survival of Representations and Warranties.  All representations and warranties  made by Parent, Seller 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 survive until sixty (60) days  after the expiration of the applicable statute of limitations, and the representations and warranties  set forth in Sections 3.1(a) (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) (such representations and warranties, together with the  representations and warranties set forth in Section 3.19 (o), (p) and (q) (for purposes of it being a  Fundamental Representation only, the “Fundamental Representations”) shall survive the Closing  for the maximum period of time allowed under Law.  The covenants or other agreements made by  Parent, Seller 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 twenty-four (24)  months from the Closing Date.  Each covenant or other agreement made by Parent, Seller or Buyer  which by its terms contemplate performance after the Closing Date shall survive the Closing  indefinitely until sixty (60) days after it is fully performed.  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.  9.2 Indemnification.    (a) Subject to the limitations set forth in this Article IX, Parent and Seller shall jointly  and severally indemnify and hold harmless Buyer, its Affiliates (including the Company and  Abacus) 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 Parent or Seller contained in this  Agreement or in any certificate furnished by Parent or Seller pursuant to this Agreement (other  than those with respect to any Fundamental Representation by Parent or Seller);   (ii) any breach of any representation or warranty of any Fundamental Representation  of Parent or Seller made in this Agreement or in any certificate furnished by Parent or Seller  pursuant to this Agreement with respect thereto;  (iii) any breach or nonfulfillment by Parent or Seller of its covenants or agreements  contained in this Agreement or any other Transaction Document;  (iv) all remedial costs and other Liabilities incurred by Buyer and any of its Affiliates  during the two year period following Closing relating to the correction of any issue noted in the  TPA Audits which related to any period on or prior to the Closing Date or replacement of any third  

 

     - 76 -    party administrator performing services for the Company or Abacus on or prior to the Closing  Date;  (v) any LA County Policies Excess Loss during the twelve months following the  Closing Date; and  (vi) any Excluded Liabilities.   (b) Subject to the limitations set forth in this Article IX, Buyer shall indemnify and  hold harmless Parent, its Affiliates and their respective Representatives, successors and permitted  assigns (the “Parent 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);   (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.    (c) 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 Section 9.2(a)(i) (in the case of Parent) or Section 9.2(b)(i) (in the case of  Buyer) (i) unless and until the aggregate amount of all Indemnifiable Losses of the Indemnitees  under such Section 9.2(a)(i) or Section 9.2(b)(i), as the case may be, exceeds one million two  hundred ninety thousand dollars ($1,290,000.00) (the “Deductible”), at which point such  Indemnitor shall be liable to its respective Indemnitees for the value of the Indemnitee’s claims  under Section 9.2(a)(i) or Section 9.2(b)(i), as the case may be, for amounts in excess of the  Deductible, subject to the limitations set forth in this Article IX.  Except in the case of fraud, the  maximum aggregate liability of Parent for any and all Indemnifiable Losses under Section 9.2(a)(i)  shall be a dollar amount equal to (x) twelve and one-half percent (12.5%), multiplied by (y) the  Base Price.  Except in the case of fraud, the maximum aggregate liability of Buyer for any and all  Indemnifiable Losses under Section 9.2(b)(i), shall be a dollar amount equal to nineteen million  three hundred fifty thousand dollars ($19,350,000).   (b) Except in the case of fraud, the maximum aggregate liability of Parent, on the one  hand, and Buyer on the other hand, to their respective Indemnitees for any and all Indemnifiable  

 

     - 77 -    Losses under Section 9.2(a)(ii), in the case of Parent, or Section 9.2(b)(ii), in the case of Buyer,  shall be an amount equal to the Purchase Price.  (c) The representations, warranties and covenants of Parent and Seller, 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 Parent and Seller set forth herein notwithstanding) (i)  any investigation made by or on behalf of any of the Buyer Indemnified Persons (including any of  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.  (d) 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.  (e) Any claim for indemnification by any of the Buyer Indemnified Parties under  Section 9.2(a)(iv) or under Section 9.2(a)(vi) (solely to the extent such claim relates to an Excluded  Liability for a Security Breach as contemplated by clause (iv) in the definition of “Excluded  Liability”) must be made on or prior to the third anniversary of the Closing Date.  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), reasonably foreseeable  lost profits, diminution of value and any claim properly paid to a third party in connection with a  Third Party Claim, in each case, whether known or unknown, whether asserted or unasserted, and  whether accrued or unaccrued.  (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  prompt written notice (but in no event later than thirty (30) days after becoming aware) thereof  

 

     - 78 -    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 potential 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  

 

     - 79 -    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.  9.8 Exclusive Remedy.  Notwithstanding Section 10.10, the parties acknowledge and  agree that their sole and exclusive remedy with respect to any and all claims (other than claims  arising from fraud on the part of a party hereto in connection with the transactions contemplated  by this Agreement) for any breach of any representation, warranty, covenant, agreement or  obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be  pursuant to the indemnification provisions set forth in this Section 9.  In furtherance of the  foregoing, each party hereby waives, to the fullest extent permitted under Law, any and all rights,  claims and causes of action for any breach of any representation, warranty, covenant, agreement  or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may  have against the other parties hereto and their affiliates and each of their respective representatives  arising under or based upon any Law, except pursuant to the indemnification provisions set forth  in this Section 9.  Nothing in this Section 9.8 shall limit (i) any Person’s right to seek and obtain  any equitable relief to which any Person shall be entitled under Section 10.5; or (ii) a party’s right  to seek any remedy on account of fraud by any party hereto.  For purposes of this Agreement,  “fraud” means, with respect to any Person, the knowing and intentional misrepresentation of  material facts that constitutes actual common law fraud under the Law of the State of Delaware.    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.  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  

 

     - 80 -    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, EVP & 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     E-mail:    lingling@eversheds-sutherland.com    (b) If to Parent or Seller:     Independence Holding Company  96 Cummings Point Road  Stanford, CT 06902  Attn:  Theresa A. Herbert  E-mail: therbert@ihc-geneve.com       with a copy (which shall not constitute notice) to:       Quarles & Brady LLP  33 East Main Street, Suite 900  Madison, WI 53703  Attn:  Mark T. Ehrmann  E-mail: mark.ehrmann@quarles.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.  

 

     - 81 -    10.5 Specific Performance. Each of Parent and Seller acknowledges 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 Parent or Seller may not be adequately compensated by monetary  damages.  Accordingly, each of Parent and Seller agrees 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 Parent and Seller 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 Parent and Seller may be entitled (subject to the limitations  herein), at Law or in equity, Parent and Seller 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.  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 Parent 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 readily apparent from the text or information  disclosed.  Disclosure of any item in the Buyer Disclosure Schedule or the Parent 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.  Other than references to agreements or documents in the Parent  Disclosure Schedule or Buyer Disclosure Schedule, any reference herein to any applicable Law,  agreement (including this Agreement) or document, or any section thereof, shall, unless otherwise  expressly provided, be a reference to such applicable Law, agreement, document or section as  amended, modified or supplemented (including any successor section) and in effect from time to  time.  References to “made available,” “provided to” or “delivered to” (or words of similar import)  in respect of information made available (or words of similar import) by Parent or Seller means  

 

     - 82 -    that such information has been uploaded, not later than three (3) Business Days prior to the date  of this Agreement, to the virtual data room maintained by box.com established in connection with  the transaction contemplated under this Agreement and made available in electronic form to Buyer  and its Representatives,   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, the Confidentiality  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 Parent  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, this Agreement and the rights and  obligations hereunder may not be assigned without the prior written consent of each of the parties  hereto, except that Buyer may assign any and all of its rights or obligations under this Agreement  or any other Transaction Document to any of its Affiliates.  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; provided, that Buyer will remain liable for performing  the obligations under this Agreement and the other Transaction Documents.  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.  

 

     - 83 -    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, a “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.  10.13 Certain Limitations.    (a) Notwithstanding anything to the contrary contained herein, the other Transaction  Documents, the Parent Disclosure Schedule or any of the Schedules, Annexes or Exhibits hereto  or thereto, Buyer acknowledges and agrees that neither Parent nor any of its 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 Parent or Seller 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  

 

     - 84 -    Exhibits hereto or thereto, each of Parent and Seller acknowledges and agrees that neither Buyer  nor any of its Affiliates, nor any Representative of any of them, makes or has made, and Seller has  not relied on, any representation or warranty to Parent or Seller, 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.      [Remainder of this page intentionally left blank]    

 

   [Signature Page to Stock 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: Marita Zuraitis  Title: President & Chief Executive Officer        INDEPENDENCE HOLDING COMPANY      By:  ____________________________________  Name:   Title:         INDEPENDENCE CAPITAL CORP.      By:  ____________________________________  Name:   Title:Exhibit 4.4

 

WARRANT AGREEMENT

 

This
WARRANT AGREEMENT (this “Agreement”) is made as of _________, 2021 between Legato Merger Corp. II, a Delaware
corporation, with offices at 777 Third Avenue, 37th Floor, New York, New York 10017 (“Company”), and Continental Stock
Transfer & Trust Company, a New York limited purpose trust company, with offices at 1 State Street, New York, New York 10004,
as warrant agent (“Warrant Agent”).

 

WHEREAS,
the Company is engaged in a public offering (“Public Offering”) of up to 23,000,000 units (including 3,000,000 units
which may be issued pursuant to an overallotment option granted to the underwriters of the Public Offering), each unit (“Unit”)
comprised of one share of common stock of the Company, par value $.0001 per share (“Common Stock”), and one warrant,
where each warrant entitles the holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as
described herein, and, in connection therewith, will issue and deliver up to 11,500,000 warrants (the “Public Warrants”)
to the public investors in connection with the Public Offering; and

 

WHEREAS,
the Company has filed with the Securities and Exchange Commission (the “SEC”) registration statements on Form S-1,
File No. 333-_____ (the “Registration Statement”), and a prospectus (“Prospectus”), for the
registration, under the Securities Act of 1933, as amended (“Act”) of, among other securities, the Public Warrants;
and

 

WHEREAS,
the Company has received binding commitments (“Subscription Agreements”) from the Company’s initial stockholders
and EarlyBirdCapital, Inc. (“Representative”) to purchase up to an aggregate of 535,000 Units (including 52,500 Units
which may be purchased if the underwriters’ overallotment option is exercised in full) which will include up to an aggregate of
267,500 Warrants (the “Private Warrants”) upon consummation of the Public Offering; and

 

WHEREAS,
the Company may issue up to an additional 150,000 Units which will include up to an additional 150,000 Warrants (“Working Capital
Warrants”) in satisfaction of certain working capital loans made by the Company’s officers, directors, initial stockholders
and their affiliates; and

 

WHEREAS,
following consummation of the Public Offering, the Company may issue additional warrants (“Post IPO Warrants” and together
with the Public Warrants, Private Warrants, and Working Capital Warrants, the “Warrants”) in connection with, or following
the consummation by the Company of, a Business Combination (defined below); and

 

WHEREAS,
the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with
the issuance, registration, transfer, exchange, redemption, and exercise of the Warrants; and

 

WHEREAS,
the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and
the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS,
all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding, and legal obligations of the Company, and
to authorize the execution and delivery of this Agreement.

 

NOW,
THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

1. Appointment
of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant
Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.

 

     

     

    

 

2. Warrants.

 

2.1. Form
of Warrant. Each Warrant shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions
of which are incorporated herein and shall be signed by, or bear the facsimile signature of, the Chairman of the Board of Directors or
Chief Executive Officer and Treasurer, Secretary or Assistant Secretary of the Company and shall bear a facsimile of the Company’s
seal. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in
which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased
to be such at the date of issuance.

 

2.2. Uncertificated
Warrants. Notwithstanding anything herein to the contrary, any Warrant, or portion thereof, may be issued as part of, and be represented
by, a Unit, and any Warrant may be issued in uncertificated or book-entry form through the Warrant Agent and/or the facilities of The
Depository Trust Company (the “Depositary”) or other book-entry depositary system, in each case as determined by the
Board of Directors of the Company or by an authorized committee thereof. Any Warrant so issued shall have the same terms, force and effect
as a certificated Warrant that has been duly countersigned by the Warrant Agent in accordance with the terms of this Agreement.

 

2.3. Effect
of Countersignature. Except with respect to uncertificated Warrants as described above, unless and until countersigned by the Warrant
Agent pursuant to this Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

 

2.4. Registration.

 

2.4.1. Warrant
Register. The Warrant Agent shall maintain books (“Warrant Register”) for the registration of original issuance
and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register
the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered
to the Warrant Agent by the Company.

 

2.4.2. Registered
Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat
the person in whose name such Warrant is then registered in the Warrant Register (“registered holder”) as the absolute
owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant
certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes,
and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

2.5. Detachability
of Warrants. The securities comprising the Units will not be separately transferable until the 90th day following
the date of the Prospectus or, if such 90th day is not on a day, other than a Saturday, Sunday or federal holiday, on
which banks in New York City are generally open for normal business (a “Business Day”), then on the immediately succeeding
Business Day following such date, or earlier with the consent of EarlyBirdCapital, Inc., the representative of the underwriters of the
Public Offering (“Representative”), but in no event will the Representative allow separate trading of the securities
comprising the Units until (i) the Company has filed a Current Report on Form 8-K which includes an audited balance sheet
reflecting the receipt by the Company of the gross proceeds of the Public Offering including the proceeds received by the Company from
the exercise of the underwriters’ over-allotment option in the Public Offering, if the over-allotment option is exercised prior
to the filing of the Form 8-K, and (ii) the Company has issued a press release and has filed a Current Report on Form 8-K
announcing when such separate trading shall begin (the “Detachment Date”); provided that no fractional Warrants will
be issued upon separation of the Units and only whole Warrants will trade.

  

2.6. Private
Warrant and Working Capital Warrant Attributes. The Private Warrants and Working Capital Warrants will be identical to the Public
Warrants.

 

2.7. Post
IPO Warrants. The Post IPO Warrants, when and if issued, shall have the same terms and be in the same form as the Public Warrants
except as may be agreed upon by the Company.

 

    2

     

    

 

3. Terms and
Exercise of Warrants

 

3.1. Warrant
Price. Each whole Warrant shall, when countersigned by the Warrant Agent (except with respect to uncertificated Warrants), entitle
the registered holder thereof, subject to the provisions of such Warrant and of this Agreement, to purchase from the Company the number
of shares of Common Stock stated therein, at the price of $11.50 per share, subject to the adjustments provided in Section 4 hereof
and in the last sentence of this Section 3.1. The term “Warrant Price” as used in this Agreement refers to the price
per share at which the shares of Common Stock may be purchased at the time a Warrant is exercised. The Company in its sole discretion
may lower the Warrant Price at any time prior to the Expiration Date (as defined below) for a period of not less than twenty (20) Business
Days; provided, that the Company shall provide at least twenty (20) days’ prior written notice of such reduction to registered
holders of the Warrants and, provided further that any such reduction shall be applied consistently to all of the Warrants.

 

3.2. Duration
of Warrants. A Warrant may be exercised only during the period commencing on the date that is thirty (30) days after the consummation
by the Company of a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business
combination with one or more businesses or entities (“Business Combination”) (as described more fully in the Registration
Statement) and terminating at 5:00 p.m., New York City time on the earlier to occur of (i) the date that is five (5) years after
the date on which the Company consummates a Business Combination, (ii) at 5:00 p.m., New York City time on the Redemption Date as
provided in Section 6.2 of this Agreement and (iii) the liquidation of the Company (“Expiration Date”). The
period of time from the date the Warrants will first become exercisable until the expiration of the Warrants shall hereafter be referred
to as the “Exercise Period.” Except with respect to the right to receive the Redemption Price (as set forth in Section 6
hereunder), as applicable, each outstanding Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder
and all rights in respect thereof under this Agreement shall cease at the close of business on the Expiration Date. The Company in its
sole discretion may extend the duration of the Warrants by delaying the Expiration Date; provided, however, that the Company will provide
at least twenty (20) days’ prior written notice of any such extension to registered holders and, provided further that any
such extension shall be applied consistently to all of the Warrants.

 

3.3. Exercise
of Warrants.

 

3.3.1. Payment.
Subject to the provisions of the Warrant and this Agreement, a Warrant, when countersigned by the Warrant Agent, may be exercised by the
registered holder thereof by surrendering it, at the office of the Warrant Agent, or at the office of its successor as Warrant Agent,
in the Borough of Manhattan, City and State of New York, with the subscription form, as set forth in the Warrant, duly executed, and by
paying in full the Warrant Price for each share of Common Stock as to which the Warrant is exercised and any and all applicable taxes
due in connection with the exercise of the Warrant, as follows:

 

(a)
in lawful money of the United States, by good certified check or good bank draft payable to the order of the Warrant Agent or wire transfer;

 

(b)
in the event of a redemption pursuant to Section 6.1 hereof in which the Company’s management has elected to force all holders
of Warrants to exercise such Warrants on a “cashless basis,” by surrendering the Warrants for that number of shares of Common
Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants,
multiplied by the difference between the Warrant Price and the “Fair Market Value” (defined below) by (y) the Fair Market
Value. Solely for purposes of this Section 3.3.1(b), the “Fair Market Value” shall mean the average reported closing
price of the Common Stock for the five (5) trading days ending on the third trading day prior to the date on which the notice of
redemption is sent to holders of the Warrants pursuant to Section 6 hereof; or

  

(c)
in the event the registration statement required by Section 7.4 hereof is not effective and current within ninety (90) days
after the closing of a Business Combination, by surrendering such Warrants for that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference
between the exercise price of the Warrants and the “Fair Market Value” by (y) the Fair Market Value; provided, however,
that no cashless exercise shall be permitted unless the Fair Market Value is equal to or higher than the exercise price. Solely for purposes
of this Section 3.3.1(c), the “Fair Market Value” shall mean the average reported last sale price of the Common Stock
for the five (5) trading days ending on the trading day prior to the date of exercise.

 

    3

     

    

 

3.3.2. Issuance
of Shares of Common Stock. As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment of the
Warrant Price (if any), the Company shall issue to the registered holder of such Warrant a certificate or certificates, or book entry
position, for the number of shares of Common Stock to which he, she or it is entitled, registered in such name or names as may be directed
by him, her or it, and if such Warrant shall not have been exercised in full, a new countersigned Warrant, or book entry position, for
the number of shares as to which such Warrant shall not have been exercised. Notwithstanding the foregoing, in no event will the Company
be required to net cash settle the Warrant exercise. No Warrant shall be exercisable for cash and the Company shall not be obligated to
issue shares of Common Stock upon exercise of a Warrant unless the Common Stock issuable upon such Warrant exercise has been registered,
qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants. In the
event that the condition in the immediately preceding sentence is not satisfied with respect to a Warrant, the holder of such Warrant
shall not be entitled to exercise such Warrant for cash and such Warrant may have no value and expire worthless, in which case the purchaser
of a Unit containing such Public Warrants shall have paid the full purchase price for the Unit solely for the shares of Common Stock underlying
such Unit. Warrants may not be exercised by, or securities issued to, any registered holder in any state in which such exercise or issuance
would be unlawful.

 

3.3.3. Valid
Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly
issued, fully paid and nonassessable.

 

3.3.4. Date
of Issuance. Each person in whose name any book entry position or certificate for shares of Common Stock is issued shall for all purposes
be deemed to have become the holder of record of such shares on the date on which the Warrant, or book entry position representing such
Warrant, was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that,
if the date of such surrender and payment is a date when the share transfer books of the Company or book entry system of the Warrant Agent
are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date
on which the share transfer books or book entry system are open.

 

3.3.5 Maximum
Percentage. A holder of a Warrant may notify the Company in writing in the event it elects to be subject to the provisions contained
in this subsection 3.3.5; however, no holder of a Warrant shall be subject to this subsection 3.3.5 unless he, she or it makes such election.
If the election is made by a holder, the Warrant Agent shall not cause the exercise of the holder’s Warrant, and such holder shall
not have the right to exercise such Warrant, to the extent that after giving effect to such exercise, such person (together with such
person’s affiliates), to the Warrant Agent’s actual knowledge, would beneficially own in excess of 9.8% (the “Maximum
Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the
foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such person and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which the determination of such sentence is
being made, but shall exclude shares of Common Stock that would be issuable upon (x) exercise of the remaining, unexercised portion
of the Warrant beneficially owned by such person and its affiliates and (y) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such person and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For
purposes of the Warrant, in determining the number of outstanding shares of Common Stock, the holder may rely on the number of outstanding
shares of Common Stock as reflected in (1) the Company’s most recent annual report on Form 10-K, quarterly report
on Form 10-Q, current report on Form 8-K or other public filing with the SEC as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the Company or the Warrant Agent setting forth the number of shares
of Common Stock outstanding. For any reason at any time, upon the written request of the holder of the Warrant, the Company shall, within
two (2) Business Days, confirm orally and in writing to such holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of equity
securities of the Company by the holder and its affiliates since the date as of which such number of outstanding shares of Common Stock
was reported. By written notice to the Company, the holder of a Warrant may from time to time increase or decrease the Maximum Percentage
applicable to such holder to any other percentage specified in such notice; provided, however, that any such increase shall not be effective
until the sixty-first (61st) day after such notice is delivered to the Company.

 

    4

     

    

 

4. Adjustments.

 

4.1. Stock
Dividends; Split Ups. If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding
shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split up of shares of Common Stock,
or other similar event, then, on the effective date of such stock dividend, split up or similar event, the number of shares of Common
Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock.

 

4.2. Aggregation
of Shares. If after the date hereof, the number of outstanding shares of Common Stock is decreased by a consolidation, combination,
reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation,
combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each
Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.

 

4.3 Extraordinary
Dividends. If the Company, at any time while the Warrants are outstanding and unexpired, shall pay a dividend or make a distribution
in cash, securities or other assets to the holders of the shares of Common Stock or other shares of the Company’s capital stock
into which the Warrants are convertible (an “Extraordinary Dividend”), then the Warrant Price shall be decreased, effective
immediately after the effective date of such Extraordinary Dividend, by the amount of cash and the fair market value (as determined by
the Company’s Board of Directors, in good faith) of any securities or other assets paid in respect of such Extraordinary Dividend
divided by all outstanding shares of the Company at such time (whether or not any shareholders waived their right to receive such dividend);
provided, however, that none of the following shall be deemed an Extraordinary Dividend for purposes of this provision: (a) any adjustment
described in subsection 4.1 above, (b) any cash dividends or cash distributions which, when combined on a per share basis with all
other cash dividends and cash distributions paid on the Common Stock during the 365-day period ending on the date of declaration
of such dividend or distribution does not exceed $0.50 per share (taking into account all of the outstanding shares of the Company at
such time (whether or not any shareholders waived their right to receive such dividend) and as adjusted to appropriately reflect any of
the events referred to in other subsections of this Section 4 and excluding cash dividends or cash distributions that resulted in
an adjustment to the Warrant Price or to the number of shares of Common Stock issuable on exercise of each Warrant) but only with respect
to the amount of the aggregate cash dividends or cash distributions equal to or less than $0.50, (c) any payment to satisfy the conversion
rights of the holders of the shares of Common Stock in connection with a proposed initial Business Combination or certain amendments to
the Company’s Amended and Restated Certificate of Incorporation (as described in the Registration Statement) or (d) any payment
in connection with the Company’s liquidation and the distribution of its assets upon its failure to consummate a Business Combination.
Solely for purposes of illustration, if the Company, at a time while the Warrants are outstanding and unexpired, pays a cash dividend
of $0.35 and previously paid an aggregate of $0.40 of cash dividends and cash distributions on the Common Stock during the 365-day period
ending on the date of declaration of such $0.35 dividend, then the Warrant Price will be decreased, effectively immediately after the
effective date of such $0.35 dividend, by $0.25 (the absolute value of the difference between $0.75 (the aggregate amount of all cash
dividends and cash distributions paid or made in such 365-day period, including such $0.35 dividend) and $0.50 (the greater
of (x) $0.50 and (y) the aggregate amount of all cash dividends and cash distributions paid or made in such 365-day period
prior to such $0.35 dividend)). Furthermore, solely for the purposes of illustration, if following the closing of the Company’s
initial Business Combination, there were 100,000,000 shares outstanding and the Company paid a $1.00 dividend to 17,500,000 of such shares
(with the remaining 82,500,000 shares waiving their right to receive such dividend), then no adjustment to the Warrant Price would occur
as a $17.5 million dividend payment divided by 100,000,000 shares equals $0.175 per share which is less than $0.50 per share.

 

4.4 Adjustments
in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided
in Sections 4.1 and 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon
the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares
of Common Stock so purchasable immediately thereafter.

 

    5

     

    

 

4.5. Replacement
of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of Common Stock
(other than a change covered by Section 4.1, 4.2 or 4.3 hereof or that solely affects the par value of the Common Stock), or in the
case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Common Stock),
or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety
or substantially as an entirety in connection with which the Company is dissolved, the Warrant holders shall thereafter have the right
to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common
Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind
and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization,
merger or consolidation, or upon a dissolution following any such sale or transfer, that the Warrant holder would have received if such
Warrant holder had exercised his, her or its Warrant(s) immediately prior to such event. If any reclassification also results in a change
in the Common Stock covered by Section 4.1, 4.2 or 4.3, then such adjustment shall be made pursuant to Sections 4.1, 4.2, 4.3, 4.4
and this Section 4.5. The provisions of this Section 4.5 shall similarly apply to successive reclassifications, reorganizations,
mergers or consolidations, sales or other transfers. In no event will the Warrant Price be reduced to less than the par value per share
issuable upon exercise of the Warrant.

 

4.6. Issuance
in connection with a Business Combination. If, in connection with a Business Combination, the Company (a) issues additional shares
of Common Stock or equity-linked securities at an issue price or effective issue price of less than $9.20 per share (with such issue price
or effective issue price as determined by the Company’s Board of Directors, in good faith, and in the case of any such issuance
to the Company’s initial stockholders, or their affiliates, without taking into account any founders’ shares held by them
prior to such issuance), (b) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and
interest thereon, available for the funding of the Business Combination on the date of the consummation of such Business Combination (net
of redemptions), and (c) the Fair Market Value (as defined below) is below $9.20 per share, the exercise price of the warrants will be
adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Fair Market Value or (ii) the price at which the Company
issues the Common Stock or equity-linked securities. Solely for purposes of this Section 4.6, the “Fair Market Value”
shall mean the volume weighted average reported trading price of the Common Stock for the twenty (20) trading days starting on the trading
day prior to the date of the consummation of the Business Combination.

 

4.7 Notices
of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the
Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth
in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified
in Sections 4.1, 4.2, 4.3, 4.4, 4.5, or 4.6, then, in any such event, the Company shall give written notice to each Warrant holder, at
the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event. Failure to
give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

4.8. No
Fractional Warrants or Shares. Notwithstanding any provision contained in this Agreement to the contrary, the Company shall not issue
fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant
would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise,
round up to the nearest whole number of shares of Common Stock to be issued to the Warrant holder.

 

4.9. Form
of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued
after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant
to this Agreement. However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company
may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange
or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

 

    6

     

    

 

4.10 Other
Events. In case any event shall occur affecting the Company as to which none of the provisions of preceding subsections of this Section 4
are strictly applicable, but which would require an adjustment to the terms of the Warrants in order to (i) avoid an adverse impact
on the Warrants and (ii) effectuate the intent and purpose of this Section 4, then, in each such case, the Company shall appoint
a firm of independent public accountants, investment banking or other appraisal firm of recognized national standing, which shall give
its opinion as to whether or not any adjustment to the rights represented by the Warrants is necessary to effectuate the intent and purpose
of this Section 4 and, if they determine that an adjustment is necessary, the terms of such adjustment. The Company shall adjust
the terms of the Warrants in a manner that is consistent with any adjustment recommended in such opinion.

 

5. Transfer and
Exchange of Warrants.

 

5.1. Registration
of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register,
upon surrender of such Warrant for transfer, properly endorsed with signatures, in the case of certificated Warrants, properly guaranteed
and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number
of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. In the case of certificated Warrants, the Warrants
so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

 

5.2. Procedure
for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, either in certificated form or in book entry position,
together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more
new Warrants, or book entry positions, as requested by the registered holder of the Warrants so surrendered, representing an equal aggregate
number of Warrants; provided, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant
Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel
for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.

 

5.3. Fractional
Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance
of a warrant certificate or book-entry position for a fraction of a Warrant.

 

5.4. Service
Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.

 

5.5. Warrant
Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms
of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required
by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

 

5.6. Private
Warrants and Working Capital Warrants. The Warrant Agent shall not register any transfer of Private Warrants or Working Capital Warrants
until after the consummation by the Company of an initial Business Combination, except for transfers (i) among the initial stockholders
or to the initial stockholders’ or the Company’s officers, directors, consultants or their affiliates, (ii) to a holder’s
stockholders or members upon the holder’s liquidation, in each case if the holder is an entity, (iii) by bona fide gift to
a member of the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s
immediate family, in each case for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant
to a qualified domestic relations order, (vi) to the Company for no value for cancellation in connection with the consummation of
a Business Combination, (vii) in connection with the consummation of a Business Combination by private sales at prices no greater
than the price at which the Private Warrants were originally purchased, (viii) in the event of the Company’s liquidation prior
to its consummation of an initial Business Combination or (ix) in the event that, subsequent to the consummation of an initial Business
Combination, the Company completes a liquidation, merger, share exchange or other similar transaction which results in all of the Company’s
stockholders having the right to exchange their Common Stock for cash, securities or other property, in each case (except for clauses
(vi), (viii) or (ix) or with the Company’s prior written consent) on the condition that prior to such registration for transfer,
the Warrant Agent shall be presented with written documentation pursuant to which each transferee or the trustee or legal guardian for
such transferee agrees to be bound by the transfer restrictions contained in this section and any other applicable agreement the transferor
is bound by.

 

    7

     

    

 

5.7. Transfers
prior to Detachment. Prior to the Detachment Date, the Public Warrants may be transferred or exchanged only together with the Unit
in which such Warrant is included, and only for the purpose of effecting, or in conjunction with, a transfer or exchange of such Unit.
Furthermore, each transfer of a Unit on the register relating to such Units shall operate also to transfer the Warrants included in such
Unit. Notwithstanding the foregoing, the provisions of this Section 5.7 shall have no effect on any transfer of Warrants on or after
the Detachment Date.

 

6. Redemption.

 

6.1. Redemption.
Not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time during the Exercise Period, at
the office of the Warrant Agent, upon the notice referred to in Section 6.2, at the price of $0.01 per Warrant (“Redemption
Price”), provided that the closing price of the Common Stock equals or exceeds $18.00 per share (subject to adjustment in accordance
with Section 4 hereof), on each of twenty (20) trading days within any thirty (30) trading day period commencing after
the Warrants become exercisable and ending on the third trading day prior to the date on which notice of redemption is given and provided
that there is an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants, and a current
prospectus relating thereto, available throughout the 30-day redemption or the Company has elected to require the exercise of
the Warrants on a “cashless basis” pursuant to subsection 3.3.1(b); provided, however, that if and when the Public Warrants
become redeemable by the Company, the Company may not exercise such redemption right if the issuance of shares of Common Stock upon exercise
of the Public Warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable
to effect such registration or qualification.

 

6.2. Date
Fixed for, and Notice of, Redemption. In the event the Company shall elect to redeem all of the Warrants that are subject to redemption,
the Company shall fix a date for the redemption (the “Redemption Date”). Notice of redemption shall be mailed by first
class mail, postage prepaid, by the Company not less than thirty (30) days prior to the Redemption Date to the registered holders
of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner
herein provided shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

 

6.3. Exercise
After Notice of Redemption. The Warrants may be exercised, for cash (or on a “cashless basis” in accordance with Section 3
of this Agreement) at any time after notice of redemption shall have been given by the Company pursuant to Section 6.2 hereof and
prior to the Redemption Date. In the event the Company determines to require all holders of Warrants to exercise their Warrants on a “cashless
basis” pursuant to Section 3.3.1(b), the notice of redemption will contain the information necessary to calculate the number
of shares of Common Stock to be received upon exercise of the Warrants, including the “Fair Market Value” in such case. On
and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the
Warrants, the Redemption Price.

 

7. Other Provisions Relating to Rights
of Holders of Warrants.

 

7.1. No
Rights as Stockholder. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent
or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other
matter.

 

7.2. Lost,
Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent
may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or
destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

 

7.3. Reservation
of Shares of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares
of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.

 

    8

     

    

 

7.4. Registration
of Shares of Common Stock. The Company agrees that as soon as practicable after the closing of its initial Business Combination, it
shall use its best efforts to file with the Securities and Exchange Commission a registration statement for the registration, under the
Act, of the shares of Common Stock issuable upon exercise of the Warrants, and it shall use its best efforts to take such action as is
necessary to register or qualify for sale, in those states in which the Warrants were initially offered by the Company and in those states
where holders of Warrants then reside, the shares of Common Stock issuable upon exercise of the Warrants, to the extent an exemption is
not available. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration
statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of this Agreement.
If any such registration statement has not been declared effective by the 90th day following the closing of the Business Combination,
holders of the Warrants shall have the right, during the period beginning on the 91st day after the closing of the Business Combination
and ending upon such registration statement being declared effective by the Securities and Exchange Commission, and during any other period
when the Company shall fail to have maintained an effective registration statement covering the shares of Common Stock issuable upon exercise
of the Warrants, to exercise such Warrants on a “cashless basis” as determined in accordance with Section 3.3.1(c). The
Company shall provide the Warrant Agent with an opinion of counsel for the Company (which shall be an outside law firm with securities
law experience) stating that (i) the exercise of the Warrants on a cashless basis in accordance with this Section 7.4 is not
required to be registered under the Act and (ii) the shares of Common Stock issued upon such exercise will be freely tradable under
U.S. federal securities laws by anyone who is not an affiliate (as such term is defined in Rule 144 under the Act) of the Company and,
accordingly, will not be required to bear a restrictive legend. For the avoidance of any doubt, unless and until all of the Warrants have
been exercised on a cashless basis, the Company shall continue to be obligated to comply with its registration obligations under the first
three sentences of this Section 7.4. The provisions of this Section 7.4 may not be modified, amended, or deleted without the prior written
consent of the Representative.

 

8. Concerning
the Warrant Agent and Other Matters.

 

8.1. Payment
of Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant
Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated
to pay any transfer taxes in respect of the Warrants or such shares of Common Stock.

 

8.2. Resignation,
Consolidation, or Merger of Warrant Agent.

 

8.2.1. Appointment
of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office
of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor
Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days
after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall,
with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of
the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor
Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the
State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized
under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment,
any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor
Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason
it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon
request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for
more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties,
and obligations.

 

    9

     

    

 

8.2.2. Notice
of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the
predecessor Warrant Agent and the transfer agent for the shares of Common Stock not later than the effective date of any such appointment.

 

8.2.3. Merger
or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated
or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant
Agent under this Agreement without any further act.

 

8.3. Fees
and Expenses of Warrant Agent.

 

8.3.1. Remuneration.
The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and will reimburse
the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.

 

8.3.2. Further
Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and
delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying
out or performing of the provisions of this Agreement.

 

8.4. Liability
of Warrant Agent.

 

8.4.1. Reliance
on Company Statement. Whenever in the performance of its duties under this Agreement, the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established
by a statement signed by the Chief Executive Officer or Chairman of the Board of Directors of the Company and delivered to the Warrant
Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions
of this Agreement.

 

8.4.2. Indemnity.
The Warrant Agent shall be liable hereunder only for its own fraud, gross negligence, willful misconduct or bad faith. The Company agrees
to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel
fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of the Warrant Agent’s
fraud, gross negligence, willful misconduct, or bad faith.

 

8.4.3. Exclusions.
The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution
of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4
hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization
or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common
Stock will, when issued, be valid and fully paid and nonassessable.

 

8.5. Acceptance
of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms
and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently
account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of shares of Common Stock through the exercise
of Warrants.

 

9. Miscellaneous Provisions.

 

9.1. Successors.
All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns.

 

    10

     

    

 

9.2. Notices.
Any notice, statement or demand authorized by this Agreement to be given or made by the Warrant Agent or by the holder of any Warrant
to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private
courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:

  

Legato
Merger Corp. II

777
Third Avenue, 37th Floor

New
York, New York 10017

Attn:
David D. Sgro

 

Any notice, statement
or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall
be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within
five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with
the Company), as follows:

 

Continental Stock Transfer &
Trust Company

1 State Street

New York, New York 10004

Attn: Compliance Department

 

with a copy in each case to:

 

Graubard Miller

The Chrysler Building

405 Lexington Avenue, 11th Floor

New York, New York 10174

Attn: David Alan Miller, Esq.

 

    11

     

    

 

and

 

and

EarlyBirdCapital, Inc.

366 Madison Avenue, 8th Floor

New York, NY 10017

Attn: Steven Levine

 

9.3. Applicable
Law. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by the
laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive
laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in
any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for
the Southern District of New York. The Company hereby waives any objection that such courts represent an inconvenient forum. Notwithstanding
the foregoing, the provisions of this paragraph are not binding on holders of Warrants and will not apply to suits brought to enforce
any liability or duty created by the Act or the Exchange Act or any other claim for which the federal district courts of the United States
of America are the sole and exclusive forum. Any process or summons to be served upon the Company may be served by transmitting a copy
thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2
hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.

 

9.4. Persons
Having Rights under this Agreement. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the
registered holders of the Warrants and, for the purposes of Sections 7.4, 9.4 and 9.8 hereof, the Representative, any right, remedy, or
claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. The Representative
shall be deemed to be a third-party beneficiary of this Agreement with respect to Sections 7.4, 9.4 and 9.8 hereof. All covenants, conditions,
stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties
hereto (and the Representative with respect to the Sections 7.4, 9.4 and 9.8 hereof) and their successors and assigns and of the registered
holders of the Warrants.

 

9.5. Examination
of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in
the Borough of Manhattan, City and State of New York, for inspection by the registered holder of any Warrant. The Warrant Agent may require
any such holder to submit his Warrant for inspection by it.

 

9.6. Counterparts.
This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

9.7. Effect
of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation
thereof.

 

9.8 Amendments.
This Agreement may be amended by the parties hereto without the consent of any registered holder for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect
to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not
adversely affect the interest of the registered holders. All other modifications or amendments, including any amendment to increase the
Warrant Price or shorten the Exercise Period, shall require the written consent or vote of the registered holders of (i) a majority
of the then outstanding Public Warrants if such modification or amendment is being undertaken prior to, or in connection with, the consummation
of a Business Combination or (ii) a majority of the then outstanding Warrants if such modification or amendment is being undertaken
after the consummation of a Business Combination. Notwithstanding the foregoing, the Company may lower the Warrant Price or extend the
duration of the Exercise Period pursuant to Sections 3.1 and 3.2, respectively, without the consent of the registered holders. The provisions
of this Section 9.8 may not be modified, amended or deleted without the prior written consent of the Representative.

 

9.9 Trust
Account Waiver. The Warrant Agent acknowledges and agrees that it shall not make any claims or proceed against the trust account established
by the Company in connection with the Public Offering (as more fully described in the Registration Statement) (“Trust Account”),
including by way of set-off, and shall not be entitled to any funds in the Trust Account under any circumstance. In the event
that the Warrant Agent has a claim against the Company under this Agreement, the Warrant Agent will pursue such claim solely against the
Company and not against the property held in the Trust Account.

 

9.10 Severability.
This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to
such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

[signature page follows]

 

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IN
WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year first above written.

 

	 	LEGATO MERGER CORP.
	 	 	 
	 	By:	/s/ David D. Sgro
	 	 	Name: David D. Sgro
	 	 	Title: Chief Executive Officer
	 	 
	 	CONTINENTAL
    STOCK TRANSFER & TRUST COMPANY
	 	 	 
	 	By:	/s/ Erika Young
	 	 	Name: Erika Young
	 	 	Title: Vice President

 

[Signature Page to Warrant Agreement]

 

    13

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