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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q

 

☒   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2021.

 

☐   Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from: ________ to _________  

 

Commission File Number: 001-32244

 

INDEPENDENCE HOLDING COMPANY

(Exact name of registrant as specified in its charter)

 

Delaware

 

58-1407235

(State or other jurisdiction of incorporation or organization) 

(I.R.S. Employer Identification No.)

 

96 CUMMINGS POINT ROAD, STAMFORD, CT                      06902

                                        (Address of principal executive offices)                                          (Zip Code)

 

Registrant's telephone number, including area code: (203) 358-8000

 

NOT APPLICABLE

Former name, former address and former fiscal year, if changed since last report.

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

IHC

NYSE

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [   ]

 

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   [X]   No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer [    ]

Accelerated Filer  [X]

Non-Accelerated Filer   [    ]

Smaller Reporting Company  ☒

Emerging Growth Company   ☐

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   

Yes   ☐   No  [X]

 

As of August 7, 2021, the registrant had 14,644,389 shares of Common Stock outstanding.

1

 

INDEPENDENCE HOLDING COMPANY

 

INDEX

 

PART I – FINANCIAL INFORMATION

PAGE

 

 

NO.

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets

4

 

 

 

Condensed Consolidated Statements of Income

5

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

6

 

 

 

Condensed Consolidated Statements of Changes in Equity

7

 

 

 

Condensed Consolidated Statements of Cash Flows

9

 

 

 

Notes to Condensed Consolidated Financial Statements

10

 

 

 

Item 2. Management's Discussion and Analysis of Financial Condition

 

 

and Results of Operations

36

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

50

 

 

 

Item 4. Controls and Procedures

50

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.    Legal Proceedings

51

 

 

 

 

Item 1A. Risk Factors

52

 

 

 

 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

52

 

 

 

 

Item 3.   Defaults Upon Senior Securities

52

 

 

 

 

Item 4.    Mine Safety Disclosures

52

 

 

 

 

Item 5.    Other Information

52

 

 

 

Item 6.    Exhibits

53

 

 

 

Signatures

56

 

 

 

 

 

 

Copies of the Company’s SEC filings can be found on its website at www.ihcgroup.com.

2

 

Forward-Looking Statements

 

This report on Form 10−Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. We have based our forward-looking statements on our current expectations and projections about future events. Our forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as the growth of our business and operations, our business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” “project”, “believe,” “estimate,” “expect,” “intend,” “plan,” “probably” or similar expressions, we are making forward-looking statements.

 

Numerous risks and uncertainties may impact the matters addressed by our forward-looking statements, any of which could negatively and materially affect our future financial results and performance.  We describe some of these risks and uncertainties in greater detail in Item 1A, Risk Factors, of IHC’s Annual Report on Form 10-K as filed with Securities and Exchange Commission.

 

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this report, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved. Our forward-looking statements speak only as of the date made, and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, any forward-looking event discussed in this report may not occur.

3

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements     

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)

 

 

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

(Unaudited)

 

 

ASSETS:

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Short-term investments

 

$

1,550 

 

$

1,568 

Securities purchased under agreements to resell

 

 

70,323 

 

 

33,038 

Fixed maturities, available-for-sale

 

 

183,709 

 

 

210,719 

Equity securities

 

 

- 

 

 

1,753 

Other investments

 

 

2,022 

 

 

1,928 

Total investments

 

 

257,604 

 

 

249,006 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

22,834 

 

 

31,923 

Investment in Iguana Capital, Inc. (“Iguana Capital”) (Note 2)

 

 

33,762 

 

 

- 

Due and unpaid premiums

 

 

10,950 

 

 

9,981 

Due from reinsurers

 

 

354,735 

 

 

357,237 

Goodwill

 

 

12,486 

 

 

12,486 

Funds held in escrow

 

 

78,779 

 

 

- 

Other assets

 

 

29,864 

 

 

46,832 

Assets attributable to discontinued operations (Note 2)

 

 

416,162 

 

 

375,691 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,217,176 

 

$

1,083,156 

 

 

 

 

 

 

 

LIABILITIES AND  EQUITY:

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Policy benefits and claims

 

$

127,815 

 

$

132,957 

Future policy benefits

 

 

196,026 

 

 

198,086 

Funds on deposit

 

 

142,155 

 

 

141,376 

Unearned premiums

 

 

1,763 

 

 

1,952 

Other policyholders' funds

 

 

11,988 

 

 

12,001 

Due to reinsurers

 

 

2,242 

 

 

3,872 

Accounts payable, accruals and other liabilities

 

 

66,519 

 

 

44,855 

Liabilities attributable to discontinued operations (Note 2)

 

 

120,180 

 

 

75,939 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

668,688 

 

 

611,038 

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

-  

 

 

2,312  

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock $1.00 par value, 100,000 shares authorized;

 

 

 

 

 

 

none issued or outstanding

 

 

-  

 

 

-  

Common stock $1.00 par value, 23,000,000 shares authorized;

 

 

 

 

 

 

18,625,458 shares issued; and 14,644,389 and

 

 

 

 

 

 

14,643,047 shares outstanding

 

 

18,625  

 

 

18,625  

Paid-in capital

 

 

125,653  

 

 

124,757  

Accumulated other comprehensive income

 

 

3,220  

 

 

4,197  

Treasury stock, at cost; 3,981,069 and 3,982,411 shares

 

 

(77,189) 

 

 

(77,088) 

Retained earnings

 

 

478,139  

 

 

399,273  

 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

 

548,448  

 

 

469,764  

NONREDEEMABLE NONCONTROLLING INTERESTS

 

 

40  

 

 

42  

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

548,488  

 

 

469,806  

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

$

1,217,176  

 

$

1,083,156  

 

See the accompanying Notes to Condensed Consolidated Financial Statements.

4

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

42,451  

$

49,138  

$

86,023  

$

99,804  

Net investment income

 

1,651  

 

2,329  

 

3,452  

 

4,828  

Fee income

 

4,944  

 

3,907  

 

11,079  

 

7,341  

Other income

 

410  

 

807  

 

1,026  

 

1,432  

Net investment gains (losses)

 

(126) 

 

274  

 

91  

 

117  

 

 

 

 

 

 

 

 

 

 

49,330  

 

56,455  

 

101,671  

 

113,522  

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

17,192  

 

21,339  

 

39,113  

 

47,628  

Selling, general and administrative expenses

 

32,842  

 

37,974  

 

63,602  

 

69,034  

 

 

 

 

 

 

 

 

 

 

50,034  

 

59,313  

 

102,715  

 

116,662  

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

(704) 

 

(2,858) 

 

(1,044) 

 

(3,140) 

Income tax benefits

 

(267) 

 

(1,066) 

 

(430) 

 

(1,187) 

 

 

 

 

 

 

 

 

 

Loss from continuing operations, net of tax

 

(437) 

 

(1,792) 

 

(614) 

 

(1,953) 

 

 

 

 

 

 

 

 

 

Discontinued operations (Note 2):

 

 

 

 

 

 

 

 

Total pretax income from discontinued operations

 

92,375  

 

3,594  

 

99,574  

 

9,243  

Income tax expense on discontinued operations

 

15,570  

 

1,264  

 

17,026  

 

2,430  

Income from discontinued operations, net of tax

 

76,805  

 

2,330  

 

82,548  

 

6,813  

 

 

 

 

 

 

 

 

 

Net income

 

76,368  

 

538  

 

81,934  

 

4,860  

(Income) loss from nonredeemable noncontrolling interests

 

1  

 

(43) 

 

2  

 

(34) 

(Income) loss from redeemable noncontrolling interests

 

102  

 

(74) 

 

156  

 

(127) 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

76,471  

$

421  

$

82,092  

$

4,699  

 

 

 

 

 

 

 

 

 

Basic income per common share

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(0.03) 

$

(0.12) 

$

(0.04) 

$

(0.13) 

Income from discontinued operations

 

5.25 

 

0.15 

 

5.65 

 

0.45 

Basic income per common share

$

5.22 

$

0.03 

$

5.61 

$

0.32 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

14,642  

 

14,765  

 

14,641  

 

14,811 

 

 

 

 

 

 

 

 

 

Diluted income per common share

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(0.03) 

$

(0.12) 

$

(0.04) 

$

(0.13) 

Income from discontinued operations

 

5.25 

 

0.15 

 

5.65 

 

0.45 

Diluted income per common share

$

5.22 

$

0.03 

$

5.61 

$

0.32 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING

 

14,642  

 

14,765  

 

14,641  

 

14,811 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.

5

 

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2021

 

 

 

 

 

Net income

$

76,368  

$

538  

$

81,934 

$

4,860  

Other comprehensive income:

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available-for-sale securities, pre-tax

 

1,212 

 

2,227  

 

(1,248)

 

2,093  

Tax expense (benefit) on unrealized gains (losses) on available-for-sale securities

 

260 

 

474  

 

(271)

 

451  

Unrealized gains (losses) on available-for-sale securities, net of taxes

 

952 

 

1,753  

 

(977)

 

1,642  

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

952 

 

1,753  

 

(977)

 

1,642  

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME, NET OF TAX

 

77,320  

 

2,291  

 

80,957 

 

6,502  

 

 

 

 

 

 

 

 

 

Comprehensive (income) loss, net of tax, attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

(Income) loss from noncontrolling interests in subsidiaries

 

103  

 

(117) 

 

158 

 

(161) 

Other comprehensive (income) loss, net of tax, attributable to

 

 

 

 

 

 

 

 

noncontrolling interests

 

-  

 

-  

 

- 

 

-  

 

 

 

 

 

 

 

 

 

COMPREHENSIVE (INCOME) LOSS, NET OF TAX,

 

 

 

 

 

 

 

 

   ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

103  

 

(117) 

 

158 

 

(161) 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME, NET OF TAX,

 

 

 

 

 

 

 

 

   ATTRIBUTABLE TO IHC

$

77,423  

$

2,174  

$

81,115 

$

6,341  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.

6

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (In thousands)

Three Months Ended June 30, 2021 and 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCUMULATED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER

 

TREASURY

 

 

 

TOTAL IHC

 

NONREDEEMABLE

 

 

 

 

COMMON

 

PAID-IN

 

COMPREHENSIVE

 

STOCK,

 

RETAINED

 

STOCKHOLDERS'

 

NONCONTROLLING

 

TOTAL

 

STOCK

 

CAPITAL

 

INCOME

 

AT COST

 

EARNINGS

 

EQUITY

 

INTERESTS

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARCH 31, 2021

$

18,625 

$

125,189  

$

2,268  

$

(77,228) 

$

404,894  

$

473,748  

$

41  

$

473,789  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

76,471  

 

76,471  

 

(1) 

 

76,470  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

loss, net of tax

 

 

 

 

 

952  

 

 

 

 

 

952  

 

-  

 

952  

Common stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    ($0.22 per share)

 

 

 

 

 

 

 

 

 

(3,226) 

 

(3,226) 

 

-  

 

(3,226) 

Share-based compensation

 

 

 

464  

 

 

 

39  

 

 

 

503  

 

-  

 

503  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUNE 30, 2021

$

18,625 

$

125,653  

$

3,220  

$

(77,189) 

$

478,139  

$

548,448  

$

40  

$

548,488  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARCH 31, 2020

$

18,625 

$

123,260 

$

1,101  

$

(71,196) 

$

388,102  

$

459,892  

$

6  

$

459,898  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

421  

 

421  

 

43  

 

464  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income, net of tax

 

 

 

 

 

1,753  

 

 

 

 

 

1,753  

 

- 

 

1,753  

Repurchases of common stock

 

 

 

 

 

 

 

(3,129) 

 

 

 

(3,129) 

 

- 

 

(3,129) 

Common stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    ($0.22 per share)

 

 

 

 

 

 

 

 

 

(206) 

 

(206) 

 

- 

 

(206) 

Share-based compensation

 

 

 

544 

 

 

 

  

 

 

 

544  

 

- 

 

544  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUNE 30, 2020

$

18,625 

$

123,804 

$

2,854  

$

(74,325) 

$

388,317  

$

459,275  

$

49 

$

459,324  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (In thousands)

Six Months Ended June 30, 2021 and 2020

 

 

 

 

 

 

 

 

 

ACCUMULATED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER

 

TREASURY

 

 

 

TOTAL IHC

 

NONREDEEMABLE

 

 

 

 

COMMON

 

PAID-IN

 

COMPREHENSIVE

 

STOCK,

 

RETAINED

 

STOCKHOLDERS'

 

NONCONTROLLING

 

TOTAL

 

STOCK

 

CAPITAL

 

INCOME (LOSS)

 

AT COST

 

EARNINGS

 

EQUITY

 

INTERESTS

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DECEMBER 31, 2020

$

18,625 

$

124,757 

$

4,197  

$

(77,088) 

$

399,273  

$

469,764  

$

42  

$

469,806  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

82,092  

 

82,092  

 

(2) 

 

82,090  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

loss, net of tax

 

 

 

 

 

(977) 

 

 

 

 

 

(977) 

 

-  

 

(977) 

Repurchases of common stock

 

 

 

 

 

 

 

(140) 

 

 

 

(140) 

 

-  

 

(140) 

Common stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    ($0.22 per share)

 

 

 

 

 

 

 

 

 

(3,226) 

 

(3,226) 

 

-  

 

(3,226) 

Share-based compensation

 

 

 

896 

 

 

 

39  

 

 

 

935  

 

-  

 

935  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUNE 30, 2021

$

18,625 

$

125,653 

$

3,220  

$

(77,189) 

$

478,139  

$

548,448  

$

40  

$

548,488  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DECEMBER 31, 2019

$

18,625 

$

122,717 

$

1,212  

$

(69,724) 

$

386,864 

$

459,694  

$

18  

$

459,712  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

4,699 

 

4,699  

 

34  

 

4,733  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income, net of tax

 

 

 

 

 

1,642  

 

 

 

 

 

1,642  

 

-  

 

1,642  

Repurchases of common stock

 

 

 

 

 

 

 

(4,601) 

 

 

 

(4,601) 

 

-  

 

(4,601) 

Distributions to noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interests

 

 

 

 

 

 

 

 

 

 

 

-  

 

(3) 

 

(3) 

Common stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    ($0.22 per share)

 

 

 

 

 

 

 

 

 

(3,246) 

 

(3,246) 

 

-  

 

(3,246) 

Share-based compensation

 

 

 

1,087 

 

 

 

 

 

 

 

1,087  

 

-  

 

1,087  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUNE 30, 2020

$

18,625 

$

123,804 

$

2,854  

$

(74,325) 

$

388,317 

$

459,275  

$

49  

$

459,324  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.

8

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

2021

 

 

2020

CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:

 

 

 

 

 

Net income

$

81,934  

 

$

4,860  

Adjustments to reconcile net income to net change in cash from

 

 

 

 

 

operating  activities:

 

 

 

 

 

Gain on disposal of discontinued operations

 

(74,534) 

 

 

-  

Pretax provision for loss on disposal

 

812  

 

 

-  

Amortization of deferred acquisition costs

 

425  

 

 

166  

Net amortization of purchased premium and discount in net investment income

 

1,139  

 

 

1,218  

Net investment (gains)

 

(91) 

 

 

(117) 

Depreciation and amortization

 

908  

 

 

759  

Other

 

17,107  

 

 

2,393  

 Changes in assets and liabilities:

 

 

 

 

 

Change in insurance liabilities

 

37,333  

 

 

27,057  

Change in  amounts due from reinsurers

 

2,663  

 

 

3,725  

Change in claim fund balances

 

(1,022) 

 

 

574  

Change in due and unpaid premiums

 

(15,141) 

 

 

(8,253) 

Change in contract asset

 

(1,006) 

 

 

-  

Other operating activities

 

3,008  

 

 

(4,135) 

 

 

 

 

 

 

Net change in cash from operating activities

 

53,535  

 

 

28,247  

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED BY) INVESTING ACTIVITIES:

 

 

 

 

 

Net (purchases) sales and maturities of short-term investments

 

1,060  

 

 

(1,049) 

Net (purchases) sales of securities under resale agreements

 

(139,647) 

 

 

5,740  

Sales of equity securities

 

3,494  

 

 

-  

Sales of fixed maturities

 

10,366  

 

 

36,413  

Maturities and other repayments of fixed maturities

 

44,520  

 

 

55,936  

Purchases of fixed maturities

 

(8,343) 

 

 

(96,353) 

Cash divested from deconsolidation of subsidiary

 

(4,878) 

 

 

-  

Payments to acquire business, net of cash acquired

 

-  

 

 

(13,707) 

Payments to acquire other investments

 

(2,500) 

 

 

(1,250) 

Other investing activities

 

(1,870) 

 

 

(3,372) 

 

 

 

 

 

 

Net change in cash from investing activities

 

(97,798) 

 

 

(17,642) 

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED BY)  FINANCING ACTIVITIES:

 

 

 

 

 

Repurchases of common stock

 

(140) 

 

 

(4,489) 

Withdrawals of investment-type insurance contracts

 

(112) 

 

 

(326) 

Dividends paid

 

(3,221) 

 

 

(6,215) 

Other financing activities

 

(32) 

 

 

(3) 

 

 

 

 

 

 

Net change in cash from financing activities

 

(3,505) 

 

 

(11,033) 

 

 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

 

(47,768) 

 

 

(428) 

Cash, cash equivalents and restricted cash, beginning of year, including discontinued operations

 

74,793  

 

 

24,631  

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period, including discontinued operations

$

27,025  

 

$

24,203  

 

 

 

 

 

 

NON-CASH ACTIVITY:

 

 

 

 

 

Proceeds from sale of subsidiary – funds held in escrow

$

78,779  

 

$

-  

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.

9

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1.Organization, Consolidation, Basis of Presentation and Accounting Policies 

 

(A)    Business and Organization 

 

Independence Holding Company, a Delaware corporation (“IHC”), is a holding company principally engaged in underwriting, administering and/or distributing group and individual specialty benefit products, including disability, supplemental health, pet, and group life insurance through: (i) its insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life"),  Madison National Life Insurance Company, Inc. ("Madison National Life"), and Independence American Insurance Company; and (ii) its marketing and administrative companies, including IHC Specialty Benefits Inc. (“IHCSB”), IHC Brokerage Group, Inc. (“IBG”), INSXCloud, Inc. (“INSXCloud”) (formerly My1HR, Inc.), collectively the “IHC Agencies” and its lead generation company, Torchlight Technology Group LLC., (“Torchlight”). On June 30, 2021, the Company sold its majority interest in PetPartners, Inc. (“PetPartners”), a major distributor and administrator of pet insurance underwritten by Independence American Insurance Company and an unaffiliated insurer. Standard Security Life, Madison National Life and Independence American Insurance Company are sometimes collectively referred to as the “Insurance Group”. IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company", or “IHC”, or are implicit in the terms “we”, “us” and “our”. 

 

Geneve Corporation, a financial holding company, and its affiliated entities, held approximately 62% of IHC's outstanding common stock at June 30, 2021.  

 

(B)     Basis of Presentation 

 

The unaudited Condensed Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited Condensed Consolidated Financial Statements include the accounts of IHC and its consolidated subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect: (i) the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and (ii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. IHC’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements.

 

During the second quarter of 2021, the Board of Directors committed to various plans for the disposal of several business operations (see Note 2). Each plan represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, they each qualify for reporting as discontinued operations in the second quarter 2021. The assets, liabilities, and related income and expenses associated with each disposal group are presented as discontinued operations in the accompanying condensed consolidated financial statements and Notes thereto for all periods presented.

 

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global health pandemic and the United States declared a national health emergency. COVID-19 has led to largescale disruption in the global economy, market instability and widespread unemployment in the United States. The COVID-19 outbreak continues to be a fluid situation and as it evolves, the duration of COVID-19 and its potential effects on our business cannot be certain. Regulatory mandates have affected, and we anticipate will continue to impact, the insurance industry. We currently cannot predict if there will be a material impact to

10

our business, results of operations or financial condition in future reporting periods. Consequently, future changes in market conditions may impact estimates used in the preparation of our financial statements associated with evaluations of goodwill and other intangible assets for impairment, estimates associated with the determination of valuation allowances related to net operating loss carryforwards, and estimates of certain losses under insurance contracts. These estimates may all be subject to substantial adjustments in future periods.  In addition, volatile market conditions may result in declines in the fair value of our investment portfolio and possible impairments of certain securities.

 

In the opinion of management, all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods have been included. The condensed consolidated results of operations for the three months and six months ended June 30, 2021 are not necessarily indicative of the results to be anticipated for the entire year.

 

(C)  Reclassifications 

 

Certain amounts in prior year’s condensed consolidated financial statements and Notes thereto have been reclassified to conform to the 2021 presentation, primarily for the effects of discontinued operations.

 

(D)   Recent Accounting Pronouncements 

 

Recently Adopted Accounting Standards

 

In December 2019, the Financial Accounting Standard Board (“FASB”) issued guidance to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes, the requirement to allocate current and deferred tax expense to legal entities not subject to tax in its separate financial statements, enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

 

Recently Issued Accounting Standards Not Yet Adopted 

 

In August 2018, the FASB issued guidance to improve existing measurements, presentation and disclosure requirements for long-duration contracts issued by insurance entities. The amendments in this guidance requires an entity to (1) review and update assumptions used to measure cash flows at least annually as well as update the discount rate assumption at each reporting date; (2) measure market risk benefits associated with deposit contracts at fair value; (3) disclose liability rollforwards and information about significant inputs, judgements assumptions, and methods used in measurement. Additionally, it simplifies the amortization of deferred acquisition costs and other balances on a constant level basis over the expected term of the related contracts. In 2019, the FASB delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Upon adoption, the amendments in this guidance should be applied to contracts in-force as of the beginning of the earliest period presented with a cumulative adjustment to beginning retained earnings. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued guidance requiring financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. An allowance for credit losses will be deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected with changes in the allowance recorded in earnings. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than the currently applied U.S. GAAP method

11

of taking a permanent impairment of the security, which would be limited to the amount by which fair value is below the amortized cost. Certain existing requirements used to evaluate credit losses have been removed. In 2019, the FASB provided transition relief by providing entities with an option to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible instruments upon adoption and delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The amendments in this guidance should be applied through a cumulative effect adjustment to retained earnings upon adoption as of the beginning of the first reporting period in which the guidance is effective. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

 

Note 2.Discontinued Operations 

(A)Sale of Standard Security Life 

 

On April 14, 2021, IHC and its wholly owned subsidiary, Independence Capital Corp. (“ICC”), entered into a Stock Purchase Agreement (the “SSL Purchase Agreement”) with Reliance Standard Life Insurance Company (“Reliance Standard”) to sell all of the issued and outstanding capital stock of Standard Security Life, a wholly owned subsidiary of ICC, for an aggregate purchase price of $180,000,000 in cash.  In addition, at closing, the Company will receive a dividend from Standard Security Life equal to the excess of aggregate statutory capital and surplus over $53,000,000 as of the closing date. Standard Security Life had statutory capital and surplus of $82,091,000 at June 30, 2021.  The closing of the transaction, the closing dividend and certain other items are subject to customary closing conditions including applicable regulatory approvals, one of which is the approval of the New York State Department of Financial Services. Standard Security Life currently cedes a portion of its New York short-term disability (“DBL”) and paid family leave rider (“PFL”) business to Independence American Insurance Company. We filed notice to cancel this reinsurance contract in accordance with the terms of the SSL Purchase Agreement. Under the terms of the SSL Purchase Agreement, the sale transaction will include all of Standard Security Life’s DBL and PFL business (including the DBL and PFL business previously ceded to Independence American Insurance Company) and will exclude other lines of business which will be reinsured prior to the closing. The DBL and PFL business being sold was part of the Company’s Group disability, life, DBL and PFL segment. The aforementioned transaction, consisting of the sale of Standard Security Life, the closing dividend and other closing conditions, is collectively referred to as the “SSL Sale” transaction or disposal group. DBL and PFL are major product lines for the Company. The sale of Standard Security Life and resulting exit from DBL and PFL business represents a strategic shift that will have a major effect on the Company’s operations and financial results. The SSL Sale transaction qualified for reporting as discontinued operations in the second quarter of 2021 upon the Board of Director’s commitment to a plan for its disposal in April 2021, and the subsequent execution of the SSL Purchase Agreement. Provided that all regulatory approvals and other closing conditions are met, the Company expects to complete the SSL Sale transaction by the end of 2021.

 

On July 29, 2021, the SSL Purchase Agreement was amended and restated to: (i) include in the disposal group, the business lines that were previously excluded from the transaction; (ii) remove the reinsurance requirement for the previously excluded business lines; and (iii) increase the target statutory capital and surplus to $57,000,000. As a result of this change in the disposal plan, the Company will include the assets, liabilities and results of operations for those business lines affected in discontinued operations for all periods presented, beginning in the third quarter of 2021.

 

Aside from customary transition services, there will be no continuing involvement with Standard Security Life after its disposal.

(B)Sale of Pet Division and Independence American Insurance Company (“Pets Sale”) 

 

On May 17, 2021, IHC and certain subsidiaries entered into agreements to sell a 70% controlling interest in its pet division, including all of the issued and outstanding capital stock of Independence American

12

Insurance Company to a subsidiary of Iguana Capital, Inc. (“Iguana Capital”), an investment company specifically formed to facilitate this transaction as follows:  

 

(i)IHC and its wholly owned subsidiary, IHC SB Holdings LLC (“SBH”), entered into a Stock Purchase Agreement (the “PPI Purchase Agreement”) with Iguana Capital to sell its 85% interest in PetPartners for $77,000,000 in cash (subject to working capital adjustments);  

(ii)IHC and its wholly owned subsidiary, AMIC Holdings, Inc. (“AMIC”), entered into a Stock Purchase Agreement (the “IAHC Purchase Agreement”) with Iguana Capital to sell all of the stock of Independence American Holdings Corp. (“IAHC”), which owns all of the stock of Independence American Insurance Company and other pet assets, for $190,400,000 in cash (subject to adjustments for targeted statutory capital and surplus): and  

(iii)Following each of the above, IHC will retain a 30% interest in the form of an equity investment in Iguana Capital. 

 

Both agreements are subject to customary closing conditions. The closing of the IAHC Purchase Agreement however is also subject to certain regulatory approvals, one of which is the approval of the Delaware Insurance Department.  For this reason, the transaction was structured as two agreements such that the sale of PetPartners occurred on June 30, 2021, and the closing of the transactions contemplated in the IAHC Purchase Agreement will follow at a later date upon receipt of applicable regulatory approvals. Provided that all regulatory approvals and other closing conditions are met, the Company expects to complete the IAHC sale transaction by the end of 2021.

 

Under the terms of the IAHC Purchase Agreement, the transaction includes the sale of all Independence American Insurance Company’s pet business and excludes other business lines. These excluded business lines will be retained by the Company through a reinsurance agreement with Madison National Life prior to closing. The reinsurance agreement will remain in effect until the underlying business is either transferred to Madison National Life or the business runs out. The aforementioned transaction, consisting of the sale of PetPartners, IAHC and Independence American Insurance Company, and other closing conditions, is collectively referred to as the “Pets Sale” transaction or disposal group. The pet business being sold was part of the Company’s Specialty Health segment. Because the pet business is a major product line for the Company, and the Company will no longer actively engage in the sales and marketing of pet insurance, the Pets Sale transaction represents a strategic shift that will have a major effect on the Company’s operations and financial results. The Pets Sale transaction qualified for reporting as discontinued operations in the second quarter of 2021 as a result of the Board of Directors’ commitment to a plan for the disposal of a controlling interest in its pet business in May 2021, and the execution of both the PPI Purchase Agreement and the IAHC Purchase Agreement on May 17, 2021.

 

On June 30, 2021, the Company completed the sale of its majority interest in PetPartners and, as a result, the Company ceased to have a controlling financial interest in PetPartners. Upon closing, the Company received proceeds of $78,779,000 (consisting of the purchase price and certain initial working capital adjustments), recognized an initial equity investment in Iguana Capital valued at $33,762,000, and recorded a $62,693,000 gain on the disposal, net of transaction costs and income taxes. Transaction costs consisting of transaction bonuses, legal expenses and financial advisor expenses amounted to an aggregate of $6,070,000. The PPI Purchase Agreement includes a waiver and consent to offer The American Kennel Club (“AKC”), PetPartners’ minority shareholder, until December 31, 2021, the right to sell their shares at the same price and terms as in the PPI Purchase Agreement. In the event AKC desires to sell such its shares, Iguana Capital and SBH will equally finance the cash payment to AKC. In connection with the PPI Sale transaction, the Company recorded a $6,800,000 contingent liability (the maximum amount required) based on its belief that AKC will exercise this right. If for any reason the IAHC Purchase Agreement is terminated, then at the option of either SBH or an affiliate of Iguana Capital, IAHC may reacquire the Company’s interest in PetPartners (the “PPI Put/Call Option”). The value of the PPI Put/Call Option was deemed to be negligible due to the structure of the put and call features, the short time horizon and the Company’s belief that there is a low probability that the deal would be terminated. The proceeds received from the sale of PetPartners were deposited into an escrow

13

account owned by SBH and treated as a security deposit. The funds will be released from escrow upon either the consummation of the IAHC sale transaction or upon the exercise of the PPI Put/Call Option. At June 30, 2021, the security deposit is presented as funds held in escrow on the Condensed Consolidated Balance Sheet.

 

Continuing involvement with the Pets Sale disposal group will consist of customary transition services, the reinsurance of retained business lines, the PPI Put/Call Option, and the equity investment in Iguana Capital.

 

The following is a reconciliation, by disposal group, of the carrying amounts of major classes of assets and liabilities included in discontinued operations on the Condensed Consolidated Balance Sheets for the periods indicated (in thousands):

 

 

 

June 30, 2021

 

 

SSL Sale

 

Pets Sale

 

Total

 

 

 

Major classes of assets:

 

 

 

 

 

 

Investments and cash

$

164,346 

$

144,688 

$

309,034 

Goodwill

 

- 

 

41,716 

 

41,716 

Other assets

 

30,020 

 

35,392 

 

65,412 

 

 

 

 

 

 

 

Assets attributable to discontinued operations

$

194,366 

$

221,796 

$

416,162 

 

 

 

 

 

 

 

Major classes of liabilities:

 

 

 

 

 

 

Policy benefits and claims

$

56,987 

$

12,743 

$

69,730 

Unearned premiums

 

26,778 

 

6,080 

 

32,858 

Other liabilities

 

12,500 

 

5,092 

 

17,592 

 

 

 

 

 

 

 

Liabilities attributable to discontinued operations

$

96,265 

$

23,915 

$

120,180 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

SSL Sale

 

Pets Sale

 

Total

 

 

 

Major classes of assets included in discontinued operations:

 

 

 

 

 

 

Investments and cash

$

114,916 

$

149,844 

$

264,760 

Goodwill

 

- 

 

62,414 

 

62,414 

Other assets

 

18,787 

 

29,730 

 

48,517 

 

 

 

 

 

 

 

Assets attributable to discontinued operations

$

133,703 

$

241,988 

$

375,691 

 

 

 

 

 

 

 

Major classes of liabilities included in discontinued operations:

 

 

 

 

 

 

Policy benefits and claims

$

34,500 

$

11,775 

$

46,275 

Unearned premiums

 

5,208 

 

5,629 

 

10,837 

Other liabilities

 

9,316 

 

9,511 

 

18,827 

 

 

 

 

 

 

 

Liabilities attributable to discontinued operations

$

49,024 

$

26,915 

$

75,939 

 

 

 

 

 

 

 

 

14

 

The following is a reconciliation, by disposal group, of the major line items constituting the pretax profit of discontinued operations to the income from discontinued operations, net of tax, as shown on the Condensed Consolidated Statements of Income for the periods indicated (in thousands):

 

 

 

For the Three Months Ended June 30, 2021

 

 

SSL Sale

 

Pets Sale

 

Total

 

 

 

Revenues

$

50,342  

$

33,080  

$

83,422  

Expenses:

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

24,341  

 

18,442  

 

42,783  

Selling, general and administrative expenses

 

7,394  

 

14,592  

 

21,986  

 

 

 

 

 

 

 

Pretax income of discontinued operations during phase-out

 

18,607  

 

46  

 

18,653  

Pretax provision for loss on disposal

 

(402) 

 

(410) 

 

(812) 

Pretax gain on disposal of discontinued operations

 

-  

 

74,534  

 

74,534  

Total pretax income from discontinued operations

 

18,205  

 

74,170  

 

92,375  

Income tax expense on discontinued operations

 

3,836  

 

11,734  

 

15,570  

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

$

14,369  

$

62,436  

$

76,805  

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2020

 

 

SSL Sale

 

Pets Sale

 

Total

 

 

 

Revenues

$

30,442 

$

20,407 

$

50,849 

Expenses:

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

22,152 

 

11,098 

 

33,250 

Selling, general and administrative expenses

 

6,150 

 

7,855 

 

14,005 

 

 

 

 

 

 

 

Pretax income of discontinued operations during phase-out

 

2,140 

 

1,454 

 

3,594 

Pretax provision for loss on disposal

 

- 

 

- 

 

- 

Pretax gain on disposal of discontinued operations

 

- 

 

- 

 

- 

Total pretax income from discontinued operations

 

2,140 

 

1,454 

 

3,594 

Income tax expense on discontinued operations

 

822 

 

442 

 

1,264 

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

$

1,318 

$

1,012 

$

2,330 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2021

 

 

SSL Sale

 

Pets Sale

 

Total

 

 

 

Revenues

$

93,738  

$

61,999  

$

155,737  

Expenses:

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

53,865  

 

34,374  

 

88,239  

Selling, general and administrative expenses

 

14,850  

 

26,796  

 

41,646  

 

 

 

 

 

 

 

Pretax income of discontinued operations during phase-out

 

25,023  

 

829  

 

25,852  

Pretax provision for loss on disposal

 

(402) 

 

(410) 

 

(812) 

Pretax gain on disposal of discontinued operations

 

-  

 

74,534  

 

74,534  

Total pretax income from discontinued operations

 

24,621  

 

74,953  

 

99,574  

Income tax expense on discontinued operations

 

5,151  

 

11,875  

 

17,026  

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

$

19,470  

$

63,078  

$

82,548  

 

 

 

 

 

 

 

 

15

 

 

 

For the Six Months Ended June 30, 2020

 

 

SSL Sale

 

Pets Sale

 

Total

 

 

 

Revenue

$

59,943 

$

37,838 

$

97,781 

Expenses:

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

40,560 

 

20,459 

 

61,019 

Selling, general and administrative expenses

 

13,004 

 

14,515 

 

27,519 

 

 

 

 

 

 

 

Pretax income of discontinued operations during phase-out

 

6,379 

 

2,864 

 

9,243 

Pretax provision for loss on disposal

 

- 

 

- 

 

- 

Pretax gain on disposal of discontinued operations

 

- 

 

- 

 

- 

Total pretax income from discontinued operations

 

6,379 

 

2,864 

 

9,243 

Income tax expense on discontinued operations

 

1,689 

 

741 

 

2,430 

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

$

4,690 

$

2,123 

$

6,813 

 

 

 

 

 

 

 

 

The assets and liabilities in discontinued operations are measured at the lower of their carry value or fair value less cost to sell. During the three months and six months ended June 30, 2021, it was not necessary to write-down any assets or liabilities attributable to the disposal groups in discontinued operations to fair value, less costs to sell. The Company expects to recognize gains from the sales of these disposal groups, therefore, any costs to sell the disposal groups, primarily legal expenses, incurred prior to the actual disposal of the discontinued operation, are expensed when incurred and presented in pretax provision for loss on disposal in the tables above.

 

Pretax income (loss) from discontinued operations during phase-out attributable to IHC was $18,653,000 and $25,852,000 for the three and six months ended June 30, 2021, respectively, and was $3,594,000 and $9,243,000 for the three and six months ended June 30, 2020, respectively.

 

Total cash flows from operating activities of discontinued operations were $45,917,000 and $26,813,000 for the six months ended June 30, 2021 and 2020, respectively. Total cash flows from investing activities of discontinued operations were $(88,501,000) and $(29,753,000) for the six months ended June 30, 2021 and 2020, respectively.

 

On a consolidated basis, the Company recorded $15,570,000 and $1,264,000 of income taxes related to pretax income from discontinued operations for the three months ended June 30, 2021 and 2020, respectively, and $17,026,000 and $2,430,000 for the six months ended June 30, 2021 and 2020, respectively. In 2021, these amounts include $11,841,000 of income taxes related to the pretax gain on disposal of discontinued operations. In connection with the sale of PetPartners, AMIC decreased its valuation allowance on existing deferred tax assets by $8,281,000 and utilized approximately $46,116,000 of its outstanding Federal net operating loss carryforwards (See Note 11). Differences between the Federal statutory income tax rate on discontinued operations and the Company’s effective income tax rate on pretax income from discontinued operations are primarily the result of AMIC’s decrease in its valuation allowance, state and local income taxes, nondeductible goodwill and other expenses.

 

16

 

 

Note 3.Income Per Common Share 

 

Diluted income per share was computed using the treasury stock method. As a result of losses from continuing operations for the three months and six months ended June 30, 2021 and 2020, such shares were deemed anti-dilutive.

 

The following is a reconciliation of income available to common shareholders used to calculate income per share for the periods indicated (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

Income from continuing operations attributable to IHC

$

(436)  

$

(1,835) 

$

(612)  

$

(1,987) 

Income from discontinued operations attributable to IHC

$

76,907  

$

2,256  

$

82,704  

$

6,686  

 

 

 

 

 

 

 

 

 

  Net income attributable to IHC

$

76,471  

$

421  

$

82,092  

$

4,699  

 

 

 

 

 

 

 

 

 

 

Note 4.Cash, Cash Equivalents and Restricted Cash 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods indicated (in thousands): 

 

 

 

June 30,

 

 

2021

 

2020

 

 

Cash and cash equivalents

$

22,834 

$

11,655 

Restricted cash in other assets

 

418 

 

985 

Cash, cash equivalents and restricted cash in discontinued operations

 

3,773 

 

11,563 

 

 

 

 

 

Total cash, cash equivalents and restricted cash including discontinued operations

$

27,025 

$

24,203 

 

 

 

 

 

 

Restricted cash includes insurance premiums collected from insureds that are pending remittance to insurance carriers and/or payment of insurance claims and commissions to third party administrators. These amounts are required to be set aside by contractual agreements with the insurance carriers and are included in other assets on the Condensed Consolidated Balance Sheets.

17

 

 

Note 5.Investment Securities 

 

The cost (amortized cost with respect to certain fixed maturities), gross unrealized gains, gross unrealized losses and fair value of fixed maturities available-for-sale are as follows for the periods indicated (in thousands):

 

 

 

June 30, 2021 

 

 

 

 

GROSS 

 

GROSS 

 

 

 

 

AMORTIZED

 

UNREALIZED

 

UNREALIZED

 

FAIR 

 

 

COST 

 

GAINS 

 

LOSSES 

 

VALUE 

 

 

 

 

FIXED MATURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Corporate securities

$

75,245  

$

1,583  

$

(779) 

$

76,049  

CMOs – residential (1)

 

3,071  

 

118  

 

(5) 

 

3,184  

U.S. Government obligations

 

23,029  

 

273  

 

- 

 

23,302  

Agency MBS - residential (2)

 

35  

 

-  

 

(4) 

 

31  

GSEs (3)

 

2,969  

 

-  

 

(84) 

 

2,885  

States and political subdivisions

 

74,086  

 

1,261  

 

(384) 

 

74,963  

Foreign government obligations

 

3,144  

 

151  

 

-  

 

3,295  

 

 

 

 

 

 

 

 

 

Total fixed maturities

$

181,579  

$

3,386  

$

(1,256) 

$

183,709  

 

 

 

December 31, 2020

 

 

 

 

GROSS 

 

GROSS 

 

 

 

 

AMORTIZED

 

UNREALIZED

 

UNREALIZED

 

FAIR 

 

 

COST 

 

GAINS 

 

LOSSES 

 

VALUE 

 

 

 

 

FIXED MATURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Corporate securities

$

91,802 

$

2,174 

$

(1,302) 

$

92,674 

CMOs – residential (1)

 

3,439 

 

146 

 

(2) 

 

3,583 

U.S. Government obligations

 

23,397 

 

414 

 

-  

 

23,811 

Agency MBS - residential (2)

 

39 

 

- 

 

(5) 

 

34 

GSEs (3)

 

3,055 

 

- 

 

(81) 

 

2,974 

States and political subdivisions

 

82,910 

 

1,768 

 

(452) 

 

84,226 

Foreign government obligations

 

3,211 

 

206 

 

-  

 

3,417 

 

 

 

 

 

 

 

 

 

Total fixed maturities

$

207,853 

$

4,708 

$

(1,842) 

$

210,719 

 

(1)Collateralized mortgage obligations (“CMOs”) 

(2)Mortgage-backed securities (“MBS”) 

(3)Government-sponsored enterprises (“GSEs”) are private enterprises established and chartered by the Federal Government or its various insurance and lease programs which carry the full faith and credit obligation of the U.S. Government. 

 

The amortized cost and fair value of fixed maturities available-for-sale at June 30, 2021, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

 

 

AMORTIZED

 

 

FAIR

 

 

 

COST

 

 

VALUE

 

 

 

 

 

 

 

Due in one year or less

 

$

36,481

 

$

36,938

Due after one year through five years

 

 

87,377

 

 

89,128

Due after five years through ten years

 

 

20,124

 

 

20,292

Due after ten years

 

 

31,522

 

 

31,252

Fixed maturities with no single maturity date

 

 

6,075

 

 

6,099

 

 

 

 

 

 

 

 

 

$

181,579

 

$

183,709

18

 

The following tables summarize, for all fixed maturities available-for-sale in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time those securities that have continuously been in an unrealized loss position for the periods indicated (in thousands):

 

 

 

June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

Unrealized

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

Corporate securities

$

19,962

 

$

740 

 

$

4,503

 

$

39 

 

$

24,465

$

779 

CMOs-residential

 

707

 

 

5 

 

 

-

 

 

- 

 

 

707

 

5 

Agency MBS - residential

 

31

 

 

4 

 

 

-

 

 

- 

 

 

31

 

4 

GSEs

 

-

 

 

- 

 

 

2,886

 

 

84 

 

 

2,886

 

84 

States and political subdivisions

 

10,319

 

 

76 

 

 

8,813

 

 

308 

 

 

19,132

 

384 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      unrealized loss position

$

31,019

 

$

825 

 

$

16,202

 

$

431 

 

$

47,221

$

1,256 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  unrealized loss position

 

9

 

 

 

 

 

14

 

 

 

 

 

23

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

Unrealized

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

Corporate securities

$

23,591

 

$

458 

 

$

8,845

 

$

844 

 

$

32,436

$

1,302 

CMOs-residential

 

748

 

 

2 

 

 

-

 

 

- 

 

 

748

 

2 

Agency MBS - residential

 

34

 

 

5 

 

 

-

 

 

- 

 

 

34

 

5 

GSEs

 

-

 

 

- 

 

 

2,974

 

 

81 

 

 

2,974

 

81 

States and political subdivisions

 

16,983

 

 

150 

 

 

6,108

 

 

302 

 

 

23,091

 

452 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      unrealized loss position

$

41,356

 

$

615 

 

$

17,927

 

$

1,227 

 

$

59,283

$

1,842 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  unrealized loss position

 

20

 

 

 

 

 

13

 

 

 

 

 

33

 

 

 

Substantially all of the unrealized losses on fixed maturities available-for-sale at June 30, 2021 and December 31, 2020 relate to investment grade securities. Management does not intend to sell, and it is likely that management will not be required to sell these securities prior to their anticipated recovery. The unrealized losses on the Company's fixed maturity securities are related to general market changes in interest rates, and/or the levels of credit spreads largely due to current market conditions relating to the COVID-19 pandemic rather than specific concerns with the issuer's ability to pay interest and repay principal. We have evaluated each corporate security’s credit rating as well as industry risk factors associated with the securities. The fair value of these securities is expected to recover as they approach maturity and therefore the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2021.

 

19

 

Net investment gains are as follows for periods indicated (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

Realized gains (losses):

 

 

 

 

 

 

 

 

Fixed maturities available-for-sale

$

(126) 

$

50 

$

46  

$

284  

Equity securities

 

-  

 

- 

 

292  

 

-  

 

 

 

 

 

 

 

 

 

Total realized gains (losses) on debt and equity securities

 

(126) 

 

50 

 

338  

 

284  

Unrealized gains (losses) on equity securities

 

-  

 

214 

 

(247) 

 

(184) 

 

 

 

 

 

 

 

 

 

Gains (losses) on debt and equity securities

 

(126) 

 

264 

 

91  

 

100  

Gains (losses) on other investments

 

-  

 

10 

 

-  

 

17  

 

 

 

 

 

 

 

 

 

Net investment gains

$

(126) 

$

274  

$

91  

$

117  

 

For the three months and six months ended June 30, 2021, the Company realized gross gains of $61,000 and $254,000, respectively, and gross losses of $187,000 and $206,000, respectively, from sales, maturities and prepayments of fixed maturities available-for-sale. For the three months and six months ended June 30, 2020, the Company realized gross gains of $97,000 and $346,000, respectively, and gross losses of $47,000 and $62,000, respectively, from sales, maturities and prepayments of fixed maturities available-for-sale.

 

Other-Than-Temporary Impairment Evaluations

 

We recognize other-than-temporary impairment losses in earnings in the period that we determine: 1) we intend to sell the security; 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in other comprehensive income (loss). See Note 1G(v) to the Consolidated Financial Statements in the 2020 Annual Report on Form 10-K for further discussion of the factors considered by management in its regular review to identify and recognize other-than-temporary impairments on fixed maturities available-for-sale.  The Company did not recognize any other-than-temporary impairments on available-for-sale securities in the first six months of 2021 or 2020.

 

Note 6.Fair Value Disclosures  

 

For all financial and non-financial assets and liabilities accounted for at fair value on a recurring basis, the Company utilizes valuation techniques based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market expectations. These two types of inputs create the following fair value hierarchy:

 

Level 1 - Quoted prices for identical instruments in active markets.

 

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 - Instruments where significant value drivers are unobservable.

 

The following section describes the valuation methodologies we use to measure different assets at fair value.

 

20

Fixed maturities available-for-sale:

 

Fixed maturities available-for-sale included in Level 2 are comprised of our portfolio of government securities, agency mortgage-backed securities, corporate fixed income securities, foreign government obligations, collateralized mortgage obligations, municipals and GSEs that were priced with observable market inputs. Level 3 debt securities consist of municipal tax credit strips.  The valuation method used to determine the fair value of municipal tax credit strips is the present value of the remaining future tax credits (at the original issue discount rate) as presented in the redemption tables in the Municipal Prospectuses.   This original issue discount is accreted into income on a constant yield basis over the term of the debt instrument. Further, we retain independent pricing vendors to assist in valuing certain instruments.

 

Equity securities:

 

Equity securities included in Level 1 are equity securities with quoted market prices. 

 

The following tables present our financial assets measured at fair value on a recurring basis for the periods indicated (in thousands):

 

 

 

June 30, 2021

 

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

FINANCIAL ASSETS:

 

 

 

 

 

 

 

 

 

Fixed maturities available-for-sale:

 

 

 

 

 

 

 

 

 

  Corporate securities

$

- 

 

$

76,049 

$

- 

$

76,049 

  CMOs - residential

 

- 

 

 

3,184 

 

- 

 

3,184 

  US Government obligations

 

- 

 

 

23,302 

 

- 

 

23,302 

  Agency MBS - residential

 

- 

 

 

31 

 

- 

 

31 

  GSEs

 

- 

 

 

2,885 

 

- 

 

2,885 

  States and political subdivisions

 

- 

 

 

73,949 

 

1,014 

 

74,963 

  Foreign government obligations

 

- 

 

 

3,295 

 

- 

 

3,295 

     Total fixed maturities

 

- 

 

 

182,695 

 

1,014 

 

183,709 

 

 

 

 

 

 

 

 

 

 

Total Financial Assets

$

- 

 

$

182,695 

$

1,014 

$

183,709 

 

 

 

December 31, 2020

 

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

FINANCIAL ASSETS:

 

 

 

 

 

 

 

 

 

Fixed maturities available-for-sale:

 

 

 

 

 

 

 

 

 

  Corporate securities

$

- 

 

$

92,674 

$

- 

$

92,674 

  CMOs - residential

 

- 

 

 

3,583 

 

- 

 

3,583 

  US Government obligations

 

- 

 

 

23,811 

 

- 

 

23,811 

  Agency MBS - residential

 

- 

 

 

34 

 

- 

 

34 

  GSEs

 

- 

 

 

2,974 

 

- 

 

2,974 

  States and political subdivisions

 

- 

 

 

83,130 

 

1,096 

 

84,226 

  Foreign government obligations

 

- 

 

 

3,417 

 

- 

 

3,417 

     Total fixed maturities

 

- 

 

 

209,623 

 

1,096 

 

210,719 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

  Common stocks

 

1,753 

 

 

- 

 

- 

 

1,753 

     Total equity securities

 

1,753 

 

 

- 

 

- 

 

1,753 

 

 

 

 

 

 

 

 

 

 

Total Financial Assets

$

1,753 

 

$

209,623 

$

1,096 

$

212,472 

 

21

 

The following table presents the changes in fair value of our Level 3 financial assets for the periods indicated (in thousands):

 

 

 

Three Months Ended June 30,

 

 

2021

 

 

2020

 

 

States and

 

Total

 

 

States and

 

Total

 

 

Political

 

Level 3

 

 

Political

 

Level 3

 

 

Subdivisions

 

Assets

 

 

Subdivisions

 

Assets

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

1,055  

$

1,055  

 

$

1,214  

$

1,214  

 

 

 

 

 

 

 

 

 

 

Increases (decreases) recognized in earnings:

 

 

 

 

 

 

 

 

 

   Net investment gains

 

-  

 

-  

 

 

-  

 

-  

 

 

 

 

 

 

 

 

 

 

Gains (losses) included in other

 

 

 

 

 

 

 

 

 

  comprehensive income (loss):

 

 

 

 

 

 

 

 

 

    Net unrealized gains (losses)

 

(4) 

 

(4) 

 

 

(5) 

 

(5) 

 

 

 

 

 

 

 

 

 

 

Repayments and amortization of

 

 

 

 

 

 

 

 

 

   fixed maturities

 

(37) 

 

(37) 

 

 

(34) 

 

(34) 

 

 

 

 

 

 

 

 

 

 

Balance at end of period

$

1,014  

$

1,014  

 

$

1,175  

$

1,175  

 

 

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

 

States and

 

Total

 

 

States and

 

Total

 

 

Political

 

Level 3

 

 

Political

 

Level 3

 

 

Subdivisions

 

Assets

 

 

Subdivisions

 

Assets

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

1,096  

$

1,096  

 

$

1,251  

$

1,251  

 

 

 

 

 

 

 

 

 

 

Increases (decreases) recognized in earnings:

 

 

 

 

 

 

 

 

 

   Net investment gains

 

-  

 

-  

 

 

-  

 

-  

 

 

 

 

 

 

 

 

 

 

Gains (losses) included in other

 

 

 

 

 

 

 

 

 

  comprehensive income (loss):

 

 

 

 

 

 

 

 

 

    Net unrealized gains (losses)

 

(8) 

 

(8) 

 

 

(9) 

 

(9) 

 

 

 

 

 

 

 

 

 

 

Repayments and amortization of

 

 

 

 

 

 

 

 

 

   fixed maturities

 

(74) 

 

(74) 

 

 

(67) 

 

(67) 

 

 

 

 

 

 

 

 

 

 

Balance at end of period

$

1,014  

$

1,014  

 

$

1,175  

$

1,175  

 

Included in unrealized gains (losses) on available-for-sale securities, pre-tax, on the Condensed Consolidated Statement of Comprehensive Income for the three months and six months ended June 30, 2021 are $(4,000) and $(8,000) of unrealized gains (losses) attributable to the change in unrealized gains (losses) related to Level 3 securities held at June 30, 2021.

 

22

 

The following table provides carrying values, fair values and classification in the fair value hierarchy of the Company’s financial instruments, that are not carried at fair value but are subject to fair value disclosure requirements, for the periods indicated (in thousands):

 

 

 

June 30, 2021

 

December 31, 2020

 

 

Level 1

 

Level 2

 

 

 

Level 1

 

Level 2

 

 

 

 

Fair

 

Fair

 

Carrying

 

Fair

 

Fair

 

Carrying

 

 

Value

 

Value

 

Value

 

Value

 

Value

 

Value

 

 

 

 

 

 

FINANCIAL ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

  Short-term investments

$

1,550 

$

- 

$

1,550 

$

1,568 

$

- 

$

1,568 

  Securities purchased under

 

 

 

 

 

 

 

 

 

 

 

 

     agreements to resell

 

70,323 

 

- 

 

70,323 

 

33,038 

 

- 

 

33,038 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

  Funds on deposit

$

- 

$

142,155 

$

142,155 

$

- 

$

141,376 

$

141,376 

  Other policyholders’ funds

 

- 

 

11,988 

 

11,988 

 

- 

 

12,001 

 

12,001 

 

The following methods and assumptions were used to estimate the fair value of the financial instruments that are not carried at fair value in the Condensed Consolidated Financial Statements:

 

Securities purchased under agreements to resell

 

Securities purchased under agreements to resell are carried at the amounts at which the securities will be subsequently resold, which approximates fair value.

 

Short-term Investments

 

Investments with original maturities of 91 days to one year are considered short-term investments and are carried at cost, which approximates fair value.

 

Funds on Deposit

 

The Company has two types of funds on deposit. The first type is credited with a current market interest rate, resulting in a fair value which approximates the carrying amount. The second type carries fixed interest rates which are higher than current market interest rates. The fair value of these deposits was estimated by discounting the payments using current market interest rates. The Company's universal life policies are also credited with current market interest rates, resulting in a fair value which approximates the carrying amount. Both types of funds on deposit are included in Level 2 of the fair value hierarchy.

 

Other Policyholders’ Funds

 

Other policyholders’ funds are primarily credited with current market interest rates resulting in a fair value which approximates the carrying amount.

 

Note 7.Other Investments, Including Variable Interest Entities 

 

Equity Method Investments

 

Equity income (loss) from equity method investments for the three months and six months ended June 30, 2021 was $4,000 and $64,000 respectively; and was $(356,000) and $(28,000) for the three months and six months ended June 30, 2020, respectively.

 

23

 

Variable Interest Entities

 

The Company has a minority interest in certain limited partnerships that we have determined to be Variable Interest Entities (“VIEs”).  The aforementioned VIEs are not required to be consolidated in the Company’s condensed consolidated financial statements as we are not the primary beneficiary since we do not have the power to direct the activities that most significantly impact the VIEs’ economic performance.

 

The Company will periodically reassess whether we are the primary beneficiary in any of these investments. The reassessment process will consider whether we have acquired the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. Our maximum loss exposure is limited to our combined $2,022,000 carrying value in these equity investments which is included in other investments in the Condensed Consolidated Balance Sheet as of June 30, 2021.

 

Related Party Transactions

 

At June 30, 2021 and December 31, 2020, the Company’s Condensed Consolidated Balance Sheets include $94,000 and $163,000, respectively, of administrative fees and other expenses payable to Ebix Health Exchange Holdings, LLC (“Ebix Health Exchange”), which are included in other assets and accounts payable, accruals and other liabilities, respectively. The Company’s Condensed Consolidated Statements of Income include administrative fee expenses to Ebix Health Exchange, which are included in selling, general and administrative expenses, of $361,000 and $762,000, respectively, for the three months and six months ended June 30, 2021; and include $423,000 and $899,000, respectively, for the same periods in 2020.

 

Selling, general and administrative expense for the three months ended March 31, 2020 includes approximately $1,507,000 of expense related to the purchase of leads from an affiliated lead generation company, Torchlight, which was acquired in April of 2020. Lead costs subsequent to acquisition are eliminated in consolidation. 

 

Note 8.Acquisitions 

 

The Abacus Group, LLC.

 

On January 1, 2020 (the "Abacus Acquisition Date"), the Company acquired the remaining 56% membership units of The Abacus Group, LLC, (“Abacus”) for a purchase price of $2,599,000, Abacus is an agency group that writes worksite business for Madison National Life and other carriers and receives commissions and other fees. The Company acquired Abacus to further the Company’s position in the worksite marketplace. The Company accounted for its prior ownership interest using the equity method. Immediately preceding the transaction, the Company determined the fair value of its equity interest to be $1,838,000 using a market approach and, as a result, recorded a loss of $163,000, which is included in other income on the Condensed Consolidated Statement of Income.

 

24

 

Upon the acquisition, the Company consolidated the assets and liabilities of Abacus. The following table presents the identifiable assets acquired and liabilities assumed in the acquisition of Abacus on the Abacus Acquisition Date based on their respective fair values (in thousands):

 

Other assets

 

$

350  

 

 

 

 

Total identifiable assets

 

 

350  

 

 

 

 

Other liabilities

 

 

575  

 

 

 

 

Total liabilities

 

 

575  

 

 

 

 

Net identifiable assets (liabilities) acquired

 

$

(225) 

 

 

 

 

 

In connection with the acquisition, the Company recorded $4,662,000 of goodwill of which $2,725,000 is deductible for income tax purposes.

 

Goodwill represents the synergies with our insurance carriers. Abacus has an existing distribution network and offers increased distribution sources for IHC carriers’ existing products and developing products through its enrollment platform designed specifically for producers in the worksite marketplace. Goodwill was calculated as the sum of (i) the acquisition date fair value of total cash consideration transferred of $2,599,000, (ii) the aggregate acquisition-date fair value of equity interests immediately before the acquisition of $1,838,000, and (iii) the net identifiable liabilities of $225,000 that were assumed. The enterprise value of Abacus was determined by a market approach net of any control premium. Acquisition-related costs, primarily legal and consulting fees, were not material and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Income.

 

Revenue and net income from Abacus for the period from the Abacus Acquisition Date to June 30, 2020, is not material as most of their agency fee income is derived from Madison National Life and is now eliminated in consolidation. The amount of fee income earned from other carriers in 2020 is not material and will reduce over time as the business either runs-off or is transitioned to Madison National Life.

 

Pro forma adjustments to present the Company’s consolidated revenues and net income as if the acquisition date was January 1, 2019 are not material and accordingly are omitted.

 

Torchlight Technology Group LLC.

 

On April 15, 2020 (the "Torchlight Acquisition Date"), the Company acquired the remaining 77% membership units of Torchlight Technology Group LLC, (“Torchlight”) for a purchase price of $11,443,000 in cash and other consideration valued at $185,000. In accordance with the purchase and sale agreement, the Company will also make future incentive payments to the former owners based on the future market appreciation of IHC. These payments will be accounted for as compensation for post-combination services. The Company purchased Torchlight for its marketing technology (“MarTech”), artificial data intelligence, and consumer lead generation capabilities. In an effort to further expand our InsureTech division (comprised of Torchlight, our call centers, field and career agents, and web domains), the Company wants to be able to internally develop and deliver lead traffic opportunities in an affordable and controlled environment. The Company accounted for its prior ownership interest using the equity method. Immediately preceding the transaction, the Company determined the fair value of its equity interest to be $3,432,000 using the income approach and, as a result, recorded a gain of $519,000, which is included in other income on the Condensed Consolidated Statement of Income.

 

Upon the acquisition, the Company consolidated the assets and liabilities of Torchlight. The following

25

table presents the identifiable assets acquired and liabilities assumed in the acquisition of Torchlight on the Torchlight Acquisition Date based on their respective fair values (in thousands):

 

Cash

 

$

333 

Intangible assets

 

 

2,700 

Other assets

 

 

2,132 

 

 

 

 

Total identifiable assets

 

 

5,165 

 

 

 

 

Other liabilities

 

 

1,227 

 

 

 

 

Total liabilities

 

 

1,227 

 

 

 

 

Net identifiable assets acquired

 

$

3,938 

 

 

 

 

 

In connection with the acquisition, the Company recorded $11,122,000 of goodwill, of which $7,976,000 is deductible for income tax purposes, and $2,700,000 of intangible assets. In 2021, a portion of this goodwill was allocated to the Pets Sale disposal group presented in discontinued operations.

 

Goodwill represents the synergies with our agencies. With a significant dependence on consumer and small business opportunities, our agencies require a consistent and predictable flow of lead traffic, and as a result, have meaningful synergies with the functions and deliverables that are developed at Torchlight. Before the acquisition of Torchlight, our agency was fully dependent on market traffic, which was both unpredictable in price and availability. Such restrictions would not allow for coordinated or scheduled growth. Goodwill was calculated as the sum of (i) the acquisition date fair value of total aggregate consideration transferred of $11,628,000; and (ii) the aggregate acquisition-date fair value of equity interests immediately before the acquisition of $3,432,000; over (iii) the net identifiable assets of $3,938,000 that were acquired. The enterprise value of Torchlight was determined by an independent appraisal using a discounted cash flow model. Acquisition-related costs, primarily legal and consulting fees, were not material and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Income.

 

Revenue and net loss from Torchlight for the period from the Torchlight Acquisition Date to June 30, 2020 is $1,828,000 and $(564,000), respectively. The net loss is primarily related to the integration of Torchlight with the Company’s other operations.

 

Pro forma adjustments to present the Company’s consolidated revenues and net income as if the acquisition date was January 1, 2019 are not material and accordingly are omitted.

 

Note 9.Goodwill and Other Intangible Assets 

 

The carrying amount of goodwill is $12,486,000 at June 30, 2021 and December 31, 2020, of which $8,263,000 is attributable to the Specialty Health Segment at both June 30, 2021 and December 31, 2020, and $4,223,000 is attributable to the Group disability and life segment for the same periods.

 

The Company has net other intangible assets of $3,667,000 and $4,008,000 at June 30, 2021 and December 31, 2020, respectively, which are included in other assets in the Condensed Consolidated Balance Sheets. These intangible assets consist of: (i) finite-lived intangible assets, principally the fair value of acquired agent and broker relationships, which are subject to amortization; and (ii) indefinite-lived intangible assets which consist of the estimated fair value of insurance licenses that are not subject to amortization.

 

The gross carrying amounts of these other intangible assets are as follows for the periods indicated (in thousands):

26

 

 

 

June 30, 2021

 

December 31, 2020

 

 

Gross

 

 

 

Gross

 

 

 

 

Carrying

 

Accumulated

 

Carrying

 

Accumulated

 

 

Amount

 

Amortization

 

Amount

 

Amortization

 

 

 

 

Finite-lived Intangible Assets:

 

 

 

 

 

 

 

 

  Agent and broker relationships

$

6,583 

$

4,599 

$

7,583 

$

5,385 

  Software systems

 

1,500 

 

294 

 

1,500 

 

167 

     Total finite-lived

$

8,083 

$

4,893 

$

9,083 

$

5,552 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

 

 

2021

 

2020

Indefinite-lived Intangible Assets:

 

 

 

 

 

 

   Insurance licenses

 

 

 

 

$

477 

$

477 

     Total indefinite-lived

 

 

 

 

$

477 

$

477 

 

Amortization expense was $179,000 and $341,000 for the three months and six months ended June 30, 2021, respectively; and was $171,000 and $224,000 for the three months and six months ended June 30, 2020, respectively. 

 

Note 10.Fee Income 

 

Substantially all of the fee income recorded by the IHC Agencies and lead generation company relate to our Specialty Health segment. The following table presents fee income disaggregated by type for the periods indicated (in thousands).

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

Commissions

$

1,416 

 

1,932 

 

4,297 

$

3,672 

Administrative Fees

 

80 

 

581 

 

177 

 

1,069 

Marketing Fees

 

254 

 

292 

 

559 

 

643 

Enrollment Platform Fees

 

529 

 

455 

 

1,029 

 

973 

Lead and Referral Fees

 

2,633 

 

588 

 

4,945 

 

854 

Payment Plan, Application and Other Fees

 

32 

 

59 

 

72 

 

130 

 

 

 

 

 

 

 

 

 

Total Fee Income

$

4,944 

 

3,907 

 

11,079 

$

7,341 

 

Commission Revenues

 

Commission revenues result from the sales of certain policies by the IHC Agencies on behalf of multiple unaffiliated insurance carriers. Increased sales of products to these unaffiliated insurance carriers began in 2020 as a result of new contracts with the carriers and increased distribution channels. These policies primarily consist of senior products, such as Medicare Advantage, Medicare Part D prescription drug plans and Medicare Supplement plans, as well as Affordable Care Act (“ACA”) plans. A significant portion of our commission revenues are recorded at a point in time upon the issuance of a policy by the unaffiliated insurance carrier based on expected constrained lifetime value (“LTV”). Constrained LTV represents expected commissions to be received over the lifetime of the policies sold. The Company analyzes various factors, such as commission rates, carrier mix, contract amendments and terminations, estimated average plan durations, cancellations and non-renewals, to estimate the LTV. Constraints are applied to help ensure that the total estimated lifetime commissions expected to be collected are recognized as revenue only to the extent that it is

27

probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

 

We evaluate the appropriateness of our constraints on a quarterly basis and update the LTV assumptions if we observe evidence that suggests a change in the underlying long-term expectations. In doing this, we apply significant judgement in assessing historical cash collections and changes in circumstances that would impact future cash collections such as, but not limited to, commission rates, carrier mix, plan durations, plan cancellations and non-renewals. Changes in LTV result in an increase or decrease to fee income revenue and a corresponding increase or decrease to contract assets. Any significant impact due to changes in the LTV assumptions are recognized in revenue (i) in the period of the change; and (ii) to the extent we do not believe a significant reversal is probable.

 

Costs to Fulfill a Contract

 

Costs to fulfill a contract include commissions owed to independent licensed agents or affinity partners that are contracted by the IHC Agencies. Upon the submission of a completed insurance application, the sales and marketing performance obligation is complete and the resultant estimated lifetime commission costs incurred are expensed and a corresponding commission liability is recorded on the Condensed Consolidated Balance Sheet. As policyholders continue their policy and remit monthly premium payments, the Company receives its commissions from the insurance carrier. Commissions owed to the agent or affinity partner are then paid and the corresponding liability is reduced. Judgement is required to estimate total expected lifetime commissions based on policy duration assumptions. At June 30, 2021 and December 31, 2020, the aforementioned commission liability was $2,858,000 and $2,362,000, respectively, and is included in accounts payable, accruals and other liabilities on the Condensed Consolidated Balance Sheet.

 

Contract Asset

 

Contract assets primarily relate to our commission revenues for the sales of senior products, such as Medicare Advantage and Medicare Supplement plans and ACA plans, which began in 2020. When commission revenue for the sales of these products is recognized, a corresponding contract asset is recorded in other assets on the Condensed Consolidated Balance Sheet. The timing of revenue differs from the collection of commissions. As policyholders continue their policy and remit monthly premium payments, the Company receives its commissions from the insurance carrier and the contract asset is reduced.

 

The following table summarizes the contract asset activity for the period indicated (in thousands).

 

 

 

Six Months Ended

 

 

June 30, 2021

 

Beginning Balance

$

7,760  

Commissions recognized during the period

 

4,708  

Commission adjustments related to prior periods

 

(418)  

Cash receipts

 

(3,251) 

 

 

 

Ending Balance

$

8,799  

 

Remaining Performance Obligations

 

Deferred revenues are recorded in connection with certain terminable contracts and the right to use our INSX enrollment platform. At June 30, 2021 and December 31, 2020, deferred revenues are immaterial and expected to be fully recognized within the next 12 months.

28

 

 

Note 11.Income Taxes 

 

The provisions for income taxes shown in the Condensed Consolidated Statements of Income were computed by applying the effective tax rate expected to be applicable for the reporting periods. Differences between the Federal statutory income tax rate and the Company’s effective income tax rate are principally from the dividends received deduction and tax-exempt interest income, state and local income taxes, and compensation related tax provisions.

 

December 31, 2020, AMIC had Federal net operating loss carryforwards of approximately $46,116,000 and a corresponding valuation allowance of $8,281,000 related to those net operating loss carryforwards that, in the judgment of management, were not considered realizable. On June 30, 2021, the Company sold PetPartners and recorded a pretax gain of $74,534,000 (See Note 2). As a result, AMIC decreased its valuation allowance by $8,281,000 and utilized the $46,116,000 of its outstanding Federal net operating loss carryforwards. Total income tax expense related to the pretax gain on disposal of discontinued operations was $11,841,000. The primary differences between the Federal statutory income tax rate and the Company’s effective income tax rate related to the gain on disposal of discontinued operations are the result of AMIC’s decrease in its valuation allowance, partially offset by the non-deductibility of goodwill and other expenses related to the disposal.

 

The effective income tax rates related to losses from continuing operations in 2021 were impacted by tax benefits from exercises of share-based compensation and state and local income tax benefits on certain subsidiaries. In 2020, the effective income tax rates related to losses from continuing operations reflect a benefit from capital losses attributable to the sale of a subsidiary, partially offset by certain non-deductible expenses recorded in connection with a Regulatory Settlement Agreement.

 

On March 27, 2020, as part of the business stimulus package in response to the COVID-19 pandemic, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.  The CARES Act established new tax provisions including, but not limited to: (1) five-year carryback of net operating losses ("NOLs") generated in 2018, 2019 and 2020; (2) accelerated refund of alternative minimum tax (AMT) credit carryforwards; and (3) retroactive changes to allow accelerated depreciation for certain depreciable property. At this time, the legislation does not have a material impact on the Company due to the lack of taxable losses in the stated carryback eligible tax years and the fact that the Company was already expecting to receive a cash benefit for the remaining AMT credits in the fiscal 2018 tax year return.

 

The New York State Department of Taxation and Finance has selected the Company’s 2015 and 2016 NYS returns for audit.

29

 

 

Note 12.Policy Benefits and Claims 

 

Policy benefits and claims is the liability for unpaid loss and loss adjustment expenses. It is comprised of unpaid claims and estimated incurred but not reported (“IBNR”) reserves. Summarized below are the changes in the total liability for policy benefits and claims for the periods indicated (in thousands). Amounts incurred below do not include expenses for policy benefits and costs incurred for the Company’s life, annuity and other long-duration contracts. In addition, certain loss adjustment expenses related to short-duration contracts that are included in amounts incurred below are classified as selling general and administrative expenses on the Condensed Consolidated Statements of Income.

 

 

 

For the Six Months Ended June 30, 2021

 

 

Specialty

 

Group

 

All Other

 

 

 

 

Health

 

Disability

 

Lines

 

Total

 

 

 

 

Balance at beginning of year

$

31,680  

$

80,976  

$

20,301  

$

132,957  

Less: reinsurance recoverable

 

1,776  

 

22,472  

 

11,878  

 

36,126  

Net balance at beginning of year

 

29,904  

 

58,504  

 

8,423  

 

96,831  

 

 

 

 

 

 

 

 

 

Amount incurred, related to:

 

 

 

 

 

 

 

 

  Current year

 

16,631  

 

20,031  

 

11,947  

 

48,609  

  Prior years

 

(4,634) 

 

(4,033) 

 

(1,132) 

 

(9,799) 

 

 

 

 

 

 

 

 

 

  Total incurred

 

11,997  

 

15,998  

 

10,815  

 

38,810  

 

 

 

 

 

 

 

 

 

Amount paid, related to:

 

 

 

 

 

 

 

 

  Current year

 

4,461  

 

3,922  

 

6,885  

 

15,268  

  Prior years

 

12,080  

 

11,488  

 

3,667  

 

27,235  

 

 

 

 

 

 

 

 

 

  Total paid

 

16,541  

 

15,410  

 

10,552  

 

42,503  

 

 

 

 

 

 

 

 

 

Net balance at end of period

 

25,360  

 

59,092  

 

8,686  

 

93,138  

Plus:  reinsurance recoverable

 

1,161  

 

22,492  

 

11,024  

 

34,677  

Balance at end of period

$

26,521  

$

81,584  

$

19,710  

$

127,815  

 

30

 

 

 

 

For the Six Months Ended June 30, 2020

 

 

Specialty

 

Group

 

All Other

 

 

 

 

Health

 

Disability

 

Lines

 

Total

 

 

 

 

Balance at beginning of year

$

35,530  

$

80,079  

$

19,874  

$

135,483  

Less: reinsurance recoverable

 

1,717  

 

23,322  

 

11,954  

 

36,993  

Net balance at beginning of year

 

33,813  

 

56,757  

 

7,920  

 

98,490  

 

 

 

 

 

 

 

 

 

Amount incurred, related to:

 

 

 

 

 

 

 

 

  Current year

 

24,522  

 

19,093  

 

11,182  

 

54,797  

  Prior years

 

(1,972) 

 

(1,553) 

 

(3,201) 

 

(6,726) 

 

 

 

 

 

 

 

 

 

  Total incurred

 

22,550  

 

17,540  

 

7,981  

 

48,071  

 

 

 

 

 

 

 

 

 

Amount paid, related to:

 

 

 

 

 

 

 

 

  Current year

 

7,064  

 

4,010  

 

4,979  

 

16,053  

  Prior years

 

17,530  

 

12,125  

 

2,155  

 

31,810  

 

 

 

 

 

 

 

 

 

  Total paid

 

24,594  

 

16,135  

 

7,134  

 

47,863  

 

 

 

 

 

 

 

 

 

Net balance at end of period

 

31,769  

 

58,162  

 

8,767  

 

98,698  

Plus:  reinsurance recoverable

 

1,802  

 

22,463  

 

11,074  

 

35,339  

Balance at end of period

$

33,571  

$

80,625  

$

19,841  

$

134,037  

 

Since unpaid loss and loss adjustment expenses are estimates, actual losses incurred may be more or less than the Company’s previously developed estimates and is referred to as either unfavorable or favorable development, respectively.

 

Net favorable (unfavorable) development in the Specialty Health segment, as depicted in the tables above, is comprised of the following lines of business for the years indicated (in thousands):

 

 

 

Six Months Ended

 

 

June 30,

Specialty Health segment:

 

2021

 

2020

Short-term Medical (“STM”)

$

1,676  

$

286 

Occupational Accident

 

963  

 

798 

Fixed Indemnity Limited Benefit

 

862  

 

(736) 

Limited Medical

 

197  

 

241 

Critical Illness

 

196  

 

397 

Group Gap

 

356  

 

513 

All other specialty health lines

 

384  

 

473 

 

 

 

 

 

    Total Specialty Health segment

$

4,634  

$

1,972 

 

In both 2021 and 2020, net favorable development in the various lines of the Specialty Health segment shown above are primarily due to better than expected claim development. In 2021, experience in STM continues to be better than expected and severity has been relatively low.

 

In 2021, favorable development of $4,033,000 in the group disability business is primarily due to lower frequency and severity in both the short-term disability (“STD”) and the long-term disability (“LTD”) lines. In 2020, favorable development in the group disability business is primarily due to a reduction in open claims, specifically new claims, in the LTD line, partially offset by an increase in the overall frequency and

31

severity of claims in the STD line.

 

All other lines, primarily life and other individual health products and including our medical stop-loss business in run-off, experienced favorable development in 2021 and 2020. The favorable development in 2020 is primarily related to the group term life business due to continued improvements in experience and updated assumptions for the Paid-Up Life business.

 

Included in the preceding rollforward of the Company’s liability for policy benefits and claims are the policy benefits and claims activity associated with the Company’s health insurance lines. These are embedded within the Specialty Health segment. The table below summarizes the components of the change in the liability for policy benefits and claims that are specific to health insurance claims for the periods indicated (in thousands).

 

 

 

 

Specialty Health Segment

 

 

Health Insurance Claims

 

 

Six Months Ended

 

 

June 30,

 

 

2021

 

 

2020

 

 

 

Balance at beginning of year

$

28,295  

 

$

31,259  

Less: reinsurance recoverable

 

1,766  

 

 

1,113  

Net balance at beginning of year

 

26,529  

 

 

30,146  

 

 

 

 

 

 

Amount incurred, related to:

 

 

 

 

 

  Current year

 

15,818  

 

 

23,627  

  Prior years

 

(3,658) 

 

 

(1,184) 

 

 

 

 

 

 

  Total incurred

 

12,160  

 

 

22,443  

 

 

 

 

 

 

Amount paid, related to:

 

 

 

 

 

  Current year

 

4,319  

 

 

8,260  

  Prior years

 

11,992  

 

 

16,382  

 

 

 

 

 

 

  Total paid

 

16,311  

 

 

24,642  

 

 

 

 

 

 

Net balance at end of period

 

22,378  

 

 

27,947  

Plus:  reinsurance recoverable

 

1,158  

 

 

1,406  

Balance at end of period

$

23,536  

 

$

29,353  

 

The liability for the IBNR plus expected development on reported claims associated with the Company’s health insurance claims is $22,378,000 at June 30, 2021.

32

 

 

Note 13.Stockholders’ Equity 

 

Accumulated Other Comprehensive Income (Loss)

 

Other comprehensive income (loss) includes the after-tax net unrealized gains and losses on investment securities available-for-sale, including the subsequent increases and decreases in fair value of available-for-sale securities previously impaired and the non-credit related component of other-than-temporary impairments of fixed maturities.

 

Changes in the balances of accumulated other comprehensive income, shown net of taxes, for the periods indicated are as follows (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

Beginning balance

$

2,268  

$

1,101  

$

4,197 

$

1,212  

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

  Other comprehensive income (loss) before reclassifications

 

784 

 

1,810  

 

(1,013)

 

2,544  

  Amounts reclassified from accumulated OCI

 

168 

 

(57) 

 

36 

 

(902) 

     Net other comprehensive income (loss)

 

952 

 

1,753  

 

(977)

 

1,642  

 

 

 

 

 

 

 

 

 

Ending balance

$

3,220  

$

2,854  

$

3,220 

$

2,854  

 

Presented below are the amounts reclassified out of accumulated other comprehensive income (loss) and recognized in earnings for each of the periods indicated (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

Unrealized gains (losses) on available-for-sale securities

 

 

 

 

 

 

 

 

  reclassified during the period to the following income

 

 

 

 

 

 

 

 

  statement line items:

 

 

 

 

 

 

 

 

Net investment gains (losses)

$

(125) 

$

47 

$

47  

$

284 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(125) 

 

47 

 

47  

 

284 

Income tax expense (benefit)

 

(28) 

 

10 

 

9  

 

60 

Income (loss) from continuing operations, net of tax

 

(97) 

 

37 

 

38  

 

224 

 

 

 

 

 

 

 

 

 

Total pretax income (loss) from discontinued operations

 

(90) 

 

25 

 

(94) 

 

858 

Income tax expense (benefit) on discontinued operations

 

(19) 

 

5 

 

(20) 

 

180 

Income from discontinued operations, net of tax

 

(71) 

 

20 

 

(74) 

 

678 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(168) 

$

57 

$

(36) 

$

902 

 

Note 14.Supplemental Disclosures of Cash Flow Information 

 

Net cash payments for income taxes were $59,000 and $55,000 during the six months ended June 30, 2021 and 2020, respectively.

33

 

 

Note 15.Contingencies 

 

Third Party Administrator 

 

A third party administrator with whom we formerly did business (“Plaintiff” or “TPA”) commenced an action on May 17, 2017 in the United States District Court, Northern District of Texas, Dallas Division (the “Texas Action”), naming IHC, Madison National Life, Standard Security Life, and Independence Brokerage Group, Inc. (formerly IHC Carrier Solutions, Inc.) as defendants (“Defendants”). The Plaintiff seeks contractual payments allegedly owed by the Defendants totaling at least $3,082,000 through 2014, plus additional amounts for 2015 and 2016, and exemplary and punitive damages as allowed by law and fees and costs.  The court had previously stayed the proceedings during the pendency of two arbitrations.  The first arbitration resulted in a judicially-confirmed award in favor of Standard Security Life and Madison National Life in the amount of $5,641,000, which the Plaintiff has satisfied.  The Company received payment on September 9, 2020 and recorded it in other income on the Consolidated Statement of Income in the third quarter of 2020. The second arbitration resulted in no monetary obligations owed by any of the parties. The Plaintiff has filed a motion for leave to file a Second Amended Complaint.  The Defendants have until August 9, 2021 to file an opposition to the motion for leave to amend.

 

Multistate Market Conduct Examination (“MCE”)

 

As previously disclosed, our subsidiaries Standard Security Life, Madison National Life and Independence American Insurance Company were selected for MCE related to our short-term medical (“STM”), limited medical and fixed indemnity limited health insurance products for the period of January 1, 2014 through September 30, 2017. The insurance departments of five jurisdictions (Delaware, Wisconsin, District of Columbia, Kansas and South Dakota) served as lead states, and the District of Columbia Department of Insurance, Securities and Banking and the Delaware Department of Insurance served as the managing lead states of the MCE. In addition to the five lead states, 37 other states participated in the MCE. Each of Standard Security Life, Madison National Life and Independence American Insurance Company responded to inquiries and document production requests in the MCE and proactively communicated and cooperated with the applicable regulatory agencies for the MCE. Each of these subsidiaries also provided a detailed action plan to regulators that summarized its enhanced compliance and control mechanisms.

 

In an effort to avoid long‐term litigation and/or administrative proceedings that would be required to resolve disputes between Standard Security Life, Madison National Life and Independence American Insurance Company and the states involved in the MCE, the Lead States and Standard Security Life, Madison National Life and Independence American Insurance Company entered into separate RSAs on July 14, 2020. The RSAs require the implementation of a compliance plan, impose certain requirements related to specified business practices and monetary payments.  The thirty-seven participating states adopted the RSAs. The Company accrued $3,660,000 in accounts payable, accruals and other liabilities on the Consolidated Balance Sheet in the second quarter of 2020 and processed payment in October 2020. As set forth in the RSAs, Standard Security Life, Madison National Life and Independence American Insurance Company deny any wrongdoing or violation of any applicable laws or regulations, and the entry into the RSAs is not an admission or acknowledgment of any wrongdoing or liability. In accordance with the RSAs, the Monitoring Period commenced and Standard Security Life, Madison National Life and Independence American Insurance Company continue to comply.

 

Note 16.Segment Reporting 

 

The Insurance Group principally engages in the life and health insurance business.  Taxes and general expenses associated with parent company activities are included in Corporate. Identifiable assets by segment are those assets that are utilized in each segment and are allocated based upon the mean reserves and liabilities of each such segment. Corporate assets are composed principally of cash equivalents, resale agreements, fixed maturities, equity securities, partnership interests and certain other investments.  

34

 

Information by business segment is presented below for the periods indicated (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Revenues:

 

 

 

 

 

 

 

 

Specialty Health

$

23,862  

$

30,718  

$

50,133 

$

62,924  

Group disability and life

 

25,143  

 

24,076  

 

50,264 

 

48,161  

Individual life, annuities and other (A)

 

183  

 

490  

 

392 

 

808  

Corporate

 

268  

 

897  

 

791 

 

1,512  

 

49,456  

 

56,181  

 

101,580 

 

113,405  

Net investment gains (losses)

 

(126) 

 

274  

 

91 

 

117  

   Total revenues

$

49,330  

$

56,455  

$

101,671 

$

113,522  

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

 

 

 

 

 

 

Specialty Health (C)  

$

(841) 

$

(5,329)  

$

(2,732) 

$

(5,935) 

Group disability and life

 

3,770  

 

4,353  

 

6,900  

 

6,190  

Individual life, annuities and other  (A) (B)

 

(263) 

 

(140) 

 

(247) 

 

(283) 

Corporate

 

(3,244) 

 

(2,016) 

 

(5,056) 

 

(3,229) 

 

(578) 

 

(3,132) 

 

(1,135) 

 

(3,257) 

Net investment gains (losses)

 

(126) 

 

274  

 

91  

 

117  

   Loss from continuing operations before income taxes

$

(704) 

$

(2,858) 

$

(1,044) 

$

(3,140) 

 

(A)Substantially all of the business in the segment is coinsured. Activity in this segment primarily reflects income or expenses related to the coinsurance and the run-off of any remaining blocks that were not coinsured.  

 

(B)The Individual life, annuities and other segment includes amortization of deferred charges in connection with the assumptions of certain ceded life and annuity policies amounting to $153,000 and $176,000, for the three months ended June 30, 2021 and 2020, respectively, and $310,000 and $364,000, for the six months ended June 30, 2021 and 2020, respectively. 

 

(C)In both 2021 and 2020, significant costs associated with hiring, training and licensing a significant number of new agents, as well as costs for system development in our marketing and administrative companies. 

 

 

Note 17.Subsequent Events 

 

On July 14, 2021, IHC and its wholly owned subsidiary ICC entered into a Stock Purchase Agreement with Horace Mann Educators Corporation to sell all of the issued and outstanding capital stock of Madison National Life, a Wisconsin insurance company wholly owned by ICC, for an aggregate purchase price of $172,500,000 in cash. In addition, if Madison National Life reaches specified financial targets in 2023, IHC will receive an additional purchase price of up to $12,500,000. The transaction has been approved by the Board of Directors of IHC, and IHC’s majority stockholders have entered into a voting agreement under which such majority stockholders agreed to approve the transaction. The closing is expected no earlier than January 1, 2022. The transaction is subject to customary closing conditions, including applicable regulatory approvals, one of which is the approval by the Wisconsin Office of the Commissioner of Insurance. The aforementioned disposal plan represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, will qualify for reporting as discontinued operations in the third quarter 2021.

 

 

35

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 

CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of the financial condition and results of operations of Independence Holding Company ("IHC") and its subsidiaries (collectively, the "Company") should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company and the related Notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

 

Overview

 

Independence Holding Company, a Delaware corporation, is a holding company principally engaged in underwriting, administering and/or distributing group and individual specialty benefit products, including disability, supplemental health, pet, and group life insurance through: (i) its insurance companies, Standard Security Life, Madison National Life, and Independence American Insurance Company; and (ii) its marketing and administrative companies consisting of IHCSB, IBG, INSXCloud (collectively the “IHC Agencies”) and its lead generation company, Torchlight. On June 30, 2021, the Company sold its majority interest in PetPartners, a major distributor and administrator of pet insurance underwritten by Independence American Insurance Company and an unaffiliated insurer. Standard Security Life, Madison National Life and Independence American Insurance Company are sometimes collectively referred to as the “Insurance Group”. IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company", or “IHC”, or are implicit in the terms “we”, “us” and “our”.   

 

During the second quarter of 2021, the Board of Directors committed to the following plans for the disposal of several business operations. Each disposal plan below represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, they each qualify for reporting as discontinued operations in the second quarter 2021.

 

(A)On April 14, 2021, IHC and its wholly owned subsidiary ICC entered into a purchase agreement with Reliance Standard (“SSL Purchase Agreement”) to sell all of the issued and outstanding capital stock of Standard Security Life, a wholly owned subsidiary of ICC, for an aggregate purchase price of $180 million in cash.  In addition, at closing, the Company will receive a dividend from Standard Security Life equal to the excess of aggregate statutory capital and surplus over $53 million as of the closing date.  Standard Security Life had statutory capital and surplus of $82.1 million at June 30, 2021. The closing of the transaction, the closing dividend and certain other items are subject to customary closing conditions including applicable regulatory approvals, one of which is the approval of the New York State Department of Financial Services. Under the terms of the SSL Purchase Agreement, the transaction includes all of Standard Security Life’s DBL and PFL business and excluded all other lines of business, which will be reinsured prior to the closing. The aforementioned transaction, consisting of the sale of Standard Security Life, the closing dividend, the reinsurance of excluded business and other closing conditions, is collectively referred to as the “Standard Security Life Sale Transaction”.  

 

On July 29, 2021, the SSL Purchase Agreement was amended and restated to: (i) include in the disposal group, the business lines that were previously excluded from the transaction; (ii) remove the reinsurance requirement for the previously excluded business lines; and (iii) increase the target statutory capital and surplus to $57 million. As a result of this change in the disposal plan, the Company will include the assets, liabilities and results of operations for those business lines affected in discontinued operations for all periods presented, beginning in the third quarter of 2021.

 

 

(B)On May 17, 2021, IHC and its wholly owned subsidiary SBH entered into a stock purchase  

36

agreement with a subsidiary of Iguana Capital to sell its 85% interest in PetPartners, a major distributor and administrator of pet insurance underwritten by Independence American Insurance Company and an unaffiliated insurer.  In addition, IHC and its wholly owned subsidiary, AMIC, entered into a stock purchase agreement with Iguana Capital to sell all of the issued and outstanding capital stock of IAHC (“IAHC Purchase Agreement”), which owns all of the issued and outstanding common stock of Independence American Insurance Company and other pet assets including the Company’s equity investments in FIGO Pet Insurance, LLC and Pet Assistant Holdings, LLC. Under the terms of the IAHC Purchase Agreement, the transaction includes all of Independence American Insurance Company’s pet business and excludes all other lines of business which will be reinsured prior to the closing. The impact of these two agreements, taken in the aggregate, represents the sale of 70% of the Company’s pet business. The Company will retain a 30% interest in the form of an equity investment in the buyer, Iguana Capital. On June 30, 2021, the sale of PetPartners closed and in exchange for its shares of PetPartners, the Company received $78.8 million in cash, retained a 30% equity investment valued at $33.7 million and recorded a $74.5 million pretax gain on sale of discontinued operations, net of transaction costs. The cash is held in escrow until such time as the IAHC sale transaction closes.  In connection with the pending sale of IAHC, the Company will receive approximately $190.4 million in cash and retain a 30% equity investment valued at approximately $81.6 million. The closing of the transactions contemplated by the IAHC Purchase Agreement is subject to customary closing conditions, including applicable regulatory approvals, one of which is the approval of the Delaware Insurance Department. The aforementioned transaction, consisting of the sale of PetPartners, IAHC and Independence American Insurance Company, the reinsurance of excluded business, and other closing conditions, is collectively referred to as the “Pets Sale Transaction”.

 

On July 14, 2021, IHC and its wholly owned subsidiary Independence Capital Corp. (“ICC”) entered into a Stock Purchase Agreement with Horace Mann Educators Corporation to sell all of the issued and outstanding capital stock of Madison National Life, a Wisconsin insurance company wholly owned by ICC, for an aggregate purchase price of $172.5 million in cash; in addition, if Madison National Life reaches specified financial targets in 2023, IHC will receive an additional purchase price of up to $12.5 million. The transaction has been approved by the Board of Directors of IHC, and IHC’s majority stockholders have entered into a voting agreement under which such majority shareholders agreed to approve the transaction. The closing is expected no earlier than January 1, 2022; and the transaction is subject to customary closing conditions, including applicable regulatory approvals, one of which is the approval by the Wisconsin Office of the Commissioner of Insurance. The aforementioned transaction is referred to as the “MNL Sale” transaction or disposal group.

 

The MNL Sale transaction also represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, will qualify for reporting as discontinued operations in the third quarter 2021.

37

 

COVID-19

 

In March 2020, the World Health Organization declared the outbreak of COVID-19, a global health pandemic, and the United States declared a national health emergency. COVID-19 has led to large scale disruption in the global economy, market instability and widespread unemployment in the United States.

 

The COVID-19 outbreak continues to be a fluid situation. The business continuity and emergency response plans we implemented during 2020 continue to ensure we provide a high level of service to our customers and support our everyday business needs. To help protect the safety and wellbeing of our employees and mitigate the spread of COVID-19, we have limited travel and directed our employees to work remotely whenever possible. As the COVID-19 outbreak continues to evolve, the duration of COVID-19 and its potential effects on our business cannot be certain. Regulatory mandates have affected, and we anticipate will continue to impact, the insurance industry. We currently cannot predict if there will be a material impact to our business, results of operations or financial condition in future reporting periods. For more information, see the risk factor under the heading “We continue to face risks related to the ongoing Coronavirus (COVID-19) pandemic that could impact our sales, operating results and financial condition” in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

 

The following is a summary of key performance information and events:

 

Results of operations are summarized as follows for the periods indicated (in thousands):

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Revenues

$

49,330  

$

56,455  

$

101,671  

$

113,522   

Expenses

 

50,034  

 

59,313  

 

102,715  

 

116,662   

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

(704) 

 

(2,858) 

 

(1,044) 

 

(3,140)  

Income tax benefit

 

(267) 

 

(1,066) 

 

(430) 

 

(1,187)  

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(437) 

 

(1,792) 

 

(614) 

 

(1,953)  

Income from discontinued operations

 

76,805 

 

2,330  

 

82,548 

 

6,813   

 

 

 

 

 

 

 

 

 

Net income

 

76,368  

 

538  

 

81,934 

 

4,860   

(Income) loss from noncontrolling interests

 

103  

 

(117) 

 

158 

 

(161)  

 

 

 

 

 

 

 

 

 

Net income attributable to IHC

$

76,471  

$

421   

$

82,092 

$

4,699   

 

 

 

 

 

 

 

 

 

 

·Loss from continuing operations of $.03 per share, diluted, for the three months ended June 30, 2021 compared to $.12 per share, diluted, for the same period in 2020. Loss from continuing operations of $.04 per share, diluted, for the six months ended June 30, 2021 compared to $.13 per share, diluted, for the same period in 2020.  

 

oNet income for the for the three and six months ended June 30, 2020 includes $3.7 million in expenses for compliance with the MCE related to our STM, limited medical and fixed indemnity limited benefit health insurance products for the period of January 1, 2014 through September 30, 2017, as discussed in Note 15. 

 

·Consolidated investment yields (on an annualized basis) of 2.0% for both the three and six months ended June 30, 2021, respectively, compared to 2.4% and 2.5% for the three month and six month periods, respectively, in 2020; 

38

 

·Book value of $37.45 per common share at June 30, 2021 compared to $32.08 at December 31, 2020.  

 

·Income from discontinued operations for both the three and six months ended June 30, 2021 includes an after tax gain of $62.7 million on the sale of PetPartners.  Excluding this gain, income from discontinued operations for the three months and six months ended June 30, 2021 and 2020 were $14.1 million and $19.8 million, respectively compared with income of $2.3 million and $6.8 million in the comparable 2020 periods, respectively.  

 

·Results for the first half of 2021 were both positively and negatively impacted by COVID-19. 

 

oSales at our agency were lower than expected in the first half of 2021, impacted by lower short-term medical (“STM”) sales, as consumers, especially those over the age of 50 who often purchased STM coverage took advantage of Special Enrollment Periods for ACA coverage and the increased Advanced Premium Tax Credits, also known as subsidies, as well as employers continuing to offer employer sponsored coverage to furloughed workers. The agency is seeing an increase in fee and commission income from the sale of ACA plans. Certain lines of business that are sold with ACA coverage, such as dental and accident plans exceeded expectations but due to lower commission on these products did not fully offset the commission lost through lower STM sales. We are shifting our call center focus to the ACA market for this period.  

 

oEvolving regulatory mandates for testing and treatment coverage, the length and severity of the outbreak, claims activity, and impacts on payment of premiums have not had a significant impact on the 2021 results to date, however, we may incur additional expenses in the future relating to possible COVID-19 related claims activity and possible non-payment of premiums as the full effects of the outbreak continue to unfold. To date, we have experienced lower utilization related to the deferral of services which more than offset the extra incurred costs mentioned previously. It is still unpredictable how this level of deferred utilization will reverse or not in the future but emerging results will continue to be monitored.   

 

oResults for the Group disability and life segment were not materially impacted by COVID-19 from an aggregate claims standpoint.  The life incidence rate was higher than expected in the first half of 2021 partially due to COVID-19 reported deaths.  

 

The following is a summary of key performance information by segment:

 

oThe Specialty Health segment reported $0.8 million of losses before taxes for the three months ended June 30, 2021 compared to $5.3 million of losses before taxes for the comparable period in 2020; and reported $2.7 million in losses before taxes for the six-month period ended June 30, 2021 compared to $5.9 million of losses for the same period in 2020. The three and six months ended June 30, 2020 includes $3.7 million in expenses for compliance with the MCE related to our STM, limited medical and fixed indemnity limited benefit health insurance products for the period of January 1, 2014 through September 30, 2017. Excluding the MCE compliance expense, losses in the three and six months of 2020 were $1.6 million and $2.2 million, respectively. 

 

oPremiums earned for the three months and six months ended June 30, 2021 decreased $7.8 million and $15.9 million, respectively, as compared to the same periods in 2020. Decreases in premiums occurred in the STM, fixed indemnity limited benefit and group gap lines.   

39

 

oIHC’s agencies produced operating losses of $4.8 million and $8.7 million for the three and six months ended June 30, 2021 compared with operating losses of $4.2 million and $7.2 million for the three and six months ended June 30, 2020. These amounts exclude purchase related incentive compensation and intangible asset amortization. 

 

oUnderwriting experience, as indicated by its U.S. GAAP Combined Ratios, for the Specialty Health segment are as follows for the periods indicated (in thousands): 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Premiums Earned

$

18,639   

$

26,440   

$

38,465   

$

54,413   

Insurance Benefits, Claims & Reserves

 

4,036   

 

10,468   

 

11,906   

 

21,798   

Expenses

 

9,306   

 

16,675   

 

18,862   

 

30,812   

 

 

 

 

 

 

 

 

 

Loss Ratio (A)

 

21.7% 

 

39.6% 

 

31.0% 

 

40.1% 

Expense Ratio (B)

 

49.9% 

 

63.1% 

 

49.0% 

 

56.6% 

Combined Ratio (C)

 

71.6% 

 

102.7% 

 

80.0% 

 

96.7% 

 

(A)Loss ratio represents insurance benefits, claims and reserves divided by premiums earned. 

(B)Expense ratio represents commissions, administrative fees, premium taxes and other underwriting expenses divided by premiums earned. 

(C)The combined ratio is equal to the sum of the loss ratio and the expense ratio. 

 

oThe lower loss ratio in 2021 is primarily due to favorable reserve experience in the short term medical and fixed indemnity lines. The lower expense ratio in 2021 is primarily due to the change in product lines which have a lower expense structure. 

 

·Income before taxes from the Group disability and life segment decreased $.6 million for the three months ended June 30, 2021 compared to the same period in 2020 and increased $.7 million for the six months ended June 30, 2021 compared with the comparable period in 2020. The decrease in second quarter 2021 income was primarily due to higher loss ratios in the group term life business. The increased income in the six-month period of 2021 was as a result of lower loss ratios in the STD line of business; partially offset by higher loss ratios in the LTD line and higher loss ratios in the group term life business partially due to Covid-19 related claims. 

 

·Income and loss before taxes from the Individual life, annuities and other segment in run-off were not significant for the three or six months ended June 30, 2021 and 2020;   

 

·The Corporate segment reported losses before taxes of $3.2 million and $5.1 million for the three months and six months ended June 30, 2021, respectively, compared to losses of $2.0 million and $3.2 million in the comparable periods in 2020, primarily due to higher share-based and incentive compensation expenses; and 

40

 

·Premiums by principal product for the periods indicated are as follows (in thousands): 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

Gross Direct and Assumed

 

 

 

 

 

 

 

 

 

Earned Premiums:

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Specialty Health

$

19,734 

$

28,185 

$

40,623 

$

57,731 

Group disability and life

 

29,887 

 

28,954 

 

59,687 

 

57,934 

Individual life, annuities and other

 

4,090 

 

4,788 

 

8,857 

 

9,630 

 

 

 

 

 

 

 

 

 

 

$

53,711 

$

61,927 

$

109,167 

$

125,295 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

Net Direct and Assumed

 

 

 

 

 

 

 

 

 

Earned Premiums:

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Specialty Health

$

18,639 

 

26,440 

 

38,465 

$

54,413 

Group disability and life

 

23,808 

 

22,685 

 

47,542 

 

45,370 

Individual life, annuities and other

 

4 

 

13 

 

16 

 

21 

 

 

 

 

 

 

 

 

 

 

$

42,451 

 

49,138 

 

86,023 

$

99,804 

 

 

CRITICAL ACCOUNTING POLICIES

 

The accounting and reporting policies of the Company conform to U.S. GAAP. The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires the Company's management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. A summary of the Company's significant accounting policies and practices is provided in Note 1 of the Notes to the Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Management has identified the accounting policies related to Insurance Premium Revenue Recognition and Policy Charges, Fee Income Revenue Recognition, Insurance Liabilities, Investments, Goodwill and Other Intangible Assets, and Deferred Income Taxes as those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's Consolidated Financial Statements and this Management's Discussion and Analysis. A full discussion of these policies is included under the heading, “Critical Accounting Policies” in Item 7 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2020. During the six months ended June 30, 2021, there were no additions to or changes in the critical accounting policies disclosed in the 2020 Form 10-K except for the recently adopted accounting standards discussed in Note 1(D) of the Notes to Condensed Consolidated Financial Statements. 

41

 

Results of Operations for the Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

 

Information by business segment for the periods indicated is as follows:

 

 

 

 

 

Benefits,

Selling,

 

 

 

Net

Fee and

Claims

General

 

June 30, 2021

Premiums

Investment

Other

and

and

 

(In thousands)

Earned

Income

Income

Reserves

Administrative

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Health

$

18,639 

 

295 

 

4,928 

 

4,036 

 

20,667 

$

(841) 

Group disability and life

 

23,808 

 

1,085 

 

250 

 

13,010 

 

8,363 

 

3,770  

Individual life,

 

 

 

 

 

 

 

 

 

 

 

 

   annuities and other

 

4 

 

122 

 

57 

 

146 

 

300 

 

(263) 

Corporate

 

- 

 

149 

 

119 

 

- 

 

3,512 

 

(3,244) 

Sub total

$

42,451 

$

1,651 

$

5,354 

$

17,192 

$

32,842 

 

(578) 

 

 

 

Net investment gains (losses)

 

(126) 

Loss from continuing operations before income taxes

 

(704) 

Income taxes (benefits)

 

(267) 

Loss from continuing operations, net of tax

$

(437) 

 

 

 

 

 

Benefits,

Selling,

 

 

 

Net

Fee and

Claims

General

 

June 30, 2020

Premiums

Investment

Other

and

and

 

(In thousands)

Earned

Income

Income

Reserves

Administrative

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Health

$

26,440 

 

550 

 

3,728  

 

10,468 

 

25,579 

$

(5,329) 

Group disability and life

 

22,685 

 

1,254 

 

137  

 

10,713 

 

9,010 

 

4,353  

Individual life,

 

 

 

 

 

 

 

 

 

 

 

 

   annuities and other

 

13 

 

202 

 

275  

 

158 

 

472 

 

(140) 

Corporate

 

- 

 

323 

 

574  

 

- 

 

2,913 

 

(2,016) 

Sub total

$

49,138 

$

2,329 

$

4,714  

$

21,339 

$

37,974 

 

(3,132) 

 

 

 

Net investment gains

 

274  

Loss from continuing operations before income taxes

 

(2,858) 

Income taxes (benefits)

 

(1,066) 

Loss from continuing operations, net of tax

$

(1,792) 

 

 

 

 

 

Premiums Earned

 

In the second quarter of 2021, premiums earned decreased $6.7 million over the comparable period in 2020. The decrease is primarily due to a $7.8 million decrease in earned premiums from the Specialty Health segment primarily as a result of decreases of $4.3 million in STM premiums, $2.6 million in the fixed indemnity limited benefit line, and $1.4 million in group gap business; partially offset by an increase in dental premiums of $.4 million. Earned premiums in the Group disability and life segment increased $1.1 million primarily in the STD/LTD lines. 

 

Net Investment Income

 

Total net investment income decreased $.7 million. The overall annualized investment yields were 2.0% and 2.4% in the second quarter of 2021 and 2020, respectively. 

 

Net Investment Gains

 

The Company had net investment losses of $.1 million in 2021 compared to net investment gains of $.3 million in 2020.  These amounts include gains and losses from sales of fixed maturities available-for-sale, equity securities and other investments. Decisions to sell securities are based on management's ongoing evaluation of investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period.

42

 

Fee Income and Other Income

 

Fee income increased $1.0 million for the three-month period ended June 30, 2021 compared to the three-month period ended June 30, 2020 primarily due to an increase in lead generating fees partially offset by decreases in lifetime value commission accruals principally on Medicare advantage products by the IHC Agencies for multiple unaffiliated insurance carriers. 

 

Other income in the second quarter of both 2021 and 2020 was not significant.

 

Insurance Benefits, Claims and Reserves

 

In the second quarter of 2021, insurance benefits, claims and reserves decreased $4.1 million over the comparable period in 2020. The decrease is primarily attributable to: (i) a decrease of $6.4 million in reserves in the Specialty Health segment primarily due to a decrease of $3.8 million in the STM line and $1.8 million in the fixed indemnity limited benefit line due to lower premium volume and lower loss ratios, and $.9 million in the group gap line on lower premium volume; partially offset by (ii) an increase of $2.3 million in the Group disability and life segment primarily due higher loss ratios on group term life business partially due to COVID-19 related claims.

 

Selling, General and Administrative Expenses

 

Total selling, general and administrative expenses decreased $5.1 million over the comparable period in 2020. The decrease is principally due to: (i) a decrease of $4.9 million in the Specialty Health line of business primarily due to the second quarter of 2020 results including $3.7 million of expenses accrued for compliance with the MCE related to our STM, limited benefit and fixed indemnity limited benefit products with no comparable expenses in 2021, as well as decreases in commission and administrative expenses related to decreased volume in the fixed indemnity limited benefit, STM and group gap lines partially offset by increased lead generation expenses, compensation and system development related expenses in our marketing and administrative companies; (ii) a decrease of $.7 million in the Group disability and life segment primarily due to increased commission expenses and other general expenses on group term life and LTD/STD lines of business on increased premium volume; and (iii) an increase of $.6 million in the Corporate segment primarily due to compensation related expenses. 

 

Income Taxes

 

The effective tax rate for the three months ended June 30, 2021 was (37.9)% compared to (37.3)% for the three months ended June 30, 2020. The effective income tax rates related to losses from continuing operations in 2021 were impacted by tax benefits from exercises of share-based compensation and state and local income tax benefits on certain subsidiaries. In 2020, the effective income tax rates related to losses from continuing operations reflect a benefit from capital losses attributable to the sale of a subsidiary, partially offset by certain non-deductible expenses recorded in connection with a Regulatory Settlement Agreement.  

43

 

Results of Operations for the Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

 

Information by business segment for the periods indicated is as follows:

 

 

 

 

 

Benefits,

Selling,

 

 

 

Net

Fee and

Claims

General

 

June 30, 2021

Premiums

Investment

Other

and

and

 

(In thousands)

Earned

Income

Income

Reserves

Administrative

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Health

$

38,465 

 

638 

 

11,030 

 

11,906 

 

40,959 

$

(2,732)  

Group disability and life

 

47,542 

 

2,208 

 

514 

 

26,901 

 

16,463 

 

6,900  

Individual life,

 

 

 

 

 

 

 

 

 

 

 

 

   annuities and other

 

16 

 

257 

 

119 

 

306 

 

333 

 

(247) 

Corporate

 

- 

 

349 

 

442 

 

- 

 

5,847 

 

(5,056) 

Sub total

$

86,023 

$

3,452 

$

12,105 

$

39,113 

$

63,602 

 

(1,135) 

 

 

 

Net investment gains

 

91  

Loss from continuing operations before income taxes

 

(1,044) 

Income taxes (benefit)

 

(430) 

Loss from continuing operations, net of tax

$

(614) 

 

 

 

 

 

Benefits,

Selling,

 

 

 

Net

Fee and

Claims

General

 

June 30, 2020

Premiums

Investment

Other

and

and

 

(In thousands)

Earned

Income

Income

Reserves

Administrative

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Health

$

54,413 

 

1,122 

 

7,389  

 

21,798 

 

47,061 

$

(5,935) 

Group disability and life

 

45,370 

 

2,505 

 

286  

 

25,534 

 

16,437 

 

6,190  

Individual life,

 

 

 

 

 

 

 

 

 

 

 

 

   annuities and other

 

21 

 

411 

 

376  

 

296 

 

795 

 

(283) 

Corporate

 

- 

 

790 

 

722  

 

- 

 

4,741 

 

(3,229) 

Sub total

$

99,804 

$

4,828 

$

8,773  

$

47,628 

$

69,034 

 

(3,257) 

 

 

 

Net investment gains

 

117  

Loss from continuing operations before income taxes

 

(3,140) 

Income taxes (benefit)

 

(1,187) 

Loss from continuing operations, net of tax

$

(1,953) 

 

 

 

 

Premiums Earned

 

In the first six months of 2021, premiums earned decreased $13.8 million over the comparable period in 2020. The decrease is primarily due to a $15.9 million decrease in earned premiums from the Specialty Health segment principally as result of decreased premiums of $7.1 million in STM, $6.2 million in the fixed indemnity limited benefit line and $2.9 million in group gap business, partially offset by increased premium of $.4 million in the dental line. Earned premiums in the Group disability and life segment increased $2.1 million primarily as a result of $1.5 million on increased premiums in both STD and LTD business, as well as $.5 million in higher premiums on group term life business. 

 

Net Investment Income

 

Total net investment income decreased $1.4 million. The overall annualized investment yields were 2.0% and 2.5% in the first six months of 2021 and 2020, respectively. 

 

Net Investment Gains

 

The Company had net investment gains of $.1 million in both 2021 and 2020.  These amounts include gains and losses from sales of fixed maturities available-for-sale, equity securities and other investments. Decisions to sell securities are based on management's ongoing evaluation of investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period.

44

Fee Income and Other Income

 

Fee income increased $3.7 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due an increase in lead generating fees partially offset by decreases in lifetime value commission accruals principally on Medicare advantage products by the IHC Agencies for multiple unaffiliated insurance carriers as well as lower commissions on lower STM policy sales for IHC carriers. 

 

Other income in the first six months of both 2021 and 2020 was not significant.

 

Insurance Benefits, Claims and Reserves

 

In the first six months of 2021, insurance benefits, claims and reserves decreased $8.5 million over the comparable period in 2020. The decrease is primarily attributable to: (i) a decrease of $9.9 million in the Specialty Health segment primarily due to a decrease of $4.4 million in the STM line and $2.9 million in the fixed indemnity limited benefit line due to lower premium volume and lower loss ratios, $1.9 million in the group gap line on lower premium volume, $.5 million in the occupational accident line on favorable claim development and $.3 million on dental lines due to lower loss ratios; partially offset by (ii) an increase of $1.4 million in the Group disability and life segment primarily as a result of a $2.8 million increase in group term life benefits and claims as result of higher loss ratios partially due to COVID-19 related claims; partially offset by a $1.4 million decrease in LTD/STD benefits and claims as a result of lower loss ratios due in part to favorable loss development in the STD line, partially offset by higher loss ratios in the LTD line.

 

Selling, General and Administrative Expenses

 

Total selling, general and administrative expenses decreased $5.4 million over the comparable period in 2020. The decrease is principally due to: (i) a decrease of $6.1 million in the Specialty Health line of business primarily due to 2020 results including $3.7 million of expenses accrued for compliance with the MCE related to our STM, limited benefit and fixed indemnity limited benefit products with no comparable expenses in 2021, as well as decreases in commission and administrative expenses related to decreased volume in the fixed indemnity limited benefit, STM and group gap lines partially offset by increased lead generation expenses, compensation and system development related expenses in our marketing and administrative companies; partially offset by (ii) an increase of $1.1 million in the Corporate segment primarily due to compensation related expenses. 

 

Income Taxes

 

The effective tax rate for the six months ended June 30, 2021 was (41.2)% compared to (37.8)% for the six months ended June 30, 2020. The effective income tax rates related to losses from continuing operations in 2021 were impacted by tax benefits from exercises of share-based compensation and state and local income tax benefits on certain subsidiaries. In 2020, the effective income tax rates related to losses from continuing operations reflect a benefit from capital losses attributable to the sale of a subsidiary, partially offset by certain non-deductible expenses recorded in connection with a Regulatory Settlement Agreement.  

45

 

LIQUIDITY

 

Insurance Group

 

The Insurance Group normally provides cash flow from: (i) operations; (ii) the receipt of scheduled principal payments on its portfolio of fixed maturities; and (iii) earnings on investments. Such cash flow is partially used to fund liabilities for insurance policy benefits. These liabilities represent long-term and short-term obligations.  

 

Corporate

 

Corporate derives its funds principally from: (i) dividends from the Insurance Group; (ii) management fees from its subsidiaries; and (iii) investment income from Corporate liquidity. Regulatory constraints historically have not affected the Company's consolidated liquidity, although state insurance laws have provisions relating to the ability of the parent company to use cash generated by the Insurance Group. No dividends were declared or paid by the Insurance Group during the six months ended June 30, 2021 or 2020.  

 

It is anticipated that cash flows to be received upon the close of the disposal transactions will provide sources of corporate liquidity to offset the loss of cash flows previously derived from the insurance operations currently held in discontinued operations. The Company is evaluating the best use of liquidity derived from the disposal transactions.

 

The proceeds received from the sale of PetPartners were deposited into an escrow account owned by SBH and treated as a security deposit. The funds will be released from escrow upon either the consummation of the IAHC purchase or upon the exercise of the PPI Put/Call Option. At June 30, 2021, the security deposit is presented as funds held in escrow on the Condensed Consolidated Balance Sheet.

 

Cash Flows

 

The Company had $27.0 million and $74.8 million of cash, cash equivalents and restricted cash from continuing and discontinued operations as of June 30, 2021 and December 31, 2020, respectively.

 

For the six months ended June 30, 2021, operating activities provided $53.5 million of cash and investment activities utilized $97.8 million of cash, primarily the result of the investment of cash and cash equivalents in resale agreements. Financing activities utilized $3.5 million of cash, of which $3.2 million was utilized to pay common stock dividends. For the six months ended June 30, 2021, cash flows from the operating and investing activities of discontinued operations were $45.9 million and $(88.5) million, respectively. 

 

The Company had $328.8 million of liabilities for future policy benefits and policy benefits and claims as of June 30, 2021 that it expects to ultimately pay out of current assets and cash flows from future business. If necessary, the Company could utilize the cash received from maturities and repayments of its fixed maturity investments if the timing of claim payments associated with the Company's insurance resources does not coincide with future cash flows. For the six months ended June 30, 2021, cash received from the maturities and other repayments of fixed maturities was $44.5 million. 

 

The Company believes it has sufficient cash to meet its currently anticipated business requirements over the next twelve months including working capital requirements and capital investments.  

 

There were no material negative impacts on the Company’s cash flows or liquidity with regards to COVID-19 during the first six months of 2021. Depending on the length and severity of the outbreak, it is possible that cash flows may be negatively impacted due to increased claim activity as a result of mandated testing and treatment coverage, as well as delayed policy payments or an increase in cancelled policies due to non- payment in the future.

46

 

BALANCE SHEET

 

The Company had receivables due from reinsurers of $354.7 million at June 30, 2021 compared to $357.2 million at December 31, 2020. All of such reinsurance receivables are from highly rated companies or are adequately secured. No allowance for doubtful accounts was necessary at June 30, 2021.  

 

The Company's liability for policy benefits and claims by segment are as follows (in thousands):

 

 

 

Policy Benefits and Claims

 

 

June 30,

 

December 31,

 

 

2021

 

2020

 

 

 

 

 

Specialty Health

$

26,521 

$

31,680 

Group Disability

 

90,790 

 

89,902 

Individual A&H and Other

 

10,504 

 

11,375 

 

 

 

 

 

 

$

127,815 

$

132,957 

 

For the Specialty Health business, incurred but not reported (“IBNR”) claims liabilities plus expected development on reported claims are calculated using standard actuarial methods and practices. The “primary” assumption in the determination of Specialty Health reserves is that historical Claim Development Patterns are representative of future Claim Development Patterns. Factors that may affect this assumption include changes in claim payment processing times and procedures, changes in time delay in submission of claims, and the incidence of unusually large claims. Liabilities for policy benefits and claims for specialty health medical and disability coverage are computed using completion factors and expected Net Loss Ratios derived from actual historical premium and claim data.  The reserving analysis includes a review of claim processing statistical measures and large claim early notifications; the potential impacts of any changes in these factors are not material. The Company has business that is serviced by third-party administrators.  From time to time, there are changes in the timing of claims processing due to any number of factors including, but not limited to, system conversions and staffing changes during the year.  These changes are monitored by the Company and the effects of these changes are taken into consideration during the claim reserving process.  Other than these considerations, there have been no significant changes to methodologies and assumptions from the prior year.

 

While these calculations are based on standard methodologies, they are estimates based on historical patterns.  To the extent that actual claim payment patterns differ from historical patterns, such estimated reserves may be redundant or inadequate.  The effects of such deviations are evaluated by considering claim backlog statistics and reviewing the reasonableness of projected claim ratios.  Other factors which may affect the accuracy of policy benefits and claim estimates include the proportion of large claims which may take longer to adjudicate, changes in billing patterns by providers and changes in claim management practices such as hospital bill audits.

 

Since our analysis considered a variety of outcomes related to these factors, the Company does not believe that any reasonably likely change in these factors will have a material effect.

 

The Company’s disability business is comprised of group disability.  The two “primary” assumptions on which disability policy benefits and claims are based are: (i) morbidity levels; and (ii) recovery rates. If morbidity levels increase, for example due to an epidemic or a recessionary environment, the Company would increase reserves because there would be more new claims than expected.  In regard to the assumed recovery rate, if disabled lives recover more quickly than anticipated then the existing claims reserves would be reduced; if less quickly, the existing claims reserves would be increased. Advancements in medical treatments could affect future recovery, termination, and mortality rates.

 

The $78.7 million increase in IHC’s stockholders' equity in the first six months of 2021 is primarily due to $82.5 million of net income attributable to IHC from discontinued operations, primarily $62.7 million in after tax gains on the sale of PetPartners; reduced by $3.2 million of common stock dividends.

47

 

Asset Quality and Investment Impairments

 

The nature and quality of insurance company investments must comply with all applicable statutes and regulations, which have been promulgated primarily for the protection of policyholders. The Company has gross unrealized gains of $3.4 million and gross unrealized losses of $1.3 million on its fixed maturities available-for-sale securities at June 30, 2021. All of the Company’s fixed maturities were investment grade and continue to be rated on average AA. The Company marks all of its fixed maturities available-for-sale to fair value through accumulated other comprehensive income or loss. These investments tend to carry less default risk and, therefore, lower interest rates than other types of fixed maturity investments. The Company did not have any non-performing fixed maturities at June 30, 2021.  

 

The Company reviews its investments regularly and monitors its investments continually for impairments. The Company did not record any other-than-temporary impairment losses in the six months ended June 30, 2021 or 2020.

 

The following table summarizes the carrying value of securities with fair values less than 80% of their amortized cost at June 30, 2021 by the length of time the fair values of those securities were below 80% of their amortized cost (in thousands):

 

 

 

 

 

Greater than

 

Greater than

 

 

 

 

 

 

 

 

3 months,

 

6 months,

 

 

 

 

 

 

Less than

 

less than

 

less than

 

Greater than

 

 

 

 

3 months

 

6 months

 

12 months

 

12 months

 

Total

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities

$

-

$

-

$

-

$

641

$

641

 

 

 

 

 

 

 

 

 

 

 

 

The unrealized losses on fixed maturities available-for-sale were evaluated in accordance with the Company's impairment policy and were determined to be temporary in nature at June 30, 2021. From time to time, as warranted, the Company may employ investment strategies to mitigate interest rate and other market exposures. Further deterioration in credit quality of the companies backing the securities, further deterioration in the condition of the financial services industry, imbalances in liquidity that exist in the marketplace, a worsening of the current economic recession, or declines in real estate values may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as other-than-temporary in future periods which may cause the Company to incur additional write-downs.

 

CAPITAL RESOURCES

 

Due to its strong capital ratios, broad licensing and excellent asset quality and credit-worthiness, the Insurance Group remains well positioned with its current activities. It is anticipated that any future acquisitions or other expansion of operations at the remaining entities of IHC will be funded internally from existing capital and surplus and parent company liquidity. In the event additional funds are required, it is expected that they would be borrowed or raised in the public or private capital markets to the extent determined to be necessary or desirable.

 

 

48

 

OUTLOOK

 

For the remainder of 2021, and continuing in 2022, the Company anticipates that it will:

 

·Close on the sale of all of the issued and outstanding capital stock of Standard Security Life to Reliance Standard pursuant to the SSL Purchase Agreement signed on April 14, 2021 and amended on July 29, 2021.  Reliance Standard believes that this transaction, which is subject to various regulatory approvals, will close in the second half of this year.  Standard Security Life will dividend statutory surplus in excess of $57 million to its parent at closing so earnings prior to closing will be retained by IHC.  

 

·Close on the sale of all of the issued and outstanding capital stock of IAHC to Iguana Capital pursuant to the IAHC Purchase Agreement signed on May 17, 2021.  We believe this transaction, which is subject to various regulatory approvals, will close in the second half of this year.  

 

·Close on the sale of the stock of Madison National Life to Horace Mann Educators Corporation pursuant to the MNL Purchase Agreement signed on July 14, 2021.  This transaction, subject to various regulatory approvals, is expected to close no earlier than January 1, 2022.  

 

·Focus on the transition and consummation of all transactions entered into in 2021. The consummation of these transactions shall be the entire focus of the Company for the remainder of 2021. After all the transactions are consummated, IHC projects that it will hold approximately $560 million in cash and investments, net of liabilities; a 30% interest in Iguana Capital with a carrying value of approximately $115 million; and our health insurance agency and other assets with an aggregate carrying value of approximately $20 million, resulting in an estimated book value of approximately $47.00 per share which is calculated assuming the transactions occurred on June 30, 2021.  These projections are based on information currently known to management and include the use of estimates and assumptions with regards to anticipated transaction costs, estimated tax rates and other potential changes.   

 

·Improve the profitability and better integrate all of our agencies. IHC has experienced many changes in its agency model in 2021 as a result of a changing market and due to the decision to sell all three of IHC’s carriers. Although we continue to record losses in our agency business, we expect that to improve in the future. IHC has re-evaluated and made significant changes to the direction of the Company.   As we progress, our agency operations will be centered around INSXcloud.com (INSX), our CMS approved Web Broker. INSX provides an agent with the ability to quote, directly enroll and track applications on the Federally Facilitated Marketplace, plus much more. Specifically, brokers can quickly generate quotes, create PDF’s of plan comparisons, enroll customers in plans, and invite customers to enroll themselves – all through an easy-to-use cloud-based web portal. IHC is expanding INSX to directly serve the consumer and partner market, as well as expanding product offerings on the platform. 

 

·Continue to expand on our IHCSB agency. The balance of IHCSB includes our W-2 Call Centers and our captive independent Advisors unit, both of which sell into the under/over age 65 health insurance markets, as well as our Independence Brokerage Group (IBG) which recruits independent agents and agencies to sell via our platforms and contracts. We are refocusing a portion of our over 65 division into the under 65 market in order to take advantage of the positioning of INSX, IHCSB, our lead generation capabilities, and the market growth resulting from the American Rescue Plan Act. 

 

·Continue to focus on administrative efficiencies and the transition of the three insurance carriers as we progress towards closing on all three sales in the next few quarters 

49

·Continue to monitor the COVID-19 outbreak as it evolves. The duration of COVID-19 and its potential effects on our business cannot be certain, so we currently cannot predict if there will be a material impact to our business, results of operations or financial condition in 2021. During the COVID-19 pandemic, we have fully transitioned our existing sales teams to work from home. Our customer facing agents have transitioned to a full-time work at home model, and although we have implemented enhanced technology solutions, sales may be impacted as COVID-19 continues to develop. 

 

Subject to making additional repurchases of IHC common stock, dividends to shareholders and various investments, the Company will maintain a highly liquid and high quality portfolio.

 

Our financial results in the future will depend on: (i) our ability to execute on our revised agency model and develop the agencies into a much larger and profitable operation; and (ii) any increase in the value of our minority interest in Iguana Capital where we participate on the board of directors.

 

 

 

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

 

Not required for smaller reporting companies. 

 

 

ITEM 4.   CONTROLS AND PROCEDURES 

 

Evaluation of Disclosure Controls and procedures

 

IHC’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) supervised and participated in IHC’s evaluation of its disclosure controls and procedures as of the end of the period covered by this report.  Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in IHC’s periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Based upon that evaluation, IHC’S CEO and CFO concluded that IHC’s disclosure controls and procedures were effective.

 

Management, including the CEO and CFO, identified no change in our internal control over financial reporting that occurred during our fiscal quarter ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

50

 

PART II.  OTHER INFORMATION

 

ITEM 1.   LEGAL PROCEEDINGS 

 

We are involved in legal proceedings and claims that arise in the ordinary course of our businesses. We have established reserves that we believe are sufficient given information presently available related to our outstanding legal proceedings and claims. We do not anticipate that the result of any pending legal proceeding or claim will have a material adverse effect on our financial condition or cash flows, although there could be such an effect on our results of operations for any particular period.

 

Third Party Administrator

 

A third party administrator with whom we formerly did business (“Plaintiff” or “TPA”) commenced an action on May 17, 2017 in the United States District Court, Northern District of Texas, Dallas Division (the “Texas Action”), naming IHC, Madison National Life, Standard Security Life, and Independence Brokerage Group, Inc. (formerly IHC Carrier Solutions, Inc.) as defendants (“Defendants”). The Plaintiff seeks contractual payments allegedly owed by the Defendants totaling at least $3,082,000 through 2014, plus additional amounts for 2015 and 2016, and exemplary and punitive damages as allowed by law and fees and costs.  The court had previously stayed the proceedings during the pendency of two arbitrations.  The first arbitration resulted in a judicially-confirmed award in favor of Standard Security Life and Madison National Life in the amount of $5,641,000, which the Plaintiff has satisfied.  The Company received payment on September 9, 2020 and recorded it in other income on the Consolidated Statement of Income in the third quarter of 2020.  The second arbitration resulted in no monetary obligations owed by any of the parties. The Plaintiff has filed a motion for leave to file a Second Amended Complaint.  The Defendants have until August 9, 2021 to file an opposition to the motion for leave to amend.    

 

Multistate Market Conduct Examination

 

As previously disclosed, our subsidiaries Standard Security Life, Madison National Life and Independence American Insurance Company were selected for MCE related to our STM, limited medical and fixed indemnity limited health insurance products for the period of January 1, 2014 through September 30, 2017. The insurance departments of five jurisdictions (Delaware, Wisconsin, District of Columbia, Kansas and South Dakota) served as lead states, and the District of Columbia Department of Insurance, Securities and Banking and the Delaware Department of Insurance served as the managing lead states of the MCE. In addition to the five lead states, 37 other states participated in the MCE. Each of Standard Security Life, Madison National Life and Independence American Insurance Company responded to inquiries and document production requests in the MCE and proactively communicated and cooperated with the applicable regulatory agencies for the MCE. Each of these subsidiaries also provided a detailed action plan to regulators that summarized its enhanced compliance and control mechanisms.

 

In an effort to avoid long‐term litigation and/or administrative proceedings that would be required to resolve disputes between Standard Security Life, Madison National Life and Independence American Insurance Company and the states involved in the MCE, the Lead States and Standard Security Life, Madison National Life and Independence American Insurance Company entered into separate RSAs on July 14, 2020. The RSAs require the implementation of a compliance plan, impose certain requirements related to specified business practices and monetary payments.  The thirty-seven participating states adopted the RSAs. The Company accrued $3,660,000 in accounts payable, accruals and other liabilities on the Consolidated Balance Sheet in the second quarter of 2020 and processed payment in October 2020. As set forth in the RSAs, Standard Security Life, Madison National Life and Independence American Insurance Company deny any wrongdoing or violation of any applicable laws or regulations, and the entry into the RSAs is not an admission or acknowledgment of any wrongdoing or liability. In accordance with the RSAs, the Monitoring Period commenced and Standard Security Life, Madison National Life and Independence American Insurance Company continue to comply.

51

ITEM 1A.   RISK FACTORS 

 

There were no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 in Item 1A to Part 1 of Form 10-K.  

 

 

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 

 

Share Repurchase Program

 

IHC has a program, initiated in 1991, under which it repurchases shares of its common stock. In August 2016, the Board of Directors increased the number of shares that can be repurchased to 3,000,000 shares of IHC common stock. As of June 30, 2021, 1,535,393 shares were still authorized to be repurchased.

 

Share repurchases during the second quarter of 2021 are summarized as follows:

 

2021 

 

 

 

Maximum Number 

 

 

Average Price 

of Shares Which 

Month of 

 Shares 

of Repurchased 

Can be 

Repurchase 

 

Repurchased 

 

Shares 

 

Repurchased 

 

 

 

 

April

-

$

- 

1,535,393 

May

-

$

- 

1,535,393 

June

-

$

- 

1,535,393 

 

 

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES 

 

Not applicable.

 

 

ITEM 4.   MINE SAFETY DISCLOSURES 

 

Not applicable.

 

ITEM 5.   OTHER INFORMATION 

 

Not applicable.  

52

 

ITEM 6.   EXHIBITS  

 

 

Exhibit Number

 

3.1   Restated Certificate of Incorporation of Independence Holding Company (Filed as Exhibit 3(i) to our Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference). 

3.2   Certificate of Amendment of Restated Certificate of Incorporation of Independence Holding Company (Filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on July 29, 2004 and incorporated herein by reference). 

3.3   By-Laws of Independence Holding Company (Filed as Exhibit 3.3 to our Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein by reference), as amended by Amendment to By-Laws of Independence Holding Company (Filed as Exhibit 3.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 and incorporated herein by reference). 

4.1   Description of the registrant’s securities registered pursuant to Section 12 of the Securities and Exchange Act of 1934, as amended (Filed as Exhibit 4.1 to our Annual Report on Form 10-K for the year ended December 31, 2020 and incorporated herein by reference).  

10.1  Officer Employment Agreement, made as of April 18, 2011, by and among Independence Holding Company, Standard Security Life Insurance Company of New York and Mr. David T. Kettig (Filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on April 22, 2011 and incorporated herein by reference). 

10.2  Officer Employment Agreement, made as of April 18, 2011, by and among Independence Holding Company, Madison National Life Insurance Company, Inc. and Mr. Larry R. Graber (Filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on April 22, 2011 and incorporated herein by reference). 

10.3  Officer Employment Agreement, made as of April 18, 2011, by and between Independence Holding Company and Ms. Teresa A. Herbert (Filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on April 22, 2011 and incorporated herein by reference). 

10.4  Officer Employment Agreement, made as of May 11, 2011, by and between Independence Holding Company and Mr. Roy T.K. Thung (Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended March 31, 2011 filed with the SEC on May 12, 2011, and incorporated herein by reference). 

10.5 Retirement Benefit Agreement, dated as of September 30, 1991, between Independence Holding Company and Mr. Roy T.K. Thung, as amended. (Filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference; Amendment No. 1 filed as Exhibit 10(iii)(A)(4a) to our Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference; Amendment No. 2 filed as Exhibit 10(iii)(4)(b) to our Current Report on Form 8-K filed with the SEC on June 22, 2005 and incorporated herein by reference; Amendment No. 3 filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 7, 2009 and incorporated herein by reference.) 

10.6  Purchase Agreement, made and entered into on June 15, 2015, by and among Madison National Life Insurance Company, Inc., Standard Security Life Insurance Company of New York and National Guardian Life Insurance Company (Filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on June 16, 2015, and incorporated herein by reference). 

53

10.7  Sale Bonus Agreement, dated November 7, 2016, by and between Independence American Holdings Corp. and David T. Kettig (Filed as Exhibit 10.8 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and incorporated herein by reference). 

10.8  Officer Employment Agreement, made as of May 25, 2011, by and among Independence Holding Company, Standard Security Life and Mr. Gary J. Balzofiore (Filed as Exhibit 10.9 to our Annual Report on Form 10-K for the year ended December 31, 2016 and incorporated herein by reference).  

10.9Officer Employment Agreement, made as of June 22, 2015, by and among Independence Holding Company, Standard Security Life and Mr. Vincent Furfaro, as amended by the Assignment and Assumption with Novation and Amendment of Officer Employment Agreement dated January 1, 2017 by and among Standard Security Life, AMIC Holdings, Inc. and Mr. Vincent Furfaro (Filed as Exhibit 10.9 to our Annual Report on Form 10-K for the year ended December 31, 2018 and incorporated herein by reference).  

10.10Amended and Restated Officer Employment Agreement, dated as of March 24, 2020, by and between AMIC Holdings, Inc. and Vincent Furfaro (filed as Exhibit 10.1 to our Current Report on Form 8-K/A filed with the SEC on April 9, 2020 and incorporated herein by reference). 

10.11Sale Bonus Agreement, dated July 25, 2018, by and between Independence American Holdings Corp. and Vincent Furfaro (Filed as Exhibit 10.10 to our Annual Report on Form 10-K for the year ended December 31, 2018 and incorporated herein by reference).  

10.12Assignment and Assumption with Novation and Amendment of Officer Employment Agreement dated January 1, 2017 by and among Standard Security Life, AMIC Holdings, Inc. and Mr. David T. Kettig (Filed as Exhibit 10.11 to our Annual Report on Form 10-K for the year ended December 31, 2018 and incorporated herein by reference). 

10.13Sale Bonus Agreement, dated October 15, 2019, by and between Independence American Holdings Corp. and Gary J. Balzofiore (Filed as Exhibit 10.12 to our Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference). 

10.14Stock Purchase Agreement, dated April 14, 2021, by and among Reliance Standard Life Insurance Company, Independence Capital Corp. and Independence Holding Company (Filed as Exhibit 10.14 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and incorporated herein by reference).  

 

10.15Stock Purchase Agreement, dated as of May 17, 2021, by and among Independence American Holdings Corp., IHC SB Holdings, LLC, Iguana PP Holdings, Inc., Iguana Capital, Inc. and JAB Holdings B.V.* 

 

10.16Stock Purchase Agreement, dated as of May 17, 2021, by and among Independence Holding Company, Madison Investors Corp., AMIC Holdings Inc., Iguana Acquisition LLC, and JAB Holdings B.V.* 

 

10.17Transaction Bonus Agreement, made and entered into effective as of June 30, 2021, by and among AMIC Holdings Inc., Independence Holding Company, Independence American Holdings Corp., and David T. Kettig.* 

 

10.18Officer Employment Agreement, made as of May 20, 2011, by and between Independence Holding Company and Colleen P. Maggi.* 

 

54

 

10.19First Amendment to the Stock Purchase Agreement, dated as of June 28, 2021, by and among Independence American Holdings Corp., IHC SB Holdings, LLC, Iguana PP Holdings, Inc., Iguana Capital, Inc., and JAB Holdings B.V.* 

 

10.20Stockholders Agreement, made and entered into as of June 30, 2021, by and among Iguana Capital, Inc., Iguana Holdings Ltd., Iguana Acquisition, LLC and IHC SB Holdings, LLC.* 

 

31.1  Certification of the Chief Executive Officer and President Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 

 

31.2  Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 

 

32.1  Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * 

 

32.2  Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * 

 

101.INS   XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 

101.SCH   XBRL Taxonomy Extension Schema Document. * 

101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document. * 

101.LAB   XBRL Taxonomy Extension Label Linkbase Document. * 

101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document. * 

101.DEF   XBRL Taxonomy Extension Definition Linkbase Document. * 

 

104Cover page formatted as inline XBRL and contained in Exhibit 101. 

 

 

* Filed herewith.

55

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

INDEPENDENCE HOLDING COMPANY

(REGISTRANT)

 

 

 

By: /s/Roy T. K. Thung                                    Date:August 9, 2021      

Roy T.K. Thung

Chief Executive Officer, and Chairman

 of the Board of Directors

 

 

 

 

By:/s/Colleen P. Maggi                                    Date:August 9, 2021   

            Colleen P. Maggi

Corporate Vice President and

    Chief Financial Officer 

56

EXECUTION VERSION

EXHIBIT 10.15

STOCK PURCHASE AGREEMENT

 

by and among

 

INDEPENDENCE AMERICAN HOLDINGS CORP.,

 

IHC SB HOLDINGS, LLC,

 

and

 

IGUANA PP HOLDINGS, INC.,

 

IGUANA CAPITAL, INC.,

 

and

 

JAB HOLDINGS B.V.

(solely for purposes of Section 9.12 and the other provisions of Article IX)

 

Dated as of May 17, 2021

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND TERMS

Section 1.01Definitions2 

Section 1.02Interpretations.17 

ARTICLE II

THE PURCHASE AND SALE; CLOSING; CLOSING DELIVERABLES

Section 2.01Purchase and Sale of Sale Shares19 

Section 2.02The Closing19 

Section 2.03Deliveries at Closing.20 

Section 2.04Estimated Closing Date Balance Sheet; Estimated Closing Consideration20 

Section 2.05Post-Closing Adjustments to the Estimated Closing Consideration.21 

Section 2.06Withholding Taxes24 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

Section 3.01Organization, Standing and Power.25 

Section 3.02Authorization25 

Section 3.03Noncontravention.26 

Section 3.04Governmental Approvals26 

Section 3.05Capital Stock of the Company.26 

Section 3.06Subsidiaries28 

Section 3.07Financial Statements; No Undisclosed Liabilities.28 

Section 3.08Absence of Certain Changes.29 

Section 3.09Legal Proceedings.29 

Section 3.10Compliance with Laws; Permits.29 

Section 3.11Insurance Policies30 

Section 3.12Material Contracts.30 

Section 3.13Intellectual Property; IT Assets; Privacy.33 

Section 3.14Employee Benefits Matters.35 

Section 3.15Labor.37 

Section 3.16Tax Matters.38 

Section 3.17Real Property39 

Section 3.18Environmental Matters40 

Section 3.19Interested Party Transactions40 

Section 3.20IAIC Production40 

Section 3.21Sufficiency of Assets40 

Section 3.22Brokers and Other Advisors40 

Section 3.23CARES Act40 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER PARTIES

Section 4.01Organization, Standing and Power41 

Section 4.02Authorization41 

Section 4.03Noncontravention.41 

Section 4.04Governmental Approvals42 

Section 4.05Legal Proceedings42 

Section 4.06Financial Capacity42 

Section 4.07Investment Representation42 

Section 4.08Brokers and Other Advisors42 

Section 4.09No Prior Activities and Agreements42 

Section 4.10Capitalization of Purchaser Parent, Valid Issuance of Purchaser Parent Shares43 

ARTICLE V

COVENANTS

Section 5.01Conduct of the Business Pending the Closing.43 

Section 5.02Access to Information.48 

Section 5.03Reasonable Best Efforts.49 

Section 5.04Publicity50 

Section 5.05Employment and Employee Benefits.50 

Section 5.06Insurance.52 

Section 5.07IHC Marks.53 

Section 5.08Tax Matters.53 

Section 5.09Third-Party Consents57 

Section 5.10Confidentiality.57 

Section 5.11Further Assurances58 

Section 5.12D&O Insurance.58 

Section 5.13Certain Other Covenants.59 

Section 5.14AKC Interest in the Company61 

Section 5.15Escrow Agreement62 

Section 5.16Transition Services Agreement62 

Section 5.17Rollover Agreement62 

Section 5.18Intercompany Accounts62 

Section 5.19Purchaser Release63 

Section 5.20Seller Release63 

Section 5.21Resignations63 

ARTICLE VI

CONDITIONS TO CLOSING

Section 6.01Conditions Precedent to Obligations of Each Party64 

Section 6.02Conditions Precedent to Obligations of Purchaser Parties64 

Section 6.03Conditions Precedent to Obligations of Parent and Seller65 

Section 6.04Frustration of Closing Conditions66 

ARTICLE VII

TERMINATION

Section 7.01Termination of Agreement66 

Section 7.02Procedure upon Termination67 

Section 7.03Effect of Termination67 

ARTICLE VIII

INDEMNIFICATION

Section 8.01Indemnification Obligations.67 

Section 8.02Survival68 

Section 8.03Indemnification Limitations.69 

Section 8.04Notification of Claims.70 

Section 8.05Payment72 

Section 8.06Exclusive Remedies72 

Section 8.07Additional Indemnification Provisions72 

Section 8.08Mitigation73 

ARTICLE IX

MISCELLANEOUS

Section 9.01Entire Agreement; Amendments and Waivers73 

Section 9.02Binding Effect; Assignment.74 

Section 9.03Governing Law; Jurisdiction.74 

Section 9.04Specific Enforcement.75 

Section 9.05Waiver of Jury Trial.75 

Section 9.06Remedies76 

Section 9.07Notices76 

Section 9.08Severability77 

Section 9.09Expenses77 

Section 9.10Non-Recourse77 

Section 9.11Counterparts78 

Section 9.12JAB Holdings Obligation78 

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EXHIBITS

 

Exhibit AKey Employees 

Exhibit BTransition Services Agreement 

Exhibit CStockholders Agreement 

Exhibit DIllustrative Closing Net Working Capital Calculation 

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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of May 17, 2021, by and among Independence American Holdings Corp., a Delaware corporation (“Parent”), IHC SB Holdings, LLC, a Delaware limited liability company (“Seller”), Iguana PP Holdings, Inc., a Delaware corporation (“Purchaser”), Iguana Capital, Inc., a Delaware corporation (“Purchaser Parent” and together with Purchaser, the “Purchaser Parties”, each a “Purchaser Party”), and JAB Holdings B.V., a private limited liability company incorporated under the laws of the Netherlands (“JAB Holdings”) (solely for purposes of Section 9.12 and the other provisions of Article IX).  JAB Holdings, Purchaser, Purchaser Parent, Parent and Seller are collectively referred to herein as the “Parties” and each, a “Party”).

W I T N E S E T H:

WHEREAS, as of the date hereof, Seller, a wholly-owned direct Subsidiary of Parent, owns 340 of the 400 issued and outstanding shares of capital stock (each, a “Share”, and collectively, the “Shares”) of PetPartners, Inc., a Delaware corporation (the “Company”);

WHEREAS, as promptly as practicable following the date hereof, Purchaser Parent and Seller shall enter into the Rollover Agreement;

WHEREAS, immediately prior to the Closing (as hereinafter defined), (a) Seller shall contribute to Purchaser Parent 30% of its Shares (the “Rollover Shares”) in exchange for common stock of Purchaser Parent (“Rollover Contribution” and such shares of Purchaser Parent, the “Purchaser Parent Shares”), (b) an Affiliate of Purchaser Parent will make a contribution of cash to Purchaser Parent in exchange for common stock of Purchaser Parent (“Cash Contribution”), and (c) the contributions in clauses (a) and (b) are intended to be characterized by Seller, Parent, JAB Holdings and Purchaser Parent as a single interrelated transaction that is treated as an exchange described in Section 351(a) of the Code;

WHEREAS, immediately after the Rollover Contribution and immediately before the purchase of Shares (other than the Rollover Shares) by Purchaser from Seller pursuant to this Agreement, Purchaser Parent shall contribute the Rollover Shares to Purchaser;

WHEREAS, Seller desires to, and Parent desires to cause Seller to, transfer to Purchaser, and Purchaser desires to acquire from Seller, 70% of Seller’s Shares (the “Sale Shares”) in exchange for cash in a transaction governed by Section 1001 of the Code, upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, pursuant to a separate Stock Purchase Agreement dated as of even date herewith (the “IAHC Purchase Agreement”), Parent and its other subsidiaries party thereto are agreeing to sell and an Affiliate of Parent Purchaser is agreeing to acquire indirectly 100% of Parent’s shares in Independence American Insurance Company, a Delaware corporation (“IAIC”), and certain other minority equity interests and certain other assets held by such sellers on such terms and subject to such conditions as set forth therein;

WHEREAS, immediately following the consummation of the transactions contemplated by this Agreement, (i) an Affiliate of Purchaser Parent will own 70% of the common shares of Purchaser Parent, (ii) Parent and Seller together will own 30% of the common shares of Purchaser Parent, (iii) Purchaser Parent will own 100% of the common stock of Purchaser, (iv) Purchaser Parent will indirectly wholly own IAIC, and (v) Purchaser Parent will indirectly own those minority interests and other assets acquired from Parent pursuant to the IAHC Purchase Agreement;

WHEREAS, each of (a) the board of directors of Purchaser, (b) the board of directors of Purchaser Parent, (c) the board of directors of Parent and (d) the board of directors of Seller has approved this Agreement and the Transactions, upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with the Transactions and also to prescribe various conditions thereto;

WHEREAS, contemporaneously with the Closing, Purchaser intends to cause the Company to enter into employment agreements with each of the employees set forth on Exhibit A (the “Key Employees”);

WHEREAS, in connection with this Agreement and upon the terms and subject to the conditions set forth herein: Seller or another Affiliate of the Company and the Company will enter into a transition services agreement in substantially the form attached hereto as Exhibit B (the “Transition Services Agreement”), under which certain transition services will be provided to the Company on the terms and subject to the conditions set forth therein; and

WHEREAS, contemporaneously with the Closing, Seller and an Affiliate of Purchaser Parent will enter into a Stockholders Agreement in substantially the form attached hereto as Exhibit C (the “Stockholders Agreement”), which shall provide for Seller and such Affiliate having certain rights and restrictions in respect of their ownership of shares of common stock of Purchaser Parent following the completion of the Rollover Contribution.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the Parties agree as follows:



Article IDEFINITIONS AND TERMS

Section 1.01Definitions.  For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.01: 

“Acquired Competitive Business” has the meaning specified in Section 5.13(b).

“Action” means any judicial (civil or criminal) or administrative actions, Claims, suits, demands, complaints, litigation, investigations, review, audits, proceedings, arbitration, hearing or other similar disputes by or before a Governmental Authority.

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“Adjusted Closing Date Balance Sheet” has the meaning specified in Section 2.05(b).

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“Affiliate Agreements” has the meaning specified in Section 3.19.

“Agreement” has the meaning specified in the Preamble.

“AKC” means American Kennel Club, Inc.

“AKC Maximum Contribution Amount” means $6,800,000.

“AKC Purchase Agreement” has the meaning specified in Section 5.14(b).

“AKC Shares” means the 60 shares of the issued and outstanding shares of capital stock of the Company owned by AKC.

“AKC Waiver and Consent” means that certain waiver and consent letter agreement executed by AKC and the Company dated May 14, 2021.

“Ancillary Agreements” means, collectively, the Confidentiality Agreement, the Transition Services Agreement, the Stockholders Agreement, the Rollover Agreement and the Escrow Agreement.

“Bankruptcy and Equity Exception” has the meaning specified in Section 3.02.

“Benefit Plan” has the meaning specified in Section 3.14(a).

“Business Day” means any day of the year other than a Saturday, Sunday or any day on which national banking institutions in New York, New York are authorized or required by applicable Law to be closed for business.

“Business Licenses” has the meaning specified in Section 3.10(a)(iii).

“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.

“Cash” means, as of any given time of determination, all cash and cash equivalents held on a consolidated basis by the Company at such time determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and

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estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end (excluding for clarification any security, customer or other deposits), plus (a) any deposits in transit, and minus (b) any checks written (but not yet cashed) by the Company; provided, however, that the definition of “Cash” (i) shall exclude restricted cash in respect of fiduciary liability obligations and (ii) if any amounts that would constitute Transaction Expenses are paid by the Company after the Effective Time but prior to Closing, such amounts paid shall be deemed to reduce Cash on a dollar for dollar basis.

“Cash Contribution” has the meaning specified in the Recitals.

“Claims” means any and all manner of claims, suits, damages, demands and liabilities whatsoever in law or equity, whether known or unknown, liquidated or unliquidated, fixed, contingent, direct or indirect.

“Closing” has the meaning specified in Section 2.01.

“Closing Cash” means the Cash as of the Effective Time.

“Closing Consideration” means (a) $77,000,000 (b) plus (0.595 * Closing Cash) (c) plus or minus, as applicable, (0.595 * the Closing Net Working Capital Adjustment), (d) minus (0.595 * the Closing Indebtedness) and (e) minus the Transaction Expenses.

“Closing Date” has the meaning specified in Section 2.02.

“Closing Indebtedness” means the Indebtedness of the Company as of the Effective Time, which amount, for the avoidance of doubt, is to be expressed as a positive number.

“Closing Net Working Capital” means (a) the Current Assets of the Company, less (b) the Current Liabilities of the Company, in each case calculated as of immediately prior to the Closing.  For illustrative purposes only, an example calculation of Closing Net Working Capital as of March 31, 2021 is attached hereto as Exhibit D, depicting Closing Net Working Capital as it may have been calculated on such date. Such example is not determinative as to the calculation of Closing Net Working Capital in accordance with this Agreement.

“Closing Net Working Capital Adjustment” means an amount equal to the Closing Net Working Capital minus the Target Working Capital.

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

“Company” has the meaning specified in the Recitals.

“Company Confidential Information” has the meaning specified in Section 5.10(b).

“Company Employee” means any individual employed by or providing services to Parent or any of its Affiliates (including the Company) that provide services primarily with respect to, or is otherwise necessary to the operations of, the Company, including each of those employees as set forth on Section 3.15(a) of the of the Seller Disclosure Schedule.

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“Company Intellectual Property” means all Intellectual Property owned by or purported to be owned by the Company.

“Company IT Assets” means all IT Assets owned by or purported to be owned by the Company.

“Company Shareholders Agreement” means the Amended and Restated Shareholders Agreement of the Company, dated as of March 24, 2017, by and among AKC, Seller, Parent and the Company.

“Competitive Business” has the meaning specified in Section 5.13(a)(i).

“Confidentiality Agreement” has the meaning specified in Section 5.02(f).

“Consent” means, with respect to a Person, any written or documentary consent, approval, authorization, waiver, grant, concession, license, permit, certificate of need, variance, exemption or order of, registration, certificate, declaration, or filing with, or report or notice to such Person.

“Continuation Period” has the meaning specified in Section 5.05(b).

“Continuing Employee” has the meaning specified in Section 5.05(b).

“Contract” means any contract, indenture, note, bond, lease, commitment or other legally binding agreement.

“Contracting Parties” has the meaning specified in Section 9.10.

“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions thereof or related or associated epidemics, pandemic or disease outbreaks.

“COVID-19 Measures” means any quarantine, “shelter in place”, “stay at home”, workforce reduction, social distancing, shutdown, closure, sequester, safety or similar Law, directive or binding guidelines promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including the CARES Act and the Families First Act.

“Current Assets” means accounts receivable, inventory and prepaid expenses, but excluding (a) Tax assets, current and deferred and (b) receivables from any of the Company’s Affiliates and Representatives or any of their respective Affiliates, determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end.

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“Current Liabilities” means accounts payable and accrued expenses, but excluding payables to any of the Company’s Affiliates and Representatives and, directors, their respective Affiliates, Tax liabilities, and the current portion of long term debt, determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end; provided, that, for the avoidance of doubt, in no event shall any amount or item that constitutes Indebtedness or a Transaction Expense be deemed to be a Current Liability for purposes of this Agreement.

“Data Room” means the electronic data room maintained by an Affiliate of Parent and Seller, made available to Purchaser Parties and their Affiliates and hosted by Box Inc., titled “Project Gecko”.

“Dispute Notice” has the meaning specified in Section 2.05(b).

“Disputed Items” has the meaning specified in Section 2.05(b).

“Divested Portion” has the meaning specified in Section 5.13(b).

“Effective Time” has the meaning specified in Section 2.02.

“Eligible Insurance Proceeds” means, with respect to Losses to be reimbursed by the Indemnifying Party that may be covered, in whole or in part, by third-party insurance coverage, the maximum amount of insurance proceeds actually received in cash under such third-party insurance coverage with respect to such Losses, net of the costs (including any premium increases) in seeking such collection.

“Employee Census” means a complete and accurate census of the Company Employees detailing, to the extent permitted by applicable Law, (i) name or employee identification number, (ii) the date of hire, (iii) title or position, (iv) employing entity, (v) work location, (vi) classification, (vii) full-time or part time status, (viii) leave status and (ix) such employee’s annualized compensation as of the date of such census, including base salary, vacation and paid time off accrual amounts, bonus and commission potential, severance pay potential and any other compensation forms, if applicable.

“Environmental Law” means any law, regulation, order, decree, agency requirement or common law standard of conduct relating to pollution, contamination, waste, hazardous substance exposure or the protection of the health, safety or the environment.

“ERISA” has the meaning specified in Section 3.14(a).

“Escrow Account” means the escrow account established pursuant to the terms of the Escrow Agreement for deposit and distribution of (i) the Purchase Price Adjustment Holdback Amount and (ii) the Purchase Price Escrow Amount, in each case, in accordance with this Agreement.

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“Escrow Agent” means Citibank, N.A.

“Escrow Agreement” means an escrow agreement to be entered into by and among Purchaser, Seller and the Escrow Agent on the Closing Date, in customary form reasonably satisfactory to the parties thereto.

“Estimated Closing Consideration” has the meaning specified in Section 2.04.

“Estimated Closing Date Balance Sheet” has the meaning specified in Section 2.04.

“Estimated Closing Statement” has the meaning specified in Section 2.04.

“Exchange Act” means the Securities Exchange Act of 1934.

“Existing Policy” has the meaning specified in Section 5.12(b).

“Final Balance Sheet” has the meaning specified in Section 2.05(f).

“Final Closing Consideration” means the Closing Consideration as set forth in the Final Closing Statement.

“Final Closing Statement” has the meaning specified in Section 2.05(e).

“Financial Statements” has the meaning specified in Section 3.07(a).

“Fundamental Parent and Seller Representations” means the representations and warranties set forth in Section 3.01 (Organization, Standing and Power), Section 3.02 (Authorization), Section 3.03(a)(i), Section 3.03(b) (Noncontravention), Section 3.05 (Capital Stock of the Company), Section 3.16 (Tax Matters) and Section 3.22 (Brokers and Other Advisors).

“GAAP” means generally accepted accounting principles in the United States.

“Government Contracts” means any Contract with any Governmental Authority.

“Governmental Authority” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, European Union, multinational or other supranational, national, federal, regional, state or local or any agency, instrumentality, authority, department, commission, board or bureau thereof or other legislative, executive or judicial governmental entity or semi-governmental or self-regulatory organization, including the National Association of Insurance Commissioners, or any court or similar judicial or arbitral body.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“IAIC” has the meaning specified in the Recitals.

“IAHC Purchase Agreement” has the meaning specified in the Recitals.

“IHC” means Independence Holding Company.

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“IHC Marks” means any and all Trademarks owned by Parent, Seller or any of their Affiliates (other than the Company and IAIC), including all Trademarks comprising, using or containing “IHC,” “Independence American Holdings Corp.”, “Independence Holding Company” or “The IHC Group,” whether in logo form or otherwise, whether alone or in combination with other words or elements, and including all combinations thereof and any Trademarks embodying any of the foregoing either alone or in combination with other words or elements.

“Indebtedness” means, with respect to any Person, without duplication, (a) the principal amount of and accrued interest, premiums, penalties, breakage costs, make-whole payments or obligations or other similar costs, fees or expenses (if any), that would be required to be paid by the borrower pursuant to a customary payoff letter (or otherwise as required by the terms of the underlying instrument), in each case, in respect of (i) any indebtedness of such Person or any of its Subsidiaries for money borrowed and (ii) any indebtedness or other liabilities of such Person or any of its Subsidiaries evidenced by a note, bond, debenture, loan stock or other similar instrument or security, (b) all obligations of the type referred to in clause (a) of third parties for the payment of which such Person or its Subsidiaries is responsible or liable, as obligor, guarantor, surety or otherwise, including any guarantee of such obligations, (c) all obligations of such Person or any of its Subsidiaries as lessee, (d) all obligations with respect to borrowings from any bank, financial institution or other entity, including loans and bank overdrafts, (e) all obligations in respect of letters of credit, bankers’ acceptances and similar facilities issued for the account of such Person or any of its Subsidiaries and all obligations under any performance bonds (but, in each case with respect to this clause (e), solely to the extent drawn and not paid), (f) the net obligations, which may be positive or negative, under all interest rate and exchange rate derivatives, swaps or similar agreements of such Person and its Subsidiaries, (g) all obligations of such Person or any of its Subsidiaries in respect of deferred purchase price with respect to the acquisition by such Person or any of its Subsidiaries of any business, division or product line or portion thereof (whether by merger, sale of stock, sale of assets or otherwise), (h) all indebtedness secured by a Lien to secure all or part of the purchase price of the property subject to such mortgage or Lien, (i) 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 including any Taxes deferred in accordance with Section 2302 of the CARES Act, (j) all liabilities under any currency or interest swap or other interest or currency protection, hedging or financial futures transaction or arrangement, (k) deferred revenue (including the related service obligation for American Pet Insurance Company), (l) self-insurance accruals, (m) 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, related to each Continuing Employee (for the avoidance of doubt, the unpaid bonus amount will include the pre-Closing portion of any bonus payable to a Continuing Employee for their employment with the Company or any Affiliate for the year in which the Closing occurs except for those employees who are paid a pro-rata share of an annual bonus in connection with the termination of their employment agreement), (n) all Liabilities with respect to accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Company Employee immediately prior to the Closing, (o) all Liabilities with respect to

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accrued but unpaid severance amounts accrued or owed by the Company as of the Closing, together with the employer portion of any Taxes arising therefrom, (p) all guarantees by such Person or any of its Subsidiaries of any of the foregoing obligations of any third party, (q) cancellation reserves, (r) accrued but unpaid dividends and (s) fiduciary liability obligations of the Company, net of any restricted cash held in respect thereof, in each case determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end.  For the avoidance of doubt, “Indebtedness” shall not include: (i) any liabilities taken into account in the calculation of Closing Net Working Capital included in the Estimated Closing Statement or Post-Closing Statement; or (ii) any amounts included in the Transaction Expenses.

“Indemnified Party” means the Purchaser Indemnified Party and/or the Seller Indemnified Party, as applicable.

“Indemnified Taxes” means, except to the extent taken into account in determining the Closing Consideration as finally determined pursuant to Section 2.05, (a) any and all Taxes imposed on or with respect to the Company or any of its Subsidiaries for any Pre-Closing Tax Period, (b) Taxes of any other Person for which the Company or any of its Subsidiaries 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, and (c) Transfer Taxes for which Seller is responsible under Section 5.08(c); provided, that Indemnified Taxes shall not include any Taxes that (i) are included as a Current Liability in determining Closing Net Working Capital, Indebtedness or Transaction Expenses, in each case as finally determined, or (ii) are imposed with respect to actions taken by the Purchaser or any Affiliate thereof (including the Company and any of its Subsidiaries) on the Closing Date after the Closing that are outside of the ordinary course of business.  For purposes of this Agreement, whenever it is necessary to determine the portion of any Taxes imposed on or with respect to the Company 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 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).

“Indemnifying Party” means the Purchaser Indemnifying Party and/or the Seller Indemnifying Party, as applicable.

“Independent Accountant” has the meaning specified in Section 2.05(c).

“Insurance Cap” has the meaning specified in Section 5.12(b).

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“Intellectual Property” means all intellectual property or other proprietary rights arising under the Laws of any jurisdiction, including all rights in any of the following: (a) patents and patent applications, including continuations, divisionals, continuations-in-part, reissues or reexaminations and patents issuing thereon; (b) trademarks, service marks, trade dress, logos, corporate names, trade names, symbols, logos, Internet domain names and other similar identifiers of origin, in each case, whether or not registered, together with the goodwill associated with any of the foregoing and symbolized thereby (collectively, “Trademarks”); (c) copyrights, copyright registrations and applications, published and unpublished works of authorship, whether or not copyrightable, copyrights in and to the foregoing, together with all common law rights and moral rights therein, and any applications and registrations therefor; (d) Software; and (e) trade secrets, know-how, confidential or proprietary information, methods, formulae, inventions (whether or not patentable), processes, techniques, source code, algorithms, models, designs, drawings, specifications, data and databases, and proprietary customer or similar data (collectively, “Trade Secrets”).

“Interested Party” has the meaning specified in Section 3.19.

“Interim Financial Statements” has the meaning specified in Section 3.07(a).

“IRS” means the Internal Revenue Service.

“IT Assets” means technology devices, computers, computer systems, Software, hardware, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipment and all data stored therein or processed thereby and all associated documentation.

“JAB Holdings” has the meaning specified in the Preamble.

“Joint Direction” means a joint written instruction of Purchaser and Seller instructing the Escrow Agent to make a payment out of the Escrow Account.

“Key Employees” has the meaning specified in the Recitals.

“Knowledge” means (a) in the case of Parent or Seller, the actual knowledge after due inquiry of any of the individuals identified in Section 1.01(a) of the Seller Disclosure Schedule, and (b) in the case of Purchaser, the actual knowledge after due inquiry of any of the individuals identified in Section 1.01(a) of the Purchaser Disclosure Schedule.

“Law” means any local or foreign law, statute, ordinance, code, treaty, rule, regulation, decree or Order.

“Leased Real Property” has the meaning specified in Section 3.17.

“Liability” means, with respect to any Person, any debt, liability or obligation of such Person (whether direct or indirect, known or unknown, asserted or unasserted, determined, determinable or otherwise, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due and whether or not required under GAAP to be reflected on the financial statements of such Person).

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“Lien” means any lien, pledge, mortgage, deed of trust, security interest, easement, servitude, preemptive right, right of first refusal, transfer restriction or other similar encumbrance.  Solely for purposes of Section 3.13, it is understood that “Lien” does not include any license or similar right granted with respect to any Intellectual Property.

“Losses” means any and all losses, damages, costs, expenses, Liabilities, settlement payments, awards, judgments, fines, obligations, claims penalties, interest and penalties, deficiency related to any of the foregoing (including reasonable and documented legal fees (including court and attorneys’ and other professionals’ fees) and expenses and out-of-pocket costs of investigation, collection or enforcement of any provision of this Agreement or Ancillary Agreement), in each case, whether known or unknown, whether asserted or unasserted, and whether accrued or unaccrued.

“Material Adverse Effect” means an effect, event, development, circumstance, fact or change that, individually or in the aggregate, has or would reasonably be expected to (a) have a material adverse effect on the business, results of operations or financial condition of the Company; provided, however, that no effect, event, development, circumstance, fact or change arising out of or resulting from any of the following, either alone or in combination, shall be deemed to constitute or be taken into account in determining whether there has been a Material Adverse Effect:  (i) any conditions generally affecting the U.S. pet insurance and related brokerage industry or other industries in which the Company currently operates; (ii) general economic conditions, including changes in the credit, debt, financial, currency or capital markets (including changes in interest or exchange rates), in each case, in the United States; (iii) earthquakes, floods, fires, hurricanes, tropical storms, tornadoes, wind storms, tsunamis, volcanic eruptions, natural disasters or other acts of nature; (iv) any epidemic, pandemic or disease outbreaks (including COVID-19) or any COVID-19 Measures or any change in such COVID-19 Measures or interpretations thereof or any other public health event; (v) global, national or regional political conditions or unrest, including hostilities, acts of war, sabotage or terrorism or military actions or any escalation, worsening or diminution of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway; (vi) the negotiation, execution, announcement, pendency or performance of this Agreement or the consummation of the Transactions (including compliance with the terms of this Agreement); (vii) any change or proposed change in Laws or GAAP or other applicable accounting rules, or the interpretation or enforcement thereof or other legal or regulatory conditions or actions; (viii) that the prospective owner of the Company is Purchaser or any Affiliate of Purchaser; (ix) any failure by the Company to meet any projections, forecasts or estimates (provided, however, that any effect, event or change that caused or contributed to such failure to meet any projections, forecasts or estimates shall not be excluded under this clause (ix)); (x) any change or announcement of a potential change, in and of itself, in the credit, financial strength or claims paying ratings of the Company (provided, however, that any effect, event, development, circumstance, fact or change that caused or contributed to such change in such rating shall not be excluded under this clause (x)); and (xi) any action taken or omitted to be taken by the Company at the request or with the prior consent of Purchaser; provided that in the case of clauses (i), (ii), (iii), (iv), (v) and (vii), any such effect, event, development, circumstance, fact or change that is not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect to the extent such effect, event, development, circumstance, fact or change adversely affects the Company in a disproportionate manner

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relative to the other participants in the insurance lines in which the Company operates, considered as a whole; or (b) prevent, materially delay or materially impair the consummation of the Transactions.

“Material Contracts” has the meaning specified in Section 3.12(a).  

“Material Distribution Partner Contracts” means any contract between the Company, on the one hand, and a distribution partner of the Company, on the other hand, representing premiums of at least $500,000 during the twelve (12) month period ended December 31, 2020.

“Material Vendor Contracts” means the top ten (10) agreements, as measured by the total expenditures incurred by the Company and its Subsidiaries under each such Contract during the twelve (12) month period ended December 31, 2020, by and between the Company or its Subsidiaries, on the one hand, and a supplier, vendor, agent, distributor or other service provider, on the other hand.

“Net After-Tax Basis” means, with respect to the calculation of any indemnification payment owed to any Party pursuant to Article VIII, calculation thereof by (a) increasing such indemnification payment by an amount equal to the sum of the amount of any cash Tax liability paid or payable by the Indemnified Party as a result of receipt or accrual of the indemnity payment in the year of such receipt or accrual and (b) decreasing such indemnification payment by an amount equal to any savings in Taxes actually realized in the form of a reduction in cash Tax liability by treating any such Loss (or other Tax benefit attributable thereto) as the last item that is taken into account in determining the amount in this clause (b) paid by the Indemnified Party as a result of the indemnified liability in the year of the incurrence of such liability.

“New Benefit Plans” has the meaning specified in Section 5.05(d).

“New York Courts” has the meaning specified in Section 9.03(b).

“Non-Compete Restricted Period” means a period commencing on the Closing Date and ending three (3) years following the date of the closing of the transactions contemplated by the IAHC Purchase Agreement.

“Non-Solicit Restricted Period” means a period commencing on the Closing Date and ending two (2) years following the date of the closing of the transactions contemplated by the IAHC Purchase Agreement.

“Nonparty Affiliates” has the meaning specified in Section 9.10.

“Notice of Insurance” has the meaning specified in Section 8.07(d).

“Open Source License” means any license that requires, as a condition of modification, licensing, conveyance or distribution of Software subject to such license, that such Software or other Software combined, linked or distributed with or derived from such Software (or any modifications or derivative works thereof) be disclosed, licensed, conveyed, distributed or made available in source code form or on a royalty-free basis (including for the purpose of making additional copies or derivative works).

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“Order” means any order, final award, injunction, judgment, decree (including any consent decree or similar agreed order or judgment), ruling, writ, directive, settlement, stipulation, ruling, determination or assessment, whether civil, criminal or administrative, entered, issued, made or rendered by any Governmental Authority of competent jurisdiction.

“Organizational Documents” means any corporate, partnership or limited liability organizational documents, including certificates or articles of incorporation, bylaws, certificates of formation, operating agreements, certificates of limited partnership, partnership agreements, shareholder agreements and certificates of existence, as applicable.

“Outside Date” has the meaning specified in Section 7.01(a).

“Parent” has the meaning set forth in the Preamble.

“Parties” has the meaning specified in the Preamble.

“Permits” means any license, franchise, permit, certificate, approval or authorization from any Governmental Authority.

“Permitted Liens” means (a) Liens for Taxes, assessments or other governmental charges not yet due or payable or that are being contested in good faith through appropriate proceedings and for which adequate reserves have been established in the accounting books and records prior to the date hereof, (b) mechanics’, carriers’, workers’, repairers’, construction contractors’, landlords’ and similar Liens arising or incurred in the ordinary course of business consistent with past practice that are not yet delinquent and which are not, in the aggregate, material to either the Company, or the amount or validity of which is being contested in good faith by appropriate proceedings, and which are reflected on or specifically reserved against or otherwise disclosed in the consolidated balance sheets included in the Financial Statements, (c) zoning, building codes, entitlement and other land use and environmental regulations by any Governmental Authority, none of which materially and adversely impact the current use of the affected property, (d) Liens securing Indebtedness arising or incurred in the ordinary course of business consistent with past practice and disclosed in the Financial Statements, subject to the terms and limitations under this Agreement, (e) with respect to leasehold interests, mortgages and other Liens incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the Leased Real Property, (f) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation arising or incurred in the ordinary course of business consistent with past practice, (g) any Liens reflected with specificity in the Financial Statements and (h) restrictions on transfers of securities under applicable securities Laws or the Company’s Organizational Documents.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity.

“Personal Information” means (a) any information in the possession or under the control of the Company or any of its Subsidiaries that identifies or could reasonably be used to identify an individual, device, browser or household, or (b) any other information or data protected under Privacy Laws that are applicable to the Company or any of its Subsidiaries.

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“Post-Closing Statement” has the meaning specified in Section 2.05(b).

“Pre-Closing Tax Period” means (i) any Tax period ending on or before the Closing Date and (ii) the portion of any Straddle Period ending on the Closing Date.

“Privacy Laws” means all applicable foreign or domestic (federal, state or local) Laws or industry requirements concerning the privacy, security or Processing of information or data, and all rules and regulations promulgated thereunder, including the Federal Trade Commission Act; the Privacy Act of 1974; the CAN-SPAM Act; the Telephone Consumer Protection Act; the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801, et seq.; the New York Department of Financial Services Cybersecurity Regulation, 23 NYCRR § 500, et seq.; N.Y. Gen. Bus. Law § 899-aa, et seq.; N.Y. Gen. Bus. Law § 899-bb, et seq.; 11 NYCRR 420 et seq.; 11 NYCRR 421 et seq.; the Telemarketing and Consumer Fraud and Abuse Prevention Act; data breach notification Laws; the California Consumer Privacy Act; and the European General Data Protection Regulation.  

“Privacy Policies” means all public statements and policies of the Company and its Subsidiaries with respect to privacy, security or Processing of information or data.

“Process” or “Processing” means any operation or set of operations that is performed upon data or information, whether or not by automatic means, including collection, access, acquisition, creation, storage, adaptation, alteration, correction, retrieval, maintenance, use, disclosure, transmission, transfer (including cross-border transfers), combination, storage, deletion, destruction or the design, implementation or other use of artificial intelligence, machine learning and/or deep learning and the insights, input, output, outcomes, predictions, analysis, visualizations and other results therefrom.

“Purchase Price Adjustment Holdback Amount” means an aggregate amount equal to $1,000,000 to be held by the Escrow Agent solely to satisfy any amounts payable to Purchaser pursuant to Section 2.05, plus any interest or other amounts earned thereon.

“Purchase Price Escrow Amount” means an aggregate amount equal to the Estimated Closing Consideration less the Purchase Price Adjustment Holdback Amount to be held by the Escrow Agent, which shall be released (i) to Seller within two (2) Business Days upon the consummation of the IAHC Purchase Agreement or (ii) to such Affiliate of Purchaser Parent that is a party to the Stockholders Agreement within two (2) Business Days upon the exercise of its rights pursuant to Section 9 thereof.

“Purchaser” has the meaning specified in the Preamble.

“Purchaser Parent” has the meaning specified in the Preamble.

“Purchaser Disclosure Schedule” has the meaning specified in Article IV.

“Purchaser Indemnified Parties” has the meaning specified in Section 8.01(a).

“Purchaser Losses” has the meaning specified in Section 8.01(a).

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“Purchaser Parent Shares” has the meaning specified in the Recitals.

“Purchaser Parties” and a “Purchaser Party” have the meaning specified in the Preamble.

“Purchaser Released Parties” shall have the meaning set forth in Section 5.20.

“Purchaser Releasing Parties” shall have the meaning set forth in Section 5.19.

“Registered” means, with respect to Intellectual Property, issued by, registered with or the subject of a pending application before any Governmental Authority or Internet domain name registrar.

“Representative” means with respect to any Person, any officer, director, principal, partner, manager, member, attorney, accountant, agent, employee, consultant, financial advisor, financing source or other authorized representative of such Person.

“Resolution Period” has the meaning specified in Section 2.05(c).

“Resolved Matters” has the meaning specified in Section 2.05(c).

“Restricted Contract” has the meaning specified in Section 3.12(a)(xii).

“Review Period” has the meaning specified in Section 2.05(b).

“Rollover Agreement” means an agreement to be entered into by and between Purchaser Parent and Seller in connection with the Rollover Contribution, in customary form reasonably satisfactory to the parties thereto, which shall include customary accredited investor representations from Seller.

“Rollover Contribution” has the meaning specified in the Recitals.

“Rollover Shares” has the meaning specified in the Recitals.

“Sale Shares” has the meaning set forth in the Recitals.

“Securities” has the meaning specified in Section 3.05(d).

“Securities Act” means the Securities Act of 1933.

“Security Breach” means any actual, suspected, reported or claimed (a) loss or misuse (by any means) of Personal Information; (b) unauthorized access to any IT Assets; (c) inadvertent, unauthorized and/or unlawful Processing of Personal Information; or (d) 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 Assets.

“Seller” has the meaning specified in the Preamble.

“Seller Confidential Information” has the meaning specified in Section 5.10(c).

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“Seller Disclosure Schedule” has the meaning specified in Article III.

“Seller Indemnified Parties” has the meaning specified in Section 8.01(b).

“Seller Losses” has the meaning specified in Section 8.01(b).

“Seller Pension Plan” has the meaning specified in Section 3.14(d).

“Seller Released Parties” shall have the meaning set forth in Section 5.19.

“Seller Releasing Parties” shall have the meaning set forth in Section 5.20.

“Seller Tax Returns” shall have the meaning set forth in Section 5.08(a).

“Share” and “Shares” have the meaning specified in the Recitals.

“Software” means all (a) computer programs, including algorithms, models and methodologies, whether in source code or object code, (b) databases and other compilations and collections of data or information and (c) documentation, including user manuals and other training documentation, related to clauses (a) or (b).

“Stockholders Agreement” has the meaning specified in the Recitals.

“Straddle Period” means any Tax period beginning before or on the Closing Date and ending after the Closing Date.

“Subsidiary” of any Person (for purposes of this definition, the “Controlling Company”) means any other Person (a) of which a majority of the outstanding voting securities or other voting equity interests, or a majority of any other interests having the power to direct or cause the direction of the management and policies of such other Person, are owned, directly or indirectly, by the Controlling Company or (b) with respect to which the Controlling Company or its Subsidiaries is a general partner or managing member.

“Substantial Detriment” has the meaning specified in Section 5.03(c).

“Target Working Capital” means $$1,417,000.

“Tax Contest” has the meaning specified in Section 5.08(e).

“Tax Return” means any return, report, claim for refund, estimate, information return, declarations, disclosures or statement or other similar document relating to or required to be filed with any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Taxes” means all federal, state, local or non-U.S. taxes or charges in the nature of taxes, including all income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, premium, escheat, unemployment, excise, severance, stamp, occupation, property and

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estimated taxes, all interest, penalties, fines and additions to tax imposed by any Governmental Authority in connection with any of the foregoing.

“Third-Party Claim” has the meaning specified in Section 8.04(a).

“Trade Secrets” has the meaning specified in the definition of Intellectual Property.

“Trademarks” has the meaning specified in the definition of Intellectual Property.

“Transaction Expenses” means the sum, without duplication, of the following: (i) all fees and expenses incurred or payable by or on behalf of the Company or any of its Affiliates for which the Company or any of its Subsidiaries is liable and which remains unpaid as of the Closing, including all legal, accounting, financial advisory, consulting, finders and all other fees and expenses (in each case whether or not billed or invoiced prior to the Closing); (ii) any bonus, retention, change-in-control, transaction or similar payment obligations of the Company or any of its Subsidiaries to any Person resulting from, or in connection with, the Transactions or any commitment made prior to the Closing by the Company or any of its Subsidiaries to make any bonus, retention, change-in-control, transaction or similar payments to any Person (regardless of when payment is due); and (iii) all Transaction Payroll Taxes related to the payment Transaction Expenses described in clause (ii) above.  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 or any of its Subsidiaries or Purchaser 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.

“Transactions” means the transactions contemplated by this Agreement and the Ancillary Agreements.

“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 or Purchaser.

“Transition Services Agreement” has the meaning set forth in the Recitals.

“Unresolved Matters” has the meaning specified in Section 2.05(c).

“Year-End Financial Statements” has the meaning specified in Section 3.07(a).

Section 1.02Interpretations. 

(a)As used in this Agreement, references to the following terms have the meanings indicated: 

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(i)to the Preamble or to the Recitals, Sections, Articles, Exhibits or Schedules are to the Preamble or a Recital, Section or Article of, or an Exhibit or Schedule to, this Agreement unless otherwise clearly indicated to the contrary; 

(ii)to any Law are to such Law as amended, modified, supplemented or replaced from time to time and any rules or regulations promulgated thereunder and to any section of any Law including any successor to such section;  

(iii)to any Governmental Authority include any successor to the Governmental Authority and to any Affiliate include any successor to the Affiliate;  

(iv)to any “copy” of any Contract or other document or instrument are to a true, correct and complete copy thereof;  

(v)to “hereof”, “herein”, “hereunder”, “hereby”, “herewith” and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or clause of this Agreement, unless otherwise clearly indicated to the contrary;  

(vi)to the “date of this Agreement”, “the date hereof” and words of similar import refer to the date set forth in the Preamble; and 

(vii)to “this Agreement” includes the Exhibits and Schedules (including the Seller Disclosure Schedule and the Purchaser Disclosure Schedule) to this Agreement. 

(b)Any documents and agreements referred to herein shall be deemed to have been “delivered”, “provided” or “made available” (or any phrase of similar import) to Purchaser Parties for purposes of this Agreement if they have been posted to the Data Room at least five (5) Business Days prior to the date of this Agreement. 

(c)Whenever the word “include”, “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation”.  The word “or” shall not be exclusive.  Any singular term in this Agreement will be deemed to include the plural, and any plural term the singular.  All pronouns and variations of pronouns will be deemed to refer to the feminine, masculine or neuter, singular or plural, as the identity of the Person referred to may require.  Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. 

(d)Whenever the last day for the exercise of any right or the discharge of any duty under this Agreement falls on a day other than a Business Day, the Party having such right or duty shall have until the next Business Day to exercise such right or discharge such duty.  Unless otherwise indicated, the word “day” shall be interpreted as a calendar day.  With respect to any determination of any period of time, unless otherwise set forth herein, the word “from” means “from and including” and the word “to” means “to but excluding”. 

(e)The table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. 

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(f)References to “dollars” or “$” mean United States dollars, unless otherwise clearly indicated to the contrary. 

(g)The Parties have participated jointly in the negotiation and drafting of this Agreement; consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement. 

(h)No summary of this Agreement prepared by or on behalf of any Party shall affect the meaning or interpretation of this Agreement. 

(i)All capitalized terms used without definition in the Exhibits and Schedules (including the Seller Disclosure Schedule and the Purchaser Disclosure Schedule) to this Agreement shall have the meanings ascribed to such terms in this Agreement. 

(j)For purposes of determining whether any asset, liability or other amount was specifically recorded, identified, reserved for or accrued in the Final Balance Sheet, such asset, liability or other amount will be deemed specifically recorded, identified, reserved for or accrued in the Final Balance Sheet to the extent that (i) such asset, liability or other amount is specifically recorded, identified, reserved for or accrued in the underlying detail supporting the amounts set forth on the Final Closing Statement, including, to the extent applicable, the accounting work papers of the Company, Parent, Seller or Purchaser, as applicable, or (ii) such asset, liability or other amount was specifically recorded, identified, reserved for or accrued directly in the Final Balance Sheet. 



Article IITHE PURCHASE AND SALE; CLOSING; CLOSING DELIVERABLES

Section 2.01Purchase and Sale of Sale Shares.  Upon the terms and subject to the conditions set forth in this Agreement, and in reliance on the representations, warranties and covenants contained herein, at the closing of the Transaction (the “Closing”), Seller agrees to, and Parent agrees to cause Seller to, sell, assign, convey, transfer and deliver to Purchaser, and Purchaser agrees to purchase and accept from Seller, all Sale Shares held by Seller, free and clear of any Liens, for a cash amount equal to the Final Closing Consideration.   

Section 2.02The Closing.  Subject to the satisfaction of the conditions set forth in Article VI (or, to the extent permitted by applicable Law, the written waiver thereof by the Party entitled to waive any such condition), the Closing will take place remotely via the exchange of documents and signatures at 9:00 a.m., New York time on the later of (i) the third (3rd) Business Day after satisfaction or waiver of each condition to the Closing set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) and (ii) June 30, 2021, unless another time, date or place is agreed to in writing by the Parties.  The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.  The Closing will be effective as of 12:01 a.m. (Eastern U.S. Time) on the Closing Date (the “Effective Time”). 

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Section 2.03Deliveries at Closing. 

(a)By Parent.  Upon the terms and subject to the conditions set forth in this Agreement, at or prior to the Closing, Parent shall deliver or cause to be delivered: 

(i)to Purchaser, counterparts of each of the Ancillary Agreements (other than the Confidentiality Agreement) to which Parent or any of its Affiliates is a party, duly executed by all parties thereto other than Purchaser or its applicable Affiliates; 

(ii)to Purchaser, on behalf of Parent, the certificate contemplated by Section 6.03(c); 

(iii)to Purchaser, the certificate or certificates representing the Sale Shares and the Rollover Shares, in accordance with the terms of the Rollover Agreement, in each case, duly endorsed in blank by the record holder thereof or accompanied by duly executed stock power(s) endorsed in blank by the record holder thereof or other appropriate instrument of sale, assignment and transfer with respect to the Shares; and 

(iv)to Purchaser, a duly executed IRS Forms W-9, and a certificate on a form reasonably acceptable to Purchaser, a that complies with the requirements of Treasury Regulations Section 1.1445-2(b) (“FIRPTA Certificate”). 

(b)By Purchaser.  Upon the terms and subject to the conditions set forth in this Agreement, at or prior to the Closing, Purchaser shall deliver or cause to be delivered: 

(i)to Escrow Agent, the Purchase Price Escrow Amount by wire transfer of immediately available funds to the account designated to Purchaser by Escrow Agent on or prior to the Closing Date; 

(ii)to the Escrow Agent (to the Escrow Account), the Purchase Price Adjustment Holdback Amount; 

(iii)to Seller, shares of common stock of Purchaser Parent in accordance with the terms of the Rollover Agreement; and 

(iv)to Parent, counterparts of each of the Ancillary Agreements (other than the Confidentiality Agreement) to which Purchaser or any of its Affiliates is a party, duly executed by Purchaser or its applicable Affiliates party thereto; and 

(v)to Parent, the certificate contemplated by Section 6.03(c). 

Section 2.04Estimated Closing Date Balance Sheet; Estimated Closing Consideration.  No later than five (5) Business Days before the Closing Date, Parent shall deliver to Purchaser (i) an estimated unaudited balance sheet of the Company, as of the Closing, which shall be prepared in accordance with GAAP consistently applied (except that such balance sheet will not be required to include footnotes) (the “Estimated Closing Date Balance Sheet”), and (ii) based on the Estimated Closing Date Balance Sheet, a statement (the “Estimated Closing Statement”) accompanied by documentation reasonably satisfactory to Purchaser in support of  

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the calculation of information set forth therein, setting forth Parent’s calculation of the Closing Consideration (the “Estimated Closing Consideration”) and each element of the definition thereof.  The Estimated Closing Statement shall be prepared by Parent in a manner consistent with the terms of (including the definitions contained in) this Agreement.

Section 2.05Post-Closing Adjustments to the Estimated Closing Consideration. 

(a)From and after the Closing Date until the determination of the Final Closing Statement and Final Balance Sheet pursuant to this Section 2.05, Purchaser shall, and shall cause its Affiliates (including the Company) to, permit Parent and its Representatives reasonable access to the personnel, accountants and properties of the Company, and provide reasonable access (with the right to make copies), during normal business hours upon reasonable advance notice, to all of the books, records, Contracts and other documents (including auditor’s work papers) of the Company that are or could reasonably be relevant to the calculations set forth in the Final Closing Statement and Adjusted Closing Date Balance Sheet, any Dispute Notice or otherwise related to the negotiation or resolution of the Estimated Closing Statement or Estimated Closing Date Balance Sheet.  Parent and its Representatives shall use their reasonable best efforts to minimize any disruption to the Company or Purchaser in connection with such access. 

(b)Following the Closing, Purchaser shall prepare (i) an unaudited consolidated balance sheet of the Company as of the Closing prepared in accordance with GAAP consistently applied (except that such balance sheet will not be required to include footnotes) (the “Adjusted Closing Date Balance Sheet”) and (ii) a statement (“Post-Closing Statement”) setting forth Purchaser’s good-faith calculation of the Closing Consideration and each element of the definition thereof, based on the Adjusted Closing Date Balance Sheet.  Purchaser shall deliver the Post-Closing Statement, together with reasonable supporting detail as to each of the calculations set forth in the Post-Closing Statement and Adjusted Closing Date Balance Sheet to Parent no later than one hundred twenty (120) days following the Closing Date.  Notwithstanding anything herein to the contrary, the Parties agree that the Post-Closing Statement and Adjusted Closing Date Balance Sheet, and the component items and calculations therein, shall be prepared by Purchaser in accordance with the terms of (including the definitions contained in) this Agreement.  The Post-Closing Statement and Adjusted Closing Date Balance Sheet shall be conclusive, final and binding on all Parties absent manifest error unless Parent provides Purchaser written notice (a “Dispute Notice”) of any disputes or objections thereto (collectively, the “Disputed Items”) with reasonable supporting detail as to such Disputed Items, within sixty (60) days after receipt of the Post-Closing Statement and Adjusted Closing Date Balance Sheet (such period, the “Review Period”).   

(c)Purchaser and Parent shall, for a period of thirty (30) days (or such longer period as Purchaser and Parent may agree in writing) following delivery of a Dispute Notice to Purchaser (the “Resolution Period”), attempt in good faith to resolve their differences (all such discussions and communications related thereto shall (unless otherwise agreed by Purchaser and Parent in writing) be governed by Rule 408 of the Federal Rules of Evidence and any applicable similar state rule).  Any Disputed Items whose resolutions are agreed to by Purchaser and Parent in writing, together with any items or calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet not disputed or objected to by Parent in the Dispute  

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Notice, are collectively referred to herein as the “Resolved Matters”.  Any Resolved Matters shall be conclusive, final and binding on all Parties absent manifest error, except to the extent such component could be affected by other components of the calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet that are the subject of a Dispute Notice.  If at the end of the Resolution Period, Purchaser and Parent have been unable to resolve all of the differences that they may have with respect to the matters specified in the Dispute Notice, either of Purchaser or Parent may, upon written notice to the other, refer all matters that remain in dispute with respect to the Dispute Notice (the “Unresolved Matters”) for resolution to a partner of KPMG US LLP (the “Independent Accountant”).  If KPMG US LLP notifies the Parties that it is unwilling or unable to serve as the Independent Accountant, within thirty (30) days thereafter, the Parties will jointly select and retain a partner or senior employee of a nationally recognized accounting firm that is not the auditor or independent accounting firm of any of the Parties, who is a certified public accountant and is independent of the Parties and impartial, to serve as the Independent Accountant, and such accounting firm shall be deemed the Independent Accountant for the purposes of the immediately preceding sentence.  If, during such thirty (30) day period, the Parties cannot mutually agree on an alternate Independent Accountant, any Party may request the American Arbitration Association to appoint as the Independent Accountant, within fifteen (15) days from the date of such request or as soon as practicable thereafter, a partner in a nationally recognized accounting firm that is not the auditor or independent accounting firm of any of the Parties, who is a certified public accountant and who is independent of the Parties and impartial.  If one or more Unresolved Matters are submitted to the Independent Accountant for resolution, Purchaser and Parent shall enter into a customary engagement letter with, and to the extent necessary each Party will waive and cause its controlling Affiliates to waive any conflicts with, the Independent Accountant at the time such dispute is submitted to the Independent Accountant and shall cooperate with the Independent Accountant in connection with its determination pursuant to this Section 2.05.  Within ten (10) days after the Independent Accountant has been retained, each of Purchaser and Parent shall furnish, at their own expense, to the Independent Accountant and substantially simultaneously to the other a written statement of its position with respect to each Unresolved Matter.  Within five (5) Business Days after the expiration of such ten (10) day period, each of Purchaser and Parent may deliver to the Independent Accountant its response to the other’s position on each Unresolved Matter; provided that it delivers a copy thereof substantially simultaneously to the other.  With each submission, each of Purchaser and Parent may also furnish to the Independent Accountant such other information and documents as it deems relevant or such information and documents as may be requested by the Independent Accountant; provided that it delivers a copy thereof substantially simultaneously to the other.  The Independent Accountant may, at its discretion, conduct one or more conferences (whether in person or by teleconference) concerning the disagreement and each of Purchaser and Parent shall have the right to present additional documents, materials and other information and to have present its Representatives at each of such conferences.

(d)The Independent Accountant shall be directed to promptly, and in any event within thirty (30) days after its appointment pursuant to Section 2.05(c), render its decision on the Unresolved Matters (and not on any other matter or calculation set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet).  The Independent Accountant’s determination as to each Unresolved Matter shall be set forth in a written statement delivered to each of Purchaser and Parent, which shall include the Independent Accountant’s (i)  

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determination as to the calculation of each of the Unresolved Matters and (ii) the corresponding corrective calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet that are derived from its determination as to the calculations of the Unresolved Matters, all of which shall be conclusive, final and binding on all Parties absent manifest error.  In resolving any Unresolved Matter, the Independent Accountant may not assign a value to such item greater than the greatest value for such item claimed by Purchaser in the Post-Closing Statement or Adjusted Closing Date Balance Sheet or by Parent in the Dispute Notice or less than the lower value for such item claimed by Purchaser in the Post-Closing Statement or Adjusted Closing Date Balance Sheet or by Parent in the Dispute Notice.  The Independent Accountant shall also determine the proportion of its fees and expenses to be paid by each of Purchaser and Parent based on the relative extent (as determined by the Independent Accountant) to which the Independent Accountant has accepted the positions of Purchaser and Parent in its determination as to each Unresolved Matter.

(e)For purposes of this Agreement, subject to the third sentence of Section 2.05(b), the “Final Closing Statement” shall be (i) in the event that no Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), (ii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, and Purchaser and Parent are able to agree on all matters set forth in such Dispute Notice, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted pursuant to the agreement of Purchaser and Parent in writing, or (iii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period and Purchaser and Parent are unable to agree on all matters set forth in such Dispute Notice, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted by the Independent Accountant to be consistent with (A) the Resolved Matters and (B) the Independent Accountant’s determination as to the calculation of the Unresolved Matters in accordance with Section 2.05(c). 

(f)For purposes of this Agreement, subject to the third sentence of Section 2.05(b), the “Final Balance Sheet” shall be (i) in the event that no Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), (ii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, Purchaser and Parent are able to agree on all matters set forth in such Dispute Notice, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted pursuant to the agreement of Purchaser and Parent in writing or (iii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period and Purchaser and Parent are unable to agree on all matters set forth in such Dispute Notice, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted by the Independent Accountant to be consistent with (A) the Resolved Matters and (B) the Independent Accountant’s determination as to the calculation of the Unresolved Matters in accordance with Section 2.05(c). 

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(g)Payment of the Post-Closing Adjustment. 

(i)If the Final Closing Consideration exceeds the Estimated Closing Consideration, then within two (2) Business Days after the final determination of the Final Closing Statement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account to Seller an aggregate amount equal to the Purchase Price Adjustment Holdback Amount.  Contemporaneously with that delivery, Purchaser shall pay to Seller by wire transfer of immediately available funds to an account designated by Seller the full amount by which the Final Closing Consideration exceeds the Estimated Closing Consideration (if any).  In the case of this Section 2.05(g)(i), Seller’s sole and exclusive remedy shall be to seek payment from Purchaser of the amount determined pursuant to this Section 2.05(g)(i). 

(ii)If the Final Closing Consideration is less than or equal to the Estimated Closing Consideration, then within two (2) Business Days after the final determination of the Final Closing Statement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account: (i) to the Purchaser, the lesser of (A) the Purchase Price Adjustment Holdback Amount and (B) the absolute value of the dollar amount by which the Estimated Closing Consideration exceeds the Final Closing Consideration, by wire transfer of immediately available funds to the account or accounts designated in writing by Purchaser; and (ii) to Seller, any remaining amount of the Purchase Price Adjustment Holdback Amount, if any, following the payment to the Company made pursuant to this Section 2.05(g)(ii); provided, that if the absolute value of the difference between the Estimated Closing Consideration and the Final Closing Consideration is greater than the Purchase Price Adjustment Holdback Amount, then Seller shall pay to Purchaser the difference between the absolute value of such difference and the Purchase Price Adjustment Holdback Amount by wire transfer or delivery of other immediately available funds.  In the case of this Section 2.05(g)(ii), Purchaser’s sole and exclusive remedy shall be to seek payment from Seller of the amount determined pursuant to this Section 2.05(g)(ii). 

(h)All payments pursuant to this Section 2.05 shall be treated as an adjustment to the Closing Consideration for all non-U.S., federal, state and local income Tax purposes. 

Section 2.06Withholding Taxes.  Notwithstanding anything to the contrary contained in this Agreement, Purchaser and the Company 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 of state, local or foreign Tax Law.  Purchaser, 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. 

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Article IIIREPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

Except as set forth in the disclosure schedule delivered by Parent and Seller to Purchaser Parties concurrently with the execution of this Agreement (the “Seller Disclosure Schedule”) (it being understood and agreed by the Parties that disclosure of any item in any section or subsection of the Seller Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Seller Disclosure Schedule to which the relevance of such item is reasonably apparent on its face), Parent and Seller hereby jointly and severally represent and warrant to Purchaser Parties as of the date hereof and as of the Closing Date as follows:

 

Section 3.01Organization, Standing and Power.   

(a)Each of Parent and Seller is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, this Agreement and the Ancillary Agreements to which it will be a party. Each Affiliate of Parent (other than Seller and the Company) that will be a party to any Ancillary Agreement is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, the Ancillary Agreements to which such Person will be a party. 

(b)Each of the Company and its Subsidiaries are duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to own or lease and operate all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries are duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification required by Law. Parent has made available to Purchaser Parties true, correct and complete copies of the Organizational Documents of each of the Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries are not in violation of any of its Organizational Documents. 

Section 3.02Authorization.  The execution, delivery and performance by Parent and Seller of this Agreement and each Ancillary Agreement to which it is or will be party, and the consummation by Parent and Seller of the Transactions, have been duly and validly authorized by all requisite action of each of Parent and Seller. This Agreement has been, and each applicable Ancillary Agreement will be, at or prior to the Closing, duly executed and delivered by each of Parent and Seller, as applicable, and, assuming due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitutes a legal, valid and binding obligation of each of Parent and Seller, as applicable, enforceable against each of Parent and Seller, as applicable, in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar Laws of general  

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application affecting or relating to the enforcement of creditors’ rights generally or general principles of equity, whether considered in a proceeding at Law or in equity (the “Bankruptcy and Equity Exception”).

Section 3.03Noncontravention.  

(a)None of the execution and delivery of this Agreement or any applicable Ancillary Agreement by Parent, Seller or the Company, as applicable, the consummation by Parent, Seller or the Company, as applicable, of the Transactions, or compliance by Parent, Seller or the Company, as applicable, with any of the terms or provisions hereof or thereof will (i) conflict with or violate any provision of their respective Organizational Documents or (ii) (A) assuming that the authorizations, consents and approvals referred to in Section 3.04 are obtained and the filings referred to in Section 3.04 are made, violate any Law applicable to Parent, Seller or the Company, (B) with or without notice, lapse of time or both, violate, breach or constitute a default under any of the terms, conditions or provisions of any Material Contract or accelerate or give rise to a right of termination, cancellation or acceleration of any of the Company’s obligations under any such Material Contract or to the loss or diminution of any of the Company’s rights or benefits under a Material Contract, (C) assuming that the authorizations, consents and approvals referred to in Section 3.04 are obtained and the filings referred to in Section 3.04 are made, with or without notice, lapse of time or both, violate, breach or constitute a default under any Permit held by the Company or by which the Company or any of its assets or properties are bound or (D) result in the creation of any Lien (other than any Permitted Lien) on any properties, rights or assets of the Company, except, in the case of clause (ii), for such violations, defaults, accelerations, rights, losses and Liens as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 

(b)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 or any Affiliate of the foregoing (including IHC) is necessary to approve this Agreement, any Ancillary Agreement or the Transactions. 

Section 3.04Governmental Approvals.  Except for (a) filings required under, and compliance with other applicable requirements of, the HSR Act and (b) Consents set forth in Section 3.04 of the Seller Disclosure Schedule and any filings that may be made by or on behalf of Purchaser Parties or their Affiliates, no consents, authorizations or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement or any applicable Ancillary Agreement by Parent, Seller or the Company, as applicable, or the consummation by Parent, Seller or the Company, as applicable, of the Transactions, other than such other consents, authorizations, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions.  

Section 3.05Capital Stock of the Company. 

(a)As of the date hereof, four hundred (400) Shares are issued and outstanding.  Section 3.05(a) of the Seller Disclosure Schedule sets forth a list, as of the date hereof, of all holders of outstanding Shares. 

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(b)Seller is the sole record and beneficial owner of three hundred and forty (340) issued and outstanding Shares.  Seller has good and valid title to all such Shares, free and clear of all Liens (other than any transfer restrictions imposed by federal and state securities and insurance laws), and upon delivery by Seller of such Shares at the Closing, good and valid title to such Shares will pass to Purchaser. 

(c)Except for this Agreement, Seller is not a party to any Contracts with respect to the voting, purchase, dividend rights, disposition or transfer of the capital stock of the Company. 

(d)There are (i) no outstanding shares of capital stock of, or other equity or voting interest in, the Company, (ii) no outstanding securities of the Company convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company, (iii) no outstanding options, warrants, rights or other commitments or agreements to acquire from the Company, or that obligate the Company to issue or register, or that restrict the transfer or voting of, any capital stock of, or other equity or voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company, (iv) no obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any capital stock of, or other equity or voting interest (including any voting debt) in, the Company (the items in clauses (i), (ii), (iii) and (iv)), together with the capital stock of the Company, being referred to collectively as “Securities”), (v) no calls, subscriptions, preemptive rights or Contracts for the purchase or issuance of Securities, (vi) no “phantom stock” or similar obligations of the Company, (vii) no Contracts requiring the Company to acquire any equity interest of any other Person and (viii) no other obligations by the Company to make any payments based on the price or value of any Securities or dividends paid thereon or revenues, earnings or financial performance or any other attribute of the Company. 

(e)There are no outstanding agreements of any kind which (i) obligate the Company to repurchase, redeem or otherwise acquire any Securities, (ii) obligate the Company to preempt the sale of any Securities to Purchaser, (iii) obligate the Company to sell, or grant any Person a right to acquire, or in any way dispose of, any Securities or obligations exercisable or exchangeable for, or convertible into, Securities or (iv) obligate the Company to grant, extend or enter into any such agreements, and the Company does not have any outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote with the holders of the Shares on any matter.  All Shares have been duly authorized and validly issued and are fully paid, nonassessable, issued in compliance with all applicable Law concerning the issuance of securities and the Company’s Organizational Documents and have not been issued in violation of any preemptive or other similar rights. 

(f)The Securities of each Subsidiary of the Company issued and outstanding as of the date hereof: (i) have been duly authorized and validly issued; (ii) are, to the extent applicable, fully paid and non-assessable; and (iii) has not been issued in violation of and is not subject to, any preemptive or subscription rights, rights of first refusal or other similar rights, except, in each case, where the (A) failure to be so duly authorized, validly issued, fully paid or non-assessable, or (B) issuance in violation of or subject to such rights, is not material to the Company and its Subsidiaries, taken as a whole.  As of the date hereof, neither the Company nor any of its Subsidiaries has any Subsidiaries or owns any Securities in any other Person.  

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(g)As of the date hereof, the Company is the record and beneficial owner of a majority of the Securities and voting power of each of its Subsidiaries, in each case free and clear of any Liens, except for Permitted Liens.  There are no outstanding (i) options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other contracts that require the Company to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem Securities of any Subsidiary, (ii) stock appreciation, phantom stock, profit participation or similar rights with respect to such Subsidiaries or (iii) bonds, debentures, notes, or other Indebtedness that entitles the holders to vote (or that is convertible or exercisable for or exchangeable into securities that entitle the holders to vote) with holders of securities of any Subsidiary on any matter. 

Section 3.06Subsidiaries.  Except for Subsidiaries set forth on Section 3.06 of the Seller Disclosure Schedule, the Company has (and in the last four (4) years has had) no Subsidiaries. 

Section 3.07Financial Statements; No Undisclosed Liabilities. 

(a)True, complete and correct copies of (i) the audited financial statements of the Company for the years ended December 31, 2019 and 2020, and the related statements of operations, stockholders’ equity and cash flows for the fiscal years ended December 31, 2019 and 2020 (collectively, the “Year-End Financial Statements”), and (ii) unaudited financial statements of the Company for the period ended March 31, 2021 and the related statements of operations, stockholders’ equity and cash flows for the three-month period then ended (the “Interim Financial Statements” and together with the Year-End Financial Statements, the “Financial Statements”), have been made available to Purchaser.  The Financial Statements were prepared from the books of account and other financial records of the Company and its Subsidiaries, as applicable, and were prepared in accordance with GAAP consistently applied during the periods involved except as otherwise noted therein.  The Financial Statements fairly present, in all material respects, the financial position and the results of operations of the Company and its Subsidiaries, at the dates, and for the periods, presented therein (subject, in the case of Interim Financial Statements, to changes resulting from normal year-end audit adjustments and to the absence of certain notes).  As of their respective filing dates, the Financial Statements complied in all material respects with all requirements of applicable Law. 

(b)Except as otherwise set forth at Section 3.07(b) of the Seller Disclosure Schedule, neither the Company nor any of its Subsidiaries have any Liabilities which would be required to be reflected on, reserved against or otherwise described on a financial statement of the Company prepared in accordance with GAAP or the notes thereto, and were not so reflected on, reserved against or described, except Liabilities (i) reflected on, reserved against or described on the Financial Statements of the Company as at December 31, 2020 (including the notes thereto), (ii) incurred after December 31, 2020 in the ordinary course of business consistent with past practice or (iii) required or reasonably contemplated pursuant to this Agreement or the Ancillary Agreements to be incurred by the Company in connection with the Transactions. 

(c)The books, records and accounts of the Company and its Subsidiaries have been maintained in all material respects in compliance with all applicable Law and reasonable business practices. The Company maintains a system of internal accounting controls sufficient to  

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provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP.

Section 3.08Absence of Certain Changes.  

(a)Since December 31, 2020, except for the Transactions, the business of the Company has been conducted in all material respects in the ordinary course of business consistent with past practice and  

(b)Since December 31, 2020, there has not been any change, occurrence or development in the financial condition, properties, assets, liabilities, business or results of operations or any other change, occurrence or development, which has had, or would, individually or in the aggregate, reasonably be expected to have, a Material Adverse Effect. 

Section 3.09Legal Proceedings.   

(a)There is no pending or, to the Knowledge of Parent or Seller, threatened Action  against the Company or any of its Subsidiaries (other than ordinary course claims under insurance policies within the applicable limited thereof), which, if adversely determined, would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. 

(b)Neither the Company nor any of its Subsidiaries are not subject to any cease-and-desist or other Order issued by, or is a party to any written agreement, consent agreement, memorandum of understanding, commitment letter or similar undertaking between the Company or its Subsidiaries, on the one hand, and any Governmental Authority, on the other hand, or is subject to any Order by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policy, procedure or board resolutions at the request of, any Governmental Authority, that materially restricts the conduct of its business, nor, since December 31, 2018, have Parent, Seller, the Company or any of the Company’s Subsidiaries been advised in writing by any Governmental Authority that it is considering issuing or requesting any of the foregoing. 

Section 3.10Compliance with Laws; Permits. 

(a) The Company and each of its Subsidiaries are, and have been since December 31, 2018, in compliance in all material respects with all Laws applicable to the Company, its respective business operations or its Subsidiaries; 

(ii)Since December 31, 2018, none of Parent, Seller, the Company or any of the Company’s Subsidiaries have received any written notice from any Governmental Authority of any material violation of any Laws by the Company or any of its Subsidiaries; and 

(iii)The Company or one of its Subsidiaries holds all Permits required by Law for the lawful conduct of its respective businesses as presently conducted (but, for the avoidance of doubt, excluding any Permits and Contracts relating to Intellectual Property) (the “Business Licenses”), (iv) all Business Licenses are valid and in good standing and are in full force and effect, (v) the Company or its Subsidiary, as applicable, is in compliance in all material respects with the terms of all of the Business Licenses and (vi)  

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the Company and its Affiliates have not received any written communication alleging any material noncompliance on the part of the Company or any of its Subsidiaries with respect to any Law that has not been cured as of the date hereof.

(b)Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions, Parent and Seller are in compliance with all Laws applicable to Parent and Seller, respectively.  As of the date hereof, neither the Company nor any of its Subsidiaries are not a party to any Government Contracts. 

Section 3.11Insurance Policies.  Section 3.11 of the Seller Disclosure Schedule sets forth a list of all in-force property and liability insurance policies and fidelity or financial institution bonds that are maintained by or for the benefit of the Company and its Subsidiaries, including enterprise-wide insurance policies that cover (a) the Company on the one hand and (b) one or more of Parent or its Affiliates on the other hand. All current property and liability insurance policies covering the Company and its Subsidiaries are in full force and effect (and all premiums due and payable thereon have been paid in full on a timely basis), and no written notice of cancellation, termination or revocation or other written notice that any such insurance policy is no longer in full force or effect or that the issuer of any such insurance policy is not willing or able to perform its obligations thereunder has been received as of the date hereof by Parent or its Affiliates. None of Parent, Seller, the Company or its Subsidiaries, nor, to the Knowledge of Parent, any insurer under such property and liability insurance policies, is in violation or breach of, or default under, any provision thereof. There are no claims by or on behalf of the Company or its Subsidiaries pending under any such insurance policies as to which coverage has been denied by the insurer or as to which, after reviewing the information provided with respect to such claim, the insurer has advised in writing that it intends to deny. 

Section 3.12Material Contracts. 

(a)Section 3.12(a) of the Seller Disclosure Schedule sets forth a list of all the following Contracts  to which the Company or its Subsidiaries are a party as of the date hereof (the “Material Contracts”): 

(i)Material Distribution Partner Contracts; 

(ii)Material Vendor Contracts; 

(iii)Contracts that involved the expenditure of more than $100,000 in the aggregate during (A) the twelve (12) month period ended as of December 31, 2020 or (B) the twelve (12) month period ended as of December 31, 2019; 

(iv)joint venture, investment, partnership, stockholder, limited liability or other similar Contracts (other than distribution agreements and reseller agreements entered into in the ordinary course of business consistent with past practice); 

(v)Contracts providing for the direct or indirect acquisition or disposition by the Company or any of its Subsidiaries of any business, division or product line (whether  

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by merger, sale of stock, sale of assets or otherwise), or capital stock of any other Person since December 31, 2015;

(vi)Contracts providing for the incurrence of any Indebtedness having an outstanding principal amount of more than $50,000 or the making of any loans (other than loans made to employees in the ordinary course of business consistent with past practice); 

(vii)Contracts that prohibit the payment of dividends or distribution in respect of the capital stock of the Company or any of its Subsidiaries, the pledging of the capital stock of the Company or any of its Subsidiaries or the incurrence of Indebtedness by the Company or any of its Subsidiaries; 

(viii)Contracts under which the Company or any of its Subsidiaries has directly or indirectly guaranteed or otherwise agreed to be responsible for Indebtedness of more than $100,000 for borrowed money or other obligations or liabilities of any Person (except for Indebtedness for borrowed money or other obligations or liabilities); 

(ix)Contracts containing covenants requiring capital expenditures in excess of $75,000 on an annual basis or in excess of $150,000 in the aggregate; 

(x)Contracts creating any Lien (other than Permitted Liens) upon any material assets of the Company or any of its Subsidiaries, other than purchase money security interests in connection with the acquisition of equipment in the ordinary course of business consistent with past practice; 

(xi)Contracts pursuant to which (A) any license or other rights with respect to material Intellectual Property is granted by a third party to, or granted to a third party by, the Company or any of its Subsidiaries, other than agreements for unmodified, generally commercially available “off-the-shelf” Software that have been granted on standardized, generally available terms, (B) the Company or any of its Subsidiaries has assigned or transferred or agreed to assign or transfer any material Intellectual Property to any third party or (C) the Company or any of its Subsidiaries is subject to any obligation or covenant with respect to the use, licensing, enforcement, prosecution or other exploitation of any material Intellectual Property, including standstills, settlements and trademark co-existence or consent Contracts; 

(xii)(A) Contracts containing provisions or covenants that (1) expressly limit or purport to limit the ability of the Company or any of its Subsidiaries (or, after the Closing, Purchaser or any of its Affiliates) to engage in any line of business or with any Person or engage in any business activity in any geographic area or (2) other than in the ordinary course of business, restrict, directly or indirectly, the Company’s or any of its Subsidiaries’ (or, after the Closing, Purchaser’s or its Affiliates) ability to solicit or hire any Person or solicit business from any Person, (B) Contracts that could require the disposition of any material assets or line of business of the Company or any of its Subsidiaries (or, after the Closing, Purchaser or its Affiliates) and (C) Contracts that contain a “most favored nation” provision or, following the Closing, would reasonably be  

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expected to obligate Purchaser or any of its Affiliates to conduct business with any third party on a preferential or exclusive basis (each such Contract as specified in clauses (A), (B) and (C), a “Restricted Contract”);

(xiii)Contracts between, on the one hand, the Company, and, on the other hand, any Affiliates of the Company, and any Affiliate Agreements; 

(xiv)leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) under which the Company or any of its Subsidiaries leases or occupies Leased Real Property; 

(xv)Contracts with AKC; 

(xvi)any Government Contract;  

(xvii)Contracts that contain a put, call, right of first refusal, right of first offer or similar right pursuant to which the Company or any of its Subsidiaries could be required to, directly or indirectly, purchase or sell, as applicable, any securities, capital stock or other interests, assets or business of any Person; 

(xviii)Contracts related to any settlement of any material Actions;  

(xix)Contracts as to which the consequences of its existence or a default, a non-renewal or a termination thereof would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; 

(xx)any collective bargaining agreement or any Contract with any labor or trade union, works council or any other employee representative body that relates to any Company Employee or any group of Company Employees; 

(xxi)any employment, retention, severance Contract or similar agreement (other than standard offer letters provided by Parent or ones of its Affiliates not containing any severance or retention provisions) with any Company Employee, other than an employment agreement that is for an at-will employee who makes less than $100,000; and 

(xxii)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.   

(b)Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each Material Contract is valid and binding on the Company or its Subsidiaries and is in full force and effect and enforceable in accordance with its terms, (ii) the Company or its Subsidiaries and, to the Knowledge of Parent or Seller, each of the other parties thereto are not in breach of, default or violation under any of such Material Contracts and, to the Knowledge of Parent or Seller, no event has occurred that with notice or lapse of time, or both, would constitute such a breach, default or violation, and (iii) none of Parent or its Affiliates has received written notice of the existence of any event or condition which constitutes, or, after  

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notice or lapse of time or both, will constitute, a breach on the part of the Company of any such Material Contract.  A copy of each Material Contract has previously been made available to Purchaser.

Section 3.13Intellectual Property; IT Assets; Privacy. 

(a)Section 3.13(a) of the Seller Disclosure Schedule sets forth a list, as of the date hereof, of all Registered Company Intellectual Property.  Each item of Registered Company Intellectual Property that is material to the business of the Company is subsisting, valid and enforceable.  There are no Actions pending or, to the Knowledge of Parent or Seller, threatened with respect to any material Registered Company Intellectual Property, including with respect to the validity or enforceability thereof, except as may reasonably be expected during the ordinary course of prosecution of applications for Intellectual Property with a Governmental Authority. 

(b)The Company is the sole and exclusive owner and possesses all right, title and interest in and to the Company Intellectual Property (free and clear of any Liens other than Permitted Liens), and otherwise has a valid, written and enforceable right to use each item of material Intellectual Property used or held for use by the Company in its business as currently conducted, and all such ownership or other rights to use such material Intellectual Property shall survive the consummation of the Transactions without modification, cancellation, termination or suspension, or acceleration of any right, obligation or payment with respect to any such material Intellectual Property.  No material Company Intellectual Property is subject to any outstanding Order or agreement adversely affecting the Company’s ownership or use of, or any rights in or to, any such material Company Intellectual Property.  

(c)Since December 31, 2018, the operation of the business of the Company and the making, using, importing, selling or offering for sale, disposition or any other exploitation of any product or service of the Company have not infringed, misappropriated or otherwise violated any Intellectual Property of any third party in any material respect.  Except as set forth on Section 3.13(c)  the Seller Disclosure Schedules, since December 31, 2018, there has not been any pending or threatened Actions (including any “cease and desist” letter or invitation to take a license) against the Company alleging that the operation of the business of the Company or the making, using, importing, selling or offering for sale, disposition or any other exploitation of any product or service of the Company infringes, misappropriates or otherwise violates any Intellectual Property of any third party.  

(d)Since December 31, 2018, to the Knowledge of Parent or Seller, no third party has infringed, misappropriated or otherwise violated any Company Intellectual Property in any material respect, and the Company has not asserted any claim (including any “cease and desist” letter or invitation to take a license) or commenced any Action against any Person alleging any such infringement, misappropriation or violation. 

(e)The Company has taken all reasonable measures to maintain, protect and enforce its rights in the material Company Intellectual Property, including the confidentiality of all material Trade Secrets that are included therein, and no such material Trade Secret has been used or discovered by or disclosed to any Person except pursuant to written, valid and enforceable  

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non-disclosure agreements protecting the confidentiality thereof, which such agreements have not been breached in any material respect.

(f)All of the Company’s current and former employees, contractors, consultants and other personnel who have been involved in development or creation of any material Intellectual Property for or on behalf of the Company have executed a written agreement containing a valid, enforceable and irrevocable present assignment of all right, title and interest in and to such Intellectual Property to the Company. 

(g)No Software (or products containing Software) sold, licensed, conveyed or distributed by the Company contains, is derived from, or links to any Software that is governed by an Open Source License.  The Company is in material compliance with all Open Source Licenses to which any such Software used by the Company is subject. 

(h)Except as otherwise set forth on Section 3.13(h) of the Seller Disclosure Schedule, the Company is the sole and exclusive owner of, and possesses all right, title and interest in and to, the Company IT Assets (free and clear of any Liens other than Permitted Liens), or otherwise has a valid, written and enforceable right to use each material IT Asset used or held for use by the Company as currently conducted and as intended to be conducted, and all such ownership or other rights to use such IT Assets shall survive the consummation of the Transactions without modification, cancellation, termination or suspension, or acceleration of any right, obligation or payment with respect to any such IT Assets.  All of the IT Assets used or held for use by the Company: (i) operate and perform in all material respects as required by the Company for the operation of its business as currently conducted or intended to be conducted; (ii) since December 31, 2018, have not materially malfunctioned or failed, or suffered a material Security Breach or material unscheduled downtime; and (iii) are free from any viruses, worms and other malware.  

(i)With respect to the IT Assets used or held for use by the Company, the Company has, within the past twelve (12) months, conducted reasonable penetration testing, risk assessments and data backup, data storage, data processing (including the Processing of Personal Information), system redundancy and disaster avoidance and recovery testing consistent with industry best practices for similarly situated insurance companies.  The Company has resolved in all material respects each material deficiency identified in any such testing or assessment. True, correct and complete copies of the results and reports of any such testing or assessment have been made available to Purchaser. 

(j)The Company has at all times complied in all material respects with all Privacy Laws relating to data privacy, protection and security (including with respect to Processing of any Personal Information), including the Privacy Policies.  Since December 31, 2018, the Company has not been under investigation by any Governmental Authority for a violation of any applicable Privacy Law and no claims have been asserted or threatened in writing against the Company by any Person or Governmental Authority alleging any violation of Privacy Laws or the Privacy Policies. 

(k)The Company (i) maintains a comprehensive and written information privacy and security protocol that complies with all applicable Privacy Laws and Privacy Policies, and (ii)  

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maintains reasonable measures to protect the privacy, operation, confidentiality, integrity and security of all Personal Information against any Security Breach.  To the Knowledge of Parent or Seller, the Company has not suffered a material Security Breach, been required to notify any Person or Governmental Authority of any material Security Breach or been adversely affected by any viruses, worms or other malware or denial-of-service attacks on any IT Assets.  All Company Employees, contractors, consultants and other personnel of the Company who have access to or have a role in the Processing of Personal Information have been informed of and trained regarding Privacy Laws and the Privacy Policies.

Section 3.14Employee Benefits Matters. 

(a)Section 3.14(a) of the Seller Disclosure Schedule sets forth a list of each material Benefit Plan and separately identifies each Benefit Plan that is sponsored by the Company (each, a “Company Benefit Plan”).  For purposes of this Agreement, “Benefit Plan” means any “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”)) and any other compensation or employee benefit plan, policy, program, arrangement or agreement, whether or not covered by ERISA, for the benefit of any Company Employee or any individual service provider who primarily provides services to the Company, including any incentive compensation, equity or equity-based compensation, profit-sharing, retirement, post-retirement, severance or termination pay, employment, individual consulting, paid time off, fringe benefit, welfare, bonus, gross-up, retention, change-in-control or deferred compensation plan, policy, program, arrangement or agreement that is sponsored or maintained by, or contributed to by Parent or any Affiliate thereof (including Seller and the Company) or to which Parent or any Affiliate thereof (including Seller and the Company) is obligated to contribute or pursuant to which Parent or any Affiliate thereof (including Seller and the Company) has any potential liability, other than, in each case, any such plan, policy, program, arrangement or agreement that is sponsored by a Governmental Authority. 

(b)With respect to each Benefit Plan, Parent has made available to Purchaser Parties copies of (in each case, only if applicable) (i) each plan document, including any amendments thereto, (ii) a written description of such benefit Plan if such plan is not set forth in writing, (iii) the most recent annual report on Form 5500 required to be filed with the IRS, and (iv) the most recent summary plan descriptions, including any summary of material modifications thereto. 

(c)(i) Each Benefit Plan has been established and administered in all material respects in compliance with its terms and applicable Law, (ii) none of Parent, any Affiliate of Parent (including Seller and the Company) nor, to the Knowledge of Parent and Seller, any third party has engaged in any non-exempt “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA), with respect to any Benefit Plan that could reasonably be expected to result in the imposition of any liability to the Company, (iii) there are no pending or, to the Knowledge of Parent or Seller, threatened claims (other than routine claims for benefits), audits, actions or proceedings with respect to any Benefit Plans, and (iv) all contributions or other amounts payable by the Company with respect to each Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP in all material respects. 

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(d)All Benefit Plans that are “employee pension plans” (as defined in Section 3(2) of ERISA) that are intended to be tax-qualified under Section 401(a) of the Code (each, a “Seller Pension Plan”) have received a favorable opinion letter from the IRS or are entitled to rely on a favorable determination letter from the IRS, or have filed a timely application therefor and, to the Knowledge of Parent or Seller, 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 Seller Pension Plan that would reasonably be likely to cause the loss of such qualification status of such Seller Pension Plan.  Parent has made available to Purchaser Parties a copy of the most recent determination or opinion letter received with respect to each Seller Pension Plan, as well as a copy of each pending application for a determination letter (if any). 

(e)None of Parent, any Affiliate of Parent (including Seller and the Company) nor any trade or business, whether or not incorporated, that, together with Parent or any Affiliate thereof would be treated as a single employer under Section 414 of the Code, (i) has contributed (or has any obligation of any sort) in the last six (6) years to a plan that is subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code (or similar provision under non-U.S. law) or (ii) has maintained, established, participated in or contributed to, or is or has been obligated to contribute to, or has otherwise incurred any obligation or liability (including any contingent liability) under any “multiemployer pension plan” (as defined in Section 3(37) of ERISA).  No Benefit Plan is a “multiple employer plan” (within the meaning of Section 4063 of ERISA). 

(f)No Benefit Plan provides health, medical, dental or life insurance benefits following retirement or other termination of employment, except as required under Section 4980B of the Code or any other similar applicable Law or for coverage through the end of the calendar month in which a termination of employment occurs. 

(g)Neither the execution of this Agreement, nor any stockholder or other approval of this Agreement, nor the consummation of the Transactions (whether alone or in connection with any other event(s)) could (i) entitle any Company Employee to severance pay or any increase in severance pay, (ii) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise), or increase the amount, of compensation due to any Company Employee, (iii) cause Parent or any Affiliate thereof (including Seller and the Company) to transfer or set aside any assets to fund any benefits under any Benefit Plan, or (iv) limit or restrict the right to merge, amend, terminate or transfer the assets of any Benefit Plan on or following the Closing. 

(h)Neither the execution of this Agreement, nor any stockholder or other approval of this Agreement, nor the consummation of the Transactions (whether alone or in connection with any other event(s)) could result in the payment of any amount that could, individually or in combination with any other such payment, constitute an “excess parachute payment”, as defined in Section 280G(b)(1) of the Code. 

(i)Neither Parent nor any Affiliate thereof (including Seller and the Company) has  an obligation to provide, and no Benefit Plan provides any Company Employee with the right to, a “gross-up”, indemnification reimbursement or similar payment in respect of any Taxes that may become payable under Section 409A or 4999 of the Code. 

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(j)No Benefit Plan is maintained outside the jurisdiction of the United States or covers any Company Employees who reside or work outside the United States. 

(w)Section 3.14(j) of the Seller Disclosure Schedule sets forth, with respect to each Company Employee, (1) an estimate of the amount (or value if such payment is not made in cash) of the payments to be made to such employee by Parent or any Affiliate thereof (including Seller and the Company) in connection with the consummation of the Transactions (for example, co-invest interests, management promote interests, transaction bonuses or severance), and (2) whether such Company Employee is a party to or is bound by any employment agreement or restrictive covenants (for example, non-competition, non-solicitation or confidentiality covenants) with Parent, Seller or any other parent entity of the Company.  Any agreement triggering payment of the type described in Section 3.14(k)(1) or listed in Section 3.14(k)(2) of the Seller Disclosure Schedule has been provided by Parent to Purchaser. 

Section 3.15Labor. 

(a)Section 3.15(a) of the Seller Disclosure Schedules, sets forth a true, complete and correct list of the Employee Census as such list may be updated in accordance with Section 5.05(a). 

(b)No Company Employee is covered by any collective bargaining agreement, contract or other arrangement or understanding with a labor union or a labor organization, and, to the Knowledge of Parent or Seller, there are no activities or proceedings by any individual or group of individuals, including representatives of any labor organizations or labor unions, to organize any Company Employees.  There are no (a) strikes, work stoppages, work slowdowns, lockouts or other labor disputes pending or, to the Knowledge of Parent or Seller, threatened against the Company by the Company Employees and no such disputes have occurred since December 31, 2018, or (b) unfair labor practice charges or complaints pending or, to the Knowledge of Parent or Seller, threatened against the Company by or on behalf of any Company Employees or group of Company Employees. 

(c)With respect to the Company Employees, Parent and its Affiliates (including Seller and the Company) are, and for the past three (3) years have been, in compliance in all material respects with all applicable Law respecting labor, employment, fair employment practices (including equal employment opportunity laws), terms and conditions of employment, workers’ compensation, occupational safety and health, affirmative action, employee privacy, workplace discrimination and harassment, sexual harassment, immigration, employee leave issues, plant closings, employee classification and wages and hours.  With respect to the Company Employees, neither Parent nor any Affiliate thereof (including Seller and the Company) has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or any similar state or local Law that remains unsatisfied. 

(d)To the Knowledge of Parent or Seller, in the last five (5) years, no allegations of harassment, discrimination or sexual misconduct have been made against any Company Employee who is an officer or any Key Employee in his or her capacity as a director, employee or other service provider of Parent or any Affiliate thereof (including Seller and the Company). 

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Section 3.16Tax Matters. 

(a)(i) The Company has timely filed with the appropriate Governmental Authority, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all income Tax Returns and other material Tax Returns required by Law to be filed by it, and all such filed Tax Returns were prepared in material compliance with applicable Law and are true, correct and complete in all material respects, and (ii) all Taxes payable by or on behalf of the Company (whether or not shown on any Tax Return) have been timely paid.  As of the date hereof, the Company is not the beneficiary of an extension of time within which to file any Tax Return. 

(b)No deficiency with respect to Taxes has been proposed, asserted or assessed in writing against the Company which has not been fully paid or adequately reflected on the Financial Statements. 

(c)No audits, investigations or other administrative proceedings or court proceedings are presently pending, or to the Knowledge of Parent or Seller have been threatened or proposed, in each case with regard to Taxes of the Company. 

(d)The Company does not have any liability for Taxes of any Person (other than the Company and any of its Subsidiaries) arising from the application of Treasury Regulations Section 1.1502-6 or any analogous provision of state, local or non-U.S. Law, or as transferee or successor, by Contract or otherwise. 

(e)The Company will not be a party to, is bound by or has any obligation under any Tax sharing, Tax allocation or Tax indemnity Contract (other than any commercial Contracts entered into in the ordinary course of business consistent with past practice that do not relate primarily to Taxes), other than any such Contracts that terminate with respect to the Company effective as of the Closing Date. 

(f)All material Taxes required by Law to be withheld with respect to the Company have been withheld, and, to the extent required by Law, have been remitted to the relevant Governmental Authority. 

(g)The Company has not participated in a “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2) 

(h)There are no Liens upon any of the assets or properties of the Company, other than Permitted Liens. 

(i)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. 

(j)The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of (i) any installment sale or open transaction entered into prior to  

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the Closing, (ii) any accounting method change, (iii) closing agreement executed prior to the Closing, (iv) any prepaid amount received or deferred revenue accrued prior to the Closing, (v) any intercompany transaction or excess loss account described in Section 1502 of the Code (or any corresponding provision of state, local or non-U.S. Law) existing prior to the Closing, (vi) any election under Section 108(i) of the Code (or any corresponding provision of state, local or foreign Law), or (vii) the application of Section 965 of the Code (including as the result of any election under Section 965(h) of the Code).

(k)The Company is not, has not been, or will not be, a “United States real property holding corporation” within the meaning of Section 897 of the Code during the five (5) year period ending on the Closing Date. 

(l)The Company has never been a member of an affiliated, consolidated, combined or unitary group for income Tax purposes, other than an affiliated, consolidated, combined or unitary group where Independence Holding Company is the common parent in the last five (5) years. 

(m)The Company is not a “life insurance company” taxed pursuant to Section 816 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. 

(n)Within the last two (2) years, the Company has not been a “distributing corporation” or a “controlled corporation” within the meaning of Section 355 of the Code in a transaction intended to qualify under Section 355 of the Code. 

(o)The Company has not delayed the payment of any payroll or other employment-related Taxes pursuant to Section 2302 of the CARES Act. 

(p)The Company is not engaged in and has never been engaged in a trade or business through a “permanent establishment” within the meaning of an applicable income Tax treaty in any country other than the United States. 

(q)Notwithstanding anything to the contrary set forth herein: (i) the representations and warranties set forth in this Section 3.16 (Tax Matters) and Section 3.14 (Employee Benefits Matters) constitute the sole and exclusive representations and warranties of or with respect to Tax matters; and (ii) such representations and warranties (and any claims based thereon) (other than the representations and warranties set forth in Section 3.16(j) or (o) shall be limited to Taxes attributable to Tax periods (or portions thereof) ending on or before the Closing Date. 

Section 3.17Real Property.  Neither the Company nor any of its Subsidiaries own any real property. Section 3.17 of the Seller Disclosure Schedule sets forth all property leased or subleased by the Company or its Subsidiaries (the “Leased Real Property”). The Company or its Subsidiaries have valid, legally binding, enforceable leases or subleases, as applicable, for each Leased Real Property that are in full force and effect, and the Company is not in material breach of or default under any such lease or sublease, and all Leased Real Property is free and clear of all Liens (except for Permitted Liens). 

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Section 3.18Environmental Matters.  The Company and its Subsidiaries have complied at all times in all material respects with applicable Environmental Laws and has not leased, owned or operated any property which could be expected to require investigation or remediation and none of Parent or its Affiliates has received any claim or notice regarding potential liability of the Company in connection with any Environmental Law, and there are no other circumstances or conditions involving the Company or any of its Subsidiaries that could be expected to result in any claim, liability, cost or restriction on the ownership, use or transfer of any property in connection with any Environmental Law.  

Section 3.19Interested Party Transactions.  As of the date hereof, no employee or director of the Company or any Person owning directly or indirectly one percent (1%) or more of the Shares as of the date hereof (any such person or entity, an “Interested Party”) or, to the Knowledge of Parent or Seller, any Affiliate or family member of any such Interested Party, is a party to any Contract with or binding upon the Company or any of its Subsidiaries or has any material interest in any property or assets owned by the Company or any of its Subsidiaries or has engaged in any material transaction with the Company or any of its Subsidiaries (in each case, other than those related to a Benefit Plan or other ordinary course employment, compensation or incentive arrangements (all such Contracts, the “Affiliate Agreements”)). 

Section 3.20IAIC Production.  The Company, at the time the Company solicited, negotiated, sold or produced business for IAIC, to the extent required by Law, was duly and appropriately appointed by IAIC to act as a producer and, to the Knowledge of Parent and Seller, was duly and appropriately licensed as a producer (for the type of business solicited, negotiated, sold or produced by the Company), in each case, in the particular jurisdiction in which the Company solicited, negotiated, sold or produced such business. Since December 31, 2018, the Company was appointed and compensated by IAIC in compliance in all material respects with applicable Law. 

Section 3.21Sufficiency of Assets.  As of the Closing, the assets, properties and rights of the Company and taking in consideration transactions contemplated under IAHC Purchase Agreement, together with the services provided pursuant to the Transition Services Agreement, will comprise all of the assets, Permits, properties and rights reasonably required to permit Purchaser Parties to conduct the Company’s business immediately following the Closing Date in all material respects in substantially the same manner as such business is being conducted as of the date hereof and as of December 31, 2020. 

Section 3.22Brokers and Other Advisors.    Except for Raymond James Ltd., no broker, investment banker, financial advisor, intermediary, finder or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, directly or indirectly, in connection with the Transactions.  Parent is solely responsible for the payment of the fees and expenses of any broker, investment banker, financial advisor, intermediary, finder or other Person acting in a similar capacity in connection with the Transactions based upon arrangements made by or on behalf of Parent or any of its Affiliates. 

Section 3.23CARES Act.  The Company has not either (a) submitted any application which has not been rescinded, terminated or withdrawn in writing or (b) received any funds  

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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 IVREPRESENTATIONS AND WARRANTIES OF PURCHASER PARTIES

Except as set forth in the disclosure schedule delivered by Purchaser to Parent concurrently with the execution of this Agreement (the “Purchaser Disclosure Schedule”) (it being understood and agreed by the Parties that disclosure of any item in any section or subsection of the Purchaser Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Purchaser Disclosure Schedule to which the relevance of such item is reasonably apparent on its face), Purchaser Parties hereby represent and warrant to Seller, as of the date hereof and as of the Closing Date, as follows:

Section 4.01Organization, Standing and Power.  Purchaser Party is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, this Agreement and the Ancillary Agreements to which such Purchaser Party is or will be a party. 

Section 4.02Authorization.  The execution, delivery and performance by Purchaser Parties of this Agreement and each Ancillary Agreement to which any Purchaser Party is a party, and the consummation of the Transactions, have been duly and validly authorized by all requisite action of such Purchaser Party.  This Agreement has been, and each Ancillary Agreement to be executed by any Purchaser Party will be, at or prior to the Closing, duly executed and delivered by such Purchaser Party and, assuming due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitutes a legal, valid and binding obligation of such Purchaser Party, enforceable against such Purchaser Party in accordance with its terms, subject to the Bankruptcy and Equity Exception. 

Section 4.03Noncontravention. 

(a)None of the execution and delivery of this Agreement or any Ancillary Agreement to be executed by any Purchaser Party, the consummation by such Purchaser Party of the Transactions, or compliance by such Purchaser Party with any of the terms or provisions hereof or thereof will  conflict with or violate any provision of the Organizational Documents of Purchaser Party or  assuming that the authorizations, consents and approvals referred to in Section 4.04 are obtained and the filings referred to in Section 4.04 are made, violate any Law applicable to such Purchaser Party, except, in the case of clause (ii), for such violations as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions. 

(b)No vote or consent of the holders of any class or series of capital stock or other equity interest of any Purchaser Party is necessary to approve this Agreement, any Ancillary Agreement to be executed by such Purchaser Party or the Transactions. 

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Section 4.04Governmental Approvals.  Except for (a) filings required under, and compliance with other applicable requirements of, the HSR Act, and (b) Consents set forth in Section 4.04 of the Purchaser Disclosure Schedule, no consents, authorizations or approvals of, or filings, declarations or registrations with, any Person or Governmental Authority are necessary for the execution, delivery and performance of this Agreement and any Ancillary Agreement to be executed by any Purchaser Party and the consummation by Purchaser Parties of the Transactions, other than such other consents, authorizations, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions. 

Section 4.05Legal Proceedings.  Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions, (a) there is no pending or, to the Knowledge of Purchaser Parties, threatened in writing Action against any Purchaser Party or any of its respective properties, assets or businesses, and (b) no Purchaser Party is subject to any outstanding Order. 

Section 4.06Financial Capacity.  Purchaser will have at the Closing immediately available and unencumbered funds to enable Purchaser to pay the full Closing Consideration and consummate the Transactions and satisfy all of its obligations under this Agreement when required to do so pursuant to the terms hereof. 

Section 4.07Investment Representation.  Purchaser is acquiring the Sale Shares for its own account with the present intention of holding such securities for investment purposes and not with a view to, or for sale in connection with, any distribution of such securities in violation of any federal or state securities laws.  Purchaser acknowledges that it is informed as to the risks of the Transactions and of ownership of the Sale Shares.  Purchaser acknowledges that the Sale Shares have not been registered under the Securities Act, or any state or foreign securities laws and that the Sale Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the Securities Act and the Sale Shares are registered under any applicable state or foreign securities laws or sold pursuant to an exemption from registration under the Securities Act and any applicable state or foreign securities laws. 

Section 4.08Brokers and Other Advisors.  Except for Goldman Sachs & Co. LLC, no broker, investment banker, financial advisor, intermediary, finder or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, directly or indirectly, in connection with the Transactions based upon arrangements made by or on behalf of Purchaser Parties. 

Section 4.09No Prior Activities and Agreements.  There will be at or prior to the Closing no Contracts between any of Purchaser Parties, on the one hand, and any member of the management or directors of the Company, on the other hand, that relate in any way to the Company or the Transactions. 

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Section 4.10Capitalization of Purchaser Parent, Valid Issuance of Purchaser Parent Shares. The Purchaser Parent Shares, when issued and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Stockholders Agreement and applicable state and federal securities laws. The Purchaser Parent Shares will be issued in compliance with all applicable federal and state securities laws. 



Article VCOVENANTS

Section 5.01Conduct of the Business Pending the Closing. 

(a)During the period from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance with Article VII, except (i) as required by applicable Law, (ii) as instructed or required by a Governmental Authority, (iii) as expressly required or contemplated by the terms of this Agreement, (iv) for the transactions contemplated by or related to IAHC Purchase Agreement, or (iv) to the extent Purchaser otherwise provides its prior consent in writing (such consent not to be unreasonably withheld, delayed or conditioned), Parent and Seller shall cause the Company to comply with this Agreement, and otherwise ensure that (x) the Company shall conduct its business in the ordinary course of business consistent with past practice and, to the extent consistent therewith, use its reasonable best efforts to preserve its business organization intact and maintain existing relations and goodwill with Governmental Authorities, rating agencies, customers, reinsurers, producers, insureds, suppliers, service providers and employees, and (y) except as set forth in Section 5.01(a) of the Seller Disclosure Schedule, the Company shall not and shall cause its Subsidiaries not to (it being understood that no act or omission with respect to the matters specifically addressed by any provision of this clause (y) shall be deemed to be a breach of clause (x)):  

(i)(A) authorize for issuance, issue, sell, grant or subject to any Lien any shares of capital stock, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of capital stock, or any rights, warrants or options to purchase any shares of capital stock or (B) redeem, purchase or otherwise acquire any of its shares of capital stock, or any rights, warrants or options to acquire any shares of capital stock; 

(ii)split, combine, subdivide, reclassify, redeem, purchase or otherwise acquire, directly or indirectly, any shares of capital stock; 

(iii)other than this Agreement and any Ancillary Agreements, adopt a plan or agreement of complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries; 

(iv)(A)  declare, make, set aside, authorize or pay any dividends or make any distribution with respect to its outstanding shares of capital stock (whether in cash, assets, stock or other securities or otherwise) or (B) incur, issue, assume, guarantee or otherwise  

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become liable for any Indebtedness (other than (1) 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); (2) 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; and (3) all Liabilities with respect to accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Company Employee immediately prior to the Closing) or issue or sell any debt securities or warrants or other rights to acquire any debt security of the Company;

(v)amend, restate, supplement or otherwise modify its Organizational Documents; 

(vi)(A) other than in the ordinary course of business consistent with past practice, amend, modify, extend, cancel, rescind, waive any rights under, assign, fail to renew or terminate any leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) under which the Company or any of its Subsidiaries leases or occupies Leased Real Property or (B) enter into any new leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) for leased real property;  

(vii)sell, lease, license or otherwise dispose of any of its material properties (other than Intellectual Property), rights, licenses, operations, product lines, businesses or assets, except (A) sales and licenses of products and services of the Company in the ordinary course of business consistent with past practice, (B) sales and dispositions of investment assets by the Company in the ordinary course of business consistent with past practice, (C) pursuant to any insurance or reinsurance Contracts in the ordinary course of business consistent with past practice, or (D) pursuant to Material Contracts in force on the date hereof; 

(viii)make any loan, advance, guarantee or capital contribution to or investment in any Person, except advances to employees for expenses not to exceed $1,000 in any single instance or in excess of $20,000 in the aggregate in the ordinary course of business consistent with past practice; 

(ix)engage in any transactions with respect to investment assets by the Company or any of its Subsidiaries outside the ordinary course of business consistent with past practice, other than to the extent otherwise agreed by Purchaser in writing as to any particular investment asset; 

(x)make or authorize any capital expenditures in excess of $10,000 in any single instance or in excess of $100,000 in the aggregate during any twelve (12) month period; 

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(xi)sell, transfer, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon or allow to lapse or expire or otherwise dispose of any material Company Intellectual Property or material Company IT Assets, other than (A) in the ordinary course of business consistent with past practice, (B) pursuant to Contracts in force on the date hereof and made available to Purchaser on or prior to the date hereof, and (C) dispositions of obsolete or worn-out IT Assets; 

(xii)make any changes to how the Company processes Personal Information, other than non-material changes made in the ordinary course of business consistent with past practice; 

(xiii)make any acquisitions of (including by merger, consolidation or acquisition of stock or assets or any other business combination) assets, any corporation, partnership, other business organization or any division thereof or equity interests therein or a substantial portion of the assets thereof; 

(xiv)pay, discharge, settle or compromise any pending or threatened Action which (A) requires payment to or by the Company or any of its Subsidiaries (exclusive of attorneys’ fees) in excess of $20,000 in any single instance or in excess of $200,000 in the aggregate (other than ordinary course payments or settlements under insurance or reinsurance Contracts that are within the applicable policy limits under such insurance or reinsurance Contract) or (B) imposes any obligations (other than for the payment of money, a release of claims, confidentiality and other obligations customarily included in monetary settlements) or material restrictions on the operations of the Company or any of its Subsidiaries, except for any payment, discharge or settlement the amount of which (1) is explicitly reflected on the Financial Statements (including the notes thereto) or (2) does not exceed the proceeds received from any insurance policies in connection with such payment, discharge or settlement;  

(xv)(A) increase the compensation or consulting fees, bonus, pension, welfare, fringe or other benefits of any Company Employee, other than increases in annual base salary or wage rate in the ordinary course of business consistent with past practice that do not exceed three percent (3%) individually or three percent (3%) in the aggregate, (B) increase or grant any additional rights to severance, termination, retention or change-in-control, bonus or long-term incentive pay to any Company Employee (other than any amounts for which Parent or its Affiliates (other than the Company) will retain sole responsibility after the Closing), (C) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund or in any other way secure the payment, of compensation or benefits under any Benefit Plan in respect of any Company Employee, (D) establish, adopt, enter into, amend, commence participation in or terminate any Benefit Plan or any plan, policy, program, arrangement or agreement that would be a Benefit Plan if it were in existence as of the date hereof, or (E) hire any employee or engage any independent contractor (who is a natural person) or terminate any Company Employee other than, in each case, in the ordinary course of business for individuals with an annual salary or wage rate or consulting fees not in excess of $100,000;   

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(xvi)with respect to the Company Employees, become a party to, establish, adopt, amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization; 

(xvii)transfer internally (including in response to a request for transfer by a Company Employee), or otherwise materially alter the duties and responsibilities of, any Company Employee in a manner that would (A) materially affect the proportion of his or her work hours allocated to the Company during the twelve (12) months prior to Closing (or such shorter period as such Company Employee has worked for the Company) and/or (B) otherwise cause such individual to cease being characterized as a Company Employee under this Agreement; 

(xviii)take any action that would constitute a “mass layoff” or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification Act of 1988 or would otherwise trigger notice requirements or liability under any foreign, state or local plant closing notice law; 

(xix)in each case, in any action or series of related actions, place any more Company Employees on unpaid leave or furlough, or reduce the hours or weekly pay of any Company Employee;   

(xx) make any material changes in financial or Tax accounting methods, principles, practices or procedures (or change an annual accounting period), except as may be required under GAAP; 

(xxi)make or change any material Tax election, file any amendment to any Tax Return with respect to any material Taxes, settle or compromise any material Tax Liability, audit or other Action, agree to any extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of Taxes, file any material voluntary Tax disclosure, amnesty or similar filing, enter into any closing agreement with respect to a material amount of Tax, enter into a Tax allocation, sharing indemnity or similar agreement, assume any Liability for Taxes of any other Person (whether by contract or otherwise) or take any action to surrender any right to claim a material Tax refund; 

(xxii)make any material change to the investment guidelines of the Company or any of its Subsidiaries in effect as of the date hereof or acquire or dispose of any investment assets in any manner inconsistent with such investment guidelines; 

(xxiii)(A) enter into any Contract that would have been a Restricted Contract had it been entered into prior to this Agreement; (B) other than in the ordinary course of business consistent with past practice, enter into any Contract that would have been a Material Contract had it been entered into prior to this Agreement; (C) other than in the ordinary course of business consistent with past practice, amend, modify, extend, cancel, rescind, waive any rights under, assign, fail to renew or terminate any Material Contract; (D) other than Benefit Plans, any action with respect to changes in compensation and benefits permitted pursuant to Section 5.01(a)(xv), any ordinary course insurance policies  

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between the Company or any of its Subsidiaries and an individual person, or in the ordinary course of business consistent with past practice, enter into or modify any Contract with Parent (or an Affiliate thereof) or Sellers, or (E) engage in any transaction with any Interested Party or any Affiliate or family member of an Interested Party;

(xxiv)other than in the ordinary course of business consistent with past practice, alter or amend in any material respect any existing underwriting, reserving, hedging, marketing, pricing, risk management, reinsurance, claim handling, loss control, investment, actuarial practice guideline or policy of the Company or any of its Subsidiaries, or any material assumption underlying an actuarial practice or policy, except as may be required by (or, in the reasonable good faith judgment of the Company, advisable due to) a change in GAAP, any Governmental Authority or applicable Law occurring after the date of this Agreement; 

(xxv)(A) make any filings with any Governmental Authority relating to the withdrawal or surrender of any Permits held by the Company or any of its Subsidiaries, or the withdrawal by the Company or any of its Subsidiaries from any lines of business, (B) fail to keep current and in full force and effect, or to apply for or renew, any Permit, consent, or registration of the Company or any of its Subsidiaries issued by any Governmental Authority or (C) enter into any Government Contract;  

(xxvi)enter into or engage in (through acquisition, product extension or otherwise) the business of selling any products or services materially different from the products or services of the Company or any of its Subsidiaries as of the date of this Agreement or enter into or engage in new lines of business;  

(xxvii) permit or allow any assets of the Company to become subject to any Lien, except Permitted Liens; 

(xxviii) fail to pay or satisfy when due any material account payable or other material liability, other than any such liability that is being contested in good faith by the Company or any of its Subsidiaries; 

(xxix)subject the Company or any of its Subsidiaries to any bankruptcy, receivership, insolvency or similar proceeding; 

(xxx)take any actions or omit to take any actions that would, individually or in the aggregate, reasonably be expected to (A) prevent, materially delay or materially impair the consummation of the Transactions or (B) result in any of the conditions set forth in Article VI not being satisfied; or 

(xxxi)agree in writing or otherwise to take any of the foregoing actions prohibited by this Section 5.01(a). 

(b)Purchaser Parties acknowledge and agree that (i) nothing contained in this Agreement shall give Purchaser or any other Purchaser Party, directly or indirectly, the right to control or direct the operations of the Company prior to the Effective Time, (ii) prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this  

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Agreement, complete control and supervision over its operations and (iii) notwithstanding anything to the contrary set forth in this Agreement, no consent of Purchaser shall be required with respect to any matter set forth in this Section 5.01 or elsewhere in this Agreement to the extent the requirement of such consent would violate any applicable Law.

Section 5.02Access to Information. 

(a)During the period from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance with Article VII and subject to applicable Law, Purchaser shall be entitled, through its Representatives, to have such access to the Company Employees, properties, businesses and operations of the Company and its Subsidiaries and such examination of the books and records of the Company and its Subsidiaries, including books and records of the Company and its Subsidiaries held by Parent or Seller, as Purchaser reasonably requests in connection with Purchaser’s efforts to consummate the Transactions.  Parent and Seller agree to deliver to Purchaser at the Closing any books or records of the Company and its Subsidiaries that are held by Parent or Seller and copies of any books or records of Parent, Seller or their Affiliates that relate primarily to the Company and its Subsidiaries.  

(b)For sixty (60) months following the Closing, Parent shall use reasonable best efforts to grant Purchaser and its Representatives reasonable access during Parent’s normal business hours to any of Parent’s then-current employees, the properties, businesses and operations of the Company and its Subsidiaries and such examination of the books and records of Parent that primarily relate to the Company and its Subsidiaries (including documentation relating to a Security Breach), including books and records of the Company held by Parent or Seller, as Purchaser reasonably requests and upon reasonable prior notice if such access is reasonably deemed necessary by Purchaser or any of its Affiliates in connection with its tax, regulatory, litigation, contractual or other legitimate, non-competitive matters; provided, however, that Parent shall not be required to provide access to any such employees or books and records to the extent that such access:  (i) would violate applicable Law or would adversely impact any legal privilege; or (ii) would result in the disclosure of any trade secrets or any competitively sensitive information of Parent or of a third party to whom Parent has confidentiality obligations.  All requests for access to such employees or books and records shall be made to such representatives of Parent as Parent shall designate, who shall be solely responsible for coordinating all requests and all access permitted hereunder.  Nothing in the foregoing will prevent Purchaser or any of its Affiliates (at its sole cost and expense) from seeking to make such employees available via subpoena or other legal or similar process, and Parent shall reasonably cooperate in making employees available for such purposes. 

(c)Any such access and examination shall be conducted on reasonable advance written notice, during regular business hours and under reasonable circumstances and shall be subject to (i) restrictions under applicable Law and (ii) reasonable restrictions imposed by Parent and Seller to protect the confidentiality of books and records of Parent, Seller or any of their respective Affiliates (other than the Company) that do not relate, directly or indirectly, to the Company. 

(d)Parent and Seller, respectively, shall use their reasonable best efforts to cause the officers, employees, consultants, agents, accountants, attorneys and other Representatives of the  

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Company to reasonably cooperate with Purchaser and Purchaser’s Representatives in connection with such access and examination, and Purchaser and its Representatives shall reasonably cooperate with the Company and its officers, employees, consultants, agents, accountants, attorneys and other Representatives and shall use their reasonable best efforts to minimize any disruption to the business.  

(e)Notwithstanding anything herein to the contrary, no such access or examination shall be permitted to the extent that it would (i) unreasonably disrupt the operations of the Company or its Subsidiaries or (ii) reasonably be likely to cause the Company or its Subsidiaries to lose the benefit of attorney-client privilege or conflict with any confidentiality obligations to which the Company or its Subsidiaries is bound, whether pursuant to a Contract or imposed by an Order or other directive or restriction by a Governmental Authority, in each case with respect to information to be disclosed; provided, however, that Parent and Seller shall cause the Company to request, but the Company shall not be required to obtain, a waiver of any such confidentiality obligations upon Purchaser’s reasonable prior written request; and provided, further, that Parent and Seller shall cause the Company to use reasonable best efforts to seek alternative means to disclose such information as nearly as possible without affecting attorney-client privilege or conflicting with such confidentiality obligations (it being understood that such reasonable best efforts shall not require the Company to pay any consideration or amend or modify any Contract). 

(f)Purchaser acknowledges that the information provided to Purchaser Parties in connection with this Agreement, the Ancillary Agreements and the Transactions is subject to the terms of that certain Mutual Non-Disclosure Agreement by and between Seller, JAB Investments S.á r.l. and Double Oak Partners, LLC dated March 8, 2021 (the “Confidentiality Agreement”). 

 

Section 5.03Reasonable Best Efforts. 

(a)Upon the terms and subject to the conditions set forth in this Agreement, each of Purchaser Parties, on the one hand, and Parent and Seller, on the other hand, shall, and shall cause their Affiliates (including, in the case of Parent and Seller, the Company) to, use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things reasonably necessary, proper or advisable to fulfill all conditions to Closing applicable to such Party pursuant to this Agreement and to consummate and make effective, as promptly as reasonably practicable, the Transactions, including (i) preparing and filing as soon as practicable after the date hereof all forms, registrations and notices required to be filed to consummate the Transactions and the taking of such actions as are reasonably necessary to obtain any requisite approvals, Consents, Orders, exemptions or waivers by any Governmental Authority, including filings pursuant to the HSR Act and (ii) executing and delivering any additional agreements, documents or instruments reasonably necessary, proper or advisable to consummate the Transactions and to fully carry out the purposes of this Agreement. 

(b)In furtherance of and without limiting the foregoing, (i) each of Purchaser and Parent shall file, or cause to be filed, 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 and requesting early termination of the waiting period  

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under the HSR Act as promptly as practicable after the date hereof, and (ii) Purchaser, on the one hand, and Parent and Seller, on the other hand, as applicable, shall make, or cause to be made, any other registrations, filings and notices with Governmental Authorities required to consummate the Transactions as promptly as practicable after the date hereof.  Purchaser shall have responsibility for the filing fees associated with filings it is required to make under any applicable antitrust or competition Laws, including the filings associated with the HSR Act.

(c)Notwithstanding anything to the contrary contained in this Agreement, including this Section 5.03 or the “reasonable best efforts” standard, Purchaser shall not be obligated to take or refrain from taking, or to agree to it, its Affiliates or the Company or any of its Subsidiaries taking or refraining from taking, any action or to suffer to exist any restriction, condition or requirement imposed by a Governmental Authority which, individually or together with all other such actions, restrictions, conditions or requirements, would, or would reasonably be expected to (i) have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of Purchaser or any of its Affiliates, (ii) impose any material limitations on Purchaser’s or its Affiliates’ ownership or operation of all or any portion of its or any of its Affiliates’ businesses, operations or assets or compel Purchaser or any of its Affiliates to dispose of or hold separate all or any portion of its or any of its Affiliates’ businesses, operations or assets or (iii) would reasonably be expected to substantially impair the benefits to Purchaser reasonably likely, as of the date hereof, to be realized from the consummation of the Transactions (any action having the effects described in clause (i), (ii) or (iii) above being referred to herein as a “Substantial Detriment”); provided, however, that no actual or proposed change in Law applicable to Purchaser or its Affiliates after the date hereof shall be taken into account in determining whether a Substantial Detriment has occurred or exists. 

(d)Notwithstanding anything to the contrary contained in this Agreement, in no event shall a Party or any of its Affiliates be required by a Governmental Authority to agree to take or enter into any action, which action is not conditioned upon the Closing. 

Section 5.04Publicity.  None of the Parties or any of their Affiliates shall issue any press release or public announcement or comment concerning this Agreement or the Ancillary Agreements or the Transactions without obtaining the prior written approval of Purchaser and Parent; provided that the Parties and their Affiliates may, without such prior written approval, issue such press release, or make such public announcement or comment to the extent, in the judgment of such Party upon the advice of its outside counsel, disclosure is required by applicable Law (including the periodic reporting requirements under the Exchange Act) or under the rules of any securities exchange on which the securities of such Party or any of its Affiliates are listed (provided that, to the extent so required by applicable Law, the Party intending to make such release shall use its reasonable best efforts consistent with applicable Law to consult with the other Parties in advance of such release with respect to the text thereof).  None of the Parties shall make any disclosure to third parties regarding the Transactions without the prior written consent of the other Party. 

Section 5.05Employment and Employee Benefits. 

(a)Parent and Seller shall, and shall cause its Affiliates to, cause (i) the employment of each Company Employee to transfer to the Company prior to the Effective Time; and (ii) the  

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employment of any employee employed by the Company who is not a Company Employee to transfer out of the Company, no later than five (5) Business Days prior to the Effective Time.  No later than seven (7) Business Days prior to the Effective Time, Parent shall provide Purchaser with an update to the Employee Census, listing only the employees employed by the Company.  Parent shall provide an updated Employee Census as soon as possible after the execution of this Agreement listing all Company Employees as of the date of this Agreement.

(b)For at least one (1) year following the Effective Time (the “Continuation Period”), Purchaser shall provide, or shall cause its Affiliates to provide, each Company Employee who is employed immediately prior to the Effective Time (each, a “Continuing Employee”) with (i) an annual base salary or hourly wage rate and, where applicable, a target annual cash bonus opportunity that is substantially similar, in the aggregate, to those provided to such Continuing Employee immediately prior to the Effective Time, and (ii) an employee defined contribution plan and welfare benefits that are substantially comparable in the aggregate to those that are generally made available to similarly situated employees of Purchaser; provided, that the obligation to provide the defined contribution plan and welfare benefits referenced in clause (ii) hereof shall commence no sooner than on the date on which Purchaser completes the various administrative actions in order to effectuate the participation of the Continuing Employees in such plan and benefits with Purchaser. For the avoidance of doubt, Purchaser is under no obligation to provide such plan and benefits beyond the first anniversary of the Effective Time.   

(c)With respect to any accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Continuing Employee immediately prior to the Closing Date, (i) Purchaser shall assume such liability to the extent reflected in the Indebtedness, and (ii) Purchaser shall allow such Continuing Employee to use such accrued vacation, flexible time-off and sick pay accrued and unused by such Continuing Employees as of the Closing Date pursuant to Purchaser’s applicable policies in effect from time to time. 

(d)With respect to all employee benefit plans of Purchaser and its Affiliates in which Continuing Employees are eligible to participate following the Effective Time (the “New Benefit Plans”), for purposes of determining eligibility to participate, level of benefits and vesting, each Continuing Employee’s service with Parent, Seller or any Affiliate thereof (including the Company) (as well as service with any predecessor employer of Parent, Seller or any Affiliate thereof (including the Company), to the extent service with the predecessor employer was recognized by Parent, Seller or any Affiliate thereof (including the Company)) shall be treated as service with Purchaser or its Affiliates; provided that no such crediting of service shall (i) result in any duplication of benefits for the same period of service or (ii) apply for purposes of benefit accrual under any New Benefit Plan that is a defined benefit pension or retiree medical plan. 

(e)Purchaser shall use reasonable best efforts, or shall cause its Affiliates to use reasonable best efforts, to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any New Benefit Plan that is a welfare benefit plan in which Continuing Employees (and their eligible dependents) will be eligible to participate from and after the Effective Time, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods  

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would not have been satisfied or waived under the comparable Benefit Plan immediately prior to the Effective Time.

(f)As of the Effective Time, Purchaser shall cause the Company to assume all unpaid obligations of Parent, Seller and any of their Affiliates to each Continuing Employee pursuant to any sales commission, annual bonus, special bonus set forth in Section 5.05(f) of the Seller Disclosure Schedule or other cash incentive programs or arrangements, in each case in respect of any performance period that includes the Closing Date and solely to the extent reflected in the Indebtedness.  

(g)Prior to making any written or oral communications to the Company Employees pertaining to compensation or benefit matters that are affected by the Transactions, Parent or Seller shall provide Purchaser with a copy of the intended communication, Purchaser shall have a reasonable period of time to review and comment on the communication, and Parent or Seller, as applicable, shall consider any such comments in good faith. 

(h)Parent shall retain all Liability, and Purchaser and its Affiliates shall have no Liability, with respect to any Benefit Plans or other employee benefit plans, policies or programs sponsored or maintained by Parent or any of its Affiliates (other than the Company), including, but not limited to, any pension plans, deferred compensation plans, post-retirement plans, incentive plans, bonus plans, equity-based compensation plans, severance and fringe benefit plans, unless such Liabilities are reflected in Indebtedness, Transaction Expenses or Closing Net Working Capital. 

(i)This Section 5.05 shall be binding upon and shall inure solely to the benefit of each of the Parties and nothing in this Section 5.05 or any other provision of this Agreement or any other related Contract, express or implied (i) shall be construed to establish, amend or modify any Benefit Plan or any other benefit plan, program, agreement or arrangement, (ii) shall alter or limit the ability of Purchaser or any of its Affiliates to amend, modify or terminate any benefit plan, program, agreement or arrangement or, after the Effective Time, any Benefit Plan in accordance with their terms, without limiting or altering the terms set forth in this Section 5.05, (iii) shall prevent Purchaser or any of its Affiliates, after the Effective Time, from terminating the employment of any Continuing Employee or (iv) is intended to or shall confer upon any Company Employee or any other Person any third-party beneficiary or other right to employment or continued employment or service for any period of time by reason of this Agreement or any other related agreement, or any right to a particular term or condition of employment. 

Section 5.06Insurance. 

(a)Effective at the time of the Closing, with respect to occurrences taking place from and after the Closing Date, Parent shall cause Company and its Subsidiaries 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 by any of their self-insured programs.  

(b)With respect to events or circumstances relating to the Company or its Subsidiaries that occurred or existed prior to the Closing Date that are covered by occurrence- 

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based third-party liability insurance policies of Parent, Seller or their Affiliates (other than the Company) 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 its Subsidiaries operates their respective businesses, Purchaser may, and may cause the Company to, make claims under such policies and programs.  Parent, Seller and their Affiliates will provide reasonable cooperation and assistance in the pursuit of such claims.

(c)With respect to any open claims against the insurance policies of Parent, Seller or their Affiliates (other than the Company) relating to losses or damages suffered by the Company or any of its Subsidiaries prior to the Closing, Parent or Seller shall reasonably assist and cooperate with Purchaser in the pursuit and collection of such claims and remit any net proceeds they realize from such claims to Purchaser upon full and final settlement of such claims.  

(d)Parent, Seller or their Affiliates may amend any insurance policies in the manner they deem appropriate to give effect to this Section 5.06.  

Section 5.07IHC Marks. 

(a)Prior to the Closing, Parent and Seller shall, and shall cause the Company to, completely remove or permanently obscure the IHC Marks from the Company’s premises, website and all internal and external tangible, electronic and other documents or materials. 

(b)Conditioned on Seller’s and the Company’s compliance with Section 5.07, Purchaser agrees that, after the Closing, Purchaser will not, and will cause the Company not to, use any of the IHC Marks in connection with the operations of the Company, and will not, and will cause the Company not to, expressly do business as or represent itself as affiliated in any way with Seller or their Affiliates (other than the Company), except that (i) Purchaser, the Company and their respective Affiliates may reference the historic relationship between the Company and Seller, and (ii) the foregoing shall not preclude Purchaser, the Company or any of their respective Affiliates from any uses that would be permissible under applicable Law, including as nominative or descriptive fair use.   

Section 5.08Tax Matters. 

(a)Tax Returns.  Parent, Seller or Affiliate thereof shall prepare and timely file (taking into account any extension of time to file under applicable Law), or cause to be prepared and timely filed, all Tax Returns of the Company or any of its Subsidiaries for all taxable periods ending on or prior to the Closing Date (“Company Tax Returns”) and any Tax Returns for which the Company or any of its Subsidiaries is required to be in the U.S. federal, state or local consolidated, combined or unitary group of IHC (“Seller Tax Returns”).  Seller Tax Returns and Company Tax Returns shall be prepared in a manner consistent with past practice of the applicable entity, unless otherwise required by applicable Law or as specified in this Agreement.  In the case of Company Tax Returns, Seller shall permit Purchaser to review and comment on each such Company Tax Return prior to filing and shall make such revisions as are reasonably requested by Purchaser.  Parent (or Affiliate thereof, as applicable) shall timely remit or cause to be remitted to the applicable Governmental Authority any Taxes due in respect of such Seller  

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Tax Returns or Company Tax Returns to the extent that such Taxes are Indemnified Taxes for which Seller would be required to indemnify the Purchaser pursuant to Article VIII (and subject to, for the avoidance of doubt, any limitations on such indemnity obligations set forth in Article VIII).  Purchaser shall be responsible for preparing and filing all Tax Returns of the Company that are not Seller Tax Returns; provided that in the case of any such Tax Return with respect to a Straddle Period (“Seller Reviewed Return”), such Tax Returns shall be prepared in a manner consistent with the most recent past practice of the Company unless otherwise required by applicable Law or as specified in this Agreement.  Purchaser shall permit Parent to review and comment on each such Tax Return with respect to a Pre-Closing Tax Period prior to filing and shall make such revisions as are reasonably requested by Parent.  To the extent that the Tax Returns described in this Section 5.08(a) indicate that the Company or Subsidiary has made an overpayment of Taxes for any Pre-Closing Taxable Period or Straddle Period (taking into account all Taxes taken into account as Indebtedness or estimated Tax payments that have been made with respect to such Taxes prior to the Closing Date), the Purchaser shall, concurrently with the filing of the relevant Tax Return for the Tax year in which such overpayment is reflected, pay or cause to be paid such overpayment to the Seller, in immediately available funds using wire transfer instructions as designated in writing by the Seller.

(b)Tax Sharing Agreements.  Parent and Seller shall cause the Company and its Affiliates to terminate any Tax sharing, Tax allocation or Tax indemnity Contract among the Company and its Affiliates at or prior to Closing. 

(c)Unless Purchaser provides written consent to the contrary, upon the consummation of the transactions contemplated hereby, Seller shall make an election pursuant to Treasury Regulation Section 1.1502-36(d)(6)(i)(A) to reduce Seller’s tax basis in the Shares to the extent necessary to avoid a stepdown in any of the tax basis assets or attributes acquired by the Purchaser. 

(d)Transfer Taxes.  Purchaser and Seller shall each pay fifty percent (50%) of the Transfer Taxes arising out of or in connection with the transactions contemplated by this Agreement (including any expenses attributable thereto, penalties and interest).  The Party required by Law to file a Tax Return with respect to such Transfer Taxes shall do so in the time and manner prescribed by Law, and the non-filing Party shall promptly reimburse the filing Party for its share of any Transfer Taxes upon receipt of evidence reasonably satisfactory to the non-filing party of the amount of such Transfer Taxes. 

(e)Tax Contests. 

(i)Purchaser or Seller, as the case may be, shall notify the other Party within twenty (20) Business Days after receipt by such Party or any of its Affiliates of written notice of any pending federal, state, local or foreign Tax audit or examination or notice of deficiency or other adjustment, assessment or redetermination relating to Taxes (“Tax Contest”) for which such other Party or its Affiliates may reasonably be expected to be responsible under this Agreement, provided, that the failure to deliver any such notice promptly will not relieve the other Party of their obligations under this Agreement, except to the extent such Party is materially prejudiced as a result thereof 

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(ii)At its election, Parent (or Affiliate thereof) shall control any Tax Contests related to Taxes with respect to a Pre-Closing Tax Period (other than Straddle Periods).  Parent shall keep Purchaser fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Parent shall, in good faith, allow Purchaser to make comments to Parent regarding the conduct of or positions taken in any such proceeding.  Purchaser shall be entitled to fully participate in any such Tax Contest.  Purchaser shall have the right to consent to any settlement with respect to (or abandonment of ) any such Tax Contest (provided such consent shall not be unreasonably withheld, conditioned or delayed). In the case that Purchaser controls such Tax Contest because Parent conceded right to control such Tax Contest, Purchaser shall keep Parent fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Purchaser shall, in good faith, allow Parent to make comments to Purchaser regarding the conduct of or positions taken in any such proceeding.  Parent shall be entitled to fully participate in any such Tax Contest.  Purchaser (or an Affiliate thereof) shall control in good faith any other Tax Contest solely related to Taxes of the Company or any Subsidiary thereof.  In the case of a Tax Contest in respect of a Straddle Period, the Purchaser shall keep Parent fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Purchaser shall, in good faith, allow Parent  to make comments to Purchaser regarding the conduct of or positions taken in any such proceeding.  Parent shall be entitled to participate fully in any such Tax Contest.  Purchaser shall not settle such Tax Contest without Parent’s prior written consent (not to be unreasonably withheld, conditioned or delayed).  Notwithstanding anything to the contrary in this Agreement, Parent (or Affiliate thereof) shall have the exclusive right to control in all respects, and neither Purchaser nor any of its Affiliates shall be entitled to participate in, any Tax Contest with respect to any Tax Return of a combined, consolidated, affiliated, aggregated or unitary group of Parent (or Affiliate thereof) that includes the Company or any Subsidiary thereof. 

(iii)To the extent of any inconsistencies between any provision of this Section 5.08(e) and Section 8.04 in a matter principally involving Taxes, the provisions of this Section 5.08(e)) shall control. 

(f)Tax Refunds.  Any refunds (or credits for overpayments) of Taxes paid by the Company (including interest thereon) for any taxable period ending on or before the Closing Date that are received by Purchaser or any of its Affiliates (including, following the Closing, for the avoidance of doubt, the Company or Affiliate thereof), shall be for the account of Seller, except to the extent any such refunds or credits are included as a Current Asset in determining Closing Net Working Capital, as  finally determined (excluding any refund or credit attributable to any loss in a taxable period beginning after the Closing Date applied (e.g., as a carryback) to income in a taxable year.  Purchaser shall pay over to Seller, as additional purchase price for the Sale Shares, any such refund received in cash or the amount of any such credit within fifteen (15) days after entitlement thereto, in each case, net of any Taxes and reasonable out-of-pocket expenses incurred in connection with such refund or credit.  Notwithstanding anything in this Agreement to the contrary, in the event that any such refund or credit is subsequently determined by any Governmental Authority to be less than the amount paid by Purchaser to Seller, Seller shall promptly return any such disallowed amounts (plus any interest in respect of such disallowed refund or credit owed to a Governmental Authority) to Purchaser. 

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(g)Prohibited Tax Actions.  Purchaser shall not, and shall not permit any of its Affiliates (including, after the Closing for the avoidance of doubt, the Company or any Affiliate thereof) to, (i) except upon the Parent’s written request pursuant to Section 5.08(f) (Tax Refunds) or Section 5.08(e) (Tax Contests) file, re-file, supplement, or amend any Tax Return of the Company or any Affiliate thereof for any taxable period ending on or before the Closing Date, (ii) make an election under Sections 336 or 338 of the Code (or any comparable applicable provision of state, local or non-U.S. Tax Law) with respect to the transactions contemplated by this Agreement, (iii) make any Tax election for the Company or Affiliate thereof effective with respect to any taxable period ending on or before the Closing Date, (iv) take any action that is outside the ordinary course of business after the Closing Date relating to Taxes that creates a Tax liability on or prior to the Closing Date, or (v) enter into or file any voluntary Tax disclosure, amnesty or similar filing or agreement in each case, without the consent of Seller, not to be unreasonably withheld, conditioned, or delayed; provided withholding consent with respect to an action required by applicable Law as agreed to by the Parties or the Independent Accountant shall be unreasonable. 

(h)Cooperation on Tax Matters.  Seller and Purchaser shall (and Purchaser shall cause the Company to) take commercially reasonable efforts to (i) assist in the preparation and timely filing of any Tax Return of the Company for a Pre-Closing Tax Period, including access during regular business hours to the offices and employees of the Company; (ii) assist in any Tax Contests with respect to the Tax Returns or Taxes of the Company for a Pre-Closing Tax Period; (iii) make available any information, records (including books and records), or other documents relating to any Taxes or Tax Returns of the Company for a Pre-Closing Tax Period, including with respect to Tax Contests related thereto; (iv) provide any information required to allow Seller, Parent and the Company, or Purchaser or any Affiliates thereof to comply with any information reporting contained in the Code or other applicable Laws for a Pre-Closing Tax Period; and (v) provide certificates or forms, and timely execute any Tax Returns, that are necessary or appropriate to establish an exemption for (or reduction in) any Transfer Tax.   

(i)Tax Treatment.   

(i)For U.S. federal income Tax purposes (and state and local Tax purposes where applicable), Parent, Seller, JAB Holdings, the Company and Purchaser Parent intend that (i) the Cash Contribution and (ii) the Rollover Contribution, be collectively treated as a single interrelated transaction that qualifies as an exchange described in Section 351(a) of the Code. Parent, Seller, JAB Holdings, the Company and Purchaser Parent and their Affiliates:  (y) shall neither take nor allow to be taken any action that, to their knowledge, would reasonably be expected to adversely affect the treatment of the Rollover Continuation (or any portion thereof) as tax deferred under Section 351(a) of the Code and (z) shall act in accordance with the treatment of the Rollover Contribution as a transaction which, together with the Cash Contribution, qualifies as an exchange described in Section 351(a) of the Code in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code.  The appropriate Parties (and applicable Affiliates thereof) shall prepare all applicable books, records, and Tax filings, including any applicable statements required by Treasury Regulation Section 1.351-3(a). 

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(ii)Parent, Seller, Purchaser, the Company and Affiliates thereof intend that the transfer of the Sale Shares pursuant to this Agreement, excluding for the avoidance of doubt the Rollover Shares, shall be treated as a transaction described by Section 1001 of the Code.  Parent, Seller, JAB Holdings, the Company and Purchaser Parent and their Affiliates:  (y) shall neither take nor allow to be taken any action that, to their knowledge, would reasonably be expected to adversely affects the treatment of the purchase and sale of the Sale Shares as a taxable transaction described in Section 1001 of the Code and (z) shall act in accordance with the treatment of the purchase and sale of the Sale Shares as a transaction described in Section 1001 of the Code in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code.  

(iii)Parent, Seller, Purchaser, the Company and Affiliates thereof intend that JAB Holdings or an Affiliate thereof shall be treated, for U.S. federal (and applicable state and local) income tax purposes, as the owner of the common stock of Purchaser Parent acquired by JAB Holdings or an Affiliate thereof in connection with the transactions contemplated by this Agreement at all times from the Closing until a subsequent disposition of such shares of common stock, and each Party shall act in accordance with such treatment in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code. 

 

Section 5.09Third-Party Consents.  Upon the terms and subject to the conditions set forth in this Agreement, Parent or Seller shall use (and shall cause the Company to use) their reasonable best efforts to obtain any Consents required under any Contracts to which the Company is a party from third parties in connection with the consummation of the Transactions at or prior to the Closing.  In connection therewith, Parent and Seller shall not, and shall cause the Company not to, without the prior written consent of Purchaser, (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 (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 Purchaser may compel Parent or Seller to cause the Company 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 to) keep Purchaser reasonably informed regarding the process of obtaining such third-party Consents. 

Section 5.10Confidentiality.   

(a)The Confidentiality Agreement shall continue in full force and effect until the Closing pursuant to the IAHC Purchase Agreement, at which time the confidentiality obligations under the Confidentiality Agreement shall terminate.  If, for any reason, the transactions contemplated by this Agreement are not consummated, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms. 

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(b)From and after the Closing, Parent and Seller shall keep confidential any and all information concerning the Company and its Subsidiaries in their possession or retained by Parent and Seller hereunder and the terms of this Agreement (collectively, “Company Confidential Information”); provided that, for the purposes of this Section 5.10, Company Confidential Information shall not include, with respect to Parent and Seller, any information which (i) is generally available to or known by the public (other than as a result of an act or omission by Parent or Seller in breach of this Section 5.10(b)), (ii) is made available to Parent or Seller by any other Person; provided that such Person is not known to the recipient to be bound by a duty of confidentiality with respect thereto or (iii) has been or is subsequently developed by Parent or Seller without use of or reference to Company Confidential Information.  Notwithstanding the foregoing or anything in this Agreement to the contrary, following the Closing, Parent and Seller shall be permitted to disclose Company Confidential Information as required by Law or to directors, officers, employees or advisors of Parent or Seller who have a need to know such information, provided that such Persons are themselves obligated to keep such Company Confidential Information confidential. 

(c)Notwithstanding Section 5.10(c) of the IAHC Purchase Agreement, for a period of twenty-four (24) months following the Closing, Purchaser and its Affiliates shall keep confidential any and all information concerning Parent, Seller or any of their respective Affiliates (other than the Company) in their possession or retained by Purchaser and its Affiliates (including, for the avoidance of doubt, by the Company) hereunder and the terms of this Agreement (collectively, “Seller Confidential Information”); provided that, for the purposes of this Section 5.10, Seller Confidential Information shall not include, with respect to Purchaser and its Affiliates, any information which (i) is generally available to or known by the public (other than as a result of an act or omission by Purchaser and its Affiliates in breach of this Section 5.10(b)), (ii) is made available to Purchaser and its Affiliates by any other Person; provided that such Person is not known to the recipient to be bound by a duty of confidentiality with respect thereto or (iii) has been or is subsequently developed by Purchaser and its Affiliates without use of or reference to Seller Confidential Information.  Notwithstanding the foregoing or anything in this Agreement to the contrary, following the Closing, Purchaser and its Affiliates shall be permitted to disclose Seller Confidential Information as required by Law or to directors, officers, employees or advisors of Purchaser and its Affiliates who have a need to know such information, provided that such Persons are themselves obligated to keep such Seller Confidential Information confidential. 

Section 5.11Further Assurances.  The Parties shall execute and deliver, or shall cause to be executed and delivered, such documents and other instruments and shall take, or shall cause to be taken, such further actions as may be reasonably required to carry out the provisions of this Agreement and give effect to the Transactions. 

Section 5.12D&O Insurance. 

(a)Purchaser agrees that all rights to indemnification, advancement of expenses and exculpation by the Company now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing Date, an officer or director of the Company, shall survive the Closing Date and shall continue in full force and effect in accordance with their respective terms. 

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(b)The Company shall, and Purchaser shall cause the Company to (i) maintain in effect for a period of six (6) years after the Closing Date, if available, the current policies of directors’ and officers’ liability insurance maintained by the Company immediately prior to the Closing Date (the “Existing Policy”) (provided that the Company may substitute therefor policies, of at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors and officers of the Company when compared to the insurance maintained by the Company as of the date hereof under the Existing Policy; further, provided that if such “run-off” or other coverage is not available at a cost not greater than two hundred and fifty percent (250%) of the annual premiums paid as of the date of this Agreement under the Existing Policy (the “Insurance Cap”), then the Company shall be required to obtain as much coverage as is reasonably possible under substantially similar policies for such annual premiums as do not exceed the Insurance Cap); or (ii) obtain as of the Closing Date “tail” insurance policies with a claims period of six (6) years from the Closing Date with at least the same coverage and amounts, and containing terms and conditions that are not less advantageous to the directors and officers of the Company, in each case with respect to claims arising out of or relating to events which occurred on or prior to the Closing Date (including in connection with the transactions contemplated by this Agreement); provided, however, that the Company does not pay more than the aggregate Insurance Cap. 

(c)The obligations of Purchaser and the Company under this Section 5.12 shall not be terminated or modified in such a manner as to adversely affect any director or officer to whom this Section 5.12 applies without the consent of such affected director or officer (it being expressly agreed that the directors and officers to whom this Section 5.12 applies shall be third-party beneficiaries of this Section 5.12, each of whom may enforce the provisions of this Section 5.12. 

(d)In the event Purchaser, the Company or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in either such case, proper provision shall be made so that the successors and assigns of Purchaser or the Company, as the case may be, shall assume all of the obligations set forth in this Section 5.12. 

Section 5.13Certain Other Covenants. 

(a)As consideration for and to induce Purchaser to pay the consideration set forth in this Agreement, during the Non-Compete Restricted Period (provided that such period shall be extended by any period in which any Person is in material violation of the covenants of this Section 5.13; provided, further, that, notwithstanding the foregoing proviso, such period of tolling shall not be extended (x) for greater than twelve (12) months in the case of any single or continuing violation or (y) from and after such time as Purchaser or its Affiliates have actual knowledge of such violation) Parent and Seller shall not, and Parent and Seller shall cause each of their Subsidiaries and shall use reasonable best efforts to cause each of its Affiliates not to, directly or indirectly: 

(i)engage in or own any interest in, or control, manage or operate any Person or business division that is primarily engaged in the underwriting, distribution, sale,  

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marketing or administration of pet insurance policies or the provision of pet insurance brokerage services (a “Competitive Business”) in any country in which the Company (including its Subsidiaries) then does business;

(ii)use the Company Confidential Information (A) in connection with or with the purpose of pursuing or impairing any Competitive Business or (B) for any purpose other than risk management or modeling; or 

(iii)solicit or assist in the solicitation of any supplier, licensee or service provider with whom the Company or any of its Subsidiaries has a commercial relationship, whether by contract or otherwise, for the purpose of causing such supplier, licensee or service provider to reduce, discontinue or alter, in a manner adverse to the Company or its Subsidiaries, such commercial relationship. 

(b)Notwithstanding anything to the contrary in this Agreement, nothing in Section 5.13(a) shall preclude Parent, Seller or any of their Affiliates from (i) acquiring (by asset purchase, stock purchase, merger, reinsurance, consolidation or otherwise), directly or indirectly, the stock, business or assets of any Person that at the time of such acquisition is engaged in, or owns any interest in or controls, manages or operates any Person that is engaged in, a Competitive Business that would otherwise be prohibited by Section 5.13(a) (such Competitive Business being referred to herein as an “Acquired Competitive Business”); provided, that within twelve (12) months of the closing of the acquisition of such Acquired Competitive Business, Seller shall sell, spin-off or otherwise divest itself (or enter into an agreement to sell, spin-off or otherwise divest itself) of the portion of such Acquired Competitive Business that engages in the Acquired Competitive Business (the “Divested Portion”); provided, further that Purchaser shall have a right of first refusal to purchase the Divested Portion from Seller); or (ii) owning, directly or indirectly, as a passive, non-controlling investor (without any membership on the board of directors or similar governing body of such Person), up to an aggregate of five percent (5%) of any class of securities of a Person that is a Competitive Business that are registered under the Exchange Act, or an equivalent Law in a foreign jurisdiction. 

(c)During the Non-Solicit Restricted Period, Parent and Seller shall not, and  Parent and Seller shall cause each of their Subsidiaries and shall use reasonable best efforts to cause each of their Affiliates not to, directly or indirectly, solicit or assist in the solicitation of any individual who on the Closing Date is an employee of the Company or any of its Subsidiaries or Purchaser without the prior written approval of Purchaser, unless such individual (i) was terminated by the Company or any of its Subsidiaries or Purchaser, as applicable, (ii) has not been in the employ of the Company or any of its Subsidiaries or Purchaser during the six (6) month period prior to such solicitation or (iii) is contacted or solicited through general non-targeted solicitation or advertisement in a newspaper, online or through an employment agency. 

(d)Each of the Parties has carefully read this Section 5.13 and considered the restraints imposed upon Parent, Seller and their Affiliates, and is in full accord as to the necessity of such restrictive covenants for the reasonable and proper protection of Purchaser and its Affiliates, and agrees that each restraint imposed by the provisions of this Section 5.13 is fair and reasonable with respect to subject matter, geographic scope and time period.  It is expressly understood and agreed that although Parent, Seller and Purchaser consider such covenants to be  

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fair and reasonable, if a judicial determination is made by a court of competent jurisdiction that the time or any other restriction contained in this Section 5.13 is an invalid or unenforceable restriction against Parent, Seller or any of their Affiliates, the provisions of this Section 5.13 shall not be rendered void but shall be deemed amended to apply to such maximum time and to such maximum extent as such court may judicially determine or indicate to be enforceable.  Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is invalid or unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein, which shall be given full force and effect without regard to such finding.

(e)Each of Parent and Seller represents, stipulates and acknowledges on behalf of itself and its Affiliates that:  (i) the restrictive covenants contained in this Section 5.13 are a material inducement to Purchaser to enter into this Agreement and consummate the Transactions, for which each of Parent and Seller will receive a substantial financial benefit, and (ii) it would impair the goodwill acquired by Purchaser and reduce the value of the Company if Parent or Seller were to breach its obligations contained in this Section 5.13. 

(f)The Company shall use, and shall cause its Affiliates to use, its reasonable best efforts, at Purchaser’s expense, 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 obtain third-party debt financing in connection with the transactions contemplated hereby.   

Section 5.14AKC Interest in the Company. 

(a)In connection with the AKC Waiver and Consent, Purchaser agrees to offer to AKC until December 31, 2021 the right to sell up to 70% of the AKC Shares to Purchaser at the same price and terms upon which Seller proposes to sell its Shares to Purchaser pursuant to this Agreement, subject to the AKC Purchase Agreement.  

(b)In the event AKC desires to sell the AKC Shares during the period provided in the AKC Waiver and Consent, Parent, Seller and Purchaser shall each use their reasonable best efforts to negotiate with AKC to (i) enter into an agreement with Purchaser pursuant to which AKC shall agree to sell up to 70% of its Shares to Purchaser at the same price and terms upon which Seller proposes to sell its Shares to Purchaser pursuant to this Agreement (such agreement, the “AKC Purchase Agreement”) and (ii) enter into an amendment to the Company Shareholders Agreement that (A) eliminates the right of first refusal provisions benefitting AKC from Section 2 of the Company Shareholders Agreement in their entirety and (B) designates the use of a valuation report prepared by Bank of America Merrill Lynch for Affiliates of Purchaser Parent (instead of American Appraisal Associates) as the valuation methodology for purposes of the “Put and Call Right” provisions in Section 3 of the Company Shareholders Agreement. The Parties hereto agree that the purchase price payable to AKC pursuant to the AKC Purchase Agreement shall reflect adjustments for a multiple of 0.105 times Cash, Indebtedness and Closing Net Working Capital. 

(c)At the closing of the Transactions contemplated by the AKC Purchase Agreement, Seller and Purchaser agree that each of Seller and Purchaser shall contribute by wire transfer of immediately available funds an amount equal to 50% of the total amount of cash  

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being paid by the Company pursuant to the AKC Purchase Agreement; provided, however, that in no event shall the amount of cash being contributed by Purchaser to the Company in order to finance the Company’s purchase of the AKC Shares pursuant to the AKC Purchase Agreement be greater than the AKC Maximum Contribution Amount.

 

Section 5.15Escrow Agreement.   

(a)Prior to Closing, Purchaser and Seller shall use reasonable best efforts to negotiate the terms of the Escrow Agreement and such parties shall enter into such Escrow Agreement at the Closing.  

(b)For U.S. federal income tax purposes, Purchaser and Seller intend that the purchase and sale of the Sale Shares be treated as a completed purchase and sale of such shares occurring on or prior to the Closing Date, and each Party shall act in accordance with such treatment in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code.  Purchaser and Seller shall use reasonable best efforts to provide terms in the Escrow Agreement as it relates to the Purchase Price Escrow Amount that provide (as described below or in substantially similar form): 

(i)Seller shall be treated as the owner of the Escrow Account; 

(ii)Seller shall be treated as having received or “constructively received” the Purchase Price Escrow Amount; 

(iii)Seller shall be treated as voluntarily setting aside the Purchase Price Escrow Amount into the Escrow Account; 

(iv)the Escrow Account, as it relates to the Purchase Price Escrow Amount, shall be treated as a security arrangement rather than the sole source of cash payments; and 

(v)each Party shall act in accordance with such treatment in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code. 

Section 5.16Transition Services Agreement.  Prior to Closing, Purchaser and Seller agree to negotiate in good faith and reasonably cooperate in preparing and finalizing the schedules to the Transition Services Agreement. 

Section 5.17Rollover Agreement.  Following the date hereof, Purchaser Parent and Seller shall use reasonable best efforts to negotiate the terms of the Rollover Agreement and such parties shall enter into such Rollover Agreement as promptly as practicable following the date hereof. 

Section 5.18Intercompany Accounts.  All intercompany accounts and agreements between Seller or any of its Affiliates, on the one hand, and the Company or any of its  

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Subsidiaries, on the other hand, that exist as of the Closing shall be terminated at or prior to the Closing with no liability to the Company or any Subsidiary.

Section 5.19Purchaser Release.  Effective as of the Closing, except as otherwise set forth herein, the IAHC Purchase Agreement or the Ancillary Agreements, Purchaser on behalf of itself and each of its Subsidiaries and Affiliates, including after the Closing, the Company, and each of its and their current and former officers, managers, directors, employees, partners, members, advisors, successors and assigns (collectively, the “Purchaser Releasing Parties”), hereby irrevocably and unconditionally releases and forever discharges Seller, its Affiliates and each of their respective current and former officers, managers, directors, employees, partners, members, advisors, attorneys, financial advisors, lenders, successors and assigns (collectively, the “Seller Released Parties”) of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which the Purchaser Releasing Parties may have against each of the Seller Released Parties, now or in the future, in each case in respect of any cause, matter or thing relating to any of the Seller Released Parties occurring or arising on or prior to the date of this Agreement. 

Section 5.20Seller Release.  Effective as of the Closing, except as otherwise set forth herein, the IAHC Purchase Agreement or the Ancillary Agreements, Seller on behalf of itself and each of its Subsidiaries and Affiliates, and each of its and their current and former officers, managers, directors, employees, partners, members, advisors, successors and assigns (collectively, the “Seller Releasing Parties”), hereby irrevocably and unconditionally releases and forever discharges Purchaser, its Affiliates (including the Company) and each of their respective current and former officers, managers, directors, employees, partners, members, advisors, attorneys, financial advisors, lenders, successors and assigns (collectively, the “Purchaser Released Parties”) of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which the Seller Releasing Parties may have against each of the Purchaser Released Parties, now or in the future, in each case in respect of any cause, matter or thing relating to any of the Purchaser Released Parties occurring or arising on or prior to the date of this Agreement. 

Section 5.21Resignations. Seller and the Company shall deliver to Purchaser duly signed resignations, or if such resignation cannot reasonably be obtained, reasonable evidence of removal, effective as of and upon the Closing Date, of each of those directors and/or managers of the Company and its Subsidiaries identified by Purchaser in writing to the Company at least ten (10) Business Days prior to the Closing Date.  For the avoidance of doubt, the Parties acknowledge and agree that the resignations will be for the resignation from the director and/or manager positions held by such signatories at the Company and/or its Subsidiaries but will not be a resignation from employment with the Company and/or its Subsidiaries.  

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Article VICONDITIONS TO CLOSING

Section 6.01Conditions Precedent to Obligations of Each Party.  The obligations of each Party to consummate the Transactions are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by the Party to whose benefit such condition exists, in whole or in part, to the extent permitted by applicable Law): 

(a)no injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining or otherwise making illegal or prohibiting consummation of the Transactions; 

(b)the waiting period or required approval applicable to the Transactions under the HSR Act shall have expired (or early termination shall have been granted) or been received; and 

(c)delivery to the applicable Party of all items required pursuant to Section 2.03. 

Section 6.02Conditions Precedent to Obligations of Purchaser Parties.  In addition, the obligations of Purchaser Parties to consummate the Transactions are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Purchaser, in whole or in part, to the extent permitted by applicable Law): 

(a)(i) (A) the representations and warranties of Parent and Seller set forth in Article III (other than (1) the Fundamental Parent and Seller Representations, (2) the representations and warranties set forth in Section 3.08(b) and (3) those other representations and warranties that address matters as of a specified date) shall be true and correct as of the Closing Date as though then made at and as of the Closing Date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties) and (B) the representations and warranties of Parent and Seller set forth in Article III that address matters as of a specified date (other than the Fundamental Parent and Seller Representations and Section 3.08(b)) shall be true and correct as of such specified date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties), except where the failure of such representations and warranties referenced in the immediately preceding clauses (A) and (B) to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (ii) the Fundamental Parent and Seller Representations shall be true and correct in all material respects as of the Closing Date as though then made at and as of the Closing Date except for such Fundamental Parent and Seller Representations which address matters only as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date (in each case, without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties); and (iii) the representations and warranties set forth in Section 3.08(b) shall be true and correct in all respects as of the Closing Date as though then made; 

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(b)Parent and Seller shall have performed and complied in all material respects with all covenants required pursuant to the terms of this Agreement to be performed or complied with by them on or prior to the Closing Date;  

(c)Purchaser shall have received from Parent a certificate signed by a senior officer of Parent, dated as of the Closing Date, to the effect that the conditions specified in Section 6.02(a) and Section 6.02(b) are satisfied; 

(d)the waiting period or required approval applicable to the Transactions under the HSR Act shall have expired (or early termination shall have been granted) or been received without the imposition of any term, condition or consequence the acceptance of which would constitute a Substantial Detriment; and 

(e)None of the Key Employees shall (i) have failed to deliver an executed employment agreement with Purchaser, (ii) have terminated employment with the Company, (iii) other than as a result of death or disability, be unable to commence employment under his or her employment agreement with Purchaser upon the Closing or (iv) have notified the Company, Parent, Seller or Purchaser that he or she is terminating (or currently intends to terminate) employment with the Company. 

Section 6.03Conditions Precedent to Obligations of Parent and Seller.  In addition, the obligations of Parent and Seller to consummate the Transactions are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Parent or Seller, in whole or in part, to the extent permitted by applicable Law): 

(a)(i) (A) the representations and warranties of Purchaser Parties set forth in Article IV (other than (1) Section 4.02 and (2) those other representations and warranties that address matters as of a specified date) shall be true and correct as of the Closing Date as though then made at and as of the Closing Date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties) and (B) the representations and warranties of Purchaser set forth in Article IV of this Agreement that address matters as of a specified date (other than Section 4.02) shall be true and correct as of such specified date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties), except where the failure of such representations and warranties referenced in the immediately preceding clauses (A) and (B) to be so true and correct would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions; and (ii) the representations and warranties set forth in Section 4.02 shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date except for representations and warranties set forth in Section 4.02 which address matters only as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date (in each case, without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties); 

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(b)Purchaser shall have performed and complied in all material respects with all covenants required pursuant to the terms of this Agreement to be performed or complied with by it on or prior to the Closing Date; and 

(c)Parent shall have received a certificate signed by a senior officer of Purchaser, dated as of the Closing Date, to the effect that the conditions specified in Section 6.03(a) and Section 6.03(b) are satisfied. 

Section 6.04Frustration of Closing Conditions.  A Party may not rely on the failure of any condition set forth in Section 6.01, Section 6.02 or Section 6.03, as the case may be, to be satisfied if such failure was due to the failure of such Party to perform any of its obligations under this Agreement. 



Article VIITERMINATION

Section 7.01Termination of Agreement.  Subject to Section 9.04, this Agreement may be terminated at any time prior to the Effective Time as follows: 

(a)by Parent and Seller, on the one hand, or Purchaser Parties, on the other hand, on or after November 17, 2021 (as it may be extended pursuant to this Section 7.01(a) or the last sentence of Section 9.04, the “Outside Date”), if the Transactions shall not have occurred by 5:00 p.m., New York City time, on the Outside Date; provided that if, on the Outside Date, all of the conditions to the Closing set forth in Article VI (other than the conditions that by their nature can be satisfied only at the Closing) have been satisfied or waived, as applicable, except for the conditions set forth in Section 6.01(b), either Parent or Seller, on the one hand, or Purchaser Parties, on the other hand may, prior to 5:00 p.m., New York City time, on the Outside Date, extend the Outside Date to February 17, 2021 (such later date being the Outside Date); provided, further, that neither Parent or Seller, on the one hand, nor Purchaser Parties, on the other hand, may terminate this Agreement or extend the Outside Date pursuant to this Section 7.01(a) if it (or in the case of Parent or Seller, the Company) is in material breach of any of its obligations hereunder and such material breach causes, or results in, either (i) the failure to satisfy the conditions to the obligations of the terminating Party to consummate the Transactions set forth in Article VI prior to the Outside Date or (ii) the failure of the Effective Time to have occurred prior to the Outside Date; 

(b)by mutual written consent of Parent or Seller, on the one hand, and Purchaser Parties, on the other hand; 

(c)by Parent and Seller or by Purchaser Parties if an injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining or otherwise making illegal or prohibiting consummation of the Transactions and shall have become final and nonappealable; provided that neither Parent and Seller, on the one hand, nor Purchaser Parties, on the other hand, may terminate this Agreement pursuant to this Section 7.01(c) if it (or in the case of Parent or Seller, the Company)  

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is in material breach of any of its obligations hereunder and such material breach causes, or results in, the failure of the Closing to occur on or prior to the date of such termination;

(d)by Purchaser Parties if (i) no Purchaser Party is in material breach of any of its obligations hereunder and (ii) Parent, Seller or the Company is in material breach of any of its representations, warranties or obligations hereunder that renders or would render the conditions set forth in Section 6.02(a) or Section 6.02(b) incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (x) twenty (20) Business Days after the giving of written notice by Purchaser to Parent or Seller and (y) two (2) Business Days prior to the Outside Date; 

(e)by Parent or Seller if (i) none of Parent, Seller or the Company is in material breach of any of its obligations hereunder and (ii) any Purchaser Party is in material breach of any of its representations, warranties or obligations hereunder that renders or would render the conditions set forth in Section 6.03(a) or Section 6.03(b) incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (1) twenty (20) Business Days after the giving of written notice by Parent or Seller to Purchaser and (2) two (2) Business Days prior to the Outside Date; or 

(f)by Parent or Seller, if the IAHC Purchase Agreement is terminated for any reason. 

Section 7.02Procedure upon Termination.  In the event of termination and abandonment by any Party or Parties pursuant to Section 7.01, written notice thereof shall forthwith be given to the other Parties, and this Agreement shall terminate, and the Transactions shall be abandoned, without further action by any Party. 

Section 7.03Effect of Termination. In the event that this Agreement is validly terminated in accordance with Section 7.01, then each of the Parties shall be relieved of its duties and obligations arising under this Agreement after the date of such termination and such termination shall be without Liability to any of the Parties; provided, however, that, subject to the terms, conditions and limitations of this Section 7.03, (a) no such termination shall relieve any Party from Liability for any willful and material breach (it being acknowledged and agreed by the Parties that the failure to close the Transactions by any Party that was otherwise obligated to do so under the terms of this Agreement shall be deemed to be a willful and material breach) or fraud by that Party prior to such termination and (b) the provisions of this Section 7.03, Section 5.02(f), the last sentence of Section 5.03(b), Section 5.04 and Article IX shall remain in full force and effect and survive any termination of this Agreement in accordance with its terms. 



Article VIIIINDEMNIFICATION

Section 8.01Indemnification Obligations. 

(a)Indemnification Obligations of Parent and Seller.  From and after the Closing, Parent and Seller, in accordance with and subject to the provisions and limitations set forth in  

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this Article VIII, shall jointly and severally indemnify, defend and hold harmless Purchaser Parties and their respective Affiliates (including, after the Closing, the Company and its Subsidiaries), and each of their respective Representatives (the “Purchaser Indemnified Parties”) from and against any and all Losses actually incurred, suffered or sustained by any Purchaser Indemnified Party arising out of, or resulting from:

(i)any breach of or inaccuracy in any representation or warranty made in this Agreement by Parent or Seller in Article III (or in the closing certificate delivered by Parent in accordance with Section 6.02(c)); 

(ii)any breach of any covenant, agreement or undertaking made by or to be performed by Parent or Seller or, with respect to the period on or prior to the Closing Date, the Company or any of its Subsidiaries, in this Agreement;  

(iii)Transaction Expenses or Closing Indebtedness unpaid following the Closing;  

(iv)the VDA (as defined in the Seller Disclosure Schedules); and 

(v)any Indemnified Taxes. 

The Losses of the Purchaser Indemnified Parties described in Section 8.01(a) as to which the Purchaser Indemnified Parties are entitled to indemnification are collectively referred to as “Purchaser Losses”.

 

(b)Indemnification Obligations of Purchaser Parties.  From and after the Closing, Purchaser Parties and the Company, in accordance with and subject to the provisions and limitations set forth in this Article VIII, shall jointly and severally indemnify, defend, and hold harmless each of Parent and Seller and their respective Affiliates, and each of their respective Representatives (the “Seller Indemnified Parties”) from and against any and all Losses actually incurred, suffered or sustained by any Seller Indemnified Party arising out of, or resulting from: 

(i)any breach of or inaccuracy in any representation or warranty made in this Agreement by any Purchaser Party in Article IV (or in the closing certificate delivered by any Purchaser Party in accordance with Section 6.03(c)); or 

(ii)any breach of any covenant, agreement or undertaking made by or to be performed by any Purchaser Party in this Agreement. 

The Losses of the Seller Indemnified Parties described in this Section 8.01(b) as to which the Seller Indemnified Parties are entitled to indemnification are collectively referred to as “Seller Losses”.

Section 8.02Survival.  The representations, warranties, covenants and agreements of the Parties contained in this Agreement will survive the Closing but only to the extent specified in this Section 8.02.  Subject to the last proviso of Section 8.04(a), all representations and warranties in Article III and Article IV of this Agreement and all covenants and agreements to be performed prior to the Closing shall survive the Closing for a period of eighteen (18) months  

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after the Closing Date, or such other date as specifically provided in this Agreement, at which time they shall terminate (and no claims shall be made for indemnification under this Article VIII), except: (a) the Fundamental Parent and Seller Representations shall survive for the maximum period of time allowable under Law; (b) the representations and warranties in Section 3.16 (Tax Matters) and the specified indemnities set forth in Section 8.01(a)(v) shall survive until sixty (60) days after the expiration of the applicable statute of limitations; and (c) the covenants and agreements to be performed after the Closing shall survive indefinitely until fully performed or terminated, except as otherwise specifically provided in this Agreement.  Notwithstanding the survival periods set forth in this Section 8.02, no right to indemnification for Losses identified in a notice of a Claim for indemnity properly asserted in writing in accordance with Section 8.04 prior to the expiration of the applicable survival period set forth above will be affected by the expiration of such survival period, and instead, with respect to such claims, shall survive until the final resolution of the asserted right to indemnification specified in such notice in accordance with Section 8.04.  

Section 8.03Indemnification Limitations. 

(a)Purchaser Basket.  Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation or from breach of, or inaccuracy in, the Fundamental Parent and Seller Representations, no Purchaser Indemnified Party shall be entitled to assert any claim for indemnification under Section 8.01(a)(i):  (i) unless and until, individually or in the aggregate, all Purchaser Losses in respect of indemnification under such Sections (together in the aggregate with any Purchaser Losses under Section 8.01(a)(i) IAHC Purchase Agreement) exceed $4,000,000, after which Seller shall be obligated only for the excess of Purchaser Losses over such amount for which the Purchaser Indemnified Parties are finally determined to be otherwise entitled to indemnification, or (ii) for any Claim that individually results in Purchaser Losses in an amount that does not exceed $250,000. 

(b)Purchaser Caps.  

(i) Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, or from breach of, or inaccuracy in, the Fundamental Parent and Seller Representations, the maximum aggregate liability of Parent and Seller under Section 8.01(a)(i) (together in the aggregate with any Purchaser Losses under Section 8.01(a)(i) of the IAHC Purchase Agreement) shall not exceed an amount equal to $40,000,000 (such maximum amount, the “Cap”). 

(ii)Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, but subject to the limitations set forth in Section 8.03(b)(i) immediately above, the maximum aggregate liability of Parent and Seller under Section 8.01(a) shall not exceed the aggregate Final Closing Consideration. 

(c)Seller Basket.  Other than for Seller Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, no Seller Indemnified Party shall be entitled to assert any claim for indemnification under Section 8.01(a)(i):  (i) unless and until, individually or in the aggregate, all Seller Losses in respect of indemnification under such Sections (together in the aggregate with any Seller Losses under Section 8.01(a)(i) of the IAHC  

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Purchase Agreement) exceed $4,000,000, after which Purchaser shall be obligated only for the excess of Seller Losses over such amount for which the Seller Indemnified Parties are finally determined to be otherwise entitled to indemnification, or (ii) for any Claim that individually results in Seller Losses in an amount that does not exceed $250,000.

(d)Seller Caps.  Other than for Seller Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, (i) the maximum aggregate liability of Purchaser Parties to any Seller Indemnified Party under Section 8.01(b)(i)  (together in the aggregate with any Seller Losses under Section 8.01(b)(i) of the IAHC Purchase Agreement) shall not exceed the Cap, and (ii) subject to the limitations set forth in the immediately preceding clause (i), the maximum aggregate liability of Purchaser under Section 8.01(b) shall not exceed the Final Closing Consideration. 

Section 8.04Notification of Claims. 

(a)An Indemnified Party shall promptly notify the Indemnifying Party in writing of any Claim in respect of which indemnity may be sought under this Article VIII, including any pending or threatened Claim or demand by a third party that the Indemnified Party has determined has given or could reasonably give rise to a right of indemnification under this Agreement (including a pending or threatened Claim or demand asserted or unasserted, known or unknown or accrued or unaccrued, by a third party against the Indemnified Party) (each, a “Third-Party Claim”), describing in reasonable detail the facts and circumstances (to the extent known based on the then available information) with respect to the subject matter of such Claim or demand; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that the Indemnifying Party is materially prejudiced by such failure.  The Parties agree that (i) in this Article VIII they intend to shorten (in the case of the limited survival periods specified in Section 8.02) and lengthen (in the case of the indefinite survival periods specified in Section 8.02) (as the case may be) the applicable statute of limitations period with respect to certain Claims; (ii) notices for Claims in respect of a breach of a representation, warranty, covenant or agreement must be delivered prior to the expiration of any applicable survival period specified in Section 8.02 for such representation, warranty, covenant or agreement; and (iii) any Claims for indemnification for which notice is not timely delivered in accordance with this Section 8.04(a) shall be expressly barred and are hereby waived; provided, that, if, prior to such applicable date, a Party shall have notified the other Party in accordance with the requirements of this Section 8.04(a) of a claim for indemnification under this Article VIII (whether or not formal legal action shall have been commenced based upon such claim), such Claim shall continue to be subject to indemnification in accordance with this Article VIII notwithstanding the passing of such applicable date. 

(b)Upon receipt of a notice of a Claim for indemnity from an Indemnified Party pursuant to Section 8.04(a) in respect of a Third-Party Claim, the Indemnifying Party may, by notice to the Indemnified Party delivered within twenty (20) Business Days of the receipt of notice of such Third-Party Claim (and, for the avoidance of doubt, any failure to deliver any such notice within such time period shall be deemed an election not to assume any such defense and control), assume the defense and control of any Third-Party Claim, with its own counsel and at its own expense, but shall allow the Indemnified Party an opportunity to participate in the  

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defense of such Third-Party Claim with its own counsel and at its own expense; provided, however, that the Indemnifying Party shall bear the reasonable fees, costs and expenses of one (1) such separate counsel if (i) the Indemnified Party shall have determined in good faith that an actual or potential conflict of interest makes representation by the same counsel inappropriate or (ii) the Indemnifying Party shall have authorized the Indemnified Party to employ separate counsel at the Indemnifying Party’s expense.  The Indemnified Party shall take any actions reasonably necessary to defend such Third-Party Claim prior to the time that it receives a notice from the Indemnifying Party as contemplated by the immediately preceding sentence.  Parent and Seller, on the one hand, or Purchaser Parties, on the other hand, (as the case may be) shall, and shall cause each of its Affiliates and Representatives to, cooperate fully with the Indemnifying Party in the defense of any Third-Party Claim, which cooperation shall include designating a liaison counsel to whom the Indemnifying Party may direct notices and other communications, and upon the reasonable request of the Indemnifying Party, use reasonable efforts to make witnesses available, and provide records and documents.  If the Indemnifying Party has assumed the defense of a Third-Party Claim and is in compliance with its obligations under this Section 8.04(b) (or if the twenty (20) Business Day period has not yet elapsed), then the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed), consent to a settlement, compromise or discharge of, or the entry of any judgment arising from, any Third-Party Claim, unless such settlement, compromise, discharge or entry of any judgment (1) does not involve any finding or admission of any violation of Law or admission of any wrongdoing by any Person, (2) provides solely for the payment of money and (3) does not affect any other claims that may be made against the Indemnified Party in a manner adverse to such Indemnified Party, and the Indemnifying Party shall (x) pay or cause to be paid all amounts arising out of such settlement or judgment pursuant to the terms of such settlement or judgment, (y) not encumber any of the material assets of any Indemnified Party or agree to any restriction or condition that would apply to or materially adversely affect any Indemnified Party or the conduct of any Indemnified Party’s business and (z) obtain, as a condition of any settlement, compromise, discharge, entry of judgment (if applicable) or other resolution, a complete and unconditional release of, or dismissal with prejudice of claims against,  Indemnified Party from all matters that were asserted in connection with such claims and any and all liabilities in respect of such Third-Party Claim.  The Indemnified Party shall not settle, compromise or consent to the entry of any judgment with respect to any claim or demand for which it is seeking indemnification from the Indemnifying Party or admit to any liability with respect to such claim or demand without the prior written consent of the Indemnifying Party (which shall not be unreasonably withheld, conditioned or delayed).

(c)Notwithstanding anything to the contrary contained in this Article VIII, no Indemnifying Party shall have any liability under this Article VIII for any Losses arising out of or in connection with any Third-Party Claim that is settled or compromised by an Indemnified Party without the consent of such Indemnifying Party (which shall not be unreasonably withheld, conditioned or delayed). 

(d)In the event any Indemnifying Party receives a notice of a claim for indemnity from an Indemnified Party pursuant to Section 8.04(a) that does not involve a Third-Party Claim, the Indemnifying Party shall notify the Indemnified Party within twenty (20) Business Days following its receipt of such notice whether the Indemnifying Party disputes its liability to the  

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Indemnified Party under this Article VIII.  The Indemnified Party shall reasonably cooperate with and assist the Indemnifying Party in determining the validity of any such claim for indemnity by the Indemnified Party.

Section 8.05Payment.  In the event a Claim or any Action for indemnification under this Article VIII has been finally determined against Parent or Seller, the amount of such final determination shall be paid by the applicable Indemnifying Party to the Indemnified Party on demand by wire transfer of immediately available funds to the applicable account designated by the Indemnified Party in writing.  A Claim or an Action, and the liability for and amount of damages therefor, shall be deemed to be “finally determined” for purposes of this Article VIII when the Parties have so determined by mutual written agreement or, if disputed, when a final non-appealable Order has been entered into with respect to such Claim or Action. 

Section 8.06Exclusive Remedies.  Each Party acknowledges and agrees that: 

(a)prior to the Closing, other than in the case of intentional breach, willful misconduct or fraud by Parent, Seller or their Affiliates or Representatives, the sole and exclusive remedy of Purchaser for any breach or inaccuracy of any representation or warranty contained in this Agreement or any certificate or instrument delivered hereunder shall be, in the event that (i) each of the conditions set forth in Article VI has not been satisfied or waived as a result of such breach or inaccuracy and (ii) such breach or inaccuracy is incapable of being cured or, if capable of being cured, is not cured within thirty (30) days after Purchaser has notified Parent and Seller of intent to refuse to close the purchase and sale of the Sale Shares hereunder, refusal to close the purchase and sale of the Sale Shares hereunder; 

(b)following the Closing, other than in the case of intentional breach, willful misconduct or fraud, (i) the indemnification provisions of this Article VIII shall be the sole and exclusive remedies of the Parties for any breach of the representations or warranties contained in this Agreement and (ii) notwithstanding anything to the contrary contained herein, no breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right (other than any right specifically contemplated by the terms of Section 10 of the Stockholders Agreement) on the part of any Party to rescind this Agreement or any of the transactions contemplated by this Agreement; and 

(c)following the Closing, the indemnification provisions of this Article VIII shall be the sole and exclusive monetary remedies of the Parties for any breach of any covenant, but without prejudice to any remedies available under any of the Ancillary Agreements or Section 9.04. 

Section 8.07Additional Indemnification Provisions. 

(a)Parent, Seller and Purchaser agree, for themselves and on behalf of their respective Affiliates and Representatives, that with respect to each indemnification obligation set forth in this Article VIII, any Ancillary Agreement or any other document executed or delivered in connection with the Closing: each such obligation shall be calculated (i) on a Net After-Tax Basis and (ii) net of any Eligible Insurance Proceeds. 

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(b)Any amount payable by the Indemnifying Party pursuant to this Article VIII shall be paid promptly and payment shall not be delayed pending any determination of Eligible Insurance Proceeds.  In any case where an Indemnified Party recovers from a third party any Eligible Insurance Proceeds or any other amount in respect of any Loss for which the Indemnifying Party has actually reimbursed it pursuant to this Article VIII, such Indemnified Party shall promptly pay over to the Indemnifying Party the amount of such Eligible Insurance Proceeds, but not in excess of the sum of (i) any amount previously paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such claim and (ii) any amount expended by the Indemnifying Party in pursuing or defending any claim arising out of such matter. 

(c)The Parties shall treat any indemnification payment made under this Agreement as an adjustment to the Closing Consideration. 

(d)If any portion of Losses to be reimbursed by the applicable Indemnifying Party may be covered, in whole or in part, by third-party insurance coverage, the Indemnified Party shall promptly give notice thereof to the Indemnifying Party (a “Notice of Insurance”).  If the Indemnifying Party so requests within one hundred eighty (180) days after receipt of a Notice of Insurance, the Indemnified Party shall use its reasonable best efforts to collect (at the Indemnifying Party’s expense) the Eligible Insurance Proceeds. 

(e)The Parties acknowledge and agree that the same Loss may be subject to indemnification under more than one subsection of Section 8.01; provided, however, that in no event shall an Indemnified Party be entitled to duplicative recoveries for the same underlying Loss under this Article VIII or under any Ancillary Agreement. 

(f)For purposes of this Article VIII, in respect of the representations and warranties set forth in Article III (except for Section 3.08(b)) and Article IV, and the covenants set forth in this Agreement, any and all “Material Adverse Effect”, “material adverse effect”, “materiality” and similar exceptions and qualifiers and any similar thresholds set forth in such representations, warranties and covenants shall be disregarded (or, in the case of “Material Adverse Effect”, be read as “adverse effect”) for purposes of determining whether any such representation or warranty has been breached or determining the amount of Losses resulting therefrom. 

Section 8.08Mitigation.  Each Indemnified Party agrees to take reasonable steps as required under applicable law upon and after becoming aware of any event or condition which would reasonably be expected to give rise to any Losses that are indemnifiable hereunder. 



Article IXMISCELLANEOUS

Section 9.01Entire Agreement; Amendments and Waivers.  This Agreement and the Ancillary Agreements represent the entire understanding and agreement, and supersede all other prior agreements and understandings, both written and oral, among the Parties and their Affiliates, or any of them, with respect to the subject matter hereof.  This Agreement may be amended, supplemented or changed only by a written instrument signed by each of the Parties.   

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Each provision in this Agreement may be waived only by a written instrument making specific reference to this Agreement signed by the Party against whom enforcement of any such provision so waived is sought.  No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.  The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.  No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

Section 9.02Binding Effect; Assignment. 

(a)This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.  Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person that is not a Party, except
Section 9.10 shall be for the benefit of, and enforceable by, the Nonparty Affiliates of the Parties. 

(b)No assignment of this Agreement or of any rights or obligations hereunder may be made, directly or indirectly (by operation of law or otherwise), by any Party without the prior written consent of the other Parties, except that Purchaser may assign any and all of its rights or obligations under this Agreement or any Ancillary Agreement to any of its Affiliates.  Subject to the immediately preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.  Any purported assignment not permitted under this Section 9.02(b) shall be null and void. 

Section 9.03Governing Law; Jurisdiction.   

(a)This Agreement, and all claims or causes of action (whether in contract, tort or otherwise) based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement), shall be governed by and construed in accordance with the Laws of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws. 

(b)Each of the Parties hereby irrevocably and unconditionally (i) submits, for itself and its property, to the exclusive jurisdiction of each federal court or state court within the County of New York in the State of New York having jurisdiction over that matter (“New York Courts”), and any appellate court from any decision thereof, in any Action based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement), or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such Action shall be heard and determined in the New York Courts, (ii) waives, to the fullest extent it may legally and  

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effectively do so, any objection which it may now or hereafter have to the laying of venue of any Action based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement) in the New York Courts, (iii) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such Action in any such court and (iv) agrees that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.  Each of the Parties agrees that service of process, summons, notice or document by registered mail addressed to it at the applicable address set forth in Section 9.07 shall be effective service of process for any Action brought in any such court.

Section 9.04Specific Enforcement. 

The Parties agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, including if the Parties fail to take any action required of them hereunder to consummate this Agreement, subject to the terms and conditions of this Agreement.  The Parties acknowledge and agree that (a) the Parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof (including, for the avoidance of doubt, the right of Parent and Seller, on the one hand, or Purchaser, on the other hand, to cause the Transactions to be consummated on the terms and subject to the conditions set forth in this Agreement) in the courts described in Section 9.03(b) without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement, and (b) the right of specific enforcement is an integral part of the Transactions and without that right, the Parties would not have entered into this Agreement.  The Parties agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the Parties otherwise have an adequate remedy at law.  The Parties acknowledge and agree that any Party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 9.04 shall not be required to provide any bond or other security in connection with any such order or injunction.  If, prior to the Outside Date, any Party brings any Action, in each case, in accordance with this Section 9.04, to enforce specifically the performance of the terms and provisions hereof by any other Party, the Outside Date shall automatically be extended (x) for the period during which such Action is pending, plus ten (10) Business Days or (y) by such other time period established by the court presiding over such Action, as the case may be.

Section 9.05Waiver of Jury Trial. 

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY

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IN RESPECT OF ANY LITIGATION THAT MAY BE DIRECTLY OR INDIRECTLY BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE ANCILLARY AGREEMENTS IN CONNECTION HEREWITH OR THE TRANSACTIONS.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.05.

Section 9.06Remedies.  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 at any time of any other remedy, except to the extent expressly limited hereby. 

Section 9.07Notices.  All notices and other communications under this Agreement shall be in writing and shall be deemed given (a) when delivered personally by hand (with written confirmation of receipt by other than automatic means, whether electronic or otherwise), (b) when sent by facsimile or email (unless, in the case of email, an automatic response has been received indicating that the recipient did not receive such email) with written confirmation of transmission or (c) one (1) Business Day following the day sent by an internationally recognized overnight courier (with written confirmation of receipt), in each case, at the following addresses, facsimile numbers and email addresses (or to such other address, facsimile number or email address as a Party may have specified by notice given to the other Party pursuant to this provision): 

If to Parent, Seller or, prior to Closing, the Company:

96 Cummings Point Road
Stamford, CT 06902
Attn: Marla Di Resta
Email: mdiresta@sslicny.com

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

 

Dentons US LLP
1221 Avenue of the Americas 

New York, NY 10020-1089 

Attn:Nicholas Williams 

Kristina Beirne  

Email:n.williams@dentons.com 

kristina.beirne@dentons.com 

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If to Purchaser Parties, or following the Closing, the Company:

 

1701 Pennsylvania Avenue NW, Suite 801

Washington, DC 20006

Attn:Joachim Creus 

Email:Joachim.Creus@jabse.eu 

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

Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West
New York, NY 10001
Attn:  Paul T. Schnell  

Sean C. Doyle
          Jon A. Hlafter
Email: paul.schnell@skadden.com  

sean.doyle@skadden.com
           jon.hlafter@skadden.com 

Any Party from time to time may change its address, facsimile number or other information for the purpose of notices to that Party by giving notice, in accordance with this Section 9.07, specifying such change to the other Parties.

Section 9.08Severability.  If any condition, term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other conditions, terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the Transactions are consummated as originally contemplated to the greatest extent possible.  Notwithstanding the foregoing, the Parties intend that the provisions of Article VII and Article VIII, including the remedies (and limitations thereon) and the limitations on representations, warranties and covenants, be construed as integral provisions of this Agreement and that such provisions, remedies and limitations shall not be severable in any manner that diminishes a Party’s rights hereunder or increases a Party’s Liability or obligations hereunder. 

Section 9.09Expenses.  Except as otherwise provided in this Agreement, each Party shall bear its own expenses incurred in connection with the negotiation, execution and performance of this Agreement, each Ancillary Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the Transactions. 

Section 9.10Non-Recourse.  All Actions, Liabilities or causes of action (whether in contract or in tort, in law or in equity or granted by statute) that may be based upon, in respect of, arise under, out of or by reason of, be connected with or relate in any manner to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or  

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warranty made in, in connection with, or as an inducement to, this Agreement), may be made against only (and such representations and warranties are those solely of) the Persons that are expressly identified as Parties to this Agreement (the “Contracting Parties”).  Other than in the case of fraud, no Person who is not a Contracting Party, including any current, former or future director, officer, employee, consultant, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, representative or assignee of, and any financial advisor or lender to, any Contracting Party, or any current, former or future director, officer, employee, consultant, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, representative or assignee of, and any financial advisor or lender to, any of the foregoing (collectively, the “Nonparty Affiliates”), shall have any Liability (whether in contract or in tort, in law or in equity, or granted by statute) for any claims, causes of action or Liabilities arising under, out of, in connection with, or related in any manner to this Agreement or based on, in respect of, or by reason of this Agreement or its negotiation, execution, performance or breach, and, to the maximum extent permitted by Law, each Contracting Party hereby waives and releases all such Liabilities, claims, causes of action and obligations against any such Nonparty Affiliates.  Without limiting the foregoing, to the maximum extent permitted by Law, (a) other than in the case of fraud, each Contracting Party hereby waives and releases any and all rights, claims, demands or causes of action that may otherwise be available at law or in equity, or granted by statute, to avoid or disregard the entity form of a Contracting Party or otherwise impose Liability of a Contracting Party on any Nonparty Affiliate, whether granted by statute or based on theories of equity, agency, control, instrumentality, alter ego, domination, sham, single business enterprise, piercing the veil, unfairness, undercapitalization or otherwise and (b) each Contracting Party disclaims any reliance upon any Nonparty Affiliates with respect to the performance of this Agreement or any representation or warranty made in, in connection with or as an inducement to this Agreement.

Section 9.11Counterparts.  This Agreement may be executed in any number of counterparts (including by means of facsimile or email in .pdf format), each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 

Section 9.12JAB Holdings Obligation.   

(a)To induce Parent and Seller to enter into this Agreement, JAB Holdings hereby irrevocably and unconditionally guarantees, as a primary obligor and not as a surety, to Parent and Seller the full and timely payment and performance by Purchaser, Purchaser Parent and JAB Holdings of all of the Purchaser, Purchaser Parent and JAB Holdings’ respective covenants, obligations, undertakings and liabilities under this Agreement, including any indemnity obligations hereunder or thereunder (collectively, the “Guaranteed Obligations”).  JAB Holdings acknowledges that it is receiving benefits in connection with providing this Guaranty pursuant to this Section 9.12 (this “Guaranty”).  The liability of JAB Holdings under this Guaranty shall be absolute, unconditional and irrevocable.  

(b)JAB Holdings hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by Parent and Seller upon this Guaranty or acceptance of this Guaranty.  When pursuing its rights and remedies under this Guaranty against JAB Holdings, Parent and Seller shall be under no  

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obligation to pursue such rights and remedies it may have against Purchaser, Purchaser Parent or any other Person with respect to the Guaranteed Obligations or any right of offset with respect thereto, and any failure by Parent or Seller to pursue such other rights or remedies or to collect any payments from Purchaser, Purchaser Parent or any such other Person or to realize upon or to exercise any such right of offset, and any release by Parent or Seller of Purchaser, Purchaser Parent or any such other Person or any right of offset, shall not relieve JAB Holdings of any liability under this Guaranty, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of Parent and Seller. Furthermore, JAB Holdings waives diligence, notice of the acceptance of this Guaranty and of the Guaranteed Obligations, presentment, demand for payment, protest, promptness, obligation to protect, secure or perfect any security interest, notice of non-performance, default, dishonor and protest, all defenses that may be available by virtue of any valuation, stay, moratorium Law or other similar Law now or hereafter in effect, any right to require the marshaling of assets of Purchaser, Purchaser Parent or any other Person interested in the transactions contemplated by this Agreement, and all suretyship defenses generally (in each case, other than any defense that Purchaser or Purchaser Parent may have that payment of all applicable Guaranteed Obligations has been made and all other applicable Guaranteed Obligations have been performed and satisfied, in each case in accordance with the terms of this Agreement).

(c)JAB Holdings hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against Parent and Seller or any other Person liable with respect to any of the Guaranteed Obligations that arise from the existence, payment, performance or enforcement of JAB Holdings’ obligations under or in respect of this Agreement, including this Guaranty, or any other agreement in connection therewith, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Parent or Seller against the Purchaser or Purchaser Parent or any other Person liable with respect to any of the Guaranteed Obligations, whether or not such claim, remedy or right arises in equity or under contract, statute or common Law, including the right to take or receive from the Purchaser or Purchaser Parent or any other Person liable with respect to any of the Guaranteed Obligations, directly or indirectly, in cash or other property or by set off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been irrevocably paid in full in cash and all other Guaranteed Obligations have been performed and satisfied in accordance with the terms of this Agreement. If any amount shall be paid to JAB Holdings in violation of the immediately preceding sentence at any time prior to the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, such amount shall be segregated from other property and funds of JAB Holdings, and such amount shall forthwith be paid or delivered to Parent or Seller in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, in accordance with the terms of this Agreement, whether matured or unmatured, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. 

(d)JAB Holdings shall pay Seller within thirty (30) days of demand by Seller from time to time, the amount of all expenses, including reasonable attorneys’ fees and expenses, paid or incurred by Seller in enforcing any of its rights under this Guaranty against JAB Holdings. 

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(e)JAB Holdings has the financial capacity to pay and perform its obligations under this Guaranty, and all funds necessary for JAB Holdings to fulfill its obligations under this Guaranty shall be available to JAB Holdings for this Section 9.12. The obligations of JAB Holdings hereunder shall not be discharged other than by complete performance. The parties hereto hereby agree that JAB Holdings is a party to this Agreement solely for purposes of this Section 9.12 and the other provisions of this Article IX. 

[The remainder of this page is intentionally left blank.]

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

 

SELLER PARTIES:

IHC SB HOLDINGS, LLC 

 

By: /s/ Vincent Furfaro  

Name:Vincent Furfaro  

Title:    President  

INDEPENDENCE AMERICAN HOLDINGS CORP. 

 

By:  /s/ Teresa Herbert  

Name:Teresa Herbert  

Title:Vice President, Finance  

[Signature Page to Stock Purchase Agreement]

PURCHASER PARTIES:

IGUANA CAPITAL, INC. 

 

By: /s/ Joachim Creus  

Name: Joachim Creus  

Title President  

 

IGUANA PP HOLDINGS, INC. 

 

By: /s/ Joachim Creus  

Name:Joachim Creus  

Title:President  

 

JAB HOLDINGS B.V. 

 

By: /s/ Joachim Creus  

Name:Joachim Creus  

Title:Managing Director  

 

 

 

By:  /s/ Frank Engelen  

Name:Frank Engelen  

Title:Managing Director  

[Signature Page to Stock Purchase Agreement]

EXECUTION VERSION
EXHIBIT 10.16

STOCK PURCHASE AGREEMENT

 

by and among

 

INDEPENDENCE HOLDING COMPANY,

 

MADISON INVESTORS CORP.,

 

AMIC HOLDINGS INC.,

 

IGUANA ACQUISITION LLC,

 

and

 

JAB HOLDINGS B.V.

(solely for purposes of Section 9.12 and the other provisions of Article IX)

 

Dated as of May 17, 2021

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND TERMS

Section 1.01Definitions3 

Section 1.02Interpretations.18 

ARTICLE II

THE PURCHASE AND SALE; CLOSING; CLOSING DELIVERABLES

Section 2.01Purchase and Sale of Sale Shares20 

Section 2.02The Closing20 

Section 2.03Deliveries at Closing.21 

Section 2.04Estimated Closing Date Balance Sheet; Estimated Closing Consideration21 

Section 2.05Post-Closing Adjustments to the Estimated Closing Consideration.22 

Section 2.06Withholding Taxes25 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

Section 3.01Organization, Standing and Power.26 

Section 3.02Authorization26 

Section 3.03Noncontravention.26 

Section 3.04Governmental Approvals27 

Section 3.05Capital Stock of the Company.27 

Section 3.06Subsidiaries29 

Section 3.07Financial Statements; No Undisclosed Liabilities.29 

Section 3.08Absence of Certain Changes.30 

Section 3.09Legal Proceedings.30 

Section 3.10Compliance with Laws; Permits.30 

Section 3.11Insurance Matters31 

Section 3.12Insurance Policies32 

Section 3.13Material Contracts.32 

Section 3.14Intellectual Property; IT Assets; Privacy.35 

Section 3.15Employee Benefits Matters.37 

Section 3.16Labor.39 

Section 3.17Tax Matters.40 

Section 3.18Real Property42 

Section 3.19Environmental Matters42 

Section 3.20Interested Party Transactions42 

Section 3.21Reserves43 

Section 3.22Reinsurance43 

Section 3.23Investment Assets43 

Section 3.24Sufficiency of Assets44 

Section 3.25Brokers and Other Advisors44 

Section 3.26CARES Act44 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Section 4.01Organization, Standing and Power45 

Section 4.02Authorization45 

Section 4.03Noncontravention.45 

Section 4.04Governmental Approvals45 

Section 4.05Legal Proceedings46 

Section 4.06Financial Capacity46 

Section 4.07Investment Representation46 

Section 4.08Brokers and Other Advisors46 

Section 4.09No Prior Activities and Agreements46 

ARTICLE V

COVENANTS

Section 5.01Conduct of the Business Pending the Closing.46 

Section 5.02Access to Information.51 

Section 5.03Reasonable Best Efforts.53 

Section 5.04Publicity54 

Section 5.05Employment and Employee Benefits.54 

Section 5.06Insurance.56 

Section 5.07IHC Marks.57 

Section 5.08Tax Matters.57 

Section 5.09Third-Party Consents61 

Section 5.10Confidentiality.61 

Section 5.11Further Assurances62 

Section 5.12D&O Insurance.62 

Section 5.13Certain Other Covenants.63 

Section 5.14Reinsurance65 

Section 5.15Commutation66 

Section 5.16Pre-Closing Restructuring67 

Section 5.17Transfer of Intellectual Property67 

Section 5.18Termination of Intercompany and Related-Party Agreements67 

Section 5.19Escrow Agreement67 

Section 5.20Transition Services Agreement67 

Section 5.21Rollover Agreement68 

Section 5.22Purchaser Release68 

Section 5.23Seller Release68 

Section 5.24Resignations68 

ARTICLE VI

CONDITIONS TO CLOSING

Section 6.01Conditions Precedent to Obligations of Each Party69 

Section 6.02Conditions Precedent to Obligations of Purchaser69 

Section 6.03Conditions Precedent to Obligations of Parent and Seller70 

Section 6.04Frustration of Closing Conditions71 

ARTICLE VII

TERMINATION

Section 7.01Termination of Agreement71 

Section 7.02Procedure upon Termination72 

Section 7.03Effect of Termination73 

ARTICLE VIII

INDEMNIFICATION

Section 8.01Indemnification Obligations.73 

Section 8.02Survival74 

Section 8.03Indemnification Limitations.74 

Section 8.04Notification of Claims.75 

Section 8.05Payment77 

Section 8.06Exclusive Remedies77 

Section 8.07Additional Indemnification Provisions78 

Section 8.08Mitigation79 

ARTICLE IX

MISCELLANEOUS

Section 9.01Entire Agreement; Amendments and Waivers79 

Section 9.02Binding Effect; Assignment.79 

Section 9.03Governing Law; Jurisdiction.80 

Section 9.04Specific Enforcement.80 

Section 9.05Waiver of Jury Trial.81 

Section 9.06Remedies81 

Section 9.07Notices81 

Section 9.08Severability83 

Section 9.09Expenses83 

Section 9.10Non-Recourse83 

Section 9.11Counterparts84 

Section 9.12JAB Holdings Obligation84 

i

EXHIBITS

 

Exhibit AKey Employees 

Exhibit BTransition Services Agreement 

Exhibit CReinsurance Term Sheet  

Exhibit DPurchase Price Allocation Methodology 

ii

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of May 17, 2021, by and among Independence Holding Company, a Delaware corporation (“IHC”), Madison Investors Corp., a Delaware corporation (“MIC”, and together with IHC, “Parent”), AMIC Holdings Inc., a Delaware corporation (“Seller”), Iguana Acquisition LLC, a Delaware limited liability company (“Purchaser”), JAB Holdings B.V., a private limited liability company incorporated under the laws of the Netherlands (“JAB Holdings”) (solely for purposes of Section 9.12 and the other provisions of Article IX).  JAB Holdings, Purchaser, Parent and Seller are collectively referred to herein as the “Parties” and each, a “Party”).

W I T N E S S E T H:

WHEREAS, as of the date hereof, Seller, a wholly-owned direct Subsidiary of Parent, owns all issued and outstanding shares of capital stock (each, a “Share”, and collectively, the “Shares”) of Independence American Holdings Corp., a Delaware corporation (the “Company”);

WHEREAS, as of the date hereof, the Company owns all of the issued and outstanding shares of capital stock of Independence American Insurance Company, a Delaware corporation (“IAIC”); 4.73% of the issued and outstanding membership interests of Figo Pet Insurance LLC, an Illinois limited liability company (“FIGO” and the “FIGO Interests”); 20% of the issued and outstanding membership interests of Pet Assistant Holdings, LLC, a Utah limited liability company (“PAH” and the “PAH Interests”); the domain name PetPlace.com and PetPlace trademark registrations held through Domain Holdings, LLC, a Delaware Limited Liability Company; and the domain names Mypetinsurance.com and Petplaceinsurance.com, both held through IHC Specialty Benefits Inc., a Delaware Corporation (each of PetPlace.com, the PetPlace trademark registrations, Mypetinsurance.com and Petplaceinsurance.com and any other assets set forth in Section 5.17 of the Seller Disclosure Schedule are referred to as the “Transferred IP”); and other assets (such other assets, the “Retained Assets”) (the Company and IAIC are referred to collectively as the Companies herein (the “Companies”);

 

WHEREAS, prior to closing and the Initial Contribution (defined below), Seller shall cause the Pre-Closing Restructuring (as defined herein) to occur, as a result of which the Company shall own directly all of the issued and outstanding stock of IAIC, the FIGO Interests, the PAH Interests, and the Transferred IP and shall not own, directly or indirectly, the Retained Assets;

 

WHEREAS, Seller desires to contribute 100% of Seller’s Shares in the Company to IAHC Holdings in exchange for 100% of IAHC Holdings stock (the “IAHC Holdings Shares”) (the “Initial Contribution”);

WHEREAS, Seller desires to transfer to Purchaser, and Purchaser desires to acquire from Seller, 70% of the IAHC Holdings Shares (the “Sale Shares”)  upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, as promptly as practicable following the date hereof, JAB Holdings and Seller shall enter into the Rollover Agreement;

WHEREAS, immediately following the Closing (as hereinafter defined), (a) Seller shall contribute to Iguana Capital, Inc., a Delaware corporation and a wholly-owned direct Subsidiary of Purchaser (“Iguana Capital”), 30% of its shares of IAHC Holdings (the “Rollover Shares”) in exchange for shares of stock of Iguana Capital (“Rollover Contribution”), (b) Purchaser will make a contribution of the Sale Shares to Iguana Capital in exchange for shares of stock of Iguana Capital (“Iguana Contribution”), and (c) the contributions in clauses (a) and (b) are intended to be characterized by Seller, Parent and JAB Holdings as a single interrelated transaction that is treated as an exchange described in Section 351(a) of the Code;

WHEREAS, pursuant to a separate Stock Purchase Agreement dated as of even date herewith (the “PetPartners Purchase Agreement”), the Company and its subsidiary, IHC SB Holdings, LLC, a Delaware limited liability company (“SB Holdings”), are agreeing to sell and Purchaser is agreeing to acquire indirectly 70% of SB Holdings’ shares in PetPartners Inc., a Delaware company (“PetPartners”), on such terms and subject to such conditions as set forth therein;

 

WHEREAS, pursuant to a separate Rollover Agreement, SB Holdings is agreeing to contribute 30% of its shares in PetPartners to Iguana Capital in exchange described in Section 351(a) of the Code;

WHEREAS, immediately following the consummation of the transactions contemplated by this Agreement and the PetPartners Purchase Agreement, (i) Purchaser will own 70% of the common shares of Iguana Capital, (ii) Seller and SB Holdings together will own 30% of the common shares of Iguana Capital, (iii) Iguana Capital will wholly own directly Iguana PP Holdings, Inc., a Delaware corporation (“Iguana PP Holdings”), (iv) Iguana PP Holdings will own 85% of the common stock of Pet Partners and American Kennel Club, Inc.will own 15% of the common stock of Pet Partners, (v) Iguana Capital will indirectly wholly own the Company and (vi) Iguana Capital will indirectly own the FIGO Interests and the PAH Interests and the Transferred IP;

WHEREAS, each of (a) the managing member of Purchaser, (b) the board of directors of Parent and (c) the board of directors of Seller has approved this Agreement and the Transactions, upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with the Transactions and also to prescribe various conditions thereto;

WHEREAS, contemporaneously with the Closing, Purchaser intends to cause the Company to enter into employment agreements with each of the employees set forth on Exhibit A (the “Key Employees”); and

WHEREAS, in connection with this Agreement and upon the terms and subject to the conditions set forth herein: (i) IHC or another Affiliate of the Company and the Company will enter into a transition services agreement in substantially the form attached hereto as Exhibit B

2

(the “Transition Services Agreement”), under which certain transition services will be provided to the Company on the terms and subject to the conditions set forth therein; and (ii) at the election of Purchaser, Reinsurer and IAIC will enter into a reinsurance agreement consistent with the terms set forth in the attachment hereto as Exhibit C (such terms, the “Reinsurance Agreement Term Sheet”, and such agreement, the “Reinsurance Agreement”), pursuant to which the Company shall cede, and Reinsurer shall reinsure such policies on the terms and subject to the conditions set forth therein.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the Parties agree as follows:



Article IDEFINITIONS AND TERMS

Section 1.01Definitions.  For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.01: 

“Accounting Day” means, with respect to any month, the date on which the Company’s books close for month end.

“Acquired Competitive Business” has the meaning specified in Section 5.13(b).

“Action” means any judicial (civil or criminal) or administrative actions, Claims, suits, demands, complaints, litigation, investigations, review, audits, proceedings, arbitration, hearing or other similar disputes by or before a Governmental Authority.

“Adjusted Closing Date Balance Sheet” has the meaning specified in Section 2.05(b).

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“Affiliate Agreements” has the meaning specified in Section 3.20.

“Agreement” has the meaning specified in the Preamble.

“Ancillary Agreements” means, collectively, the Confidentiality Agreement, the Transition Services Agreement, the Reinsurance Agreement and the Escrow Agreement.

“Bankruptcy and Equity Exception” has the meaning specified in Section 3.02.

“Benefit Plan” has the meaning specified in Section 3.15(a).

3

“Business Day” means any day of the year other than a Saturday, Sunday or any day on which national banking institutions in New York, New York are authorized or required by applicable Law to be closed for business.

“Business Licenses” has the meaning specified in Section 3.10(a)(iii).

“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.

“Cap” has the meaning specified in Section 8.03(b).

“Claims” means any and all manner of claims, suits, damages, demands and liabilities whatsoever in law or equity, whether known or unknown, liquidated or unliquidated, fixed, contingent, direct or indirect.

“Closing” has the meaning specified in Section 2.01.

“Closing Consideration” means (a) $190,400,000, minus (b) (0.7 * Closing Indebtedness), plus (c) (0.7 *the amount (if any) by which Statutory Capital is in excess of the Statutory Capital Target), minus (d) (0.7 * the amount (if any) by which the Statutory Capital Target is in excess of Statutory Capital), and (e) minus the Transaction Expenses.

“Closing Date” has the meaning specified in Section 2.02.

“Closing Indebtedness” means the Indebtedness of the Company as of the Effective Time, which amount, for the avoidance of doubt, is to be expressed as a positive number.

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

“Company” has the meaning specified in the Recitals.

“Company Actuarial Analysis” has the meaning specified in Section 3.11(a).

“Company Benefit Plan” has the meaning specified in Section 3.15(a).

“Company Confidential Information” has the meaning specified in Section 5.10(b).

“Company Employee” means any individual employed by or providing services to Parent or any of its Affiliates (including the Company and its Subsidiaries) that provide services primarily with respect to, or is otherwise necessary to the operations of, the Company or any of its Subsidiaries, including each of those employees as set forth on Section 1.01(b) of the of the Seller Disclosure Schedule.

“Company Intellectual Property” means all Intellectual Property owned by or purported to be owned by the Company or any of its Subsidiaries.

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“Company IT Assets” means all IT Assets owned by or purported to be owned by the Company and its Subsidiaries.

“Competitive Business” has the meaning specified in Section 5.13(a)(i).

“Confidentiality Agreement” has the meaning specified in Section 5.02(f).

“Consent” means, with respect to a Person, any written or documentary consent, approval, authorization, waiver, grant, concession, license, permit, certificate of need, variance, exemption or order of, registration, certificate, declaration, or filing with, or report or notice to such Person.

“Continuation Notice” has the meaning specified in Section 5.14(a)(ii).

“Continuation Period” has the meaning specified in Section 5.05(b).

“Continuing Employee” has the meaning specified in Section 5.05(b).

“Contract” means any contract, indenture, note, bond, lease, commitment or other legally binding agreement.

“Contracting Parties” has the meaning specified in Section 9.10.

“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions thereof or related or associated epidemics, pandemic or disease outbreaks.

“COVID-19 Measures” means any quarantine, “shelter in place”, “stay at home”, workforce reduction, social distancing, shutdown, closure, sequester, safety or similar Law, directive or binding guidelines promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including the CARES Act and the Families First Act.

“Data Room” means the electronic data room maintained by an Affiliate of Parent and Seller, made available to Purchaser and its Affiliates and hosted by Box Inc., titled “Project Gecko”.

“Declination Notice” has the meaning specified in Section 5.14(a).

“Dispute Notice” has the meaning specified in Section 2.05(b).

“Disputed Items” has the meaning specified in Section 2.05(b).

“Divested Portion” has the meaning specified in Section 5.13(b).

“Effective Time” has the meaning specified in Section 2.02.

“Eligible Insurance Proceeds” means, with respect to Losses to be reimbursed by the Indemnifying Party that may be covered, in whole or in part, by third-party insurance coverage,

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the maximum amount of insurance proceeds actually received in cash under such third-party insurance coverage with respect to such Losses, net of the costs (including any premium increases) in seeking such collection.

“Employee Census” means a complete and accurate census of the Company Employees detailing, to the extent permitted by applicable Law, (i) name or employee identification number, (ii) the date of hire, (iii) title or position, (iv) employing entity, (v) work location, (vi) classification, (vii) full-time or part time status, (viii) leave status and (ix) such employee’s annualized compensation as of the date of such census, including base salary, vacation and paid time off accrual amounts, bonus and commission potential, severance pay potential and any other compensation forms, if applicable.

“Environmental Law” means any law, regulation, order, decree, agency requirement or common law standard of conduct relating to pollution, contamination, waste, hazardous substance exposure or the protection of the health, safety or the environment.

“ERISA” has the meaning specified in Section 3.15(a).

“Escrow Account” means the escrow account established pursuant to the terms of the Escrow Agreement for deposit and distribution of the Purchase Price Adjustment Holdback Amount.

“Escrow Agent” means Citibank, N.A.

“Escrow Agreement” means an escrow agreement to be entered into by and among Purchaser, Seller and the Escrow Agent on the Closing Date, in customary form reasonably satisfactory to the parties thereto.

“Estimated Closing Consideration” has the meaning specified in Section 2.04.

“Estimated Closing Date Balance Sheet” has the meaning specified in Section 2.04.

“Estimated Closing Statement” has the meaning specified in Section 2.04.

“Exchange Act” means the Securities Exchange Act of 1934.

“Existing Policy” has the meaning specified in Section 5.12(b).

“FIGO” has the meaning specified in the Recitals.

“FIGO Interests” has the meaning specified in the Recitals

“Final Balance Sheet” has the meaning specified in Section 2.05(f).

“Final Closing Consideration” means the Closing Consideration as set forth in the Final Closing Statement.

“Final Closing Statement” has the meaning specified in Section 2.05(e).

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“Financial Statements” has the meaning specified in Section 3.07(a).

“FIRPTA Certificate” has the meaning specified in Section 2.03(a)(iv).

“Fundamental Parent and Seller Representations” means the representations and warranties set forth in Section 3.01 (Organization, Standing and Power), Section 3.02 (Authorization), Section 3.03(a)(i), Section 3.03(b) (Noncontravention), Section 3.05 (Capital Stock of the Company), and Section 3.25 (Brokers and Other Advisors).

“GAAP” means generally accepted accounting principles in the United States.

“Government Contracts” means any Contract with any Governmental Authority.

“Governmental Authority” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, European Union, multinational or other supranational, national, federal, regional, state or local or any agency, instrumentality, authority, department, commission, board or bureau thereof or other legislative, executive or judicial governmental entity or semi-governmental or self-regulatory organization, including the National Association of Insurance Commissioners, or any court or similar judicial or arbitral body.

“Guaranteed Obligations” has the meaning specified in Section 9.12(a).

“Guaranty” has the meaning specified in Section 9.12(a).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“IAIC” has the meaning specified in the Recitals.

“IAHC Holdings” means a Delaware corporation to be formed by Seller in connection with the Pre-Closing Restructuring.

“IAHC Holdings Stock” has the meaning specified in the Recitals.

“Iguana Capital” has the meaning specified in the Recitals.

“Iguana Contribution” has the meaning specified in the Recitals.

“Iguana PP Holdings” has the meaning specified in the Recitals.

“IHC” means Independence Holding Company.

“IHC Marks” means any and all Trademarks owned by Parent, Seller or any of their Affiliates (other than the Company and its Subsidiaries and IAIC), including all Trademarks comprising, using or containing “IHC,” “Independence American Holdings Corp.”, “Independence Holding Company” or “The IHC Group,” whether in logo form or otherwise, whether alone or in combination with other words or elements, and including all combinations thereof and any Trademarks embodying any of the foregoing either alone or in combination with other words or elements.

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“Indebtedness” means, with respect to any Person, without duplication, (a) the principal amount of and accrued interest, premiums, penalties, breakage costs, make-whole payments or obligations or other similar costs, fees or expenses (if any), that would be required to be paid by the borrower pursuant to a customary payoff letter (or otherwise as required by the terms of the underlying instrument), in each case, in respect of (i) any indebtedness of such Person or any of its Subsidiaries for money borrowed and (ii) any indebtedness or other liabilities of such Person or any of its Subsidiaries evidenced by a note, bond, debenture, loan stock or other similar instrument or security, (b) all obligations of the type referred to in clause (a) of third parties for the payment of which such Person or its Subsidiaries is responsible or liable, as obligor, guarantor, surety or otherwise, including any guarantee of such obligations, (c) all obligations of such Person or any of its Subsidiaries as lessee, (d) all obligations with respect to borrowings from any bank, financial institution or other entity, including loans and bank overdrafts, (e) all obligations in respect of letters of credit, bankers’ acceptances and similar facilities issued for the account of such Person or any of its Subsidiaries and all obligations under any performance bonds (but, in each case with respect to this clause (e), solely to the extent drawn and not paid), (f) the net obligations, which may be positive or negative, under all interest rate and exchange rate derivatives, swaps or similar agreements of such Person and its Subsidiaries, (g) all obligations of such Person or any of its Subsidiaries in respect of deferred purchase price with respect to the acquisition by such Person or any of its Subsidiaries of any business, division or product line or portion thereof (whether by merger, sale of stock, sale of assets or otherwise), (h) all indebtedness secured by a Lien to secure all or part of the purchase price of the property subject to such mortgage or Lien, (i) all obligations with respect to the net current Tax liabilities of the Company and its Subsidiaries 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 and its Subsidiaries that includes the Closing Date as closing on (and including) the Closing Date), and including any Taxes deferred in accordance with Section 2302 of the CARES Act, (j) all liabilities under any currency or interest swap or other interest or currency protection, hedging or financial futures transaction or arrangement, (k) deferred revenue (including the related service obligation for American Pet Insurance Company), (l) self-insurance accruals, (m) all Liabilities with respect to accrued but unpaid bonus payments, accrued or owed by the Company and its Subsidiaries 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, related to each Continuing Employee (for the avoidance of doubt, the unpaid bonus amount will include the pre-Closing portion of any bonus payable to a Continuing Employee for their employment with the Company or any Affiliate for the year in which the Closing occurs except for those employees who are paid a pro-rata share of an annual bonus in connection with the termination of their employment agreement), (n) all Liabilities with respect to accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Company Employee immediately prior to the Closing, (o) all Liabilities with respect to accrued but unpaid severance amounts accrued or owed by the Company and its Subsidiaries as of the Closing, together with the employer portion of any Taxes arising therefrom, (p) all guarantees by such Person or any of its Subsidiaries of any of the foregoing obligations of any third party, (q) cancellation reserves, (r) accrued but unpaid dividends and (s) fiduciary liability obligations of the Company and its Subsidiaries, net of any restricted cash held in respect thereof, in each case determined in accordance with GAAP and applied using, to the extent in accordance with

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GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end.  For the avoidance of doubt, “Indebtedness” shall not include any amounts included in the Transaction Expenses.

“Indemnified Party” means the Purchaser Indemnified Party and/or the Seller Indemnified Party, as applicable.

“Indemnified Taxes” means (a) any and all Taxes imposed on or with respect to the Company or any of its Subsidiaries for any Pre-Closing Tax Period, (b) Taxes of any other Person for which the Company or any of its Subsidiaries become 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, and (c) Transfer Taxes for which Seller is responsible under Section 5.08(c); provided, that Indemnified Taxes shall not include any Taxes that are imposed with respect to actions taken by the Purchaser or any Affiliate thereof (including the Company and any of its Subsidiaries) on the Closing Date after the Closing that are outside of the ordinary course of business.  For purposes of this Agreement, whenever it is necessary to determine the portion of any Taxes imposed on or with respect to the Company and its Subsidiaries 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 and its Subsidiaries 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).

“Indemnifying Party” means the Purchaser Indemnifying Party and/or the Seller Indemnifying Party, as applicable.

“Independent Accountant” has the meaning specified in Section 2.05(c).

“Initial Contribution” has the meaning specified in the Recitals.

“Insurance Cap” has the meaning specified in Section 5.12(b).

“Intellectual Property” means all intellectual property or other proprietary rights arising under the Laws of any jurisdiction, including all rights in any of the following: (a) patents and patent applications, including continuations, divisionals, continuations-in-part, reissues or reexaminations and patents issuing thereon; (b) trademarks, service marks, trade dress, logos, corporate names, trade names, symbols, logos, Internet domain names and other similar identifiers of origin, in each case, whether or not registered, together with the goodwill associated with any of the foregoing and symbolized thereby (collectively, “Trademarks”); (c) copyrights, copyright registrations and applications, published and unpublished works of

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authorship, whether or not copyrightable, copyrights in and to the foregoing, together with all common law rights and moral rights therein, and any applications and registrations therefor; (d) Software; and (e) trade secrets, know-how, confidential or proprietary information, methods, formulae, inventions (whether or not patentable), processes, techniques, source code, algorithms, models, designs, drawings, specifications, data and databases, and proprietary customer or similar data (collectively, “Trade Secrets”).

“Interested Party” has the meaning specified in Section 3.20.

“Interim Financial Statements” has the meaning specified in Section 3.07(a).

“Investment Assets” has the meaning specified in Section 3.23.

“IRS” means the Internal Revenue Service.

“IT Assets” means technology devices, computers, computer systems, Software, hardware, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipment and all data stored therein or processed thereby and all associated documentation.

“JAB Holdings” has the meaning specified in the Preamble.

“Joint Direction” means a joint written instruction of Purchaser and Seller instructing the Escrow Agent to make a payment out of the Escrow Account.

“Key Employees” has the meaning specified in the Recitals.

“Knowledge” means (a) in the case of Parent or Seller, the actual knowledge after due inquiry of any of the individuals identified in Section 1.01(a) of the Seller Disclosure Schedule, and (b) in the case of Purchaser, the actual knowledge after due inquiry of any of the individuals identified in Section 1.01(a) of the Purchaser Disclosure Schedule.

“Law” means any local or foreign law, statute, ordinance, code, treaty, rule, regulation, decree or Order.

“Leased Real Property” has the meaning specified in Section 3.18.

“Liability” means, with respect to any Person, any debt, liability or obligation of such Person (whether direct or indirect, known or unknown, asserted or unasserted, determined, determinable or otherwise, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due and whether or not required under GAAP to be reflected on the financial statements of such Person).

“Lien” means any lien, pledge, mortgage, deed of trust, security interest, easement, servitude, preemptive right, right of first refusal, transfer restriction or other similar encumbrance.  Solely for purposes of Section 3.14, it is understood that “Lien” does not include any license or similar right granted with respect to any Intellectual Property.

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“Losses” means any and all losses, damages, costs, expenses, Liabilities, settlement payments, awards, judgments, fines, obligations, claims penalties, interest and penalties, deficiency related to any of the foregoing (including reasonable and documented legal fees (including court and attorneys’ and other professionals’ fees) and expenses and out-of-pocket costs of investigation, collection or enforcement of any provision of this Agreement or Ancillary Agreement), in each case, whether known or unknown, whether asserted or unasserted, and whether accrued or unaccrued.

“Material Adverse Effect” means an effect, event, development, circumstance, fact or change that, individually or in the aggregate, has or would reasonably be expected to (a) have a material adverse effect on the business, results of operations or financial condition of the Company and its Subsidiaries; provided, however, that no effect, event, development, circumstance, fact or change arising out of or resulting from any of the following, either alone or in combination, shall be deemed to constitute or be taken into account in determining whether there has been a Material Adverse Effect:  (i) any conditions generally affecting the U.S. pet insurance and related brokerage industry or other industries in which the Company and its Subsidiaries currently operate; (ii) general economic conditions, including changes in the credit, debt, financial, currency or capital markets (including changes in interest or exchange rates), in each case, in the United States; (iii) earthquakes, floods, fires, hurricanes, tropical storms, tornadoes, wind storms, tsunamis, volcanic eruptions, natural disasters or other acts of nature; (iv) any epidemic, pandemic or disease outbreaks (including COVID-19) or any COVID-19 Measures or any change in such COVID-19 Measures or interpretations thereof or any other public health event; (v) global, national or regional political conditions or unrest, including hostilities, acts of war, sabotage or terrorism or military actions or any escalation, worsening or diminution of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway; (vi) the negotiation, execution, announcement, pendency or performance of this Agreement or the consummation of the Transactions (including compliance with the terms of this Agreement); (vii) any change or proposed change in Laws or GAAP or other applicable accounting rules, or the interpretation or enforcement thereof or other legal or regulatory conditions or actions; (viii) that the prospective owner of the Company is Purchaser or any Affiliate of Purchaser; (ix) any failure by the Company and its Subsidiaries to meet any projections, forecasts or estimates (provided, however, that any effect, event or change that caused or contributed to such failure to meet any projections, forecasts or estimates shall not be excluded under this clause (ix)); (x) any change or announcement of a potential change, in and of itself, in the credit, financial strength or claims paying ratings of the Company and its Subsidiaries (provided, however, that any effect, event, development, circumstance, fact or change that caused or contributed to such change in such rating shall not be excluded under this clause (x)); and (xi) any action taken or omitted to be taken by the Company and its Subsidiaries at the request or with the prior consent of Purchaser; provided that in the case of clauses (i), (ii), (iii), (iv), (v) and (vii), any such effect, event, development, circumstance, fact or change that is not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect to the extent such effect, event, development, circumstance, fact or change adversely affects the Company and its Subsidiaries in a disproportionate manner relative to the other participants in the insurance lines in which the Company and its Subsidiaries operate, considered as a whole; or (b) prevent, materially delay or materially impair the consummation of the Transactions.

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“Material Contracts” has the meaning specified in Section 3.13(a).  

“Material Distribution Partner” means any of the Company and its Subsidiaries’ top ten (10) producers, brokers, distributors or agents of insurance products, as measured by direct written premiums with the Company and its Subsidiaries during the twelve (12) month period ended December 31, 2020.

“Material Distribution Partner Contracts” means any contract between the Company or any of its Subsidiaries, on the one hand, and a distribution partner of the Company or any of its Subsidiaries, on the other hand, representing premiums of at least $500,000 during the twelve (12) month period ended December 31, 2020.

“Material Reinsurance Contracts” has the meaning specified in Section 3.22.

“Material Vendor Contracts” means the top ten (10) agreements, as measured by the total expenditures incurred by the Company and its Subsidiaries under each such Contract during the twelve (12) month period ended December 31, 2020, by and between the Company or any of its Subsidiaries, on the one hand, and a supplier, vendor, agent, distributor or other service provider, on the other hand.

“New Benefit Plans” has the meaning specified in Section 5.05(d).

“New York Courts” has the meaning specified in Section 9.03(b).

“Non-Compete Restricted Period” means a period commencing on the Closing Date and ending three (3) years following the Closing Date.

“Non-Solicit Restricted Period” means a period commencing on the Closing Date and ending two (2) years following the Closing Date.

“Nonparty Affiliates” has the meaning specified in Section 9.10.

“Notice Deadline” has the meaning specified in Section 5.14(a).

“Notice of Insurance” has the meaning specified in Section 8.07(d).

“Open Source License” means any license that requires, as a condition of modification, licensing, conveyance or distribution of Software subject to such license, that such Software or other Software combined, linked or distributed with or derived from such Software (or any modifications or derivative works thereof) be disclosed, licensed, conveyed, distributed or made available in source code form or on a royalty-free basis (including for the purpose of making additional copies or derivative works).

“Order” means any order, final award, injunction, judgment, decree (including any consent decree or similar agreed order or judgment), ruling, writ, directive, settlement, stipulation, ruling, determination or assessment, whether civil, criminal or administrative, entered, issued, made or rendered by any Governmental Authority of competent jurisdiction.

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“Organizational Documents” means any corporate, partnership or limited liability organizational documents, including certificates or articles of incorporation, bylaws, certificates of formation, operating agreements, certificates of limited partnership, partnership agreements, shareholder agreements and certificates of existence, as applicable.

“Outside Date” has the meaning specified in Section 7.01(a).

“PAH” has the meaning specified in the Recitals.

“PAH Interests” has the meaning specified in the Recitals

“Parent” has the meaning set forth in the Preamble.

“Parties” has the meaning specified in the Preamble.

“Permits” means any license, franchise, permit, certificate, approval or authorization from any Governmental Authority.

“Permitted Liens” means (a) Liens for Taxes, assessments or other governmental charges not yet due or payable or that are being contested in good faith through appropriate proceedings and for which adequate reserves have been established in the accounting books and records prior to the date hereof, (b) mechanics’, carriers’, workers’, repairers’, construction contractors’, landlords’ and similar Liens arising or incurred in the ordinary course of business consistent with past practice that are not yet delinquent and which are not, in the aggregate, material to either the Company and its Subsidiaries, or the amount or validity of which is being contested in good faith by appropriate proceedings, and which are reflected on or specifically reserved against or otherwise disclosed in the consolidated balance sheets included in the Financial Statements, (c) zoning, building codes, entitlement and other land use and environmental regulations by any Governmental Authority, none of which materially and adversely impact the current use of the affected property, (d) Liens securing Indebtedness arising or incurred in the ordinary course of business consistent with past practice and disclosed in the Financial Statements, subject to the terms and limitations under this Agreement, (e) with respect to leasehold interests, mortgages and other Liens incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the Leased Real Property, (f) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation arising or incurred in the ordinary course of business consistent with past practice, (g) any Liens reflected with specificity in the Financial Statements and (h) restrictions on transfers of securities under applicable securities Laws or the Company or its Subsidiaries’ Organizational Documents.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity.

“Personal Information” means (a) any information in the possession or under the control of the Company and its Subsidiaries that identifies or could reasonably be used to identify an individual, device, browser or household, or (b) any other information or data protected under Privacy Laws that are applicable to the Company and its Subsidiaries.

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“PetPartners” has the meaning specified in the Recitals.

“PetPartners Purchase Agreement” has the meaning specified in the Recitals.

“Post-Closing Statement” has the meaning specified in Section 2.05(b).

“Pre-Closing Restructuring” has the meaning specified in Section 5.16.

“Pre-Closing Tax Period” means (i) any Tax period ending on or before the Closing Date and (ii) the portion of any Straddle Period ending on the Closing Date.

“Privacy Laws” means all applicable foreign or domestic (federal, state or local) Laws or industry requirements concerning the privacy, security or Processing of information or data, and all rules and regulations promulgated thereunder, including the Federal Trade Commission Act; the Privacy Act of 1974; the CAN-SPAM Act; the Telephone Consumer Protection Act; the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801, et seq.; the New York Department of Financial Services Cybersecurity Regulation, 23 NYCRR § 500, et seq.; N.Y. Gen. Bus. Law § 899-aa, et seq.; N.Y. Gen. Bus. Law § 899-bb, et seq.; 11 NYCRR 420 et seq.; 11 NYCRR 421 et seq.; the Telemarketing and Consumer Fraud and Abuse Prevention Act; data breach notification Laws; the California Consumer Privacy Act; and the European General Data Protection Regulation.  

“Privacy Policies” means all public statements and policies of the Company and its Subsidiaries with respect to privacy, security or Processing of information or data.

“Process” or “Processing” means any operation or set of operations that is performed upon data or information, whether or not by automatic means, including collection, access, acquisition, creation, storage, adaptation, alteration, correction, retrieval, maintenance, use, disclosure, transmission, transfer (including cross-border transfers), combination, storage, deletion, destruction or the design, implementation or other use of artificial intelligence, machine learning and/or deep learning and the insights, input, output, outcomes, predictions, analysis, visualizations and other results therefrom.

“Purchase Price Adjustment Holdback Amount” means an aggregate amount equal to $1,000,000 to be held by the Escrow Agent solely to satisfy any amounts payable to Purchaser pursuant to Section 2.05, plus any interest or other amounts earned thereon.

“Purchaser” has the meaning specified in the Preamble.

“Purchaser Disclosure Schedule” has the meaning specified in Article IV.

“Purchaser Indemnified Parties” has the meaning specified in Section 8.01(a).

“Purchaser Losses” has the meaning specified in Section 8.01(a).

“Purchaser Released Parties” shall have the meaning set forth in Section 5.23.

“Purchaser Releasing Parties” shall have the meaning set forth in Section 5.22.

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“Registered” means, with respect to Intellectual Property, issued by, registered with or the subject of a pending application before any Governmental Authority or Internet domain name registrar.

“Reinsurance Agreement” has the meaning set forth in the Recitals.

“Reinsurance Agreement Term Sheet” has the meaning set forth in the Recitals.

“Reinsurer” means either (a) an insurance company that is not an Affiliate of IHC with a financial strength rating of at least A- from A.M. Best Company, Inc. and/or a risk based capital ratio of at least 350% of authorized control level risk based capital and acceptable to Purchaser or (b) an insurance company that is an Affiliate of IHC, which may be a newly-formed insurance company domiciled in Arkansas.

“Representative” means with respect to any Person, any officer, director, principal, partner, manager, member, attorney, accountant, agent, employee, consultant, financial advisor, financing source or other authorized representative of such Person.

“Resolution Period” has the meaning specified in Section 2.05(c).

“Resolved Matters” has the meaning specified in Section 2.05(c).

“Restricted Contract” has the meaning specified in Section 3.13(a)(xii).

“Retained Assets” has the meaning set forth in the Recitals.

“Review Period” has the meaning specified in Section 2.05(b).

“Rollover Agreement” means an agreement to be entered into by and between JAB Holdings and Seller in connection with the Rollover Contribution, in customary form reasonably satisfactory to the parties thereto, which shall include customary accredited investor representations from Seller.

“Rollover Contribution” has the meaning specified in the Recitals.

“Rollover Shares” has the meaning specified in the Recitals.

“Sale Shares” has the meaning set forth in the Recitals.

“SAP” means, as to the Company and its Subsidiaries, the statutory accounting practices prescribed or permitted by applicable insurance Laws and regulatory authorities of the State of Delaware.

“SB Holdings” has the meaning set forth in the Recitals.

“Securities” has the meaning specified in Section 3.05(d).

“Securities Act” means the Securities Act of 1933.

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“Security Breach” means any actual, suspected, reported or claimed (a) loss or misuse (by any means) of Personal Information; (b) unauthorized access to any IT Assets; (c) inadvertent, unauthorized and/or unlawful Processing of Personal Information; or (d) 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 Assets.

“Seller” has the meaning specified in the Preamble.

“Seller Confidential Information” has the meaning specified in Section 5.10(c).

“Seller Disclosure Schedule” has the meaning specified in Article III.

“Seller Indemnified Parties” has the meaning specified in Section 8.01(b).

“Seller Losses” has the meaning specified in Section 8.01(b).

“Seller Pension Plan” has the meaning specified in Section 3.15(d).

“Seller Released Parties” shall have the meaning set forth in Section 5.22.

“Seller Releasing Parties” shall have the meaning set forth in Section 5.23.

“Seller Tax Return” has the meaning specified in Section 5.08(a).

“Share” and “Shares” have the meaning specified in the Recitals.

“Software” means all (a) computer programs, including algorithms, models and methodologies, whether in source code or object code, (b) databases and other compilations and collections of data or information and (c) documentation, including user manuals and other training documentation, related to clauses (a) or (b).

“Subject Business” has the meaning specified in the Reinsurance Agreement Term Sheet).

“Stockholders Agreement” has the meaning specified in the PetPartners Agreement.

“SSLIC Agreement” means the Quota Share Reinsurance Agreement, effective May 1, 2015, by and between Standard Security Life Insurance Company of New York and IAIC, as amended pursuant to the Amendment No. 1 to the Quota Share Reinsurance Agreement, effective January 1, 2021, by and between Standard Security Life Insurance Company of New York and IAIC.

“SSLIC Commutation” has the meaning specified in Section 5.14(a).

“Statutory Capital” means the aggregate statutory capital and surplus of the Company and its Subsidiaries as of the Closing Date, as determined in accordance with SAP and as would be required to be reflected on line 37, column 1 of the Company’s statutory financial statement if the Closing Date occurred on the last day of a calendar quarter.

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“Statutory Capital Target” means ninety-two million dollars ($92,000,000).

“Straddle Period” means any Tax period beginning before or on the Closing Date and ending after the Closing Date.

“Subsidiary” of any Person (for purposes of this definition, the “Controlling Company”) means any other Person (a) of which a majority of the outstanding voting securities or other voting equity interests, or a majority of any other interests having the power to direct or cause the direction of the management and policies of such other Person, are owned, directly or indirectly, by the Controlling Company or (b) with respect to which the Controlling Company or its Subsidiaries is a general partner or managing member, provided, that, for purposes of the Company, “Subsidiary” shall not include (i) Global Accident Facilities, LLC, (ii) SB Holdings and (iii) Domain Holdings, LLC for any purpose hereof.

“Substantial Detriment” has the meaning specified in Section 5.03(b).

“Tax Contest” has the meaning specified in Section 5.08(d)(i).

“Tax Return” means any return, report, claim for refund, estimate, information return, declarations, disclosures or statement or other similar document relating to or required to be filed with any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Taxes” means all federal, state, local or non-U.S. taxes or charges in the nature of taxes, including all income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, premium, escheat, unemployment, excise, severance, stamp, occupation, property and estimated taxes, all interest, penalties, fines and additions to tax imposed by any Governmental Authority in connection with any of the foregoing.

“Third-Party Claim” has the meaning specified in Section 8.04(a).

“TPA” shall mean those third-party administrative, claims or other service providers listed in Section 1.01(d) of the Seller Disclosure Schedule that provide administrative, claims or other services to the Company and its Subsidiaries, and any other third-party administrative, claims or other service providers that provide similar services to, or on behalf of, the Company and its Subsidiaries.

“Trade Secrets” has the meaning specified in the definition of Intellectual Property.

“Trademarks” has the meaning specified in the definition of Intellectual Property.

“Transaction Expenses” means the sum, without duplication, of the following: (i) all fees and expenses incurred or payable by or on behalf of the Company or any of its Affiliates for which the Company or any of its Subsidiaries is liable and which remains unpaid as of the Closing, including all legal, accounting, financial advisory, consulting, finders and all other fees and expenses (in each case whether or not billed or invoiced prior to the Closing); (ii) any bonus, retention, change-in-control, transaction or similar payment obligations of the Company or any

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of its Subsidiaries to any Person resulting from, or in connection with, the Transactions or any commitment made prior to the Closing by the Company or any of its Subsidiaries to make any bonus, retention, change-in-control, transaction or similar payments to any Person (regardless of when payment is due); and (iii) all Transaction Payroll Taxes related to the payment Transaction Expenses described in clause (ii) above.  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 or any of its Subsidiaries or Purchaser 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 or any of its Subsidiaries prior to the Closing in connection with any bonuses, retention, change-in-control or similar payments in connection with the Transactions.

“Transactions” means the transactions contemplated by this Agreement and the Ancillary Agreements.

“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, any of the Company’s Subsidiaries or Purchaser.

“Transferred IP” has the meaning specified in the Recitals.

“Transition Services Agreement” has the meaning set forth in the Recitals.

“Unresolved Matters” has the meaning specified in Section 2.05(c).

“Year-End Financial Statements” has the meaning specified in Section 3.07(a).

Section 1.02Interpretations. 

(a)As used in this Agreement, references to the following terms have the meanings indicated: 

(i)to the Preamble or to the Recitals, Sections, Articles, Exhibits or Schedules are to the Preamble or a Recital, Section or Article of, or an Exhibit or Schedule to, this Agreement unless otherwise clearly indicated to the contrary; 

(ii)to any Law are to such Law as amended, modified, supplemented or replaced from time to time and any rules or regulations promulgated thereunder and to any section of any Law including any successor to such section;  

(iii)to any Governmental Authority include any successor to the Governmental Authority and to any Affiliate include any successor to the Affiliate;  

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(iv)to any “copy” of any Contract or other document or instrument are to a true, correct and complete copy thereof;  

(v)to “hereof”, “herein”, “hereunder”, “hereby”, “herewith” and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or clause of this Agreement, unless otherwise clearly indicated to the contrary;  

(vi)to the “date of this Agreement”, “the date hereof” and words of similar import refer to the date set forth in the Preamble; and 

(vii)to “this Agreement” includes the Exhibits and Schedules (including the Seller Disclosure Schedule and the Purchaser Disclosure Schedule) to this Agreement. 

(b)Any documents and agreements referred to herein shall be deemed to have been “delivered”, “provided” or “made available” (or any phrase of similar import) to Purchaser for purposes of this Agreement if they have been posted to the Data Room at least five (5) Business Days prior to the date of this Agreement. 

(c)Whenever the word “include”, “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation”.  The word “or” shall not be exclusive.  Any singular term in this Agreement will be deemed to include the plural, and any plural term the singular.  All pronouns and variations of pronouns will be deemed to refer to the feminine, masculine or neuter, singular or plural, as the identity of the Person referred to may require.  Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. 

(d)Whenever the last day for the exercise of any right or the discharge of any duty under this Agreement falls on a day other than a Business Day, the Party having such right or duty shall have until the next Business Day to exercise such right or discharge such duty.  Unless otherwise indicated, the word “day” shall be interpreted as a calendar day.  With respect to any determination of any period of time, unless otherwise set forth herein, the word “from” means “from and including” and the word “to” means “to but excluding”. 

(e)The table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. 

(f)References to “dollars” or “$” mean United States dollars, unless otherwise clearly indicated to the contrary. 

(g)The Parties have participated jointly in the negotiation and drafting of this Agreement; consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement. 

(h)No summary of this Agreement prepared by or on behalf of any Party shall affect the meaning or interpretation of this Agreement. 

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(i)All capitalized terms used without definition in the Exhibits and Schedules (including the Seller Disclosure Schedule and the Purchaser Disclosure Schedule) to this Agreement shall have the meanings ascribed to such terms in this Agreement. 

(j)For purposes of determining whether any asset, liability or other amount was specifically recorded, identified, reserved for or accrued in the Final Balance Sheet, such asset, liability or other amount will be deemed specifically recorded, identified, reserved for or accrued in the Final Balance Sheet to the extent that (i) such asset, liability or other amount is specifically recorded, identified, reserved for or accrued in the underlying detail supporting the amounts set forth on the Final Closing Statement, including, to the extent applicable, the accounting work papers of the Company, Parent, Seller or Purchaser, as applicable, or (ii) such asset, liability or other amount was specifically recorded, identified, reserved for or accrued directly in the Final Balance Sheet. 



Article IITHE PURCHASE AND SALE; CLOSING; CLOSING DELIVERABLES

Section 2.01Purchase and Sale of Sale Shares.  Upon the terms and subject to the conditions set forth in this Agreement, and in reliance on the representations, warranties and covenants contained herein, at the closing of the Transaction (the “Closing”), Seller agrees to, and Parent agrees to cause Seller to, sell, assign, convey, transfer and deliver to Purchaser, and Purchaser agrees to purchase and accept from Seller, all Sale Shares held by Seller, free and clear of any Liens, for a cash amount equal to the Final Closing Consideration. 

Section 2.02The Closing.  Subject to the satisfaction of the conditions set forth in Article VI (or, to the extent permitted by applicable Law, the written waiver thereof by the Party entitled to waive any such condition), the Closing will take place remotely via the exchange of documents and signatures at 9:00 a.m., New York time on (a) (i) the Business Day following the first Accounting Day (which shall, if applicable, be the Accounting Day on a quarter end) on which the conditions to the Closing set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) are satisfied or waived by the Party entitled to waive any such condition or (ii) at Purchaser’s election, if each condition to the Closing set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) is satisfied or waived during the last six (6) Business Days prior to the first Accounting Day on which the conditions to the Closing set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) are satisfied or waived by the Party entitled to waive any such condition, the Business Day following the second Accounting Day on which the conditions to the Closing set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) are satisfied or waived by the Party entitled to waive any such condition or (b) such other date as agreed in writing by Purchaser and Seller.  The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.  The Closing will be effective as of 12:01 a.m. (Eastern U.S. Time) on the Closing Date (the “Effective Time”). 

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Section 2.03Deliveries at Closing. 

(a)By Parent.  Upon the terms and subject to the conditions set forth in this Agreement, at or prior to the Closing, Parent shall deliver or cause to be delivered: 

(i)to Purchaser, counterparts of each of the Ancillary Agreements (other than the Confidentiality Agreement) to which Parent or any of its Affiliates is a party, duly executed by all parties thereto other than Purchaser or its applicable Affiliates; 

(ii)to Purchaser, on behalf of Parent, the certificate contemplated by Section 6.03(c); 

(iii)to Purchaser, the certificate or certificates representing the Sale Shares, duly endorsed in blank by the record holder thereof or accompanied by duly executed stock power(s) endorsed in blank by the record holder thereof or other appropriate instrument of sale, assignment and transfer with respect to the Shares; and 

(iv)to Purchaser, a duly executed IRS Forms W-9, and a certificate on a form reasonably acceptable to Purchaser, a that complies with the requirements of Treasury Regulations Section 1.1445-2(b) (“FIRPTA Certificate”). 

(b)By Purchaser.  Upon the terms and subject to the conditions set forth in this Agreement, at or prior to the Closing, Purchaser shall deliver or cause to be delivered: 

(i)to Seller, the Estimated Closing Consideration by wire transfer of immediately available funds to the account designated to Purchaser by Seller on or prior to the Closing Date; 

(ii)to the Escrow Agent (to the Escrow Account), the Purchase Price Adjustment Holdback Amount; 

(iii)to Parent, counterparts of each of the Ancillary Agreements (other than the Confidentiality Agreement) to which Purchaser or any of its Affiliates is a party, duly executed by Purchaser or its applicable Affiliates party thereto; and 

(iv)to Parent, the certificate contemplated by Section 6.03(c). 

Section 2.04Estimated Closing Date Balance Sheet; Estimated Closing Consideration.  No later than five (5) Business Days before the Closing Date, Parent shall deliver to Purchaser (i) an estimated unaudited balance sheet of the Company, as of the Closing, which shall be prepared in accordance with GAAP consistently applied (except that such balance sheet will not be required to include footnotes) (the “Estimated Closing Date Balance Sheet”), and (ii) based on the Estimated Closing Date Balance Sheet, a statement (the “Estimated Closing Statement”) accompanied by documentation reasonably satisfactory to Purchaser in support of the calculation of information set forth therein, setting forth Parent’s calculation of the Closing Consideration (the “Estimated Closing Consideration”) and each element of the definition thereof.  The Estimated Closing Statement shall be prepared by Parent in a manner consistent with the terms of (including the definitions contained in) this Agreement. 

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Section 2.05Post-Closing Adjustments to the Estimated Closing Consideration. 

(a)From and after the Closing Date until the determination of the Final Closing Statement and Final Balance Sheet pursuant to this Section 2.05, Purchaser shall, and shall cause its Affiliates (including the Company) to, permit Parent and its Representatives reasonable access to the personnel, accountants and properties of the Company, and provide reasonable access (with the right to make copies), during normal business hours upon reasonable advance notice, to all of the books, records, Contracts and other documents (including auditor’s work papers) of the Company that are or could reasonably be relevant to the calculations set forth in the Final Closing Statement and Adjusted Closing Date Balance Sheet, any Dispute Notice or otherwise related to the negotiation or resolution of the Estimated Closing Statement or Estimated Closing Date Balance Sheet.  Parent and its Representatives shall use their reasonable best efforts to minimize any disruption to the Company or Purchaser in connection with such access. 

(b)Following the Closing, Purchaser shall prepare (i) an unaudited consolidated balance sheet of the Company as of the Closing prepared in accordance with GAAP consistently applied (except that such balance sheet will not be required to include footnotes) (the “Adjusted Closing Date Balance Sheet”) and (ii) a statement (“Post-Closing Statement”) setting forth Purchaser’s good-faith calculation of the Closing Consideration and each element of the definition thereof, based on the Adjusted Closing Date Balance Sheet.  Purchaser shall deliver the Post-Closing Statement, together with reasonable supporting detail as to each of the calculations set forth in the Post-Closing Statement and Adjusted Closing Date Balance Sheet to Parent no later than one hundred twenty (120) days following the Closing Date.  Notwithstanding anything herein to the contrary, the Parties agree that the Post-Closing Statement and Adjusted Closing Date Balance Sheet, and the component items and calculations therein, shall be prepared by Purchaser in accordance with the terms of (including the definitions contained in) this Agreement.  The Post-Closing Statement and Adjusted Closing Date Balance Sheet shall be conclusive, final and binding on all Parties absent manifest error unless Parent provides Purchaser written notice (a “Dispute Notice”) of any disputes or objections thereto (collectively, the “Disputed Items”) with reasonable supporting detail as to such Disputed Items, within sixty (60) days after receipt of the Post-Closing Statement and Adjusted Closing Date Balance Sheet (such period, the “Review Period”).   

(c)Purchaser and Parent shall, for a period of thirty (30) days (or such longer period as Purchaser and Parent may agree in writing) following delivery of a Dispute Notice to Purchaser (the “Resolution Period”), attempt in good faith to resolve their differences (all such discussions and communications related thereto shall (unless otherwise agreed by Purchaser and Parent in writing) be governed by Rule 408 of the Federal Rules of Evidence and any applicable similar state rule).  Any Disputed Items whose resolutions are agreed to by Purchaser and Parent in writing, together with any items or calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet not disputed or objected to by Parent in the Dispute Notice, are collectively referred to herein as the “Resolved Matters”.  Any Resolved Matters shall be conclusive, final and binding on all Parties absent manifest error, except to the extent such component could be affected by other components of the calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet that are the subject of a Dispute Notice.  If at the end of the Resolution Period, Purchaser and Parent have been unable to resolve  

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all of the differences that they may have with respect to the matters specified in the Dispute Notice, either of Purchaser or Parent may, upon written notice to the other, refer all matters that remain in dispute with respect to the Dispute Notice (the “Unresolved Matters”) for resolution to a partner of KPMG US LLP (the “Independent Accountant”).  If KPMG US LLP notifies the Parties that it is unwilling or unable to serve as the Independent Accountant, within thirty (30) days thereafter, the Parties will jointly select and retain a partner or senior employee of a nationally recognized accounting firm that is not the auditor or independent accounting firm of any of the Parties, who is a certified public accountant and is independent of the Parties and impartial, to serve as the Independent Accountant, and such accounting firm shall be deemed the Independent Accountant for the purposes of the immediately preceding sentence.  If, during such thirty (30) day period, the Parties cannot mutually agree on an alternate Independent Accountant, any Party may request the American Arbitration Association to appoint as the Independent Accountant, within fifteen (15) days from the date of such request or as soon as practicable thereafter, a partner in a nationally recognized accounting firm that is not the auditor or independent accounting firm of any of the Parties, who is a certified public accountant and who is independent of the Parties and impartial.  If one or more Unresolved Matters are submitted to the Independent Accountant for resolution, Purchaser and Parent shall enter into a customary engagement letter with, and to the extent necessary each Party will waive and cause its controlling Affiliates to waive any conflicts with, the Independent Accountant at the time such dispute is submitted to the Independent Accountant and shall cooperate with the Independent Accountant in connection with its determination pursuant to this Section 2.05.  Within ten (10) days after the Independent Accountant has been retained, each of Purchaser and Parent shall furnish, at their own expense, to the Independent Accountant and substantially simultaneously to the other a written statement of its position with respect to each Unresolved Matter.  Within five (5) Business Days after the expiration of such ten (10) day period, each of Purchaser and Parent may deliver to the Independent Accountant its response to the other’s position on each Unresolved Matter; provided that it delivers a copy thereof substantially simultaneously to the other.  With each submission, each of Purchaser and Parent may also furnish to the Independent Accountant such other information and documents as it deems relevant or such information and documents as may be requested by the Independent Accountant; provided that it delivers a copy thereof substantially simultaneously to the other.  The Independent Accountant may, at its discretion, conduct one or more conferences (whether in person or by teleconference) concerning the disagreement and each of Purchaser and Parent shall have the right to present additional documents, materials and other information and to have present its Representatives at each of such conferences.

(d)The Independent Accountant shall be directed to promptly, and in any event within thirty (30) days after its appointment pursuant to Section 2.05(c), render its decision on the Unresolved Matters (and not on any other matter or calculation set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet).  The Independent Accountant’s determination as to each Unresolved Matter shall be set forth in a written statement delivered to each of Purchaser and Parent, which shall include the Independent Accountant’s (i) determination as to the calculation of each of the Unresolved Matters and (ii) the corresponding corrective calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet that are derived from its determination as to the calculations of the Unresolved Matters, all of which shall be conclusive, final and binding on all Parties absent manifest error.  In resolving any Unresolved Matter, the Independent Accountant may not assign a value to such item greater  

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than the greatest value for such item claimed by Purchaser in the Post-Closing Statement or Adjusted Closing Date Balance Sheet or by Parent in the Dispute Notice or less than the lower value for such item claimed by Purchaser in the Post-Closing Statement or Adjusted Closing Date Balance Sheet or by Parent in the Dispute Notice.  The Independent Accountant shall also determine the proportion of its fees and expenses to be paid by each of Purchaser and Parent based on the relative extent (as determined by the Independent Accountant) to which the Independent Accountant has accepted the positions of Purchaser and Parent in its determination as to each Unresolved Matter.

(e)For purposes of this Agreement, subject to the third sentence of Section 2.05(b), the “Final Closing Statement” shall be (i) in the event that no Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), (ii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, and Purchaser and Parent are able to agree on all matters set forth in such Dispute Notice, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted pursuant to the agreement of Purchaser and Parent in writing, or (iii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period and Purchaser and Parent are unable to agree on all matters set forth in such Dispute Notice, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted by the Independent Accountant to be consistent with (A) the Resolved Matters and (B) the Independent Accountant’s determination as to the calculation of the Unresolved Matters in accordance with Section 2.05(c). 

(f)For purposes of this Agreement, subject to the third sentence of Section 2.05(b), the “Final Balance Sheet” shall be (i) in the event that no Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), (ii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period Purchaser and Parent are able to agree on all matters set forth in such Dispute Notice, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted pursuant to the agreement of Purchaser and Parent in writing or (iii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period and Purchaser and Parent are unable to agree on all matters set forth in such Dispute Notice, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted by the Independent Accountant to be consistent with (A) the Resolved Matters and (B) the Independent Accountant’s determination as to the calculation of the Unresolved Matters in accordance with Section 2.05(c). 

(g)Payment of the Post-Closing Adjustment. 

(i)If the Final Closing Consideration exceeds the Estimated Closing Consideration, then within two (2) Business Days after the final determination of the Final Closing Statement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account to Seller an aggregate amount equal to the Purchase Price Adjustment Holdback Amount.  Contemporaneously with that delivery, Purchaser shall pay to Seller by wire transfer of immediately available funds to  

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an account designated by Seller the full amount by which the Final Closing Consideration exceeds the Estimated Closing Consideration (if any).  In the case of this Section 2.05(g)(i), Seller’s sole and exclusive remedy shall be to seek payment from Purchaser of the amount determined pursuant to this Section 2.05(g)(i).

(ii)If the Final Closing Consideration is less than or equal to the Estimated Closing Consideration, then within two (2) Business Days after the final determination of the Final Closing Statement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account: (i) to the Purchaser, the lesser of (A) the Purchase Price Adjustment Holdback Amount and (B) the absolute value of the dollar amount by which the Estimated Closing Consideration exceeds the Final Closing Consideration, by wire transfer of immediately available funds to the account or accounts designated in writing by Purchaser; and (ii) to Seller, any remaining amount of the Purchase Price Adjustment Holdback Amount, if any, following the payment to the Company made pursuant to this Section 2.05(g)(ii); provided, that if the absolute value of the difference between the Estimated Closing Consideration and the Final Closing Consideration is greater than the Purchase Price Adjustment Holdback Amount, then Seller shall pay to Purchaser the difference between the absolute value of such difference and the Purchase Price Adjustment Holdback Amount by wire transfer or delivery of other immediately available funds.  In the case of this Section 2.05(g)(ii), Purchaser’s sole and exclusive remedy shall be to seek payment from Seller of the amount determined pursuant to this Section 2.05(g)(ii). 

(h)All payments pursuant to this Section 2.05 shall be treated as an adjustment to the Closing Consideration for all non-U.S., federal, state and local income Tax purposes. 

Section 2.06Withholding Taxes.  Notwithstanding anything to the contrary contained in this Agreement, Purchaser and the Company 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 of state, local or foreign Tax Law.  Purchaser, 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. 


Article IIIREPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

Except as set forth in the disclosure schedule delivered by Parent and Seller to Purchaser concurrently with the execution of this Agreement (the “Seller Disclosure Schedule”) (it being understood and agreed by the Parties that disclosure of any item in any section or subsection of the Seller Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Seller Disclosure Schedule to which the relevance of such item is reasonably apparent on its face), Parent and Seller hereby jointly and severally represent and warrant to Purchaser as of the date hereof and as of the Closing Date as follows:

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Section 3.01Organization, Standing and Power.   

(a)Each of Parent and Seller and, to the Knowledge of Parent or Seller, FIGO and PAH is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, this Agreement and the Ancillary Agreements to which it will be a party. Each Affiliate of Parent (other than Seller and the Company and its Subsidiaries) that will be a party to any Ancillary Agreement is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, the Ancillary Agreements to which such Person will be a party. 

(b)Each of the Company and its Subsidiaries are duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to own or lease and operate all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries are duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification required by Law. Parent has made available to Purchaser true, correct and complete copies of the Organizational Documents of each of the Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries is in violation of any of its Organizational Documents. 

Section 3.02Authorization.  The execution, delivery and performance by Parent, Seller and the Company and its Subsidiaries of this Agreement and each Ancillary Agreement to which it is or will be party, and the consummation by Parent, Seller and the Company and its Subsidiaries of the Transactions, have been duly and validly authorized by all requisite action of each of Parent, Seller, the Company, each of the Company’s Subsidiaries and IHC. This Agreement has been, and each applicable Ancillary Agreement will be, at or prior to the Closing, duly executed and delivered by each of Parent, Seller and the Company and each of the Company’s Subsidiaries, as applicable, and, assuming due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitutes a legal, valid and binding obligation of each of Parent, Seller and the Company and each of the Company’s Subsidiaries, as applicable, enforceable against each of Parent, Seller and the Company and each of the Company’s Subsidiaries, as applicable, in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar Laws of general application affecting or relating to the enforcement of creditors’ rights generally or general principles of equity, whether considered in a proceeding at Law or in equity (the “Bankruptcy and Equity Exception”). 

Section 3.03Noncontravention.  

(a)None of the execution and delivery of this Agreement or any applicable Ancillary Agreement by Parent, Seller, the Company or any of the Company’s Subsidiaries, as applicable,  

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the consummation by Parent, Seller, the Company or any of the Company’s Subsidiaries, as applicable, of the Transactions, or compliance by Parent, Seller, the Company or any of the Company’s Subsidiaries, as applicable, with any of the terms or provisions hereof or thereof will (i) conflict with or violate any provision of their respective Organizational Documents or (ii) (A) assuming that the authorizations, consents and approvals referred to in Section 3.04 are obtained and the filings referred to in Section 3.04 are made, violate any Law applicable to Parent, Seller, the Company or any of the Company’s Subsidiaries, (B) with or without notice, lapse of time or both, violate, breach or constitute a default under any of the terms, conditions or provisions of any Material Contract or accelerate or give rise to a right of termination, cancellation or acceleration of any of the Company’s or any of the Company’s Subsidiaries’ obligations under any such Material Contract or to the loss or diminution of any of the Company’s or any of the Company’s Subsidiaries’ rights or benefits under a Material Contract, (C) assuming that the authorizations, consents and approvals referred to in Section 3.04 are obtained and the filings referred to in Section 3.04 are made, with or without notice, lapse of time or both, violate, breach or constitute a default under any Permit held by the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or any of their respective assets or properties are bound or (D) result in the creation of any Lien (other than any Permitted Lien) on any properties, rights or assets of the Company or any of its Subsidiaries, except, in the case of clause (ii), for such violations, defaults, accelerations, rights, losses and Liens as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b)No vote or consent of the holders of any class or series of capital stock or other equity interest of Parent, Seller, the Company or any Subsidiary of the Company or any Affiliate of the foregoing (including IHC) is necessary to approve this Agreement, any Ancillary Agreement or the Transactions. 

Section 3.04Governmental Approvals.  Except for (a) filings required under, and compliance with other applicable requirements of, the HSR Act and (b) Consents set forth in Section 3.04 of the Seller Disclosure Schedule and any filings that may be made by or on behalf of Purchaser or its Affiliates, no consents, authorizations or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement or any applicable Ancillary Agreement by Parent, Seller, the Company or any of the Company’s Subsidiaries, as applicable, or the consummation by Parent, Seller, the Company or any of the Company’s Subsidiaries, as applicable, of the Transactions, other than such other consents, authorizations, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions. 

Section 3.05Capital Stock of the Company. 

(a)As of the date hereof, 100 Shares are issued and outstanding.  Section 3.05(a) of the Seller Disclosure Schedule sets forth a list, as of the date hereof, of all holders of outstanding Shares. 

(b)Seller is the sole record and beneficial owner of 100 issued and outstanding Shares.  Seller has good and valid title to all such Shares, free and clear of all Liens (other than any transfer restrictions imposed by federal and state securities and insurance laws), and upon  

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delivery by Seller of such Shares at the Closing, good and valid title to such Shares will pass to Purchaser.

(c)Except for this Agreement, Seller is not a party to any Contracts with respect to the voting, purchase, dividend rights, disposition or transfer of the capital stock of the Company or any of the Company’s Subsidiaries. 

(d)There are (i) no outstanding shares of capital stock of, or other equity or voting interest in, the Company or any of the Company’s Subsidiaries, (ii) no outstanding securities of the Company or any of the Company’s Subsidiaries convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company or any of the Company’s Subsidiaries, (iii) no outstanding options, warrants, rights or other commitments or agreements to acquire from the Company or any of the Company’s Subsidiaries, or that obligate the Company or any of the Company’s Subsidiaries to issue or register, or that restrict the transfer or voting of, any capital stock of, or other equity or voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company or any of the Company’s Subsidiaries, (iv) no obligations of the Company or any of the Company’s Subsidiaries to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any capital stock of, or other equity or voting interest (including any voting debt) in, the Company or any of the Company’s Subsidiaries (the items in clauses (i), (ii), (iii) and (iv)), together with the capital stock of the Company, being referred to collectively as “Securities”), (v) no calls, subscriptions, preemptive rights or Contracts for the purchase or issuance of Securities, (vi) no “phantom stock” or similar obligations of the Company or any of the Company’s Subsidiaries, (vii) no Contracts requiring the Company or any of the Company’s Subsidiaries to acquire any equity interest of any other Person and (viii) no other obligations by the Company or any of the Company’s Subsidiaries to make any payments based on the price or value of any Securities or dividends paid thereon or revenues, earnings or financial performance or any other attribute of the Company or any of the Company’s Subsidiaries. 

(e)There are no outstanding agreements of any kind which (i) obligate the Company or any of the Company’s Subsidiaries to repurchase, redeem or otherwise acquire any Securities, (ii) obligate the Company or any of the Company’s Subsidiaries to preempt the sale of any Securities to Purchaser, (iii) obligate the Company or any of the Company’s Subsidiaries to sell, or grant any Person a right to acquire, or in any way dispose of, any Securities or obligations exercisable or exchangeable for, or convertible into, Securities or (iv) obligate the Company or any of the Company’s Subsidiaries to grant, extend or enter into any such agreements, and each of the Company and each of its Subsidiaries does not have any outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote with the holders of the Shares on any matter.  All Shares have been duly authorized and validly issued and are fully paid, nonassessable, issued in compliance with all applicable Law concerning the issuance of securities and the Company’s Organizational Documents and have not been issued in violation of any preemptive or other similar rights. 

(f)The Securities of each Subsidiary of the Company issued and outstanding as of the date hereof: (i) have been duly authorized and validly issued; (ii) are, to the extent applicable, fully paid and non-assessable; and (iii) has not been issued in violation of and is not subject to,  

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any preemptive or subscription rights, rights of first refusal or other similar rights, except, in each case, where the (A) failure to be so duly authorized, validly issued, fully paid or non-assessable, or (B) issuance in violation of or subject to such rights, is not material to the Company and its Subsidiaries, taken as a whole.  As of the date hereof, neither the Company nor any of its Subsidiaries has any Subsidiaries or owns any Securities in any other Person.

(g)As of the date hereof, the Company is the record and beneficial owner of a majority of the Securities and voting power of each of its Subsidiaries, in each case free and clear of any Liens, except for Permitted Liens.  There are no outstanding (i) options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other contracts that require the Company to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem Securities of any Subsidiary, (ii) stock appreciation, phantom stock, profit participation or similar rights with respect to such Subsidiaries or (iii) bonds, debentures, notes, or other Indebtedness that entitles the holders to vote (or that is convertible or exercisable for or exchangeable into securities that entitle the holders to vote) with holders of securities of any Subsidiary on any matter. 

(h)The Company owns, directly or indirectly, all of its issued and outstanding equity interests of each of FIGO and PAH, in each case free and clear of any Liens (other than restrictions under applicable Law or Liens arising under the Organizational Documents of FIGO or PAH, as applicable), all of which interests are duly authorized, validly issued and fully paid.  

Section 3.06Subsidiaries.  Except for Subsidiaries set forth on Section 3.06 of the Seller Disclosure Schedule, the Company has (and in the last four (4) years has had) no Subsidiaries. 

Section 3.07Financial Statements; No Undisclosed Liabilities. 

(a)True, complete and correct copies of (i) the audited financial statements of the Company and its Subsidiaries for the years ended December 31, 2019 and 2020, and the related statements of operations for the fiscal years ended December 31, 2019 and 2020 (collectively, the “Year-End Financial Statements”), and (ii) unaudited financial statements of the Company and its Subsidiaries for the period ended March 31, 2021 and the related statements of operations for the three-month period then ended (the “Interim Financial Statements” and together with the Year-End Financial Statements, the “Financial Statements”), have been made available to Purchaser.  The Financial Statements were prepared from the books of account and other financial records of the Company and its Subsidiaries, as applicable, and were prepared in accordance with GAAP consistently applied during the periods involved except as otherwise noted therein.  The Financial Statements fairly present, in all material respects, the financial position and the results of operations of the Company and its Subsidiaries, at the dates, and for the periods, presented therein (subject, in the case of Interim Financial Statements, to changes resulting from normal year-end audit adjustments and to the absence of certain notes).  As of their respective filing dates, the Financial Statements complied in all material respects with all requirements of applicable Law. 

(b)Except as otherwise set forth at Section 3.07(b) of the Seller Disclosure Schedule, neither the Company nor any of its Subsidiaries have any Liabilities which would be required to  

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be reflected on, reserved against or otherwise described on a financial statement of the Company or any of its Subsidiaries prepared in accordance with GAAP or the notes thereto, and were not so reflected on, reserved against or described, except Liabilities (i) reflected on, reserved against or described on the Financial Statements of the Company and its Subsidiaries as at December 31, 2020 (including the notes thereto), (ii) incurred after December 31, 2020 in the ordinary course of business consistent with past practice or (iii) required or reasonably contemplated pursuant to this Agreement or the Ancillary Agreements to be incurred by the Company and its Subsidiaries in connection with the Transactions.

(c)The books, records and accounts of the Company and its Subsidiaries have been maintained in all material respects in compliance with all applicable Law and reasonable business practices. Each of the Company and each of its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP. 

Section 3.08Absence of Certain Changes.  

(a)Since December 31, 2020, except for the Transactions, the business of the Company and its Subsidiaries has been conducted in all material respects in the ordinary course of business consistent with past practice and  

(b)Since December 31, 2020, there has not been any change, occurrence or development in the financial condition, properties, assets, liabilities, business or results of operations or any other change, occurrence or development, which has had, or would, individually or in the aggregate, reasonably be expected to have, a Material Adverse Effect. 

Section 3.09Legal Proceedings.   

(a)There is no pending or, to the Knowledge of Parent or Seller, threatened Action  against the Company or any of its Subsidiaries or, to the Knowledge of Parent or Seller, FIGO and PAH (other than ordinary course claims under insurance policies within the applicable limits thereof), which, if adversely determined, would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. 

(b)Neither the Company nor any of its Subsidiaries is subject to any cease-and-desist or other Order issued by, or is a party to any written agreement, consent agreement, memorandum of understanding, commitment letter or similar undertaking between the Company or any of its Subsidiaries, on the one hand, and any Governmental Authority, on the other hand, or is subject to any Order by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policy, procedure or board resolutions at the request of, any Governmental Authority, that materially restricts the conduct of its business, nor, since December 31, 2018, have Parent, Seller, the Company or any of the Company’s Subsidiaries been advised in writing by any Governmental Authority that it is considering issuing or requesting any of the foregoing. 

Section 3.10Compliance with Laws; Permits. 

(a)(i) Each of the Company and each of the Company’s Subsidiaries and, to the Knowledge of Parent or Seller, FIGO and PAH are, and have been since December 31, 2018, in  

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compliance in all material respects with all Laws applicable to the Company, the Company’s Subsidiaries, FIGO or PAH, as applicable, or their respective business operations, (ii) since December 31, 2018, Parent, Seller, the Company, each of the Company’s Subsidiaries and, to the Knowledge of Parent or Seller, FIGO and PAH have not received any written notice from any Governmental Authority of any material violation of any Laws by the Company, any of the Company’s Subsidiaries, FIGO or PAH, as applicable, (iii) each of the Company and each of the Company’s Subsidiaries and, to the Knowledge of Parent or Seller, FIGO and PAH holds all Permits required by Law for the lawful conduct of its respective businesses as presently conducted (but, for the avoidance of doubt, excluding any Permits and Contracts relating to Intellectual Property) (the “Business Licenses”), (iv) all Business Licenses are valid and in good standing and are in full force and effect, (v) each of the Company and each of the Company’s Subsidiaries and, to the Knowledge of Parent or Seller, FIGO and PAH is in compliance in all material respects with the terms of all of the Business Licenses, (vi) neither the Company nor any of its Subsidiaries or Affiliates has received any written communication alleging any material noncompliance on the part of the Company, any of the Company’s Subsidiaries, FIGO or PAH with respect to any Law that has not been cured as of the date hereof and (vii) IAIC is not commercially domiciled in any jurisdiction.

(b)Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions, Parent and Seller are in compliance with all Laws applicable to Parent and Seller, respectively.  As of the date hereof, neither the Company nor any of the Company’s Subsidiaries is a party to any Government Contracts. 

Section 3.11Insurance Matters. 

(a)Prior to the date of this Agreement, Parent has delivered or made available to Purchaser a true, correct and complete copy of all material actuarial reports prepared by actuaries, independent or otherwise, with respect to the Company and its Subsidiaries since December 31, 2020, and all attachments, addenda, supplements and modifications thereto (the “Company Actuarial Analyses”). Each Company Actuarial Analysis was based, in all material respects, upon an accurate inventory of policies relevant to such Company Actuarial Analysis as at the relevant time of preparation. 

(b)Since December 31, 2018, all policies, binders, slips, certificates and other agreements of insurance, in effect as of the date of this Agreement (including all applications, supplements, endorsements, riders and ancillary documents in connection therewith) that are issued by the Company and its Subsidiaries, and any and all marketing materials related thereto, are, to the extent required under applicable Law, on forms and at rates approved by the insurance regulatory authority of the jurisdiction where issued or, to the extent required by applicable Law, have been filed with and not objected to by such authority within the period provided for objection. Since December 31, 2018, each of the Company and each of its Subsidiaries have filed all material reports, statements, documents, registrations, filings or submissions required to be filed by it with any Governmental Authority. All such reports, statements, documents, registrations, filings and submissions are in compliance (and complied at the relevant time) in all material respects with applicable Law. 

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(c)Each Material Distribution Partner, at the time such Material Distribution Partner solicited, negotiated, sold or produced business for the Company and its Subsidiaries, to the extent required by Law, was duly and appropriately appointed by the Company and its Subsidiaries to act as a producer and, to the Knowledge of Parent and Seller, was duly and appropriately licensed as a producer (for the type of business solicited, negotiated, sold or produced by such Material Distribution Partner), in each case, in the particular jurisdiction in which such Material Distribution Partner solicited, negotiated, sold or produced such business. Since December 31, 2018, each Material Distribution Partner was appointed and compensated by the Company and its Subsidiaries in compliance in all material respects with applicable Law. 

(d)To the Knowledge of Parent and Seller, each TPA is duly and appropriately licensed in all material respects for the type of services or products provided by such TPA, in each case, in the particular jurisdiction in which such TPA provided such services or products, and is, and since January 1, 2018 has been, in compliance in all material respects with all applicable Law. 

Section 3.12Insurance Policies.  Section 3.12 of the Seller Disclosure Schedule sets forth a list of all in-force property and liability insurance policies and fidelity or financial institution bonds that are maintained by or for the benefit of the Company and its Subsidiaries, including enterprise-wide insurance policies that cover (a) the Company or any of its Subsidiaries on the one hand and (b) one or more of Parent or its Affiliates on the other hand. All current property and liability insurance policies covering the Company or any of its Subsidiaries are in full force and effect (and all premiums due and payable thereon have been paid in full on a timely basis), and no written notice of cancellation, termination or revocation or other written notice that any such insurance policy is no longer in full force or effect or that the issuer of any such insurance policy is not willing or able to perform its obligations thereunder has been received as of the date hereof by Parent or its Affiliates. None of Parent, Seller, the Company or any of the Company’s Subsidiaries, nor, to the Knowledge of Parent, any insurer under such property and liability insurance policies, is in violation or breach of, or default under, any provision thereof. There are no claims by or on behalf of the Company or any of its Subsidiaries pending under any such insurance policies as to which coverage has been denied by the insurer or as to which, after reviewing the information provided with respect to such claim, the insurer has advised in writing that it intends to deny. 

Section 3.13Material Contracts. 

(a)Section 3.13(a) of the Seller Disclosure Schedule sets forth a list of all the following Contracts  to which the Company or any of its Subsidiaries is a party as of the date hereof (the “Material Contracts”): 

(i)Material Distribution Partner Contracts; 

(ii)Material Vendor Contracts; 

(iii)Contracts that involved the expenditure of more than $100,000 in the aggregate during (A) the twelve (12) month period ended as of December 31, 2020 or (B) the twelve (12) month period ended as of December 31, 2019; 

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(iv)joint venture, investment, partnership, stockholder, limited liability or other similar Contracts (other than distribution agreements and reseller agreements entered into in the ordinary course of business consistent with past practice); 

(v)Contracts providing for the direct or indirect acquisition or disposition by the Company or any of its Subsidiaries of any business, division or product line (whether by merger, sale of stock, sale of assets or otherwise), or capital stock of any other Person since December 31, 2015; 

(vi)Contracts providing for the incurrence of any Indebtedness having an outstanding principal amount of more than $50,000 or the making of any loans (other than loans made to employees in the ordinary course of business consistent with past practice); 

(vii)Contracts that prohibit the payment of dividends or distribution in respect of the capital stock of the Company or any of its Subsidiaries, the pledging of the capital stock of the Company or any of its Subsidiaries or the incurrence of Indebtedness by the Company or any of its Subsidiaries; 

(viii)Contracts under which the Company or any of its Subsidiaries has directly or indirectly guaranteed or otherwise agreed to be responsible for Indebtedness of more than $100,000 for borrowed money or other obligations or liabilities of any Person (except for Indebtedness for borrowed money or other obligations or liabilities); 

(ix)Contracts containing covenants requiring capital expenditures in excess of $75,000 on an annual basis or in excess of $150,000 in the aggregate; 

(x)Contracts creating any Lien (other than Permitted Liens) upon any material assets of the Company or any of its Subsidiaries, other than purchase money security interests in connection with the acquisition of equipment in the ordinary course of business consistent with past practice; 

(xi)Contracts pursuant to which (A) any license or other rights with respect to material Intellectual Property is granted by a third party to, or granted to a third party by, the Company or any of its Subsidiaries, other than agreements for unmodified, generally commercially available “off-the-shelf” Software that have been granted on standardized, generally available terms, (B) the Company or any of its Subsidiaries has assigned or transferred or agreed to assign or transfer any material Intellectual Property to any third party or (C) the Company or any of its Subsidiaries is subject to any obligation or covenant with respect to the use, licensing, enforcement, prosecution or other exploitation of any material Intellectual Property, including standstills, settlements and trademark co-existence or consent Contracts; 

(xii)(A) Contracts containing provisions or covenants that (1) expressly limit or purport to limit the ability of the Company or any of its Subsidiaries (or, after the Closing, Purchaser or any of its Affiliates) to engage in any line of business or with any Person or engage in any business activity in any geographic area or (2) other than in the ordinary course of business, restrict, directly or indirectly, the Company’s or any of its  

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Subsidiaries’ (or, after the Closing, Purchaser’s or its Affiliates) ability to solicit or hire any Person or solicit business from any Person, (B) Contracts that could require the disposition of any material assets or line of business of the Company or any of its Subsidiaries (or, after the Closing, Purchaser or its Affiliates) and (C) Contracts that contain a “most favored nation” provision or, following the Closing, would reasonably be expected to obligate Purchaser or any of its Affiliates to conduct business with any third party on a preferential or exclusive basis (each such Contract as specified in clauses (A), (B) and (C), a “Restricted Contract”);

(xiii)Contracts between, on the one hand, the Company or any of its Subsidiaries, and, on the other hand, any Affiliates of the Company (other than any of its Subsidiaries), and any Affiliate Agreements; 

(xiv)leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) under which the Company or any of its Subsidiaries leases or occupies Leased Real Property; 

(xv)Contracts with FIGO, PAH or any of their respective Affiliates;  

(xvi)any Government Contract;  

(xvii)Contracts that contain a put, call, right of first refusal, right of first offer or similar right pursuant to which the Company or any of its Subsidiaries could be required to, directly or indirectly, purchase or sell, as applicable, any securities, capital stock or other interests, assets or business of any Person; 

(xviii)Contracts related to any settlement of any material Actions;  

(xix)Contracts as to which the consequences of its existence or a default, a non-renewal or a termination thereof would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; 

(xx)any collective bargaining agreement or any Contract with any labor or trade union, works council or any other employee representative body that relates to any Company Employee or any group of Company Employees; 

(xxi)any employment, retention, severance Contract or similar agreement (other than standard offer letters provided by Parent or ones of its Affiliates not containing any severance or retention provisions) with any Company Employee, other than an employment agreement that is for an at-will employee who makes less than $100,000; and 

(xxii)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.   

(b)Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each Material Contract is valid and binding on the Company  

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or its Subsidiaries and is in full force and effect and enforceable in accordance with its terms, (ii) the Company or its Subsidiaries and, to the Knowledge of Parent or Seller, each of the other parties thereto are not in breach of, default or violation under any of such Material Contracts and, to the Knowledge of Parent or Seller, no event has occurred that with notice or lapse of time, or both, would constitute such a breach, default or violation, and (iii) none of Parent or its Affiliates has received written notice of the existence of any event or condition which constitutes, or, after notice or lapse of time or both, will constitute, a breach on the part of the Company or any of its Subsidiaries of any such Material Contract.  A copy of each Material Contract has previously been made available to Purchaser.

Section 3.14Intellectual Property; IT Assets; Privacy. 

(a)Section 3.14(a) of the Seller Disclosure Schedule sets forth a list, as of the date hereof, of all Registered Company Intellectual Property.  Each item of Registered Company Intellectual Property that is material to the business of the Company and its Subsidiaries is subsisting, valid and enforceable.  There are no Actions pending or, to the Knowledge of Parent or Seller, threatened with respect to any material Registered Company Intellectual Property, including with respect to the validity or enforceability thereof, except as may reasonably be expected during the ordinary course of prosecution of applications for Intellectual Property with a Governmental Authority. 

(b)The Company and its Subsidiaries are the sole and exclusive owner and possesses all right, title and interest in and to the Company Intellectual Property (free and clear of any Liens other than Permitted Liens), and otherwise have a valid, written and enforceable right to use each item of material Intellectual Property used or held for use by the Company and its Subsidiaries in their business as currently conducted, and all such ownership or other rights to use such material Intellectual Property shall survive the consummation of the Transactions without modification, cancellation, termination or suspension, or acceleration of any right, obligation or payment with respect to any such material Intellectual Property.  No material Company Intellectual Property is subject to any outstanding Order or agreement adversely affecting the Company’s or any of its Subsidiaries’ ownership or use of, or any rights in or to, any such material Company Intellectual Property.  

(c)Since December 31, 2018, the operation of the business of the Company and its Subsidiaries and the making, using, importing, selling or offering for sale, disposition or any other exploitation of any product or service of the Company and its Subsidiaries have not infringed, misappropriated or otherwise violated any Intellectual Property of any third party in any material respect.  Except as set forth on Section 3.14(c)  the Seller Disclosure Schedules, since December 31, 2018, there has not been any pending or threatened Actions (including any “cease and desist” letter or invitation to take a license) against the Company or any of its Subsidiaries alleging that the operation of the business of the Company or any of its Subsidiaries or the making, using, importing, selling or offering for sale, disposition or any other exploitation of any product or service of the Company or any of its Subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property of any third party.  

(d)Since December 31, 2018, to the Knowledge of Parent or Seller, no third party has infringed, misappropriated or otherwise violated any Company Intellectual Property in any  

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material respect, and none of the Company or any of its Subsidiaries has asserted any claim (including any “cease and desist” letter or invitation to take a license) or commenced any Action against any Person alleging any such infringement, misappropriation or violation.

(e)The Company and its Subsidiaries have taken all reasonable measures to maintain, protect and enforce its rights in the material Company Intellectual Property, including the confidentiality of all material Trade Secrets that are included therein, and no such material Trade Secret has been used or discovered by or disclosed to any Person except pursuant to written, valid and enforceable non-disclosure agreements protecting the confidentiality thereof, which such agreements have not been breached in any material respect. 

(f)All of the Company’s and the Company’s Subsidiaries’ current and former employees, contractors, consultants and other personnel who have been involved in development or creation of any material Intellectual Property for or on behalf of the Company and its Subsidiaries have executed a written agreement containing a valid, enforceable and irrevocable present assignment of all right, title and interest in and to such Intellectual Property to the Company and/or its Subsidiaries. 

(g)No Software (or products containing Software) sold, licensed, conveyed or distributed by the Company or any of its Subsidiaries contains, is derived from, or links to any Software that is governed by an Open Source License.  Each of the Company and each of its Subsidiaries is in material compliance with all Open Source Licenses to which any such Software used by the Company or any of its Subsidiaries is subject. 

(h)Except as otherwise set forth on Section 3.13(h) of the Seller Disclosure Schedule, the Company and its Subsidiaries are the sole and exclusive owners of, and possess all right, title and interest in and to, the Company IT Assets (free and clear of any Liens other than Permitted Liens), or otherwise have a valid, written and enforceable right to use each material IT Asset used or held for use by the Company and its Subsidiaries as currently conducted and as intended to be conducted, and all such ownership or other rights to use such IT Assets shall survive the consummation of the Transactions without modification, cancellation, termination or suspension, or acceleration of any right, obligation or payment with respect to any such IT Assets.  All of the IT Assets used or held for use by the Company and its Subsidiaries: (i) operate and perform in all material respects as required by the Company and its Subsidiaries for the operation of their businesses as currently conducted or intended to be conducted; (ii) since December 31, 2018, have not materially malfunctioned or failed, or suffered a material Security Breach or material unscheduled downtime; and (iii) are free from any viruses, worms and other malware.  

(i)With respect to the IT Assets used or held for use by the Company and its Subsidiaries, the Company and its Subsidiaries have, within the past twelve (12) months, conducted reasonable penetration testing, risk assessments and data backup, data storage, data processing (including the Processing of Personal Information), system redundancy and disaster avoidance and recovery testing consistent with industry best practices for similarly situated insurance companies.  The Company and its Subsidiaries have resolved in all material respects each material deficiency identified in any such testing or assessment. True, correct and complete  

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copies of the results and reports of any such testing or assessment have been made available to Purchaser.

(j)The Company and its Subsidiaries have at all times complied in all material respects with all Privacy Laws relating to data privacy, protection and security (including with respect to Processing of any Personal Information), including the Privacy Policies.  Since December 31, 2018, none of the Company or any of its Subsidiaries has been under investigation by any Governmental Authority for a violation of any applicable Privacy Law and no claims have been asserted or threatened in writing against the Company by any Person or Governmental Authority alleging any violation of Privacy Laws or the Privacy Policies. 

(k)Each of the Company and each of its Subsidiaries (i) maintains a comprehensive and written information privacy and security protocol that complies with all applicable Privacy Laws and Privacy Policies, and (ii) maintains reasonable measures to protect the privacy, operation, confidentiality, integrity and security of all Personal Information against any Security Breach.  To the Knowledge of Parent or Seller, none of the Company nor any of its Subsidiaries has suffered a material Security Breach, been required to notify any Person or Governmental Authority of any material Security Breach or been adversely affected by any viruses, worms or other malware or denial-of-service attacks on any IT Assets.  All Company Employees, contractors, consultants and other personnel of the Company and its Subsidiaries who have access to or have a role in the Processing of Personal Information have been informed of and trained regarding Privacy Laws and the Privacy Policies. 

Section 3.15Employee Benefits Matters. 

(a)Section 3.15(a) of the Seller Disclosure Schedule sets forth a list of each material Benefit Plan and separately identifies each Benefit Plan that is sponsored by the Company or any of its Subsidiaries (each, a “Company Benefit Plan”).  For purposes of this Agreement, “Benefit Plan” means any “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”)) and any other compensation or employee benefit plan, policy, program, arrangement or agreement, whether or not covered by ERISA, for the benefit of any Company Employee or any individual service provider who primarily provides services to the Company or any of the Company’s Subsidiaries, including any incentive compensation, equity or equity-based compensation, profit-sharing, retirement, post-retirement, severance or termination pay, employment, individual consulting, paid time off, fringe benefit, welfare, bonus, gross-up, retention, change-in-control or deferred compensation plan, policy, program, arrangement or agreement that is sponsored or maintained by, or contributed to by Parent or any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries) or to which Parent or any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries) is obligated to contribute or pursuant to which Parent or any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries) has any potential liability, other than, in each case, any such plan, policy, program, arrangement or agreement that is sponsored by a Governmental Authority. 

(b)With respect to each Benefit Plan, Parent has made available to Purchaser copies of (in each case, only if applicable) (i) each plan document, including any amendments thereto, (ii) a written description of such Benefit Plan if such plan is not set forth in writing, (iii) the most  

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recent annual report on Form 5500 required to be filed with the IRS, and (iv) the most recent summary plan descriptions, including any summary of material modifications thereto.

(c)(i) Each Benefit Plan has been established and administered in all material respects in compliance with its terms and applicable Law, (ii) none of Parent, any Affiliate of Parent (including Seller, the Company and the Company’s Subsidiaries) nor, to the Knowledge of Parent and Seller, any third party has engaged in any non-exempt “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA), with respect to any Benefit Plan that could reasonably be expected to result in the imposition of any liability to the Company or any of the Company’s Subsidiaries, (iii) there are no pending or, to the Knowledge of Parent or Seller, threatened claims (other than routine claims for benefits), audits, actions or proceedings with respect to any Benefit Plans, and (iv) all contributions or other amounts payable by the Company or any of the Company’s Subsidiaries with respect to each Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP in all material respects. 

(d)All Benefit Plans that are “employee pension plans” (as defined in Section 3(2) of ERISA) that are intended to be tax-qualified under Section 401(a) of the Code (each, a “Seller Pension Plan”) have received a favorable opinion letter from the IRS or are entitled to rely on a favorable determination letter from the IRS, or have filed a timely application therefor and, to the Knowledge of Parent or Seller, 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 Seller Pension Plan that would reasonably be likely to cause the loss of such qualification status of such Seller Pension Plan.  Parent has made available to Purchaser a copy of the most recent determination or opinion letter received with respect to each Seller Pension Plan, as well as a copy of each pending application for a determination letter (if any). 

(e)None of Parent, any Affiliate of Parent (including Seller, the Company and the Company’s Subsidiaries) nor any trade or business, whether or not incorporated, that, together with Parent or any Affiliate thereof would be treated as a single employer under Section 414 of the Code, (i) has contributed (or has any obligation of any sort) in the last six (6) years to a plan that is subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code (or similar provision under non-U.S. law) or (ii) has maintained, established, participated in or contributed to, or is or has been obligated to contribute to, or has otherwise incurred any obligation or liability (including any contingent liability) under any “multiemployer pension plan” (as defined in Section 3(37) of ERISA).  No Benefit Plan is a “multiple employer plan” (within the meaning of Section 4063 of ERISA). 

(f)No Benefit Plan provides health, medical, dental or life insurance benefits following retirement or other termination of employment, except as required under Section 4980B of the Code or any other similar applicable Law or for coverage through the end of the calendar month in which a termination of employment occurs. 

(g)Neither the execution of this Agreement, nor any stockholder or other approval of this Agreement, nor the consummation of the Transactions (whether alone or in connection with any other event(s)) could (i) entitle any Company Employee to severance pay or any increase in severance pay, (ii) accelerate the time of payment or vesting, or trigger any payment or funding  

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(through a grantor trust or otherwise), or increase the amount, of compensation due to any Company Employee, (iii) cause Parent or any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries) to transfer or set aside any assets to fund any benefits under any Benefit Plan, or (iv) limit or restrict the right to merge, amend, terminate or transfer the assets of any Benefit Plan on or following the Closing.

(h)Neither the execution of this Agreement, nor any stockholder or other approval of this Agreement, nor the consummation of the Transactions (whether alone or in connection with any other event(s)) could result in the payment of any amount that could, individually or in combination with any other such payment, constitute an “excess parachute payment”, as defined in Section 280G(b)(1) of the Code. 

(i)Neither Parent nor any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries) has  an obligation to provide, and no Benefit Plan provides any Company Employee with the right to, a “gross-up”, indemnification reimbursement or similar payment in respect of any Taxes that may become payable under Section 409A or 4999 of the Code. 

(j)No Benefit Plan is maintained outside the jurisdiction of the United States or covers any Company Employees who reside or work outside the United States. 

(w)Section 3.15(j) of the Seller Disclosure Schedule sets forth, with respect to each Company Employee, (1) an estimate of the amount (or value if such payment is not made in cash) of the payments to be made to such employee by Parent or any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries) in connection with the consummation of the Transactions (for example, co-invest interests, management promote interests, transaction bonuses or severance), and (2) whether such Company Employee is a party to or is bound by any employment agreement or restrictive covenants (for example, non-competition, non-solicitation or confidentiality covenants) with Parent, Seller or any other parent entity of the Company.  Any agreement triggering payment of the type described in Section 3.14(k)(1) or listed in Section 3.14(k)(2) of the Seller Disclosure Schedule has been provided by Parent to Purchaser. 

Section 3.16Labor. 

(a)Section 3.16(a) of the Seller Disclosure Schedules, sets forth a true, complete and correct list of the Employee Census as such list may be updated in accordance with Section 5.05(a). 

(b)No Company Employee is covered by any collective bargaining agreement, contract or other arrangement or understanding with a labor union or a labor organization, and, to the Knowledge of Parent or Seller, there are no activities or proceedings by any individual or group of individuals, including representatives of any labor organizations or labor unions, to organize any Company Employees.  There are no (a) strikes, work stoppages, work slowdowns, lockouts or other labor disputes pending or, to the Knowledge of Parent or Seller, threatened against the Company or any of the Company’s Subsidiaries by the Company Employees and no such disputes have occurred since December 31, 2018, or (b) unfair labor practice charges or complaints pending or, to the Knowledge of Parent or Seller, threatened against the Company or  

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any of the Company’s Subsidiaries by or on behalf of any Company Employees or group of Company Employees.

(c)With respect to the Company Employees, Parent and its Affiliates (including Seller, the Company and the Company’s Subsidiaries) are, and for the past three (3) years have been, in compliance in all material respects with all applicable Law respecting labor, employment, fair employment practices (including equal employment opportunity laws), terms and conditions of employment, workers’ compensation, occupational safety and health, affirmative action, employee privacy, workplace discrimination and harassment, sexual harassment, immigration, employee leave issues, plant closings, employee classification and wages and hours.  With respect to the Company Employees, neither Parent nor any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries) has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or any similar state or local Law that remains unsatisfied. 

(d)To the Knowledge of Parent or Seller, in the last five (5) years, no allegations of harassment, discrimination or sexual misconduct have been made against any Company Employee who is an officer or any Key Employee in his or her capacity as a director, employee or other service provider of Parent or any Affiliate thereof (including Seller, the Company and the Company’s Subsidiaries). 

 

Section 3.17Tax Matters. 

(a)(i) Each of the Company and each of its Subsidiaries has timely filed with the appropriate Governmental Authority, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all income Tax Returns and other material Tax Returns required by Law to be filed by it, and all such filed Tax Returns were prepared in material compliance with applicable Law and are true, correct and complete in all material respects, and (ii) all Taxes payable by or on behalf of the Company or any of its Subsidiaries (whether or not shown on any Tax Return) have been timely paid.  As of the date hereof, neither the Company nor any of its Subsidiaries is the beneficiary of an extension of time within which to file any Tax Return. 

(b)No deficiency with respect to Taxes has been proposed, asserted or assessed in writing against the Company or any of its Subsidiaries which has not been fully paid or adequately reflected on the Financial Statements. 

(c)No audits, investigations or other administrative proceedings or court proceedings are presently pending, or to the Knowledge of Parent or Seller have been threatened or proposed, in each case with regard to Taxes of the Company and its Subsidiaries. 

(d)Neither the Company nor any of its Subsidiaries has any liability for Taxes of any Person (other than the Company and any of its Subsidiaries) arising from the application of Treasury Regulations Section 1.1502-6 or any analogous provision of state, local or non-U.S. Law, or as transferee or successor, by Contract or otherwise. 

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(e)Neither the Company nor any of its Subsidiaries will be a party to, is bound by or has any obligation under any Tax sharing, Tax allocation or Tax indemnity Contract (other than any commercial Contracts entered into in the ordinary course of business consistent with past practice that do not relate primarily to Taxes), other than any such Contracts that terminate with respect to the Company or any of its Subsidiaries effective as of the Closing Date. 

(f)All material Taxes required by Law to be withheld with respect to the Company or any of its Subsidiaries have been withheld, and, to the extent required by Law, have been remitted to the relevant Governmental Authority. 

(g)Neither the Company nor any of its Subsidiaries has participated in a “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2). 

(h)There are no Liens upon any of the assets or properties of the Company and its Subsidiaries, other than Permitted Liens. 

(i)No written claim has been made by a Governmental Authority in a jurisdiction where the Company or any of its Subsidiaries does not file a Tax Return that the Company or any of its Subsidiaries 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. 

(j)Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of (i) any installment sale or open transaction entered into prior to the Closing, (ii) any accounting method change, (iii) closing agreement executed prior to the Closing, (iv) any prepaid amount received or deferred revenue accrued prior to the Closing, (v) any intercompany transaction or excess loss account described in Section 1502 of the Code (or any corresponding provision of state, local or non-U.S. Law) existing prior to the Closing, (vi) any election under Section 108(i) of the Code (or any corresponding provision of state, local or foreign Law), or (vii) the application of Section 965 of the Code (including as the result of any election under Section 965(h) of the Code). 

(k)Neither the Company nor any of its Subsidiaries is, has been, or will be, a “United States real property holding corporation” within the meaning of Section 897 of the Code during the five (5) year period ending on the Closing Date. 

(l)Neither the Company nor any of its Subsidiaries has ever been a member of an affiliated, consolidated, combined or unitary group for income Tax purposes, other than an affiliated, consolidated, combined or unitary group where Independence Holding Company is the common parent in the last five (5) years. 

(m)Neither the Company nor any of its Subsidiaries is a “life insurance company” taxed pursuant to Section 816 of the Code.  None of the insurance policies issued or sold by the Company or any of its Subsidiaries provide “health insurance coverage” as defined by Section 9832 of the Code. 

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(n)Within the last two (2) years, neither the Company nor any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” within the meaning of Section 355 of the Code in a transaction intended to qualify under Section 355 of the Code. 

(o)Neither the Company nor any of its Subsidiaries has delayed the payment of any payroll or other employment-related Taxes pursuant to Section 2302 of the CARES Act. 

(p)Neither the Company nor any of its Subsidiaries is engaged in and has never been engaged in a trade or business through a “permanent establishment” within the meaning of an applicable income Tax treaty in any country other than the United States. 

(q)Neither the Company’s nor any of its Subsidiaries’ assets is a “Section 197(f)(9) intangible” (as defined in Treas. Reg. § 1.197-2(h)(1)(i) and assuming for this purpose that the transition period ends on August 10, 1993). 

(r)Notwithstanding anything to the contrary set forth herein: (i) the representations and warranties set forth in this Section 3.17 (Tax Matters) and Section 3.15 (Employee Benefits Matters) constitute the sole and exclusive representations and warranties of or with respect to Tax matters; and (ii) such representations and warranties (and any claims based thereon) (other than the representations and warranties set forth in Section 3.17(j) or (o) shall be limited to Taxes attributable to Tax periods (or portions thereof) ending on or before the Closing Date. 

Section 3.18Real Property.  Neither the Company nor any of its Subsidiaries owns any real property. Section 3.17 of the Seller Disclosure Schedule sets forth all property leased or subleased by the Company or any of its Subsidiaries (the “Leased Real Property”). Each of the Company and each of its Subsidiaries has valid, legally binding, enforceable leases or subleases, as applicable, for each Leased Real Property that are in full force and effect, and neither the Company nor any of its Subsidiaries is in material breach of or default under any such lease or sublease, and all Leased Real Property is free and clear of all Liens (except for Permitted Liens). 

Section 3.19Environmental Matters.  Each of the Company and each of its Subsidiaries has complied at all times in all material respects with applicable Environmental Laws and has not leased, owned or operated any property which could be expected to require investigation or remediation and none of Parent or its Affiliates has received any claim or notice regarding potential liability of the Company or any of its Subsidiaries in connection with any Environmental Law, and there are no other circumstances or conditions involving the Company or any of its Subsidiaries that could be expected to result in any claim, liability, cost or restriction on the ownership, use or transfer of any property in connection with any Environmental Law.  

Section 3.20Interested Party Transactions.  As of the date hereof and as of the Closing Date, none of IHC, any of IHC’s Affiliates (other than the Company and its Subsidiaries) or any employee or director of the Company or any of its Subsidiaries or any Person owning directly or indirectly one percent (1%) or more of the Shares as of the date hereof (any such person or entity, an “Interested Party”) or, to the Knowledge of Parent or Seller, any Affiliate or family member of any such Interested Party, is a party to any Contract with or binding upon the Company or any of its Subsidiaries or has any material interest in any property or assets owned by the Company or any of its Subsidiaries or has engaged in any material  

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transaction with the Company or any of its Subsidiaries (in each case, other than those related to a Benefit Plan or other ordinary course employment, compensation or incentive arrangements (all such Contracts, the “Affiliate Agreements”)).

Section 3.21Reserves. The aggregate insurance policy reserves of the Company and its Subsidiaries for claims, losses, loss adjustment expenses, payment of benefits, unearned premium, expenses and claims litigation that are reflected in the Financial Statements as of December 31, 2020, (i) were computed in accordance with generally accepted actuarial standards consistently applied throughout the specified periods and were fairly stated, in accordance with sound actuarial principles, and (ii) met the requirements of applicable Law in all material respects and were at least as great as the minimum aggregate amounts required by applicable Law. Neither this Section 3.21 nor anything else in this Agreement shall constitute a representation or warranty with respect to the adequacy or sufficiency of such reserves or the effect of the adequacy or sufficiency of such reserves on any line item or asset, liability or equity amount on any Financial Statement. 

Section 3.22Reinsurance. Copies of each reinsurance agreement under which the Company or any of its Subsidiaries acts as ceding insurer and under which there was more than one million dollars ($1,000,000) of reserves ceded as of December 31, 2020 (collectively, the “Material Reinsurance Contracts”) have been made available by Parent to Purchaser. (a) Each Material Reinsurance Contract is in full force and effect, (b) with respect to each Material Reinsurance Contract under which the Company or any of its Subsidiaries acts as a ceding insurer and for which the Company or any of its Subsidiaries has taken reserve credit on its statutory annual statements as of December 31, 2020, each of the Company and each of its Subsidiaries has appropriately taken such reserve credit in accordance with SAP and applicable Law and (c) neither the Company or any of its Subsidiaries or, to the Knowledge of Parent and Seller, any counterparty to any Material Reinsurance Contract is not (with or without notice or lapse of time or both) in breach under the terms of such Material Reinsurance Contract. As of the date hereof, no amounts due to the Company or any of its Subsidiaries under the terms of any Material Reinsurance Contract are more than ninety (90) days past due. None of the execution and delivery of this Agreement or any Ancillary Agreement by Parent, Seller, the Company or any of the Company’s Subsidiaries, the consummation by Parent, Seller or the Company or any of the Company’s Subsidiaries of the Transactions, or compliance with any of the terms or provisions hereof or thereof by Parent, Seller, the Company or any of the Company’s Subsidiaries, with or without notice, lapse of time or both, violate, breach or constitute a default under any of the terms, conditions or provisions of any Material Reinsurance Contract or accelerate or give rise to a right of termination, cancellation or acceleration of any of the Company’s or any of the Company’s Subsidiaries’ obligations under any such Material Reinsurance Contract or to the loss of any benefit under a Material Reinsurance Contract, except for such violations, defaults, accelerations, rights and losses as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Reinsurance Agreement will serve to cede all of the Company’s and the Company’s Subsidiaries’ obligations and liabilities with respect to the policies in accordance with the terms set forth on the Reinsurance Agreement Term Sheet. 

Section 3.23Investment Assets. Parent has provided to Purchaser prior to the date hereof a true, correct and complete list of all securities and investment assets, including bonds,  

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notes, debentures, mortgage loans, real estate and all other instruments of Indebtedness, stocks, partnerships, joint venture interests and all other equity interests, certificates issued by or interests in trusts and derivatives (collectively, the “Investment Assets”), carried on the books and records of the Company and its Subsidiaries as of December 31, 2020 with information included therein as to the book value of each such Investment Asset and the market value thereof as of December 31, 2020 (whether or not required by GAAP or SAP to be reflected on a balance sheet), and copies of the investment guidelines of the Company and its Subsidiaries as in effect as of the date hereof. As of the date hereof, all such Investment Assets that continue to be held by the Company and its Subsidiaries comply in all material respects with such investment guidelines and in all material respects with all applicable Law. As of the date of this Agreement, each of the Company and each of its Subsidiaries has good and marketable title to all of the Investment Assets it purports to own, free and clear of all Liens other than Liens created or incurred in the ordinary course of the Company’s and its Subsidiaries’ investment operations consistent with past practice. The Investment Assets held by the Company and its Subsidiaries that were listed as admitted assets on its Financial Statements as of December 31, 2020 were qualified or eligible to be admitted assets of the Company under applicable insurance Laws.

Section 3.24Sufficiency of Assets

.  As of the Closing, the assets, properties and rights of the Company and its Subsidiaries and taking into consideration the transactions contemplated by the PetPartners Purchase Agreement, together with the services provided pursuant to the Transition Services Agreement, will comprise all of the assets, Permits, properties and rights reasonably required to permit Purchaser to conduct the Company’s and its Subsidiaries’ businesses immediately following the Closing Date in all material respects in substantially the same manner as such business is being conducted as of the date hereof and as of December 31, 2020.

Section 3.25Brokers and Other Advisors.    Except for Raymond James Ltd., no broker, investment banker, financial advisor, intermediary, finder or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, directly or indirectly, in connection with the Transactions.  Parent is solely responsible for the payment of the fees and expenses of any broker, investment banker, financial advisor, intermediary, finder or other Person acting in a similar capacity in connection with the Transactions based upon arrangements made by or on behalf of Parent or any of its Affiliates. 

Section 3.26CARES Act.  Neither the Company nor any of its Subsidiaries 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 IVREPRESENTATIONS AND WARRANTIES OF PURCHASER

Except as set forth in the disclosure schedule delivered by Purchaser to Parent concurrently with the execution of this Agreement (the “Purchaser Disclosure Schedule”) (it

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being understood and agreed by the Parties that disclosure of any item in any section or subsection of the Purchaser Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Purchaser Disclosure Schedule to which the relevance of such item is reasonably apparent on its face), Purchaser hereby represents and warrants to Seller, as of the date hereof and as of the Closing Date, as follows:

Section 4.01Organization, Standing and Power

.  Purchaser is duly formed, validly existing and in good standing under the Laws of its jurisdiction of formation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, this Agreement and the Ancillary Agreements to which Purchaser is or will be a party.

Section 4.02Authorization

.  The execution, delivery and performance by Purchaser of this Agreement and each Ancillary Agreement to be executed by Purchaser, and the consummation of the Transactions, have been duly and validly authorized by all requisite action of Purchaser.  This Agreement has been, and each Ancillary Agreement to be executed by Purchaser will be, at or prior to the Closing, duly executed and delivered by Purchaser and, assuming due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the Bankruptcy and Equity Exception.

Section 4.03Noncontravention. 

(a)None of the execution and delivery of this Agreement or any Ancillary Agreement to be executed by Purchaser, the consummation by Purchaser of the Transactions, or compliance by Purchaser with any of the terms or provisions hereof or thereof will  conflict with or violate any provision of the Organizational Documents of Purchaser or  assuming that the authorizations, consents and approvals referred to in Section 4.04 are obtained and the filings referred to in Section 4.04 are made, violate any Law applicable to Purchaser, except, in the case of clause (ii), for such violations as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions. 

(b)No vote or consent of the holders of any class or series of capital stock or other equity interest of Purchaser is necessary to approve this Agreement, any Ancillary Agreement to be executed by Purchaser or the Transactions. 

Section 4.04Governmental Approvals.  Except for (a) filings required under, and compliance with other applicable requirements of, the HSR Act, and (b) Consents set forth in Section 4.04 of the Purchaser Disclosure Schedule, no consents, authorizations or approvals of, or filings, declarations or registrations with, any Person or Governmental Authority are necessary for the execution, delivery and performance of this Agreement and any Ancillary Agreement to be executed by Purchaser and the consummation by Purchaser of the Transactions, other than such other consents, authorizations, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions. 

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Section 4.05Legal Proceedings.  Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions, (a) there is no pending or, to the Knowledge of Purchaser, threatened in writing Action against Purchaser or any of its respective properties, assets or businesses, and (b) Purchaser is not subject to any outstanding Order. 

Section 4.06Financial Capacity.  Purchaser will have at the Closing immediately available and unencumbered funds to enable Purchaser to pay the full Closing Consideration and consummate the Transactions and satisfy all of its obligations under this Agreement when required to do so pursuant to the terms hereof. 

Section 4.07Investment Representation.  Purchaser is acquiring the Sale Shares for its own account with the present intention of holding such securities for investment purposes and not with a view to, or for sale in connection with, any distribution of such securities in violation of any federal or state securities laws.  Purchaser acknowledges that it is informed as to the risks of the Transactions and of ownership of the Sale Shares.  Purchaser acknowledges that the Sale Shares have not been registered under the Securities Act, or any state or foreign securities laws and that the Sale Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the Securities Act and the Sale Shares are registered under any applicable state or foreign securities laws or sold pursuant to an exemption from registration under the Securities Act and any applicable state or foreign securities laws. 

Section 4.08Brokers and Other Advisors

.  Except for Goldman Sachs & Co. LLC, no broker, investment banker, financial advisor, intermediary, finder or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, directly or indirectly, in connection with the Transactions based upon arrangements made by or on behalf of Purchaser.

Section 4.09No Prior Activities and Agreements.  There will be at or prior to the Closing no Contracts between Purchaser, on the one hand, and any member of the management or directors of the Company, on the other hand, that relate in any way to the Company or the Transactions. 



Article VCOVENANTS

Section 5.01Conduct of the Business Pending the Closing. 

(a)During the period from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance with Article VII, except (i) as required by applicable Law, (ii) as instructed or required by a Governmental Authority, (iii) as expressly required or contemplated by the terms of this Agreement, (iv) for the transactions contemplated by or related to PetPartners Purchase Agreement, or (iv) to the extent Purchaser otherwise provides its prior consent in writing (such consent not to be unreasonably withheld, delayed or  

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conditioned), Parent and Seller shall cause the Company and its Subsidiaries to comply with this Agreement, and otherwise ensure that (x) each of the Company and each of its Subsidiaries shall conduct its business in the ordinary course of business consistent with past practice and, to the extent consistent therewith, use its reasonable best efforts to preserve its business organization intact and maintain existing relations and goodwill with Governmental Authorities, rating agencies, customers, reinsurers, producers, insureds, suppliers, service providers and employees, and (y) except as set forth in Section 5.01(a) of the Seller Disclosure Schedule, neither the Company nor any of its Subsidiaries shall (it being understood that no act or omission with respect to the matters specifically addressed by any provision of this clause (y) shall be deemed to be a breach of clause (x)):

(i)(A) authorize for issuance, issue, sell, grant or subject to any Lien any shares of capital stock, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of capital stock, or any rights, warrants or options to purchase any shares of capital stock or (B) redeem, purchase or otherwise acquire any of its shares of capital stock, or any rights, warrants or options to acquire any shares of capital stock; 

(ii)split, combine, subdivide, reclassify, redeem, purchase or otherwise acquire, directly or indirectly, any shares of capital stock; 

(iii)other than this Agreement and any Ancillary Agreements, adopt a plan or agreement of complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any its Subsidiaries; 

(iv)(A)  declare, make, set aside, authorize or pay any dividends or make any distribution with respect to its outstanding shares of capital stock (whether in cash, assets, stock or other securities or otherwise) or (B) incur, issue, assume, guarantee or otherwise become liable for any Indebtedness (other than (1) all obligations with respect to the net current Tax liabilities of the Company and its Subsidiaries 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 and its Subsidiaries that includes the Closing Date as closing on (and including) the Closing Date); (2) all Liabilities with respect to accrued but unpaid bonus payments, accrued or owed by the Company and its Subsidiaries 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; and (3) all Liabilities with respect to accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Company Employee immediately prior to the Closing) or issue or sell any debt securities or warrants or other rights to acquire any debt security of the Company or any of its Subsidiaries;  

(v)amend, restate, supplement or otherwise modify its Organizational Documents; 

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(vi)(A) other than in the ordinary course of business consistent with past practice, amend, modify, extend, cancel, rescind, waive any rights under, assign, fail to renew or terminate any leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) under which the Company or any of its Subsidiaries leases or occupies Leased Real Property or (B) enter into any new leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) for leased real property;  

(vii)sell, lease, license or otherwise dispose of any of its material properties (other than Intellectual Property), rights, licenses, operations, product lines, businesses or assets, except (A) sales and licenses of products and services of the Company and its Subsidiaries in the ordinary course of business consistent with past practice, (B) sales and dispositions of investment assets by the Company and its Subsidiaries in the ordinary course of business consistent with past practice, (C) pursuant to any insurance or reinsurance Contracts in the ordinary course of business consistent with past practice, or (D) pursuant to Material Contracts in force on the date hereof; 

(viii)make any loan, advance, guarantee or capital contribution to or investment in any Person, except advances to employees for expenses not to exceed $1,000 in any single instance or in excess of $20,000 in the aggregate in the ordinary course of business consistent with past practice; 

(ix)engage in any transactions with respect to investment assets by the Company or any of its Subsidiaries outside the ordinary course of business consistent with past practice, other than to the extent otherwise agreed by Purchaser in writing as to any particular investment asset; 

(x)make or authorize any capital expenditures in excess of $25,000 in any single instance or in excess of $200,000 in the aggregate during any twelve (12) month period; 

(xi)sell, transfer, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon or allow to lapse or expire or otherwise dispose of any material Company Intellectual Property or material Company IT Assets, other than (A) in the ordinary course of business consistent with past practice, (B) pursuant to Contracts in force on the date hereof and made available to Purchaser on or prior to the date hereof, and (C) dispositions of obsolete or worn-out IT Assets; 

(xii)make any changes to how the Company or any of its Subsidiaries Processes Personal Information, other than non-material changes made in the ordinary course of business consistent with past practice; 

(xiii)make any acquisitions of (including by merger, consolidation or acquisition of stock or assets or any other business combination) assets, any corporation, partnership, other business organization or any division thereof or equity interests therein or a substantial portion of the assets thereof; 

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(xiv)pay, discharge, settle or compromise any pending or threatened Action which (A) requires payment to or by the Company or any of its Subsidiaries (exclusive of attorneys’ fees) in excess of $50,000 in any single instance or in excess of $200,000 in the aggregate (other than ordinary course payments or settlements under insurance or reinsurance Contracts that are within the applicable policy limits under such insurance or reinsurance Contract) or (B) imposes any obligations (other than for the payment of money, a release of claims, confidentiality and other obligations customarily included in monetary settlements) or material restrictions on the operations of the Company or any of its Subsidiaries, except for any payment, discharge or settlement the amount of which (1) is explicitly reflected on the Financial Statements (including the notes thereto) or (2) does not exceed the proceeds received from any insurance policies in connection with such payment, discharge or settlement;  

(xv)(A) increase the compensation or consulting fees, bonus, pension, welfare, fringe or other benefits of any Company Employee, other than increases in annual base salary or wage rate in the ordinary course of business consistent with past practice that do not exceed three percent (3%) individually or three percent (3%) in the aggregate, (B) increase or grant any additional rights to severance, termination, retention or change-in-control, bonus or long-term incentive pay to any Company Employee (other than any amounts for which Parent or its Affiliates (other than the Company and its Subsidiaries) will retain sole responsibility after the Closing), (C) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund or in any other way secure the payment, of compensation or benefits under any Benefit Plan in respect of any Company Employee, (D) establish, adopt, enter into, amend, commence participation in or terminate any Benefit Plan or any plan, policy, program, arrangement or agreement that would be a Benefit Plan if it were in existence as of the date hereof, or (E) hire any employee or engage any independent contractor (who is a natural person) or terminate any Company Employee other than, in each case, in the ordinary course of business for individuals with an annual salary or wage rate or consulting fees not in excess of $100,000;   

(xvi)with respect to the Company Employees, become a party to, establish, adopt, amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization; 

(xvii)transfer internally (including in response to a request for transfer by a Company Employee), or otherwise materially alter the duties and responsibilities of, any Company Employee in a manner that would (A) materially affect the proportion of his or her work hours allocated to the Company or any of its Subsidiaries during the twelve (12) months prior to Closing (or such shorter period as such Company Employee has worked for the Company or any of its Subsidiaries) and/or (B) otherwise cause such individual to cease being characterized as a Company Employee under this Agreement; 

(xviii)take any action that would constitute a “mass layoff” or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification Act of 1988 or would otherwise trigger notice requirements or liability under any foreign, state or local plant closing notice law; 

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(xix)in each case, in any action or series of related actions, place any more Company Employees on unpaid leave or furlough, or reduce the hours or weekly pay of any Company Employee;   

(xx)(i) make any material changes in financial or Tax accounting methods, principles, practices or procedures (or change an annual accounting period), except as may be required under GAAP or (ii) make any material change to its underwriting, claim processing, payment or management, agency management, counterparty criteria, reinsurance, selling, customer rating, actuarial, reserving, marketing or servicing, financial or accounting procedures, policies or practices, or in the application of any of the foregoing, except as required by GAAP, SAP or applicable Law or changes in the interpretation or enforcement thereof; 

(xxi)make or change any material Tax election, file any amendment to any Tax Return with respect to any material Taxes, settle or compromise any material Tax Liability, audit or other Action, agree to any extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of Taxes, file any material voluntary Tax disclosure, amnesty or similar filing, enter into any closing agreement with respect to a material amount of Tax, enter into a Tax allocation, sharing indemnity or similar agreement, assume any Liability for Taxes of any other Person (whether by contract or otherwise) or take any action to surrender any right to claim a material Tax refund; 

(xxii)make any material change to the investment guidelines of the Company or any of its Subsidiaries in effect as of the date hereof or acquire or dispose of any investment assets in any manner inconsistent with such investment guidelines; 

(xxiii)(A) enter into any Contract that would have been a Restricted Contract had it been entered into prior to this Agreement; (B) other than in the ordinary course of business consistent with past practice, enter into any Contract that would have been a Material Contract had it been entered into prior to this Agreement; (C) other than in the ordinary course of business consistent with past practice, amend, modify, extend, cancel, rescind, waive any rights under, assign, fail to renew or terminate any Material Contract; (D) other than Benefit Plans, any action with respect to changes in compensation and benefits permitted pursuant to Section 5.01(a)(xv), any ordinary course insurance policies between the Company or any of its Subsidiaries and an individual person, or in the ordinary course of business consistent with past practice, enter into or modify any Contract with Parent (or an Affiliate thereof) or Sellers, or (E) engage in any transaction with any Interested Party or any Affiliate or family member of an Interested Party;  

(xxiv)other than in the ordinary course of business consistent with past practice, alter or amend in any material respect any existing underwriting, reserving, hedging, marketing, pricing, risk management, reinsurance, claim handling, loss control, investment, actuarial practice guideline or policy of the Company or any of its Subsidiaries, or any material assumption underlying an actuarial practice or policy, except as may be required by (or, in the reasonable good faith judgment of the Company  

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and its Subsidiaries, advisable due to) a change in GAAP, any Governmental Authority or applicable Law occurring after the date of this Agreement;

(xxv)(A) make any filings with any Governmental Authority relating to the withdrawal or surrender of any Permits held by the Company or any of its Subsidiaries, or the withdrawal by the Company or any of its Subsidiaries from any lines of business, (B) fail to keep current and in full force and effect, or to apply for or renew, any Permit, consent, or registration of the Company or any of its Subsidiaries issued by any Governmental Authority or (C) enter into any Government Contract;  

(xxvi)enter into or engage in (through acquisition, product extension or otherwise) the business of selling any products or services materially different from the products or services of the Company or any of its Subsidiaries as of the date of this Agreement or enter into or engage in new lines of business;  

(xxvii) permit or allow any assets of the Company or any of its Subsidiaries to become subject to any Lien, except Permitted Liens; 

(xxviii) fail to pay or satisfy when due any material account payable or other material liability, other than any such liability that is being contested in good faith by the Company or any of its Subsidiaries; 

(xxix)subject the Company or any of its Subsidiaries to any bankruptcy, receivership, insolvency or similar proceeding; 

(xxx)take any actions or omit to take any actions that would, individually or in the aggregate, reasonably be expected to (A) prevent, materially delay or materially impair the consummation of the Transactions or (B) result in any of the conditions set forth in Article VI not being satisfied; or 

(xxxi)agree in writing or otherwise to take any of the foregoing actions prohibited by this Section 5.01(a). 

(b)Purchaser acknowledges and agrees that (i) nothing contained in this Agreement shall give Purchaser, directly or indirectly, the right to control or direct the operations of the Company or any of its Subsidiaries prior to the Effective Time, (ii) prior to the Effective Time, the Company and its Subsidiaries shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over their operations and (iii) notwithstanding anything to the contrary set forth in this Agreement, no consent of Purchaser shall be required with respect to any matter set forth in this Section 5.01 or elsewhere in this Agreement to the extent the requirement of such consent would violate any applicable Law. 

Section 5.02Access to Information. 

(a)During the period from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance with Article VII and subject to applicable Law, Purchaser shall be entitled, through its Representatives, to have such access to the Company Employees, properties, businesses and operations of the Company and its Subsidiaries and such  

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examination of the books and records of the Company and its Subsidiaries, including books and records of the Company and its Subsidiaries held by Parent or Seller, as Purchaser reasonably requests in connection with Purchaser’s efforts to consummate the Transactions.  Parent and Seller agree to deliver to Purchaser at the Closing any books or records of the Company or any of its Subsidiaries that are held by Parent or Seller and copies of any books or records of Parent, Seller or their Affiliates that relate primarily to the Company or any of its Subsidiaries.

(b)For sixty (60) months following the Closing, Parent shall use reasonable best efforts to grant Purchaser and its Representatives reasonable access during Parent’s normal business hours to any of Parent’s then-current employees, the properties, businesses and operations of the Company and its Subsidiaries and such examination of the books and records of Parent that primarily relate to the Company and its Subsidiaries (including documentation relating to a Security Breach), including books and records of the Company and its Subsidiaries held by Parent or Seller, as Purchaser reasonably requests and upon reasonable prior notice if such access is reasonably deemed necessary by Purchaser or any of its Affiliates in connection with its tax, regulatory, litigation, contractual or other legitimate, non-competitive matters; provided, however, that Parent shall not be required to provide access to any such employees or books and records to the extent that such access:  (i) would violate applicable Law or would adversely impact any legal privilege; or (ii) would result in the disclosure of any trade secrets or any competitively sensitive information of Parent or of a third party to whom Parent has confidentiality obligations.  All requests for access to such employees or books and records shall be made to such representatives of Parent as Parent shall designate, who shall be solely responsible for coordinating all requests and all access permitted hereunder.  Nothing in the foregoing will prevent Purchaser or any of its Affiliates (at its sole cost and expense) from seeking to make such employees available via subpoena or other legal or similar process, and Parent shall reasonably cooperate in making employees available for such purposes. 

(c)Any such access and examination shall be conducted on reasonable advance written notice, during regular business hours and under reasonable circumstances and shall be subject to (i) restrictions under applicable Law and (ii) reasonable restrictions imposed by Parent and Seller to protect the confidentiality of books and records of Parent, Seller or any of their respective Affiliates (other than the Company and its Subsidiaries) that do not relate, directly or indirectly, to the Company. 

(d)Parent and Seller, respectively, shall use their reasonable best efforts to cause the officers, employees, consultants, agents, accountants, attorneys and other Representatives of the Company and its Subsidiaries to reasonably cooperate with Purchaser and Purchaser’s Representatives in connection with such access and examination, and Purchaser and its Representatives shall reasonably cooperate with the Company and its Subsidiaries and its officers, employees, consultants, agents, accountants, attorneys and other Representatives and shall use their reasonable best efforts to minimize any disruption to the business.   

(e)Notwithstanding anything herein to the contrary, no such access or examination shall be permitted to the extent that it would (i) unreasonably disrupt the operations of the Company or any of its Subsidiaries or (ii) reasonably be likely to cause the Company or any of its Subsidiaries to lose the benefit of attorney-client privilege or conflict with any confidentiality obligations to which the Company or any of its Subsidiaries is bound, whether pursuant to a  

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Contract or imposed by an Order or other directive or restriction by a Governmental Authority, in each case with respect to information to be disclosed; provided, however, that Parent and Seller shall cause the Company and its Subsidiaries to request, but neither the Company nor any of its Subsidiaries shall be required to obtain, a waiver of any such confidentiality obligations upon Purchaser’s reasonable prior written request; and provided, further, that Parent and Seller shall cause the Company and its Subsidiaries to use reasonable best efforts to seek alternative means to disclose such information as nearly as possible without affecting attorney-client privilege or conflicting with such confidentiality obligations (it being understood that such reasonable best efforts shall not require the Company or any of its Subsidiaries to pay any consideration or amend or modify any Contract).

(f)Purchaser acknowledges that the information provided to Purchaser in connection with this Agreement, the Ancillary Agreements and the Transactions is subject to the terms of that certain Mutual Non-Disclosure Agreement by and between SB Holdings, JAB Investments S.á r.l. and Double Oak Partners, LLC dated March 8, 2021 (the “Confidentiality Agreement”). 

 

Section 5.03Reasonable Best Efforts. 

(a)Upon the terms and subject to the conditions set forth in this Agreement, Purchaser, on the one hand, and Parent and Seller, on the other hand, shall, and shall cause their Affiliates (including, in the case of Parent and Seller, the Company and its Subsidiaries) to, use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things reasonably necessary, proper or advisable to fulfill all conditions to Closing applicable to such Party pursuant to this Agreement and to consummate and make effective, as promptly as reasonably practicable, the Transactions, including (i) preparing and filing as soon as practicable after the date hereof all forms, registrations and notices required to be filed to consummate the Transactions and the taking of such actions as are reasonably necessary to obtain any requisite approvals, Consents, Orders, exemptions or waivers by any Governmental Authority, including filings pursuant to the HSR Act and (ii) executing and delivering any additional agreements, documents or instruments reasonably necessary, proper or advisable to consummate the Transactions and to fully carry out the purposes of this Agreement. 

(b)In furtherance of and without limiting the foregoing, (i) each of Purchaser and Parent shall file, or cause to be filed, 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 and requesting early termination of the waiting period under the HSR Act as promptly as practicable after the date hereof, (ii) Parent shall file, or cause to be filed, a “Form A” Acquisition of Control Statement with the Insurance Commissioner of the State of Delaware within fifteen (15) Business Days of the date hereof; (iii) if the Company and its Subsidiaries enter into a Reinsurance Agreement as contemplated by the Reinsurance Term Sheet pursuant to Section 5.14 of this Agreement, the Company shall file, or cause to be filed, a “Form D” Prior Notice of a Transaction with the Insurance Department of the State of Delaware within fifteen (15) Business Days of the date hereof; (iv) in respect of the SSLIC Commutation, the Company shall file, or cause to be filed, a “Form D” Prior Notice of a Transaction with the Insurance Department of the State of Delaware within fifteen (15) Business Days of the date hereof; and (v) Purchaser, on the one hand, and Parent and Seller, on the other  

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hand, as applicable, shall make, or cause to be made, any other registrations, filings and notices with Governmental Authorities required to consummate the Transactions as promptly as practicable after the date hereof.  Purchaser shall have responsibility for the filing fees associated with filings it is required to make under any applicable antitrust or competition Laws, including the filings associated with the HSR Act.

(c)Notwithstanding anything to the contrary contained in this Agreement, including this Section 5.03 or the “reasonable best efforts” standard, Purchaser shall not be obligated to take or refrain from taking, or to agree to it, its Affiliates or the Company or the Company’s Subsidiaries taking or refraining from taking, any action or to suffer to exist any restriction, condition or requirement imposed by a Governmental Authority which, individually or together with all other such actions, restrictions, conditions or requirements, would, or would reasonably be expected to (i) have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of Purchaser or any of its Affiliates, (ii) impose any material limitations on Purchaser’s or its Affiliates’ ownership or operation of all or any portion of its or any of its Affiliates’ businesses, operations or assets or compel Purchaser or any of its Affiliates to dispose of or hold separate all or any portion of its or any of its Affiliates’ businesses, operations or assets or (iii) would reasonably be expected to substantially impair the benefits to Purchaser reasonably likely, as of the date hereof, to be realized from the consummation of the Transactions (any action having the effects described in clause (i), (ii) or (iii) above being referred to herein as a “Substantial Detriment”); provided, however, that no actual or proposed change in Law applicable to Purchaser or its Affiliates after the date hereof shall be taken into account in determining whether a Substantial Detriment has occurred or exists. 

(d)Notwithstanding anything to the contrary contained in this Agreement, in no event shall a Party or any of its Affiliates be required by a Governmental Authority to agree to take or enter into any action, which action is not conditioned upon the Closing. 

Section 5.04Publicity.  None of the Parties or any of their Affiliates shall issue any press release or public announcement or comment concerning this Agreement or the Ancillary Agreements or the Transactions without obtaining the prior written approval of Purchaser and Parent; provided that the Parties and their Affiliates may, without such prior written approval, issue such press release, or make such public announcement or comment to the extent, in the judgment of such Party upon the advice of its outside counsel, disclosure is required by applicable Law (including the periodic reporting requirements under the Exchange Act) or under the rules of any securities exchange on which the securities of such Party or any of its Affiliates are listed (provided that, to the extent so required by applicable Law, the Party intending to make such release shall use its reasonable best efforts consistent with applicable Law to consult with the other Parties in advance of such release with respect to the text thereof).  None of the Parties shall make any disclosure to third parties regarding the Transactions without the prior written consent of the other Party. 

Section 5.05Employment and Employee Benefits. 

(a)Parent and Seller shall, and shall cause its Affiliates to, cause (i) the employment of each Company Employee to transfer to the Company prior to the Closing Date; and (ii) the employment of any employee employed by the Company or any of the Company’s Subsidiaries  

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who is not a Company Employee to transfer out of the Company and its Subsidiaries, no later than five (5) Business Days prior to the Closing Date.  No later than seven (7) Business Days prior to the Closing Date, Parent shall provide Purchaser with an update to the Employee Census, listing only the employees employed by the Company and its Subsidiaries.  Parent shall provide an updated Employee Census as soon as possible after the execution of this Agreement listing all Company Employees as of the date of this Agreement.

(b)For at least one (1) year following the Effective Time (the “Continuation Period”), Purchaser shall provide, or shall cause its Affiliates to provide, each Company Employee who is employed immediately prior to the Effective Time (each, a “Continuing Employee”) with (i) an annual base salary or hourly wage rate and, where applicable, a target annual cash bonus opportunity that is substantially similar, in the aggregate, to those provided to such Continuing Employee immediately prior to the Effective Time, and (ii) an employee defined contribution plan and welfare benefits that are substantially comparable in the aggregate to those that are generally made available to similarly situated employees of Purchaser; provided, that the obligation to provide the defined contribution plan and welfare benefits referenced in clause (ii) hereof shall commence no sooner than on the date on which Purchaser completes the various administrative actions in order to effectuate the participation of the Continuing Employees in such plan and benefits with Purchaser. For the avoidance of doubt, Purchaser is under no obligation to provide such plan and benefits beyond the first anniversary of the Closing Date.   

(c)With respect to any accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Continuing Employee immediately prior to the Closing Date, (i) Purchaser shall assume such liability to the extent reflected in the Indebtedness, and (ii) Purchaser shall allow such Continuing Employee to use such accrued vacation, flexible time-off and sick pay accrued and unused by such Continuing Employees as of the Closing Date pursuant to Purchaser’s applicable policies in effect from time to time. 

(d)With respect to all employee benefit plans of Purchaser and its Affiliates in which Continuing Employees are eligible to participate following the Effective Time (the “New Benefit Plans”), for purposes of determining eligibility to participate, level of benefits and vesting, each Continuing Employee’s service with Parent, Seller or any Affiliate thereof (including the Company and its Subsidiaries) (as well as service with any predecessor employer of Parent, Seller or any Affiliate thereof (including the Company and its Subsidiaries), to the extent service with the predecessor employer was recognized by Parent, Seller or any Affiliate thereof (including the Company and its Subsidiaries)) shall be treated as service with Purchaser or its Affiliates; provided that no such crediting of service shall (i) result in any duplication of benefits for the same period of service or (ii) apply for purposes of benefit accrual under any New Benefit Plan that is a defined benefit pension or retiree medical plan. 

(e)Purchaser shall use reasonable best efforts, or shall cause its Affiliates to use reasonable best efforts, to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any New Benefit Plan that is a welfare benefit plan in which Continuing Employees (and their eligible dependents) will be eligible to participate from and after the Effective Time, except to the extent that such pre- 

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existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable Benefit Plan immediately prior to the Effective Time.

(f)As of the Effective Time, Purchaser shall cause the Company to assume all unpaid obligations of Parent, Seller and any of their Affiliates to each Continuing Employee pursuant to any sales commission, annual bonus, special bonus set forth in Section 5.05(f) of the Seller Disclosure Schedule or other cash incentive programs or arrangements, in each case in respect of any performance period that includes the Closing Date and solely to the extent reflected in the Indebtedness.  

(g)Prior to making any written or oral communications to the Company Employees pertaining to compensation or benefit matters that are affected by the Transactions, Parent or Seller shall provide Purchaser with a copy of the intended communication, Purchaser shall have a reasonable period of time to review and comment on the communication, and Parent or Seller, as applicable, shall consider any such comments in good faith. 

(h)Parent shall retain all Liability, and Purchaser and its Affiliates shall have no Liability, with respect to any Benefit Plans or other employee benefit plans, policies or programs sponsored or maintained by Parent or any of its Affiliates (other than the Company and its Subsidiaries), including, but not limited to, any pension plans, deferred compensation plans, post-retirement plans, incentive plans, bonus plans, equity-based compensation plans, severance and fringe benefit plans, unless such Liabilities are reflected in Indebtedness or Transaction Expenses. 

(i)This Section 5.05 shall be binding upon and shall inure solely to the benefit of each of the Parties and nothing in this Section 5.05 or any other provision of this Agreement or any other related Contract, express or implied (i) shall be construed to establish, amend or modify any Benefit Plan or any other benefit plan, program, agreement or arrangement, (ii) shall alter or limit the ability of Purchaser or any of its Affiliates to amend, modify or terminate any benefit plan, program, agreement or arrangement or, after the Effective Time, any Benefit Plan in accordance with their terms, without limiting or altering the terms set forth in this Section 5.05, (iii) shall prevent Purchaser or any of its Affiliates, after the Effective Time, from terminating the employment of any Continuing Employee or (iv) is intended to or shall confer upon any Company Employee or any other Person any third-party beneficiary or other right to employment or continued employment or service for any period of time by reason of this Agreement or any other related agreement, or any right to a particular term or condition of employment. 

Section 5.06Insurance. 

(a)Effective at the time of the Closing, with respect to occurrences taking place from and after the Closing Date, Parent shall cause Company and its Subsidiaries 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 and its Subsidiaries) or by any of their self-insured programs.  

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(b)With respect to events or circumstances relating to the Company and its Subsidiaries 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 and its Subsidiaries) 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 and its Subsidiaries operate their respective businesses, Purchaser may, and may cause the Company and its Subsidiaries to, make claims under such policies and programs.  Parent, Seller and their Affiliates will provide reasonable cooperation and assistance in the pursuit of such claims. 

(c)With respect to any open claims against the insurance policies of Parent, Seller or their Affiliates (other than the Company and its Subsidiaries) relating to losses or damages suffered by the Company or any of its Subsidiaries prior to the Closing, Parent or Seller shall reasonably assist and cooperate with Purchaser in the pursuit and collection of such claims and remit any net proceeds they realize from such claims to Purchaser upon full and final settlement of such claims.  

(d)Parent, Seller or their Affiliates may amend any insurance policies in the manner they deem appropriate to give effect to this Section 5.06.  

Section 5.07IHC Marks. 

(a)Prior to the Closing, Parent and Seller shall, and shall cause the Company and its Subsidiaries to, completely remove or permanently obscure the IHC Marks from the Company’s and its Subsidiaries’ premises, website and all internal and external tangible, electronic and other documents or materials. 

(b)Conditioned on Seller’s, the Company’s and the Company’s Subsidiaries’ compliance with Section 5.07, Purchaser agrees that, after the Closing, Purchaser will not, and will cause the Company and its Subsidiaries not to, use any of the IHC Marks in connection with the operations of the Company and its Subsidiaries, and will not, and will cause the Company and its Subsidiaries not to, expressly do business as or represent itself as affiliated in any way with Seller or their Affiliates (other than the Company its Subsidiaries), except that (i) Purchaser, the Company, the Company’s Subsidiaries and their respective Affiliates may reference the historic relationship between the Company and Seller, and (ii) the foregoing shall not preclude Purchaser, the Company, the Company’s Subsidiaries or any of their respective Affiliates from any uses that would be permissible under applicable Law, including as nominative or descriptive fair use.   

Section 5.08Tax Matters. 

(a)Tax Returns.  Parent, Seller or Affiliate thereof shall prepare and timely file (taking into account any extension of time to file under applicable Law), or cause to be prepared and timely filed, all Tax Returns of the Company or any of its Subsidiaries for all taxable periods ending on or prior to the Closing Date (“Company Tax Returns”) and any Tax Returns for which the Company or any of its Subsidiaries is required to be in the U.S. federal, state or local consolidated, combined or unitary group of IHC (“Seller Tax Returns”).  Seller Tax Returns and  

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Company Tax Returns shall be prepared in a manner consistent with past practice of the applicable entity, unless otherwise required by applicable Law or as specified in this Agreement.  In the case of Company Tax Returns, Seller shall permit Purchaser to review and comment on each such Company Tax Return prior to filing and shall make such revisions as are reasonably requested by Purchaser.  Parent (or Affiliate thereof, as applicable) shall timely remit or cause to be remitted to the applicable Governmental Authority any Taxes due in respect of such Seller Tax Returns or Company Tax Returns to the extent that such Taxes are Indemnified Taxes for which Seller would be required to indemnify the Purchaser pursuant to Article VIII (and subject to, for the avoidance of doubt, any limitations on such indemnity obligations set forth in Article VIII).  To the extent that the Tax Returns described in this Section 5.08(a) indicate that the Company or Subsidiary has made an overpayment of Taxes for any Pre-Closing Taxable Period or Straddle Period (taking into account all Taxes taken into account as Indebtedness or estimated Tax payments that have been made with respect to such Taxes prior to the Closing Date), the Purchaser shall, concurrently with the filing of the relevant Tax Return for the Tax year in which such overpayment is reflected, pay or cause to be paid such overpayment to the Seller, in immediately available funds using wire transfer instructions as designated in writing by the Seller. Purchaser shall be responsible for preparing and filing all Tax Returns of the Company and its Subsidiaries that are not Seller Tax Returns; provided that in the case of any such Tax Return with respect to a Pre-Closing Tax Period or Straddle Period, such Tax Returns shall be prepared in a manner consistent with the most recent past practice of the Company and its Subsidiaries unless otherwise required by applicable Law or as specified in this Agreement.  Purchaser shall permit Parent to review and comment on each such Tax Return with respect to a Pre-Closing Tax Period prior to filing and shall make such revisions as are reasonably requested by Parent.  

(b)Tax Sharing Agreements.  Parent and Seller shall cause the Company and its Affiliates to terminate any Tax sharing, Tax allocation or Tax indemnity Contract among the Company and its Affiliates at or prior to Closing. 

(c)Transfer Taxes.  Purchaser and Seller shall each pay fifty percent (50%) of the Transfer Taxes arising out of or in connection with the transactions contemplated by this Agreement (including any expenses attributable thereto, penalties and interest).  The Party required by Law to file a Tax Return with respect to such Transfer Taxes shall do so in the time and manner prescribed by Law, and the non-filing Party shall promptly reimburse the filing Party for its share of any Transfer Taxes upon receipt of evidence reasonably satisfactory to the non-filing party of the amount of such Transfer Taxes. 

(d)Tax Contests. 

(i)Purchaser or Seller, as the case may be, shall notify the other Party within twenty (20) Business Days after receipt by such Party or any of its Affiliates of written notice of any pending federal, state, local or foreign Tax audit or examination or notice of deficiency or other adjustment, assessment or redetermination relating to Taxes (“Tax Contest”) for which such other Party or its Affiliates may reasonably be expected to be responsible under this Agreement, provided, that the failure to deliver any such notice promptly will not relieve the other Party of their obligations under this Agreement, except to the extent such Party is materially prejudiced as a result thereof 

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(ii)At its election, Parent (or Affiliate thereof) shall control any Tax Contests related to Taxes with respect to a Pre-Closing Tax Period (other than Straddle Periods).  Parent shall keep Purchaser fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Parent shall, in good faith, allow Purchaser to make comments to Parent regarding the conduct of or positions taken in any such proceeding.  Purchaser shall be entitled to fully participate in any such Tax Contest.  Purchaser shall have the right to consent to any settlement with respect to (or abandonment of) any such Tax Contest (provided such consent cannot be unreasonably withheld, conditioned or delayed).  In the case that Purchaser controls such Tax Contest because Parent conceded right to control such Tax Contest, Purchaser shall keep Parent fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Purchaser shall, in good faith, allow Parent to make comments to Purchaser regarding the conduct of or positions taken in any such proceeding.  Parent shall be entitled to fully participate in any such Tax Contest.  Purchaser (or an Affiliate thereof) shall control in good faith any other Tax Contests solely related to Taxes of the Company or any Subsidiary thereof.  In the case of a Tax Contest in respect of a Straddle Period, the Purchaser shall keep Parent fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Purchaser shall, in good faith, allow Parent  to make comments to Purchaser regarding the conduct of or positions taken in any such proceeding.  Parent shall be entitled to participate fully in any such Tax Contest.  Purchaser shall not settle such Tax Contest without Parent’s prior written consent (not to be unreasonably withheld, conditioned or delayed).  Notwithstanding anything to the contrary in this Agreement, Parent (or Affiliate thereof) shall have the exclusive right to control in all respects, and neither Purchaser nor any of its Affiliates shall be entitled to participate in, any Tax Contest with respect to any Tax Return of a combined, consolidated, affiliated, aggregated or unitary group of Parent (or Affiliate thereof) that includes the Company or any Subsidiary thereof.   

(iii)To the extent of any inconsistencies between any provision of this Section 5.08(d) and Section 8.04 in a matter principally involving Taxes, the provisions of this Section 5.08(d)) shall control. 

(e)Tax Refunds.  Any refunds (or credits for overpayments) of Taxes paid by the Company and its Subsidiaries for any taxable period ending on or before the Closing Date that are received by Purchaser or any of its Affiliates (including, following the Closing, for the avoidance of doubt, the Company and its Subsidiaries or Affiliates thereof) shall be for the account of Seller as finally determined (excluding any refund or credit attributable to any loss in a taxable period beginning after the Closing Date applied (e.g., as a carryback) to income in a taxable year.  Purchaser shall pay over to Seller, as additional purchase price for the Sale Shares, any such refund received in cash or the amount of any such credit within fifteen (15) days after entitlement thereto, in each case, net of any Taxes and reasonable out-of-pocket expenses incurred in connection with such refund or credit.  Notwithstanding anything in this Agreement to the contrary, in the event that any such refund or credit is subsequently determined by any Governmental Authority to be less than the amount paid by Purchaser to Seller, Seller shall promptly return any such disallowed amounts (plus any interest in respect of such disallowed refund or credit owed to a Governmental Authority) to Purchaser. 

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(f)Section 338(h)(10) Election. Seller and IAHC Holdings shall join in making a timely election under Section 338(h)(10) of the Code (and any corresponding election under state, local and foreign law) with respect to each of the Companies and their Subsidiaries (the “Section 338(h)(10) Elections”).  Purchaser, IAHC Holdings and Seller shall comply fully with all filing and other requirements necessary to effectuate the election on a timely basis and agree to cooperate in good faith with each other in the preparation and timely filing of any Tax Returns required to be filed in connection with the making of the election, including the exchange of information and the joint preparation and filing of IRS Form 8023 and IRS Form 8883 (including any corresponding state or local tax elections and forms and all supplements thereto). None of IAHC Holdings, Purchaser nor Seller shall take any action to modify any of the forms or reports that are required for the making of any Section 338(h)(10) Election after their execution or to modify or revoke any Section 338(h)(10) Election following the filing of the 338(h)(10) Election Forms without the prior written consent of the other Parties. 

(g)Tax Allocations.  Within six (6) months following the Closing Date, Purchaser will complete a draft schedule (the “Allocation Schedule”) in accordance with the methodology reflected in Exhibit D attached hereto and Section 1060 and Section 338 of the Code and the Treasury Regulations thereunder allocating the Closing Consideration and any assumed liabilities properly treated as consideration for U.S. federal income Tax purposes (collectively, the “Allocable Amount”) among the assets of the Companies and their Subsidiaries, and provide a copy to Seller for approval (not to be unreasonably withheld, conditioned or delayed).  Seller shall have thirty (30) days to review the Allocation Schedule and deliver written notice of any objections to the Allocation Schedule to Purchaser.  If no written notice of any objections to the Allocation Schedule is received by Purchaser from Seller prior to the expiration of the thirty (30) day review period, then the Allocation Schedule will be final and binding upon the Parties.  If Purchaser receives written notice of any objections to the Allocation Schedule from Seller prior to the expiration of the thirty (30) day review period, then Purchaser and Seller will work together in good faith to resolve any objections set forth in such notice.  In the event the Parties are unable to resolve any objections set forth in such notice within thirty (30) days of the date of Purchaser’s receipt of such objection notice from Seller (or such longer period as Purchaser and Seller agree), then any amounts remaining in dispute shall be submitted for resolution to the Independent Accountant, who, acting as expert and not arbitrator, shall resolve any such disputes in accordance with the methodology reflected in Exhibit D attached hereto.  Any payments subsequent to the Closing Date (such as indemnity payments under the terms of this Agreement) that are treated as an adjustment to Closing Consideration for Tax purposes will be allocated among the Companies and their Subsidiaries’ assets in accordance with the Allocation Schedule as finally determined pursuant to this Section 5.08.  Seller, on the one hand, and Purchaser, on the other hand, will, and shall cause the Companies and their Subsidiaries to, make all Tax reports, Tax Returns and Tax refund claims and other statements in a manner consistent with the Allocation Schedule (as finally determined pursuant to this Section 5.08) and will not make inconsistent written statements on any Tax Returns or during the course of any Internal Revenue Service or other Tax audit, except to the extent required by Law.  Each Party agrees to notify the other if any Governmental Authority proposes a reallocation of such amounts. 

(h)Prohibited Tax Actions.  Purchaser shall not, and shall not permit any of its Affiliates (including, after the Closing for the avoidance of doubt, the Company and its Subsidiaries or any Affiliate thereof) to, (i) except upon the Parent’s written request pursuant to  

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Section 5.08(e) (Tax Refunds) or Section 5.08(d) (Tax Contests) file, re-file, supplement, or amend any Tax Return of the Company or its Subsidiaries or any Affiliate thereof for any taxable period ending on or before the Closing Date, (ii) make any Tax election for the Company or its Subsidiaries or Affiliates thereof effective with respect to any taxable period ending on or before the Closing Date, (iii) enter into or file any voluntary Tax disclosure, amnesty or similar filing or agreement or (iv) take any action after the Closing on the Closing Date that is outside the ordinary course of business relating to Taxes that creates a Tax liability in a Pre-Closing Taxable Period in each case, without the consent of Seller, not to be unreasonably withheld, conditioned, or delayed; provided withholding consent with respect to an action required by applicable Law as agreed to by the Parties or the Independent Accountant shall be unreasonable.

(i)Cooperation on Tax Matters.  Seller and Purchaser shall (and Purchaser shall cause the Company and its Subsidiaries to) take commercially reasonable efforts to (i) assist in the preparation and timely filing of any Tax Return of the Company or any of its Subsidiaries for a Pre-Closing Tax Period, including access during regular business hours to the offices and employees of the Company and its Subsidiaries; (ii) assist in any Tax Contests with respect to the Tax Returns or Taxes of the Company and its Subsidiaries for a Pre-Closing Tax Period; (iii) make available any information, records (including books and records), or other documents relating to any Taxes or Tax Returns of the Company and its Subsidiaries for a Pre-Closing Tax Period, including with respect to Tax Contests related thereto; (iv) provide any information required to allow Seller, Parent and the Company and its Subsidiaries, or Purchaser or any Affiliates thereof to comply with any information reporting contained in the Code or other applicable Laws for a Pre-Closing Tax Period; and (v) provide certificates or forms, and timely execute any Tax Returns, that are necessary or appropriate to establish an exemption for (or reduction in) any Transfer Tax.   

Section 5.09Third-Party Consents.  Upon the terms and subject to the conditions set forth in this Agreement, Parent or Seller shall use (and shall cause the Company and its Subsidiaries to use) their reasonable best efforts to obtain any Consents required under any Contracts to which the Company or any of its Subsidiaries is a party from third parties in connection with the consummation of the Transactions at or prior to the Closing.  In connection therewith, Parent and Seller shall not, and shall cause the Company and its Subsidiaries not to, without the prior written consent of Purchaser, (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 (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 Purchaser may compel Parent or Seller to cause the Company and its Subsidiaries 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 its Subsidiaries to) keep Purchaser reasonably informed regarding the process of obtaining such third-party Consents. 

Section 5.10Confidentiality.   

(a)The Confidentiality Agreement shall continue in full force and effect until the Closing, at which time the confidentiality obligations under the Confidentiality Agreement shall terminate.  If, for any reason, the transactions contemplated by this Agreement are not  

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consummated, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms.

(b)From and after the Closing, Parent and Seller shall keep confidential any and all information concerning the Company and its Subsidiaries in their possession or retained by Parent and Seller hereunder and the terms of this Agreement (collectively, “Company Confidential Information”); provided that, for the purposes of this Section 5.10, Company Confidential Information shall not include, with respect to Parent and Seller, any information which (i) is generally available to or known by the public (other than as a result of an act or omission by Parent or Seller in breach of this Section 5.10(b)), (ii) is made available to Parent or Seller by any other Person; provided that such Person is not known to the recipient to be bound by a duty of confidentiality with respect thereto or (iii) has been or is subsequently developed by Parent or Seller without use of or reference to Company Confidential Information.  Notwithstanding the foregoing or anything in this Agreement to the contrary, following the Closing, Parent and Seller shall be permitted to disclose Company Confidential Information as required by Law or to directors, officers, employees or advisors of Parent or Seller who have a need to know such information, provided that such Persons are themselves obligated to keep such Company Confidential Information confidential. 

(c)Notwithstanding Section 5.10(c) of the PetPartners Purchase Agreement, for a period of twenty-four (24) months following the Closing, Purchaser and its Affiliates shall keep confidential any and all information concerning Parent, Seller or any of their respective Affiliates (other than the Company and its Subsidiaries) in their possession or retained by Purchaser and its Affiliates (including, for the avoidance of doubt, by the Company and its Subsidiaries) hereunder and the terms of this Agreement (collectively, “Seller Confidential Information”); provided that, for the purposes of this Section 5.10, Seller Confidential Information shall not include, with respect to Purchaser and its Affiliates, any information which (i) is generally available to or known by the public (other than as a result of an act or omission by Purchaser and its Affiliates in breach of this Section 5.10(b)), (ii) is made available to Purchaser and its Affiliates by any other Person; provided that such Person is not known to the recipient to be bound by a duty of confidentiality with respect thereto or (iii) has been or is subsequently developed by Purchaser and its Affiliates without use of or reference to Seller Confidential Information.  Notwithstanding the foregoing or anything in this Agreement to the contrary, following the Closing, Purchaser and its Affiliates shall be permitted to disclose Seller Confidential Information as required by Law or to directors, officers, employees or advisors of Purchaser and its Affiliates who have a need to know such information, provided that such Persons are themselves obligated to keep such Seller Confidential Information confidential. 

Section 5.11Further Assurances.  The Parties shall execute and deliver, or shall cause to be executed and delivered, such documents and other instruments and shall take, or shall cause to be taken, such further actions as may be reasonably required to carry out the provisions of this Agreement and give effect to the Transactions. 

Section 5.12D&O Insurance. 

(a)Purchaser agrees that all rights to indemnification, advancement of expenses and exculpation by the Company and its Subsidiaries now existing in favor of each Person who is  

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now, or has been at any time prior to the date hereof or who becomes prior to the Closing Date, an officer or director of the Company or any of its Subsidiaries, shall survive the Closing Date and shall continue in full force and effect in accordance with their respective terms.

(b)The Company and its Subsidiaries shall, and Purchaser shall cause the Company and its Subsidiaries to (i) maintain in effect for a period of six (6) years after the Closing Date, if available, the current policies of directors’ and officers’ liability insurance maintained by the Company and its Subsidiaries immediately prior to the Closing Date (the “Existing Policy”) (provided that the Company and its Subsidiaries may substitute therefor policies, of at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors and officers of the Company and its Subsidiaries when compared to the insurance maintained by the Company and its Subsidiaries as of the date hereof under the Existing Policy; further, provided that if such “run-off” or other coverage is not available at a cost not greater than two hundred and fifty percent (250%) of the annual premiums paid as of the date of this Agreement under the Existing Policy (the “Insurance Cap”), then the Company and its Subsidiaries shall be required to obtain as much coverage as is reasonably possible under substantially similar policies for such annual premiums as do not exceed the Insurance Cap); or (ii) obtain as of the Closing Date “tail” insurance policies with a claims period of six (6) years from the Closing Date with at least the same coverage and amounts, and containing terms and conditions that are not less advantageous to the directors and officers of the Company and its Subsidiaries, in each case with respect to claims arising out of or relating to events which occurred on or prior to the Closing Date (including in connection with the transactions contemplated by this Agreement); provided, however, that the Company and its Subsidiaries do not pay more than the aggregate Insurance Cap. 

(c)The obligations of Purchaser and the Company and its Subsidiaries under this Section 5.12 shall not be terminated or modified in such a manner as to adversely affect any director or officer to whom this Section 5.12 applies without the consent of such affected director or officer (it being expressly agreed that the directors and officers to whom this Section 5.12 applies shall be third-party beneficiaries of this Section 5.12, each of whom may enforce the provisions of this Section 5.12. 

(d)In the event Purchaser, the Company, any of the Company’s Subsidiaries or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in either such case, proper provision shall be made so that the successors and assigns of Purchaser, the Company or any of the Company’s Subsidiaries, as the case may be, shall assume all of the obligations set forth in this Section 5.12. 

Section 5.13Certain Other Covenants. 

(a)As consideration for and to induce Purchaser to pay the consideration set forth in this Agreement, during the Non-Compete Restricted Period (provided that such period shall be extended by any period in which any Person is in material violation of the covenants of this Section 5.13; provided, further, that, notwithstanding the foregoing proviso, such period of tolling shall not be extended (x) for greater than twelve (12) months in the case of any single or  

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continuing violation or (y) from and after such time as Purchaser or its Affiliates have actual knowledge of such violation) Parent and Seller shall not, and Parent and Seller shall cause each of their Subsidiaries and shall use reasonable best efforts to cause each of its Affiliates not to, directly or indirectly:

(i)engage in or own any interest in, or control, manage or operate any Person or business division that is primarily engaged in the underwriting, distribution, sale, marketing or administration of pet insurance policies or the provision of pet insurance brokerage services (a “Competitive Business”) in any country in which the Company or any of its Subsidiaries then does business;  

(ii)use the Company Confidential Information (A) in connection with or with the purpose of pursuing or impairing any Competitive Business or (B) for any purpose other than risk management or modeling; or 

(iii)solicit or assist in the solicitation of any supplier, licensee or service provider with whom the Company or any of its Subsidiaries has a commercial relationship, whether by contract or otherwise, for the purpose of causing such supplier, licensee or service provider to reduce, discontinue or alter, in a manner adverse to the Company and its Subsidiaries, such commercial relationship. 

(b)Notwithstanding anything to the contrary in this Agreement, nothing in Section 5.13(a) shall preclude Parent, Seller or any of their Affiliates from (i) acquiring (by asset purchase, stock purchase, merger, reinsurance, consolidation or otherwise), directly or indirectly, the stock, business or assets of any Person that at the time of such acquisition is engaged in, or owns any interest in or controls, manages or operates any Person that is engaged in, a Competitive Business that would otherwise be prohibited by Section 5.13(a) (such Competitive Business being referred to herein as an “Acquired Competitive Business”); provided that, within twelve (12) months of the closing of the acquisition of such Acquired Competitive Business, Seller shall sell, spin-off or otherwise divest itself (or enter into an agreement to sell, spin-off or otherwise divest itself) of the portion of such Acquired Competitive Business that engages in the Acquired Competitive Business (the “Divested Portion”); provided, further that Purchaser shall have a right of first refusal to purchase the Divested Portion from Seller); or (ii) owning, directly or indirectly, as a passive, non-controlling investor (without any membership on the board of directors or similar governing body of such Person), up to an aggregate of five percent (5%) of any class of securities of a Person that is a Competitive Business that are registered under the Exchange Act, or an equivalent Law in a foreign jurisdiction. 

(c)During the Non-Solicit Restricted Period, Parent and Seller shall not, and Parent and Seller shall cause each of their Subsidiaries and shall use reasonable best efforts to cause each of their Affiliates not to, directly or indirectly, solicit or assist in the solicitation of any individual who on the Closing Date is an employee of the Company or the Company’s Subsidiaries or Purchaser without the prior written approval of Purchaser, unless such individual (i) was terminated by the Company or the Company’s Subsidiaries or Purchaser, as applicable, (ii) has not been in the employ of the Company or the Company’s Subsidiaries or Purchaser during the six (6) month period prior to such solicitation or (iii) is contacted or solicited through  

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general non-targeted solicitation or advertisement in a newspaper, online or through an employment agency.

(d)Each of the Parties has carefully read this Section 5.13 and considered the restraints imposed upon Parent, Seller and their Affiliates, and is in full accord as to the necessity of such restrictive covenants for the reasonable and proper protection of Purchaser and its Affiliates, and agrees that each restraint imposed by the provisions of this Section 5.13 is fair and reasonable with respect to subject matter, geographic scope and time period.  It is expressly understood and agreed that although Parent, Seller and Purchaser consider such covenants to be fair and reasonable, if a judicial determination is made by a court of competent jurisdiction that the time or any other restriction contained in this Section 5.13 is an invalid or unenforceable restriction against Parent, Seller or any of their Affiliates, the provisions of this Section 5.13 shall not be rendered void but shall be deemed amended to apply to such maximum time and to such maximum extent as such court may judicially determine or indicate to be enforceable.  Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is invalid or unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein, which shall be given full force and effect without regard to such finding. 

(e)Each of Parent and Seller represents, stipulates and acknowledges on behalf of itself and its Affiliates that:  (i) the restrictive covenants contained in this Section 5.13 are a material inducement to Purchaser to enter into this Agreement and consummate the Transactions, for which each of Parent and Seller will receive a substantial financial benefit, and (ii) it would impair the goodwill acquired by Purchaser and reduce the value of the Company if Parent or Seller were to breach its obligations contained in this Section 5.13. 

(f)The Company shall use, and shall cause its Affiliates to use, its reasonable best efforts, at Purchaser’s expense, 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 obtain third-party debt financing in connection with the transactions contemplated hereby. 

Section 5.14Reinsurance.   

(a)Within 60 days of the date hereof (the “Notice Deadline”), Purchaser may provide written notice to Seller that it elects for IAIC not to obtain the reinsurance coverage contemplated by the Reinsurance Agreement Term Sheet attached hereto as Exhibit C (a “Declination Notice”).  Within 30 days following such Declination Notice, Seller may, in its sole discretion, by written notice to Purchaser, either  

(i)agree not to obtain such coverage, in which case no Reinsurance Agreement shall be entered into and all provisions in this Agreement relating to entering into the Reinsurance Agreement and the Reinsurance Term Sheet shall terminate and be of no further force and effect; or 

(ii)decide to continue to pursue the reinsurance arrangement (a “Continuation Notice”); provided, that if Seller takes no action within such 30 day period then it shall be deemed to have agreed not to obtain reinsurance coverage pursuant to clause (i) above. 

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(b)In the event that either (i) Purchaser does not provide a Declination Notice to Seller on or prior to the Notice Deadline or (ii) Seller provides a Continuation Notice to Purchaser (either clause (i) or (ii), an “Affirmative Reinsurance Process”), then Parent and Seller shall, and shall cause their Affiliates to, negotiate and finalize prior to the Closing the Reinsurance Agreement, which shall include the agreed upon terms included in the Reinsurance Agreement Term Sheet attached hereto as Exhibit C and shall otherwise be reasonably acceptable to Purchaser. 

(c)Unless otherwise agreed in writing by the Parties, following the Closing, Purchaser shall cause IAIC to continue to write Subject Business, subject to the Reinsurance Agreement, until December 31, 2022 or until such other date as Purchaser and Parent shall agree in writing; provided, that in the event the Reinsurance Agreement is terminated for any reason in accordance with the terms thereof then Purchaser shall not be required to continue to write Specialty Health Insurance for any period for which the Reinsurance Agreement is not available for new business.  Parent shall, no later than twenty (20) days following the end of each calendar month following the Closing Date, indemnify, and fully reimburse, IAIC for all costs and expenses of writing, issuing and administering Specialty Health Insurance, including costs relate to policy administration, including administrative costs, underwriting and business acquisition expenses, commissions and other amounts incurred in connection with the Subject Business that are in excess of the aggregate amount received by IAIC during such calendar month period from the Reinsurer as a ceding commission, expense allowance or carrier fee under the Reinsurance Agreement.  The ceding commission will cover all expenses of IAIC related to policy administration, including administrative costs, underwriting and business acquisition expenses incurred to support the servicing obligations of the Subject Business .  These policy administration expenses will include fully loaded personnel costs.  The fully loaded personnel costs will be determined based on time studies that capture individuals’ time spent on supporting the pet and Subject Business policy activity, with the employee’s fully loaded cost then allocated between the pet and Subject Business based on the relative percentage of time the employee spends on these activities.  These policy administration expenses will also include (i) indirect expenses, such as the cost of human resource, finance and other general department expenses and (ii) non-personnel costs, including but not limited to information system maintenance and support expenses, agent license fees and facility costs.  Additional metrics will be developed to include these indirect and non-personnel policy administration costs. 

(d)In the event there has been an Affirmative Reinsurance Process and a Reinsurer has not been selected, and a final form of Reinsurance Agreement has not been negotiated, by August 31, 2021, then Purchaser shall be permitted, on behalf of IAIC, to negotiate the terms of a Reinsurance Agreement with a third party Reinsurer, subject to the written consent of Parent (not to be unreasonably withheld, conditioned or delayed).  In the event that the Reinsurer shall require the payment of a negative ceding commission in connection with the transfer of existing reserves by the Reinsurer, then Seller shall transfer to IAIC an amount of cash equal to the amount of the negative ceding commission required by the Reinsurer. 

Section 5.15Commutation. Notwithstanding anything to the contrary in Section 5.18, Seller shall cause the SSLIC Agreement to be commuted prior to the Closing (the “SSLIC Commutation”); provided, that the price and other terms of the SSLIC Commutation shall be economically neutral to IAIC and subject to the prior written approval of Purchaser, which  

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consent shall not be unreasonably withheld, conditioned or delayed.  In the event that the price of the SSLIC Commutation cannot be agreed by Purchaser, Seller, IAIC and SSLIC by July 31, 2021, then such determination shall be submitted to binding arbitration by a nationally recognized actuarial firm, reasonably acceptable to Purchaser, Seller, IAIC and SSLIC, whose decision as to price shall be final and binding on all such Persons.

Section 5.16Pre-Closing Restructuring.  From and after the date of this Agreement, Parent and Seller shall use reasonable best efforts to effect the restructuring transactions contemplated in the term sheet set forth on Section 5.16 of the Seller Disclosure Schedule prior to the Closing (the “Pre-Closing Restructuring”). 

Section 5.17Transfer of Intellectual Property.  Without limitation to Parent and Seller’s other obligations hereunder, for all Transferred IP, each of Parent and Seller shall transfer and assign, and shall cause its respective Affiliates, as appropriate, to transfer and assign, all right, title and interest to and under all such Intellectual Property, free and clear of any liens, to the Company through written and appropriately executed instruments, and Parent and Seller shall properly record such assignments in the applicable Intellectual Property office and domain name registrar, and Parent and Seller shall deliver to Purchaser evidence that such transfers and recordations have been effected in a form reasonably satisfactory to Purchaser. 

Section 5.18Termination of Intercompany and Related-Party Agreements.  Subject to Section 5.14(a), Seller shall cause any and all Contracts, intercompany balances, accounts payable or accounts receivable between or among the Company and its Subsidiaries, on the one hand, and Seller and its Affiliates (other than the Company or any of its Subsidiaries), on the other hand (except for any Contracts between or among the Company and its Subsidiaries, on the one hand, and PetPartners, PAH or FIGO, on the other), to be terminated in writing or otherwise amended or modified to exclude the Company and each of its Subsidiaries (as applicable) as a party thereto and provide a full release of the Company and each of its Subsidiaries (as applicable) so that neither the Company nor any of its Subsidiaries shall have any further liability or obligation thereunder, effective without further action as of the Closing.  No such Contract (including any provision thereof which purports to survive termination), intercompany balance, account payable or account receivable will be of any further force or effect after the Closing, and all parties thereto will be released from all Liabilities thereunder.  Each party will, at the reasonable request of any other party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.  Notwithstanding the foregoing, the provisions of this Section 5.18 will not apply to this Agreement, the Ancillary Agreements or the SSLIC Agreement. 

Section 5.19Escrow Agreement.  Prior to Closing, Purchaser and Seller shall use reasonable best efforts to negotiate the terms of the Escrow Agreement and such parties shall enter into such Escrow Agreement at the Closing. 

Section 5.20Transition Services Agreement.  Prior to Closing, Purchaser and Seller agree to negotiate in good faith and reasonably cooperate in preparing and finalizing the schedules to the Transition Services Agreement. 

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Section 5.21Rollover Agreement.  Following the date hereof, JAB Holdings and Seller shall use reasonable best efforts to negotiate the terms of the Rollover Agreement and such parties shall enter into such Rollover Agreement as promptly as practicable following the date hereof. 

Section 5.22Purchaser Release.  Effective as of the Closing, except as otherwise set forth herein, the PetPartners Purchase Agreement or the Ancillary Agreements, Purchaser on behalf of itself and each of its Subsidiaries and Affiliates, including after the Closing, the Company and its Subsidiaries, and each of their and their current and former officers, managers, directors, employees, partners, members, advisors, successors and assigns (collectively, the “Purchaser Releasing Parties”), hereby irrevocably and unconditionally releases and forever discharges Seller, its Affiliates and each of their respective current and former officers, managers, directors, employees, partners, members, advisors, attorneys, financial advisors, lenders, successors and assigns (collectively, the “Seller Released Parties”) of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which the Purchaser Releasing Parties may have against each of the Seller Released Parties, now or in the future, in each case in respect of any cause, matter or thing relating to any of the Seller Released Parties occurring or arising on or prior to the date of this Agreement. 

Section 5.23Seller Release.  Effective as of the Closing, except as otherwise set forth herein, the PetPartners Purchase Agreement or the Ancillary Agreements, Seller on behalf of itself and each of its Subsidiaries and Affiliates, and each of its and their current and former officers, managers, directors, employees, partners, members, advisors, successors and assigns (collectively, the “Seller Releasing Parties”), hereby irrevocably and unconditionally releases and forever discharges Purchaser, its Affiliates (including the Company and its Subsidiaries) and each of their respective current and former officers, managers, directors, employees, partners, members, advisors, attorneys, financial advisors, lenders, successors and assigns (collectively, the “Purchaser Released Parties”) of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which the Seller Releasing Parties may have against each of the Purchaser Released Parties, now or in the future, in each case in respect of any cause, matter or thing relating to any of the Purchaser Released Parties occurring or arising on or prior to the date of this Agreement. 

Section 5.24Resignations. Parent and Seller shall deliver to Purchaser duly signed resignations, or if such resignation cannot reasonably be obtained, reasonable evidence of removal, effective as of and upon the Closing Date, of each of those directors and/or managers of the Company and its Subsidiaries identified by Purchaser in writing to Seller at least ten (10) Business Days prior to the Closing Date.  For the avoidance of doubt, the Parties acknowledge and agree that the resignations will be for the resignation from the director and/or manager positions held by such signatories at the Company and/or its Subsidiaries but will not be a resignation from employment with the Company and/or its Subsidiaries. 

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Article VICONDITIONS TO CLOSING

Section 6.01Conditions Precedent to Obligations of Each Party.  The obligations of each Party to consummate the Transactions are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by the Party to whose benefit such condition exists, in whole or in part, to the extent permitted by applicable Law): 

(a)no injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining or otherwise making illegal or prohibiting consummation of the Transactions; 

(b)the waiting period or required approval applicable to the Transactions under the HSR Act shall have expired (or early termination shall have been granted) or been received;  

(c)delivery to the applicable Party of all items required pursuant to Section 2.03; 

(d)A “Form A” Acquisition of Control Statement shall have been filed with and accepted by the Insurance Commissioner of the State of Delaware;  

(e)if the Company and its Subsidiaries enter into a Reinsurance Agreement as contemplated by the Reinsurance Term Sheet pursuant to Section 5.14 of this Agreement, and the Reinsurer is an Affiliate of the Company, a “Form D” Prior Notice of a Transaction shall have been filed with and accepted by the Insurance Department of the State of Delaware;  

(f)a “Form D” Prior Notice of a Transaction in respect of the SSLIC Commutation shall have been filed with and accepted by the Insurance Department of the State of Delaware; and 

(g)The Pre-Closing Restructuring shall have been completed, or shall be completed concurrently with the Closing, in all respects. 

Section 6.02Conditions Precedent to Obligations of Purchaser .  In addition, the obligations of Purchaser to consummate the Transactions are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Purchaser, in whole or in part, to the extent permitted by applicable Law): 

(a)(i) (A) the representations and warranties of Parent and Seller set forth in Article III (other than (1) the Fundamental Parent and Seller Representations, (2) the representations and warranties set forth in Section 3.08(b) and (3) those other representations and warranties that address matters as of a specified date) shall be true and correct as of the Closing Date as though then made at and as of the Closing Date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties) and (B) the representations and warranties of Parent and Seller set forth in Article III that address matters as of a specified date (other than the Fundamental Parent and Seller Representations and Section 3.08(b)) shall be true and correct as of such specified date (without giving effect to materiality,  

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Material Adverse Effect or similar phrases in such representations and warranties), except where the failure of such representations and warranties referenced in the immediately preceding clauses (A) and (B) to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (ii) the Fundamental Parent and Seller Representations shall be true and correct in all material respects as of the Closing Date as though then made at and as of the Closing Date except for such Fundamental Parent and Seller Representations which address matters only as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date (in each case, without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties); and (iii) the representations and warranties set forth in Section 3.08(b) shall be true and correct in all respects as of the Closing Date as though then made;

(b)Parent and Seller shall have performed and complied in all material respects with all covenants required pursuant to the terms of this Agreement to be performed or complied with by them on or prior to the Closing Date;  

(c)Purchaser shall have received from Parent a certificate signed by a senior officer of Parent, dated as of the Closing Date, to the effect that the conditions specified in Section 6.02(a) and Section 6.02(b) are satisfied; 

(d)the waiting period or required approval applicable to the Transactions under the HSR Act shall have expired (or early termination shall have been granted) or been received without the imposition of any term, condition or consequence the acceptance of which would constitute a Substantial Detriment; 

(e)The Consent of the Governmental Authority set forth in Item #5 of Section 4.04 of the Purchaser Disclosure Schedule shall have been obtained; 

(f)None of the Key Employees shall (i) have failed to deliver an executed employment agreement with Purchaser, (ii) have terminated employment with the Company, (iii) other than as a result of death or disability, be unable to commence employment under his or her employment agreement with Purchaser upon the Closing or (iv) have notified the Company, Parent, Seller or Purchaser that he or she is terminating (or currently intends to terminate) employment with the Company; 

(g)the closing of the transactions contemplated by the PetPartners Purchase Agreement shall have occurred; and 

(h)In the event that Purchaser shall have made a timely election for the Company to obtain the reinsurance coverage contemplated by Exhibit C hereto, Seller shall have delivered to Purchaser a copy of the Reinsurance Agreement, duly executed by the Company and the Reinsurer. 

Section 6.03Conditions Precedent to Obligations of Parent and Seller.  In addition, the obligations of Parent and Seller to consummate the Transactions are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of  

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which may be waived by Parent or Seller, in whole or in part, to the extent permitted by applicable Law):

(a)(i) (A) the representations and warranties of Purchaser set forth in Article IV (other than (1) Section 4.02 and (2) those other representations and warranties that address matters as of a specified date) shall be true and correct as of the Closing Date as though then made at and as of the Closing Date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties) and (B) the representations and warranties of Purchaser set forth in Article IV of this Agreement that address matters as of a specified date (other than Section 4.02) shall be true and correct as of such specified date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties), except where the failure of such representations and warranties referenced in the immediately preceding clauses (A) and (B) to be so true and correct would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions; and (ii) the representations and warranties set forth in Section 4.02 shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date except for representations and warranties set forth in Section 4.02 which address matters only as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date (in each case, without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties); 

(b)Purchaser shall have performed and complied in all material respects with all covenants required pursuant to the terms of this Agreement to be performed or complied with by it on or prior to the Closing Date; and 

(c)Parent shall have received a certificate signed by a senior officer of Purchaser, dated as of the Closing Date, to the effect that the conditions specified in Section 6.03(a) and Section 6.03(b) are satisfied. 

Section 6.04Frustration of Closing Conditions.  A Party may not rely on the failure of any condition set forth in Section 6.01, Section 6.02 or Section 6.03, as the case may be, to be satisfied if such failure was due to the failure of such Party to perform any of its obligations under this Agreement. 



Article VIITERMINATION

Section 7.01Termination of Agreement.  Subject to Section 9.04, this Agreement may be terminated at any time prior to the Effective Time as follows: 

(a)by Parent and Seller, on the one hand, or Purchaser, on the other hand, on or after November 17, 2021 (as it may be extended pursuant to this Section 7.01(a) or the last sentence of Section 9.04, the “Outside Date”), if the Transactions shall not have occurred by 5:00 p.m., New York City time, on the Outside Date; provided that if, on the Outside Date, all of the conditions to the Closing set forth in Article VI (other than the conditions that by their nature can be  

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satisfied only at the Closing) have been satisfied or waived, as applicable, except for the conditions set forth in Section 6.01(b), either Parent or Seller, on the one hand, or Purchaser, on the other hand may, prior to 5:00 p.m., New York City time, on the Outside Date, extend the Outside Date to February 17, 2022 (such later date being the Outside Date); provided, further, that neither Parent or Seller, on the one hand, nor Purchaser, on the other hand, may terminate this Agreement or extend the Outside Date pursuant to this Section 7.01(a) if it (or in the case of Parent or Seller, the Company) is in material breach of any of its obligations hereunder and such material breach causes, or results in, either (i) the failure to satisfy the conditions to the obligations of the terminating Party to consummate the Transactions set forth in Article VI prior to the Outside Date or (ii) the failure of the Effective Time to have occurred prior to the Outside Date;

(b)by mutual written consent of Parent or Seller, on the one hand, and Purchaser, on the other hand; 

(c)by Parent and Seller or by Purchaser if an injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining or otherwise making illegal or prohibiting consummation of the Transactions and shall have become final and nonappealable; provided that neither Parent and Seller, on the one hand, nor Purchaser, on the other hand, may terminate this Agreement pursuant to this Section 7.01(c) if it (or in the case of Parent or Seller, the Company) is in material breach of any of its obligations hereunder and such material breach causes, or results in, the failure of the Closing to occur on or prior to the date of such termination; 

(d)by Purchaser if (i) Purchaser is not in material breach of any of its obligations hereunder and (ii) Parent, Seller or the Company is in material breach of any of its representations, warranties or obligations hereunder that renders or would render the conditions set forth in Section 6.02(a) or Section 6.02(b) incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (x) twenty (20) Business Days after the giving of written notice by Purchaser to Parent or Seller and (y) two (2) Business Days prior to the Outside Date; 

(e)by Parent or Seller if (i) none of Parent, Seller or the Company is in material breach of any of its obligations hereunder and (ii) Purchaser is in material breach of any of its representations, warranties or obligations hereunder that renders or would render the conditions set forth in Section 6.03(a) or Section 6.03(b) incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (1) twenty (20) Business Days after the giving of written notice by Parent or Seller to Purchaser and (2) two (2) Business Days prior to the Outside Date; or 

(f)by Parent or Seller, if the PetPartners Purchase Agreement is terminated for any reason. 

Section 7.02Procedure upon Termination.  In the event of termination and abandonment by any Party or Parties pursuant to Section 7.01, written notice thereof shall  

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forthwith be given to the other Parties, and this Agreement shall terminate, and the Transactions shall be abandoned, without further action by any Party.

Section 7.03Effect of Termination. In the event that this Agreement is validly terminated in accordance with Section 7.01, then each of the Parties shall be relieved of its duties and obligations arising under this Agreement after the date of such termination and such termination shall be without Liability to any of the Parties; provided, however, that, subject to the terms, conditions and limitations of this Section 7.03, (a) no such termination shall relieve any Party from Liability for any willful and material breach (it being acknowledged and agreed by the Parties that the failure to close the Transactions by any Party that was otherwise obligated to do so under the terms of this Agreement shall be deemed to be a willful and material breach) or fraud by that Party prior to such termination and (b) the provisions of this Section 7.03, Section 5.02(f), the last sentence of Section 5.03(b), Section 5.04 and Article IX shall remain in full force and effect and survive any termination of this Agreement in accordance with its terms. 



Article VIIIINDEMNIFICATION

Section 8.01Indemnification Obligations. 

(a)Indemnification Obligations of Parent and Seller.  From and after the Closing, Parent and Seller, in accordance with and subject to the provisions and limitations set forth in this Article VIII, shall jointly and severally indemnify, defend and hold harmless Purchaser and its Affiliates (including, after the Closing, the Company and its Subsidiaries), and each of their respective Representatives (the “Purchaser Indemnified Parties”) from and against any and all Losses actually incurred, suffered or sustained by any Purchaser Indemnified Party arising out of, or resulting from: 

(i)any breach of or inaccuracy in any representation or warranty made in this Agreement by Parent or Seller in Article III (or in the closing certificate delivered by Parent in accordance with Section 6.02(c)); 

(ii)any breach of any covenant, agreement or undertaking made by or to be performed by Parent or Seller or, with respect to the period on or prior to the Closing Date, the Company, in this Agreement;  

(iii)Transaction Expenses unpaid following the Closing; 

(iv)the VDA (as defined in the Seller Disclosure Schedules); 

(v)any Indemnified Taxes;  

(vi)the matters listed on Section 8.01(a)(v) of the Seller Disclosure Schedule; and 

(vii)any Liability of the Company and its Subsidiaries as of the Closing that does not relate to IAIC and its Subsidiaries, FIGO, PAH or the Transferred IP. 

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The Losses of the Purchaser Indemnified Parties described in Section 8.01(a) as to which the Purchaser Indemnified Parties are entitled to indemnification are collectively referred to as “Purchaser Losses”.

 

(b)Indemnification Obligations of Purchaser.  From and after the Closing, Purchaser and the Company, in accordance with and subject to the provisions and limitations set forth in this Article VIII, shall jointly and severally indemnify, defend, and hold harmless each of Parent and Seller and their respective Affiliates, and each of their respective Representatives (the “Seller Indemnified Parties”) from and against any and all Losses actually incurred, suffered or sustained by any Seller Indemnified Party arising out of, or resulting from: 

(i)any breach of or inaccuracy in any representation or warranty made in this Agreement by Purchaser in Article IV (or in the closing certificate delivered by Purchaser in accordance with Section 6.03(c)); or 

(ii)any breach of any covenant, agreement or undertaking made by or to be performed by Purchaser in this Agreement. 

The Losses of the Seller Indemnified Parties described in this Section 8.01(b) as to which the Seller Indemnified Parties are entitled to indemnification are collectively referred to as “Seller Losses”.

Section 8.02Survival.  The representations, warranties, covenants and agreements of the Parties contained in this Agreement will survive the Closing but only to the extent specified in this Section 8.02.  Subject to the last proviso of Section 8.04(a), all representations and warranties in Article III and Article IV of this Agreement and all covenants and agreements to be performed prior to the Closing shall survive the Closing for a period of eighteen (18) months after the Closing Date, or such other date as specifically provided in this Agreement, at which time they shall terminate (and no claims shall be made for indemnification under this Article VIII), except: (a) the Fundamental Parent and Seller Representations shall survive for the maximum period of time allowable under Law; (b) the representations and warranties in Section 3.17 (Tax Matters) and the specified indemnities set forth in Section 8.01(a)(v) shall survive until sixty (60) days after the expiration of the applicable statute of limitations; and (c) the covenants and agreements to be performed after the Closing shall survive indefinitely until fully performed or terminated, except as otherwise specifically provided in this Agreement.  Notwithstanding the survival periods set forth in this Section 8.02, no right to indemnification for Losses identified in a notice of a Claim for indemnity properly asserted in writing in accordance with Section 8.04(d) prior to the expiration of the applicable survival period set forth above will be affected by the expiration of such survival period, and instead, with respect to such claims, shall survive until the final resolution of the asserted right to indemnification specified in such notice in accordance with Section 8.04(d). 

Section 8.03Indemnification Limitations. 

(a)Purchaser Basket.  Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation or from breach of, or inaccuracy in, the Fundamental Parent and Seller Representations or the representations and  

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warranties in Section 3.17 (Tax Matters), no Purchaser Indemnified Party shall be entitled to assert any claim for indemnification under Section 8.01(a)(i):  (i) unless and until, individually or in the aggregate, all Purchaser Losses in respect of indemnification under such Sections (together in the aggregate with any Purchaser Losses under Section 8.01(a)(i) of the PetPartners Purchase Agreement) exceed $4,000,000, after which Seller shall be obligated only for the excess of Purchaser Losses over such amount for which the Purchaser Indemnified Parties are finally determined to be otherwise entitled to indemnification, or (ii) for any Claim that individually results in Purchaser Losses in an amount that does not exceed $250,000.

(b)Purchaser Caps.  

(i)Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, or from breach of, or inaccuracy in, the Fundamental Parent and Seller Representations or the representations and warranties in Section 3.17 (Tax Matters), the maximum aggregate liability of Parent and Seller under Section 8.01(a)(i) (together in the aggregate with any Purchaser Losses under Section 8.01(a)(i) of the PetPartners Purchase Agreement) shall not exceed an amount equal to $40,000,000 (such maximum amount, the “Cap”). 

(ii)Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, but subject to the limitations set forth in Section 8.03(b)(i) immediately above, the maximum aggregate liability of Parent and Seller under Section 8.01(a) shall not exceed the aggregate Final Closing Consideration. 

(c)Seller Basket.  Other than for Seller Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, no Seller Indemnified Party shall be entitled to assert any claim for indemnification under Section 8.01(a)(i):  (i) unless and until, individually or in the aggregate, all Seller Losses in respect of indemnification under such Sections (together in the aggregate with any Seller Losses under Section 8.01(a)(i) of the PetPartners Purchase Agreement exceed $4,000,000, after which Purchaser shall be obligated only for the excess of Seller Losses over such amount for which the Seller Indemnified Parties are finally determined to be otherwise entitled to indemnification, or (ii) for any Claim that individually results in Seller Losses in an amount that does not exceed $100,000. 

(d)Seller Caps.  Other than for Seller Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, (i) the maximum aggregate liability of Purchaser to any Seller Indemnified Party under Section 8.01(b)(i) (together in the aggregate with any Seller Losses under Section 8.01(b)(i) of the PetPartners Purchase Agreement) shall not exceed the Cap, and (ii) subject to the limitations set forth in the immediately preceding clause (i), the maximum aggregate liability of Purchaser under Section 8.01(b) shall not exceed the Final Closing Consideration. 

Section 8.04Notification of Claims. 

(a)An Indemnified Party shall promptly notify the Indemnifying Party in writing of any Claim in respect of which indemnity may be sought under this Article VIII, including any pending or threatened Claim or demand by a third party that the Indemnified Party has  

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determined has given or could reasonably give rise to a right of indemnification under this Agreement (including a pending or threatened Claim or demand asserted or unasserted, known or unknown or accrued or unaccrued, by a third party against the Indemnified Party) (each, a “Third-Party Claim”), describing in reasonable detail the facts and circumstances (to the extent known based on the then available information) with respect to the subject matter of such Claim or demand; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that the Indemnifying Party is materially prejudiced by such failure.  The Parties agree that (i) in this Article VIII they intend to shorten (in the case of the limited survival periods specified in Section 8.02) and lengthen (in the case of the indefinite survival periods specified in Section 8.02) (as the case may be) the applicable statute of limitations period with respect to certain Claims; (ii) notices for Claims in respect of a breach of a representation, warranty, covenant or agreement must be delivered prior to the expiration of any applicable survival period specified in Section 8.02 for such representation, warranty, covenant or agreement; and (iii) any Claims for indemnification for which notice is not timely delivered in accordance with this Section 8.04(a) shall be expressly barred and are hereby waived; provided, that, if, prior to such applicable date, a Party shall have notified the other Party in accordance with the requirements of this Section 8.04(a) of a claim for indemnification under this Article VIII (whether or not formal legal action shall have been commenced based upon such claim), such Claim shall continue to be subject to indemnification in accordance with this Article VIII notwithstanding the passing of such applicable date.

(b)Upon receipt of a notice of a Claim for indemnity from an Indemnified Party pursuant to Section 8.04(a) in respect of a Third-Party Claim, the Indemnifying Party may, by notice to the Indemnified Party delivered within twenty (20) Business Days of the receipt of notice of such Third-Party Claim (and, for the avoidance of doubt, any failure to deliver any such notice within such time period shall be deemed an election not to assume any such defense and control), assume the defense and control of any Third-Party Claim, with its own counsel and at its own expense, but shall allow the Indemnified Party an opportunity to participate in the defense of such Third-Party Claim with its own counsel and at its own expense; provided, however, that the Indemnifying Party shall bear the reasonable fees, costs and expenses of one (1) such separate counsel if (i) the Indemnified Party shall have determined in good faith that an actual or potential conflict of interest makes representation by the same counsel inappropriate or (ii) the Indemnifying Party shall have authorized the Indemnified Party to employ separate counsel at the Indemnifying Party’s expense.  The Indemnified Party shall take any actions reasonably necessary to defend such Third-Party Claim prior to the time that it receives a notice from the Indemnifying Party as contemplated by the immediately preceding sentence.  Parent and Seller, on the one hand, or Purchaser, on the other hand, (as the case may be) shall, and shall cause each of its Affiliates and Representatives to, cooperate fully with the Indemnifying Party in the defense of any Third-Party Claim, which cooperation shall include designating a liaison counsel to whom the Indemnifying Party may direct notices and other communications, and upon the reasonable request of the Indemnifying Party, use reasonable efforts to make witnesses available, and provide records and documents.  If the Indemnifying Party has assumed the defense of a Third-Party Claim and is in compliance with its obligations under this Section 8.04(b) (or if the twenty (20) Business Day period has not yet elapsed), then the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed), consent to a settlement,  

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compromise or discharge of, or the entry of any judgment arising from, any Third-Party Claim, unless such settlement, compromise, discharge or entry of any judgment (1) does not involve any finding or admission of any violation of Law or admission of any wrongdoing by any Person, (2) provides solely for the payment of money and (3) does not affect any other claims that may be made against the Indemnified Party in a manner adverse to such Indemnified Party, and the Indemnifying Party shall (x) pay or cause to be paid all amounts arising out of such settlement or judgment pursuant to the terms of such settlement or judgment, (y) not encumber any of the material assets of any Indemnified Party or agree to any restriction or condition that would apply to or materially adversely affect any Indemnified Party or the conduct of any Indemnified Party’s business and (z) obtain, as a condition of any settlement, compromise, discharge, entry of judgment (if applicable) or other resolution, a complete and unconditional release of, or dismissal with prejudice of claims against,  Indemnified Party from all matters that were asserted in connection with such claims and any and all liabilities in respect of such Third-Party Claim.  The Indemnified Party shall not settle, compromise or consent to the entry of any judgment with respect to any claim or demand for which it is seeking indemnification from the Indemnifying Party or admit to any liability with respect to such claim or demand without the prior written consent of the Indemnifying Party (which shall not be unreasonably withheld, conditioned or delayed).

(c)Notwithstanding anything to the contrary contained in this Article VIII, no Indemnifying Party shall have any liability under this Article VIII for any Losses arising out of or in connection with any Third-Party Claim that is settled or compromised by an Indemnified Party without the consent of such Indemnifying Party (which shall not be unreasonably withheld, conditioned or delayed). 

(d)In the event any Indemnifying Party receives a notice of a claim for indemnity from an Indemnified Party pursuant to Section 8.04(a) that does not involve a Third-Party Claim, the Indemnifying Party shall notify the Indemnified Party within twenty (20) Business Days following its receipt of such notice whether the Indemnifying Party disputes its liability to the Indemnified Party under this Article VIII.  The Indemnified Party shall reasonably cooperate with and assist the Indemnifying Party in determining the validity of any such claim for indemnity by the Indemnified Party. 

Section 8.05Payment.  In the event a Claim or any Action for indemnification under this Article VIII has been finally determined against Parent or Seller, the amount of such final determination shall be paid by the applicable Indemnifying Party to the Indemnified Party on demand by wire transfer of immediately available funds to the applicable account designated by the Indemnified Party in writing.  A Claim or an Action, and the liability for and amount of damages therefor, shall be deemed to be “finally determined” for purposes of this Article VIII when the Parties have so determined by mutual written agreement or, if disputed, when a final non-appealable Order has been entered into with respect to such Claim or Action. 

Section 8.06Exclusive Remedies.  Each Party acknowledges and agrees that: 

(a)prior to the Closing, other than in the case of intentional breach, willful misconduct or fraud by Parent, Seller or their Affiliates or Representatives, the sole and exclusive remedy of Purchaser for any breach or inaccuracy of any representation or warranty  

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contained in this Agreement or any certificate or instrument delivered hereunder shall be, in the event that (i) each of the conditions set forth in Article VI has not been satisfied or waived as a result of such breach or inaccuracy and (ii) such breach or inaccuracy is incapable of being cured or, if capable of being cured, is not cured within thirty (30) days after Purchaser has notified Parent and Seller of intent to refuse to close the purchase and sale of the Sale Shares hereunder, refusal to close the purchase and sale of the Sale Shares hereunder;

(b)following the Closing, other than in the case of intentional breach, willful misconduct or fraud, (i) the indemnification provisions of this Article VIII shall be the sole and exclusive remedies of the Parties for any breach of the representations or warranties contained in this Agreement and (ii) notwithstanding anything to the contrary contained herein, no breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right (other than any right specifically contemplated by the terms of Section 10 of the Stockholders Agreement) on the part of any Party to rescind this Agreement or any of the transactions contemplated by this Agreement; and 

(c)following the Closing, the indemnification provisions of this Article VIII shall be the sole and exclusive monetary remedies of the Parties for any breach of any covenant, but without prejudice to any remedies available under any of the Ancillary Agreements or Section 9.04. 

Section 8.07Additional Indemnification Provisions. 

(a)Parent, Seller and Purchaser agree, for themselves and on behalf of their respective Affiliates and Representatives, that with respect to each indemnification obligation set forth in this Article VIII, any Ancillary Agreement or any other document executed or delivered in connection with the Closing: each such obligation shall be calculated net of any Eligible Insurance Proceeds. 

(b)Any amount payable by the Indemnifying Party pursuant to this Article VIII shall be paid promptly and payment shall not be delayed pending any determination of Eligible Insurance Proceeds.  In any case where an Indemnified Party recovers from a third party any Eligible Insurance Proceeds or any other amount in respect of any Loss for which the Indemnifying Party has actually reimbursed it pursuant to this Article VIII, such Indemnified Party shall promptly pay over to the Indemnifying Party the amount of such Eligible Insurance Proceeds, but not in excess of the sum of (i) any amount previously paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such claim and (ii) any amount expended by the Indemnifying Party in pursuing or defending any claim arising out of such matter. 

(c)The Parties shall treat any indemnification payment made under this Agreement as an adjustment to the Closing Consideration. 

(d)If any portion of Losses to be reimbursed by the applicable Indemnifying Party may be covered, in whole or in part, by third-party insurance coverage, the Indemnified Party shall promptly give notice thereof to the Indemnifying Party (a “Notice of Insurance”).  If the Indemnifying Party so requests within one hundred eighty (180) days after receipt of a Notice of  

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Insurance, the Indemnified Party shall use its reasonable best efforts to collect (at the Indemnifying Party’s expense) the Eligible Insurance Proceeds.

(e)The Parties acknowledge and agree that the same Loss may be subject to indemnification under more than one subsection of Section 8.01; provided, however, that in no event shall an Indemnified Party be entitled to duplicative recoveries for the same underlying Loss under this Article VIII or under any Ancillary Agreement. 

(f)For purposes of this Article VIII, in respect of the representations and warranties set forth in Article III (except for Section 3.08(b)) and Article IV, and the covenants set forth in this Agreement, any and all “Material Adverse Effect”, “material adverse effect”, “materiality” and similar exceptions and qualifiers and any similar thresholds set forth in such representations, warranties and covenants shall be disregarded (or, in the case of “Material Adverse Effect”, be read as “adverse effect”) for purposes of determining whether any such representation or warranty has been breached or determining the amount of Losses resulting therefrom. 

Section 8.08Mitigation.  Each Indemnified Party agrees to take reasonable steps as required under applicable law upon and after becoming aware of any event or condition which would reasonably be expected to give rise to any Losses that are indemnifiable hereunder. 



Article IXMISCELLANEOUS

Section 9.01Entire Agreement; Amendments and Waivers.  This Agreement and the Ancillary Agreements represent the entire understanding and agreement, and supersede all other prior agreements and understandings, both written and oral, among the Parties and their Affiliates, or any of them, with respect to the subject matter hereof.  This Agreement may be amended, supplemented or changed only by a written instrument signed by each of the Parties.  Each provision in this Agreement may be waived only by a written instrument making specific reference to this Agreement signed by the Party against whom enforcement of any such provision so waived is sought.  No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.  The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.  No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 

Section 9.02Binding Effect; Assignment. 

(a)This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.  Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person that is not a Party, except
Section 9.10 shall be for the benefit of, and enforceable by, the Nonparty Affiliates of the Parties. 

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(b)No assignment of this Agreement or of any rights or obligations hereunder may be made, directly or indirectly (by operation of law or otherwise), by any Party without the prior written consent of the other Parties, except that Purchaser may assign any and all of its rights or obligations under this Agreement or any Ancillary Agreement to any of its Affiliates.  Subject to the immediately preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.  Any purported assignment not permitted under this Section 9.02(b) shall be null and void. 

Section 9.03Governing Law; Jurisdiction.   

(a)This Agreement, and all claims or causes of action (whether in contract, tort or otherwise) based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement), shall be governed by and construed in accordance with the Laws of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws. 

(b)Each of the Parties hereby irrevocably and unconditionally (i) submits, for itself and its property, to the exclusive jurisdiction of each federal court or state court within the County of New York in the State of New York having jurisdiction over that matter (“New York Courts”), and any appellate court from any decision thereof, in any Action based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement), or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such Action shall be heard and determined in the New York Courts, (ii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any Action based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement) in the New York Courts, (iii) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such Action in any such court and (iv) agrees that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.  Each of the Parties agrees that service of process, summons, notice or document by registered mail addressed to it at the applicable address set forth in Section 9.07 shall be effective service of process for any Action brought in any such court. 

Section 9.04Specific Enforcement. 

The Parties agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, including if the Parties fail to take any action required of them hereunder to consummate this Agreement, subject to the terms and conditions of this Agreement.  The Parties acknowledge and agree that (a) the

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Parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof (including, for the avoidance of doubt, the right of Parent and Seller, on the one hand, or Purchaser, on the other hand, to cause the Transactions to be consummated on the terms and subject to the conditions set forth in this Agreement) in the courts described in Section 9.03(b) without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement, and (b) the right of specific enforcement is an integral part of the Transactions and without that right, the Parties would not have entered into this Agreement.  The Parties agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the Parties otherwise have an adequate remedy at law.  The Parties acknowledge and agree that any Party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 9.04 shall not be required to provide any bond or other security in connection with any such order or injunction.  If, prior to the Outside Date, any Party brings any Action, in each case, in accordance with this Section 9.04, to enforce specifically the performance of the terms and provisions hereof by any other Party, the Outside Date shall automatically be extended (x) for the period during which such Action is pending, plus ten (10) Business Days or (y) by such other time period established by the court presiding over such Action, as the case may be.

Section 9.05Waiver of Jury Trial. 

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION THAT MAY BE DIRECTLY OR INDIRECTLY BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE ANCILLARY AGREEMENTS IN CONNECTION HEREWITH OR THE TRANSACTIONS.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.05.

Section 9.06Remedies.  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 at any time of any other remedy, except to the extent expressly limited hereby. 

Section 9.07Notices.  All notices and other communications under this Agreement shall be in writing and shall be deemed given (a) when delivered personally by hand (with  

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written confirmation of receipt by other than automatic means, whether electronic or otherwise), (b) when sent by facsimile or email (unless, in the case of email, an automatic response has been received indicating that the recipient did not receive such email) with written confirmation of transmission or (c) one (1) Business Day following the day sent by an internationally recognized overnight courier (with written confirmation of receipt), in each case, at the following addresses, facsimile numbers and email addresses (or to such other address, facsimile number or email address as a Party may have specified by notice given to the other Party pursuant to this provision):

If to Parent, Seller or, prior to Closing, the Company:

96 Cummings Point Road
Stamford, CT 06902
Attn: Marla Di Resta
Email: mdiresta@sslicny.com

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

 

Dentons US LLP 

1221 Avenue of the Americas 

New York, NY 10020-1089 

Attn:Nicholas Williams  

Kristina Beirne  

Email:n.williams@dentons.com;   

kristina.beirne@dentons.com 

If to Purchaser, or following the Closing, the Company:

 

1701 Pennsylvania Avenue NW, Suite 801 

Washington, DC 20006 

Attn:Joachim Creus  

Email:Joachim.Creus@jabse.eu 

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

Skadden, Arps, Slate, Meagher & Flom LLP 

 

One Manhattan West 

New York, NY 10001 

Attn:Paul T. Schnell  

Sean C. Doyle  

Jon A. Hlafter  

Email: paul.schnell@skadden.com  

sean.doyle@skadden.com  

jon.hlafter@skadden.com  

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If to Iguana Capital:

 

1701 Pennsylvania Avenue NW, Suite 801 

Washington, DC 20006 

Attn:Trevor Ashley  

Email:trevor.ashley@jabholco.com 

Any Party from time to time may change its address, facsimile number or other information for the purpose of notices to that Party by giving notice, in accordance with this Section 9.07, specifying such change to the other Parties.

Section 9.08Severability.  If any condition, term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other conditions, terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the Transactions are consummated as originally contemplated to the greatest extent possible.  Notwithstanding the foregoing, the Parties intend that the provisions of Article VII and Article VIII, including the remedies (and limitations thereon) and the limitations on representations, warranties and covenants, be construed as integral provisions of this Agreement and that such provisions, remedies and limitations shall not be severable in any manner that diminishes a Party’s rights hereunder or increases a Party’s Liability or obligations hereunder. 

Section 9.09Expenses.  Except as otherwise provided in this Agreement, each Party shall bear its own expenses incurred in connection with the negotiation, execution and performance of this Agreement, each Ancillary Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the Transactions. 

Section 9.10Non-Recourse.  All Actions, Liabilities or causes of action (whether in contract or in tort, in law or in equity or granted by statute) that may be based upon, in respect of, arise under, out of or by reason of, be connected with or relate in any manner to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or warranty made in, in connection with, or as an inducement to, this Agreement), may be made against only (and such representations and warranties are those solely of) the Persons that are expressly identified as Parties to this Agreement (the “Contracting Parties”).  Other than in the case of fraud, no Person who is not a Contracting Party, including any current, former or future director, officer, employee, consultant, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, representative or assignee of, and any financial advisor or lender to, any Contracting Party, or any current, former or future director, officer, employee, consultant, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, representative or assignee of, and any financial advisor or lender to, any of the foregoing (collectively, the “Nonparty Affiliates”), shall have any Liability (whether in contract or in tort, in law or in equity, or granted by statute) for any claims, causes of action or Liabilities arising under, out of,  

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in connection with, or related in any manner to this Agreement or based on, in respect of, or by reason of this Agreement or its negotiation, execution, performance or breach, and, to the maximum extent permitted by Law, each Contracting Party hereby waives and releases all such Liabilities, claims, causes of action and obligations against any such Nonparty Affiliates.  Without limiting the foregoing, to the maximum extent permitted by Law, (a) other than in the case of fraud, each Contracting Party hereby waives and releases any and all rights, claims, demands or causes of action that may otherwise be available at law or in equity, or granted by statute, to avoid or disregard the entity form of a Contracting Party or otherwise impose Liability of a Contracting Party on any Nonparty Affiliate, whether granted by statute or based on theories of equity, agency, control, instrumentality, alter ego, domination, sham, single business enterprise, piercing the veil, unfairness, undercapitalization or otherwise and (b) each Contracting Party disclaims any reliance upon any Nonparty Affiliates with respect to the performance of this Agreement or any representation or warranty made in, in connection with or as an inducement to this Agreement.

Section 9.11Counterparts.  This Agreement may be executed in any number of counterparts (including by means of facsimile or email in .pdf format), each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 

Section 9.12JAB Holdings Obligation.   

(a)To induce Parent and Seller to enter into this Agreement, JAB Holdings hereby irrevocably and unconditionally guarantees, as a primary obligor and not as a surety, to Parent and Seller the full and timely payment and performance by Purchaser of all of Purchaser’s covenants, obligations, undertakings and liabilities under this Agreement, including any indemnity obligations hereunder or thereunder (collectively, the “Guaranteed Obligations”).  JAB Holdings acknowledges that it is receiving benefits in connection with providing this Guaranty pursuant to this Section 9.12 (this “Guaranty”).  The liability of JAB Holdings under this Guaranty shall be absolute, unconditional and irrevocable.  

(b)JAB Holdings hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by Parent and Seller upon this Guaranty or acceptance of this Guaranty.  When pursuing its rights and remedies under this Guaranty against JAB Holdings, Parent and Seller shall be under no obligation to pursue such rights and remedies it may have against Purchaser or any other Person with respect to the Guaranteed Obligations or any right of offset with respect thereto, and any failure by Parent and Seller to pursue such other rights or remedies or to collect any payments from Purchaser or any such other Person or to realize upon or to exercise any such right of offset, and any release by Parent or Seller of Purchaser or any such other Person or any right of offset, shall not relieve JAB Holdings of any liability under this Guaranty, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of Parent or Seller. Furthermore, JAB Holdings waives diligence, notice of the acceptance of this Guaranty and of the Guaranteed Obligations, presentment, demand for payment, protest, promptness, obligation to protect, secure or perfect any security interest, notice of non-performance, default, dishonor and protest, all defenses that may be available by virtue of any valuation, stay, moratorium Law or other similar Law now or hereafter in effect, any right to require the  

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marshaling of assets of Purchaser or any other Person interested in the transactions contemplated by this Agreement, and all suretyship defenses generally (in each case, other than any defense that Purchaser may have that payment of all applicable Guaranteed Obligations has been made and all other applicable Guaranteed Obligations have been performed and satisfied, in each case in accordance with the terms of this Agreement).

(c)JAB Holdings hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against Parent and Seller or any other Person liable with respect to any of the Guaranteed Obligations that arise from the existence, payment, performance or enforcement of JAB Holdings’ obligations under or in respect of this Agreement, including this Guaranty, or any other agreement in connection therewith, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Parent and Seller against the Purchaser or any other Person liable with respect to any of the Guaranteed Obligations, whether or not such claim, remedy or right arises in equity or under contract, statute or common Law, including the right to take or receive from the Purchaser or any other Person liable with respect to any of the Guaranteed Obligations, directly or indirectly, in cash or other property or by set off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been irrevocably paid in full in cash and all other Guaranteed Obligations have been performed and satisfied in accordance with the terms of this Agreement. If any amount shall be paid to JAB Holdings in violation of the immediately preceding sentence at any time prior to the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, such amount shall be segregated from other property and funds of JAB Holdings, and such amount shall forthwith be paid or delivered to Seller in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, in accordance with the terms of this Agreement, whether matured or unmatured, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. 

(d)JAB Holdings shall pay Seller within thirty (30) days of demand by Seller from time to time, the amount of all expenses, including reasonable attorneys’ fees and expenses, paid or incurred by Parent or Seller in enforcing any of its rights under this Guaranty against JAB Holdings. 

(e)JAB Holdings has the financial capacity to pay and perform its obligations under this Guaranty, and all funds necessary for JAB Holdings to fulfill its obligations under this Guaranty shall be available to JAB Holdings for this Section 9.12. The obligations of JAB Holdings hereunder shall not be discharged other than by complete performance. The parties hereto hereby agree that JAB Holdings is a party to this Agreement solely for purposes of this Section 9.12 and the other provisions of this Article IX. 

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

PARENT

INDEPENDENCE HOLDING COMPANY

 

By:  /s/ David T. Kettig  

Name:David T. Kettig  

Title:President & COO 

 

MADISON INVESTORS CORP.

 

By:  /s/ Teresa Herbert  

Name:Teresa Herbert  

Title:Chief Financial Officer 

SELLER

AMIC HOLDINGS INC.

 

By:  /s/ Teresa Herbert  

Name:Teresa Herbert  

Title:Chief Financial Officer  

PURCHASER:

IGUANA ACQUISITION LLC

 

By:  /s/ Joachim Creus  

Name:Joachim Creus  

TitlePresident 

JAB HOLDINGS B.V.

 

By:  /s/ Joachim Creus  

Name:Joachim Creus  

Title:Managing Director 

 

 

 

 

By: /s/ Frank Engelen  

Name:Frank Engelen  

Title:Managing Director 

EXHIBIT 10.17 

DAVID T. KETTIG

TRANSACTION BONUS AGREEMENT

This Transaction Bonus Agreement (the “Agreement”) is made and entered into effective as of June 30, 2021, by and among AMIC Holdings Inc., a Delaware corporation (“AMIC”), Independence Holding Company, a Delaware corporation (“IHC”), Independence American Holdings Corp., a Delaware corporation (“IAHC”), and David T. Kettig (“Employee”).

 

RECITALS

Standard Security Life Insurance Company of New York, a New York corporation (“SSL”), IHC, as guarantor, and Employee entered into an Officer Employment Agreement, dated as of April 18, 2011 (the “Officer Employment Agreement”), which SSL subsequently assigned its obligations to AMIC pursuant to the Assignment and Assumption with Novation and Amendment of Officer Employment Agreement dated January 1, 2017 by and among SSL, AMIC and Employee.

 

IAHC and Employee entered into a Sale Bonus Agreement, dated as of November 7, 2016 (the “Sale Bonus Agreement”).

 

On May 17, 2021, IHC's subsidiaries IAHC and IHC SB Holdings, LLC (“SBH”) entered into a Stock Purchase Agreement with Iguana Capital, Inc. (“Iguana Capital”) and certain affiliates of Iguana Capital, including Iguana PP Holdings, Inc. (“Iguana Holdings”), a subsidiary of Iguana Capital, pursuant to which SBH will sell its entire 85% interest in PetPartners, Inc. to Iguana Holdings (“PetPartners Sale”).

 

On May 17, 2021, IHC, AMIC, IHC’s subsidiary Madison Investors Corp., Iguana Acquisition LLC (“Iguana Acquisition”) and its affiliate entered into a Stock Purchase Agreement, pursuant to which AMIC will sell its entire 100% interest in IAHC, which includes IAHC’s wholly owned subsidiary Independence American Insurance Company, an insurance company domiciled in the State of Delaware (“IAIC”), and certain other pet assets  to Iguana Acquisition (the “IAHC Sale” and together with the PetPartners Sale, the “Pet Business Sale”).

 

AMIC, IHC and Employee have mutually agreed that Employee will terminate his employment with AMIC, which will then permit him to become an employee of Iguana Capital and/or its affiliates.

 

IAHC and Employee have mutually agreed to cancel and terminate the Sale Bonus Agreement subject to the terms and conditions set forth herein.

 

IHC and Employee have agreed that Employee shall be eligible to receive a transaction bonus in recognition of Employee's efforts in connection with the Pet Business Sale provided that (i) the Sale Bonus Agreement is cancelled and terminated and Employee does

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not receive any payments pursuant to it, and (ii) Employee waives any severance or any other monetary obligations he is entitled or eligible to receive under the Officer Employment Agreement.

 

IHC and Employee are parties to a Stock Option Award Agreement granted on January 4, 2019 (“Grant Date”) pursuant to which Employee received a non-incentive stock option exercisable for 52,800 shares of common stock of IHC (the “2019 Stock Option”), which vests 1/3 on each of the first three annual anniversaries of the Grant Date.  Of the 52,800 shares, 35,200 have vested and 17,600 shares are unvested (“Unvested Options”).

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.Incorporation by Reference.  The Recitals above are hereby incorporated by reference as if set forth hereinafter. 

2.Transaction Bonus.  Effective upon, and only upon, the consummation of the IAHC Sale, IHC shall pay Employee a lump sum payment of three million dollars ($3,000,000) within thirty (30) days of the consummation of the IAHC Sale (the “Transaction Bonus”).     

3.Stock Options/Stock Appreciation Rights.  IHC has granted stock options and stock appreciation rights to Employee, including the 2019 Stock Option.  IHC shall accelerate the vesting date of the Unvested Options to June 30, 2021 subject to the terms and conditions of this Agreement.   

4.Waiver and Release.  The parties agree that the Officer Employment Agreement shall terminate effective upon Employee's employment with Iguana Capital and/or its affiliates and that Employee's termination of employment with AMIC shall be treated as a “Disqualifying Termination” under the Officer Employment Agreement; provided that nothing in this Agreement shall supersede or cancel Employee's covenants under Section 4 of the Officer Employment Agreement.  The parties further agree that the Sale Bonus Agreement shall be cancelled and terminated effective upon the consummation of the IAHC Sale.  Following cancellation and termination of the respective agreements, Employee agrees to release IAHC, IHC, AMIC, SSL and their respective parents, subsidiaries, affiliates, and related entities from any and all, known and unknown, claims, obligations, and causes of actions under or related to (a) the Sale Bonus Agreement, (b) the Officer Employment Agreement, or (c) his employment with AMIC and its affiliates.  Employee specifically acknowledges that in consideration of receipt of the Transaction Bonus, he shall not be entitled to and shall not receive any payments, including bonuses or severance, under either the Sale Bonus Agreement or the Employment Agreement and that, except for the acceleration of the Unvested Options described in Section 3 above, his termination shall not result in the vesting of any benefits.   

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5.Miscellaneous. 

(a)Governing Law.  The laws of the State of New York (without giving effect to its conflict of laws principles) will govern all matters arising out of or relating to this Agreement including, without limitation, its interpretation, construction, performance and enforcement.   

(b)Arbitration.  All controversies and claims arising under or relating to this Agreement, or the relationships or transactions contemplated hereby, are to be resolved by arbitration in accordance with the rules of the American Arbitration Association before a panel of three (3) arbitrators selected in accordance with those rules.  Any such arbitration is to be conducted in New York, New York.  Such arbitrators are to apply the laws of the State of New York, without regard to its conflict of laws principles. Each party shall submit to any court of competent jurisdiction for purposes of enforcing any award, order or judgment.  Any award, order or judgment pursuant to the arbitration is final and may be entered and enforced exclusively in any New York state or federal court of competent jurisdiction.  The arbitration specified in this Section 4(b) is intended to be the exclusive remedy available to each such party to this Agreement, 

(c) Tax Withholding.  IHC may deduct from the payment hereunder any taxes or withholdings it is required to deduct pursuant to state, federal or other laws.  Employee will complete any documents, including tax forms, necessary to process payments under this Agreement.  Failure to timely do so at the request of IHC may delay payments under this Agreement. 

(d)Amendments.  The parties hereto may amend this Agreement only by a written agreement of all the parties hereto that identifies itself as an amendment to this Agreement. 

(e)Entire Agreement.  This Agreement constitutes the final agreement among the parties hereto relating to the matters contained herein and it is the complete and exclusive expression of the parties’ agreement on the matters contained in this Agreement.  All prior and contemporaneous negotiations and agreements among and between the parties on the matters contained in this Agreement are hereby expressly superseded and replaced by this Agreement.  In entering into this Agreement, neither party hereto has relied upon any statement, representation, warranty or agreement of the other party.  

(f)Counterparts.  The parties hereto may execute this Agreement in multiple counterparts, each of which constitutes an original, and all of which, collectively, constitute only one agreement.  The signatures of all of the parties need not appear on the same counterpart, and delivery of an executed counterpart signature page by facsimile or email is as effective as executing and delivering this Agreement in the presence of the other parties to this Agreement.  This Agreement is effective upon delivery of one executed counterpart from each party hereto to each other party.  

(g)Successors.  This Agreement shall be binding upon, and shall inure to the benefit of, Employee and Employee’s estate.   Employee may not assign or pledge  

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this Agreement or any rights arising hereunder. Each of IHC, AMIC and IAHC may assign this Agreement to a parent, subsidiary, or affiliated company.  Each of IHC, AMIC and IAHC also may assign this Agreement without Employee’s consent to any successor to its business that agrees in writing to be bound by this Agreement, after which assignment any reference to “IHC,” “AMIC,” or “IAHC,” as applicable, in this Agreement shall be deemed to be a reference to such successor, and IHC, AMIC or IAHC, as applicable, thereafter shall have no further primary, secondary or other responsibilities, obligations or liabilities under this Agreement of any kind.

(h)All notices, requests, consents, claims, demands, waivers and other communications hereunder (each, a “Notice”) shall be in writing and sent to the parties at the addresses, facsimile numbers and email addresses set forth on the signature page of Agreement (or to such other address, facsimile number or email address that may be designated by the receiving party from time to time in accordance with this section). All Notices shall be deemed delivered: (i) upon delivery if delivered by hand; (ii) after one business day if delivered by a nationally recognized overnight courier (with all fees pre-paid); (iii) upon receipt if delivered by facsimile or e-mail of a PDF document (with confirmation of transmission); and (iv) after three (3) business days if delivered by certified or registered mail (in each case, return receipt requested, postage prepaid). 

(i)409A. It is intended that the payments hereunder shall comply with Section 409A of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder so as not to subject Employee to payment of interest or any additional tax under Section 409A.  All terms of this Agreement which are undefined or ambiguous must be interpreted in a manner that is consistent with Section 409A if necessary to comply with Section 409A.  This Agreement will be construed and administered to preserve the exemption from Section 409A of payments that qualify as short-term deferrals pursuant to Treas. Reg. § 1.409A-1(b)(4).  In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit will be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax.  

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of IAHC, IHC and AMIC by a duly authorized officer, as of the day and year first above written.

 

[Signature Page Follows]

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IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of immediately following the Effective Time.

AMIC Holdings, Inc., a Delaware 

corporation 

 

David T. Kettig

 

 

 

 

 

 

By: /s/ Vincent Furfaro  

 

By: /s/ David T. Kettig  

Name:Vincent Furfaro  

 

Name:David T. Kettig  

Title:Senior Vice President  

 

 

 

 

Facsimile:  ________________ 

 

 

 

Independence Holding Company, 

a Delaware corporation 

 

Email:  ___________________ 

 

 

 

By:/s/ Larry R. Graber  

 

 

Name:Larry R. Graber  

 

 

Title:Chief Life and Annuity Actuary  

 

 

           and Senior Vice President 

 

 

 

 

 

 

 

 

 

 

 

Independence American Holdings Corp., 

 

 

a Delaware corporation 

 

 

 

 

 

By:/s/ Teresa A. Herbert  

 

 

Name:Teresa A. Herbert  

 

 

Title:Vice President – Finance  

 

 

 

 

 

The following shall be used for each of AMIC Holdings, Inc., Independence Holding Company and Independence American Holdings Corp.

 

96 Cummings Point Road

Stamford, CT  06902

Attn:  Teresa A. Herbert

 

Facsimile:  ______________

Email:  therbert@ihc-geneve.com

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QB\68609588._

 

OFFICER EMPLOYMENT AGREEMENT                        EXHIBIT 10.18 

 

This Officer Employment Agreement (this "Agreement"), by and between Independence Holding Company, a Delaware corporation (the "Company"), and Ms. Colleen Maggi, an individual resident in the State of New York (the "Employee"), is made as of May 20, 201 1.

 

Recitals

 

A.The Employee is the Vice President and Controller of the Company. 

 

B.The Company wishes to employ the Employee, and the Employee wishes to be employed by the Company, i n the capacity and on the terms and conditions set forth herein. 

 

Terms and Conditions

 

In consideration of the mutual covenants contained herein, along with other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.Employment 

 

1.1.Term of Employment. The initial term of the employment agreed to hereunder shall commence on the date hereof and shall end at 1 1:59 p.m., New York City local time, on the date that is two (2) years after the date hereof (the "Initial Term"); provided, however, that such term of employment shall be automatically extended for successive two-year (2) year periods thereafter (each, a "Renewal Period" ), unless the Company or the Employee shall, at least one hundred twenty (120) days prior to the expiration of the then-applicable term, have given written notice (a "Non-Renewal Notice") to the other party that such employment term shall not be so extended, in which case no such extension shall occur. The Initial Term together with each Renewal Period, if any, are collectively referred to herein as the "Covered Employment Term." 

 

1.2.Term of Agreement. The term of this Agreement shall commence on the date hereof and shall continue until any and all obligations of any party hereto to any other party hereto shall have been performed in-full or validly waived pursuant to the applicable provisions hereof (the "Agreement Term"). 

 

1.3.Nature of Duties. The Employee shall be employed by the Company as its Vice President and Controller. Except as provided herein, the Employee shall work exclusively for the Company and its corporate affiliates and shall, at each moment i n time, have the actual authority, powers and duties (the "Duties") with the Company customarily associated with the officer positions the Employee then holds. The Employee shall devote her full business time and effort to the performance of her duties for the Company and its corporate affiliates, which she shall perform faithfully and to the best of her ability. At all times during which the Employee remains an employee of the Company, the Employee shall, if elected, serve as a member of the Company's board of directors and, at the request of the Company's corporate Secretary, as an officer or director of any other affiliate or subsidiary of the Company, i n each case without additional remuneration therefor. The Employee shall be subject to the Company's policies, procedures and approval practices, as generally in effect and as the same may be modified from time-to-time. 

 

1.4.Place of Performance. The Employee shall, at all times, be based only in the Company's offices maintained within fifty (50) miles of Stamford, Connecticut, and shall be capable of  

 

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performing all duties of the Employee that the Company shall require of her (in accordance with the other terms hereof) in such office, except for required travel in the ordinary course of business of frequency not greater than is reasonable, equitable and customary within the applicable industry for executives of similar responsibility, under the circumstances.

 

2.Compensation 

 

2.1.Base Salary. The Company and its affiliates shall pay the Employee a base salary at the annual rate in effect as of the date hereof (as the same may be adjusted upward from time to time in the Company's sole and absolute discretion, the "Base Salary"). The Base Salary shall be paid in conformity with the Company's usual salary payment practices, as then generally i n effect. 

 

2.2.Bonus. In addition, the Employee may, in the Company's sole and absolute discretion, receive a periodic bonus. Any such bonus shall be payable pursuant to the Company's customary practice. For purposes of clarity: the bon us referenced in this Section 2.2 is purely discretionary, may or may not be paid in respect of any particular time period, and the payment of any such bon us shall not be construed or interpreted as guaranteeing or otherwise affecting the payment of any subsequent bon us. 

 

2.3.Benefits. In addition, the Employee shall be entitled to participate i n all employee benefit plans and programs, including paid vacations, to the same extent generally available to, and then in effect for, the Company's other officers, in accordance with the terms of those plans and programs, as the same may be modified, from time to time. 

 

2.4.Expenses. In addition, the Employee shall be entitled to receive prompt reimbursement for all reasonable and customary travel and business expenses incurred in connection with her employment, but must incur and shall account for those expenses in accordance with the policies and procedures established by the Company. 

 

2.5.Additional Compensation. In addition, the Employee shall continue to receive such perquisites incident to employment (if any) as have been provided to the Employee during the one (I) year preceding the entering into of this Agreement (collectively, the "Additional Compensation" ). 

 

3.Termination; Change in Control 

 

3.1.Rights and Duties. If the Employee's employment by the Company is terminated, she shall be entitled to the amounts or benefits shown below, subject to the balance of this Section 3. Any provision of Section 2 hereof to the contrary notwithstanding, in the event of such a termination, the Company and the Employee shall have no further obligations to each other under this Agreement, except (i) as set forth in this Section 3, (ii) the Employee's obligations under Section 4 and (ii i ) the mutual arbitration obligations and other rights and obligations set forth under Section 5, al l of which shall survive any such termination. 

 

3.2.Qualifying Terminations. Any of the following events resulting in a cessation of the Employee's employment by the Company during the Covered Employment Term shall constitute a "Qualifying Termination": (i) discharge by the Company without Cause (as hereinafter defined); or (ii) the Employee's resignation with Good Reason. 

 

3.3.Disqualifying Terminations. Any of the following events resulting in a cessation of the Employee's employment by the Company during the Agreement Term shall constitute a "Disqualifying Termination": (i) discharge by the Company with Cause; (ii) the Employee's resignation without Good Reason; (iii) the Employee's death; or (iv) the Employee's Permanent Disability. 

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3.4.Definitions. For purposes of this Agreement, the following terms shall have the following meanings: 

 

(A)"Cause" exists upon any of the following: 

 

(i)the Employee’s refusal to perform the Duties, as the Duties exist as of the Date hereof (other than by reason of physical or mental illness, injury, or condition), after the Employee has been given notice by the Company of such default and a reasonable opportunity to cure same; 

 

(ii)the Employee's material failure to comply with applicable, material Company policies in effect as of the date hereof, after the Employee has been given notice of such failure and a reasonable opportunity to cure same; 

 

(iii)the Employee's breach of any of her obligations under Section 4 of this Agreement; or 

 

(iv)the Employee's conviction of a felony or the Employee's commission of any crime involving financial or accounting fraud upon the Company, its corporate affiliates or their respective clients or policyholders. 

 

(B)"Change in Control” means, with respect to an entity: (i) the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (or any comparable successor provision, the "Exchange Act" ), other than stockholders (or affiliates thereof) of such entity as of the date hereof, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of either (A) the outstanding shares of common stock (on a fully diluted basis) of such entity or (B) the combined voting power of the entity's then-outstanding voting securities entitled to vote generally in the election of directors of such entity; (ii) the consummation of a reorganization, merger or consolidation of such entity, in each case, with respect to which persons who were stockholders of such entity immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated entity; (iii) a liquidation or dissolution of such entity; (iv) the sale of all or substantially all of such entity's assets; or (v) any other transaction,  the intent of which may reasonably and equitably be construed to be to effect a result substantially 

equivalent to that of any of the foregoing (i) through (iv).

 

(C)"Diminution in Responsibility" means any of the following: 

 

(i)a material diminution in the Employee's authority, duties and responsibilities or the assignation to the Employee of duties and responsibilities that are materially inconsistent with the Employee's apparent authority or title with the Company, considered equitably under the circumstances and with reference to officers with similar titles at companies within the Company's industry; or 

 

(ii)other circumstances that would constitute "constructive termination" under applicable employment law. 

 

(D)"Good Reason" means any of the following: 

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(i)the Company's breach of any material provision of this Agreement, after the Company has been given notice of such breach and a reasonable opportunity to cure such breach; 

 

(ii)) the occurrence of a Diminution of Responsibility; 

 

(iii)) the Employee's receipt of a Non-Renewal Notice; or 

 

(iv)the occurrence of a Non-Qualifying Change in Control Event. 

 

(E)"Monthly Severance" means an amount equal to the result of dividing (i) the average aggregate cash compensation (i.e., Base Salary plus any bonuses paid by the Company to the Employee plus the cash cost of the Additional Compensation) received by the Employee from the Company during the then-applicable preceding five (5) completed calendar years, by (i i) twelve (12); provided, however, that if the number of such total completed calendar years during which the Employee has been employed by the Company and its affiliates is less than five (5), such average shall be obtained with respect to the number of actual completed calendar years during such period of employment, 

adjusting the denominator accordingly.

 

(F)"Non-Qualifying Change in Control Event" means the public announcement of, or the entering into of a binding agreement, by the Company, in respect of, a Change in Control of the Company i n which either (i) the proposed or intended acquirer in such a Change i n Control does not agree to assume this Agreement and continue the Employee's employment on the terms and conditions set forth herein, and (ii) the ultimate parent of such acquirer does not guarantee, on an unconditional and full recourse basis, such obligations to the Employee. 

 

(G)"Permanent Disability" means Employee's inability substantially to perform her duties and responsibilities under this Agreement by reason of any physical or mental incapacity for a period of one-hundred-eighty ( 180) consecutive days, or two or more periods of ninety (90) consecutive days each in any seven hundred twenty (720) day period. 

 

(H)"Severance Period' means a number of months equal to the greater of: (i) twelve (12); and (i i) the aggregate number (not necessarily continuous) of completed years of service as an employee of the Company or of any of its corporate affiliates, provided_, however, that i n no event shall the Severance Period exceed twenty-four (24) months. 

 

3.5.Severance Payments. 

 

(A)Qualifying Termination. In the event of a Qualifying Termination, the Employee, subject to the Employee's continued and uninterrupted adherence to the provisions of Section 4 hereof (for such duration as stated in Section 4) and the Employee's execution of a release i n form and substance reasonably acceptable to the Company, shall be entitled to receive the Monthly Severance for a duration equal to the Severance Period, in all cases payable (with respect to timing) i n accordance with the Company's customary payroll practices. In addition, any provision hereof or in any other document to the contrary notwithstanding, immediately upon any Qualifying Termination, each and every equity or equity-based compensation award then held by the Employee shall be fully and completely vested and exercisable, and any condition or restriction upon the Employee's full right and title thereto (subject to the payment of any exercise price required pursuant to such award's terms) shall lapse and terminate. 

 

(B)Disqualifying Termination. In the event of a Disqualifying Termination, the Employee shall not be entitled to any payments or benefits after the date of such termination, except for  

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(i) payments or extensions of benefits required under applicable laws and (ii) payments of compensation and reimbursement of expenses (in accordance with the terms hereof and the Company's customary and reasonable practices) properly accrued as of such date.

 

4.Covenants of Employee 

 

4.1.Non-Compete. The Employee agrees that, during the Covered Employment Term plus the longer of any Severance Period and one (I) year following any termination of the Employee's employment by the Company, the Employee (including any entity controlled by the Employee, and any agent or employee of the Employee) shall not, directly or indirectly, as an owner, employee or otherwise, compete with either the business of the Company as then conducted (collectively, the "Prohibited Field'' ), or, directly or indirectly, own, manage or control, or participate in the ownership, management, or control of any corporation, partnership, proprietorship, firm, association or other business entity which so competes. For purposes of clarity, this Section 4.1 prohibits actual competition with the Company within the Prohibited Field and/or employment with a competitor of the Company i n any position or consulting arrangement i n which the Employee's duties relate in any material way to business activities i n competition with the Company in the Prohibited Field. The restrictions set forth in this paragraph extend to the entire United States of America. 

 

4.2.Non-Solicit. The Employee agrees that, during the Covered Employment Term plus the longer of any Severance Period and one (1) year following any termination of the Employee's employment by the Company, the Employee shall not solicit for employment (or assist with such solicitation) any employee or former employee of the Company or any of its subsidiaries. The restrictions set forth in the foregoing sentence apply to the solicitation of any person who is or, within one ( I ) year before the termination of the Employee's employment by the Company, was an employee of the Company or its subsidiary (as the case may be). Additionally, the Employee agrees, during any Severance Period, not to solicit (or assist with such solicitation) any customer or client of the Company or of its subsidiaries, if such solicitation or assistance could reasonably be expected to result in diversion of revenues from the business of the Company its subsidiary (as the case may be). For the purpose of the restrictions set forth in the foregoing sentence, the terms "customer" and "client" include any person, private entity or governmental entity (or employee or agent thereof), within or outside the United States of America, with whom the Company its subsidiaries does or has done business within the one (1) year preceding the termination of the Employee's employment by the Company. 

 

4.3.Confidentiality. During the Covered Employment Term and thereafter, (i) the Employee will not divulge, transmit or otherwise disclose (except as legally compelled by court order, and then only to the extent required, after prompt notice to the Company of any such order), directly or indirectly, other than in the regular and proper course of business of the Company, any confidential knowledge or information with respect to the operations, finances, organization or employees of the Company or its subsidiaries or affiliates, or with respect to confidential or secret processes, services, techniques, customers or plans with respect to the Company or its subsidiaries or its affiliates, including, but not limited to, producer lists, pricing information and customer lists; and (ii) the Employee will not use, directly or indirectly, any confidential information for the benefit of anyone other than the Company; provided, however, that the Employee has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the public other than through disclosure by the Employee. All new processes, techniques, know-how, inventions, plans, products, patents and devices developed, made or invented by the Employee, alone or with others, while an employee of the Company which are related to the business of the Company, shall be and become the sole property of the Company, unless released in writing by the Company, and the Employee hereby assigns any and all rights therein or thereto to the Company. 

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4.4.Proprietary Rights. All files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company or its subsidiaries and affiliates, whether prepared by the Employee or otherwise coming into her possession in the course of the performance of her services under this Agreement, shall be the exclusive property of Company and shall be delivered to Company and not retained by the Employee (including, without limitations, any copies thereof) upon termination of the Employee's employment by the Company for any reason whatsoever. 

 

4.5.Equitable Relief. The Employee acknowledges that a breach of the covenants contained in this Section 4 may cause irreparable damage to the Company and its subsidiaries and its affiliates, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Employee agrees that i f he breaches any of the covenants contained in this Section 4, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief. The parties agree that venue and jurisdiction for any civil action seeking any of the remedies provided in this Section 4.5 shall be exclusively in the state or federal courts located in Connecticut, and that any such action shall be governed by and adjudicated under Connecticut law. 

 

4.6.Acknowledgements. The Company and the Employee further acknowledge that the time, scope, geographic area and other provisions of this Section 4 have been specifically negotiated by sophisticated commercial parties and agree that all such provisions are reasonable under the circumstances of the activities contemplated by this Agreement. In the event that the agreements in this Section 4 shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive i n any other respect, they shall be interpreted to extend on l y over the maximum period of time for which they may be enforceable and/or over the maximum geographical area as to 

which they may be enforceable and/or to the maximum extent in all other respects as to which they may be enforceable, all as determined by such court i n such action.

 

4.7.Further Assurances. The Employee agrees to cooperate with the Company, during the Covered Employment Term and thereafter (including following the Employee's term i nation of employment for any reason), by making herself reasonably available to testify on behalf of the Company or any of its subsidiaries or  affiliates in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist the Company or any affiliate or subsidiary thereof, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Company's Board of Directors or its representatives or counsel, or representatives or counsel to the Company or any subsidiary or affiliate thereof as reasonably requested; provided, however that the same does not materially interfere with her then-current professional activities and is not contrary to the best interests of the Employee. The Company agrees to reimburse the Employee, on an after-tax basis, for all expenses actually incurred in connection with her provision of testimony or assistance. 

 

4.8.Non-Disparagement. The Employee agrees that, during the Covered Employment  

Term and thereafter, (including following the Employee's term i nation of employment for any reason) she will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any of its subsidiaries or affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Employee from making truthful statements or disclosures that are required by applicable law, regulation or legal process.

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5.General Provisions 

 

5.1.Governing Law. The laws of the State of Connecticut (without giving effect to its conflict of laws principles) will govern all matters arising out of or relating to this Agreement and the transactions it contemplates, including, without l imitation, its interpretation, construction, performance and enforcement. 

 

5.2.Notices 

 

(A)Requirement of a Writing: Permitted Methods of Delivery. Each party giving or making any notice, request, demand or other communication (each, a "Notice") pursuant to this Agreement shall give such Notice in writing and use one of the following methods of delivery: (i) personal delivery; (i i) registered or certified mail (in each case, return receipt requested and postage prepaid); (ii i) nationally recognized overnight courier (with all fees prepaid); or (iv) facsimile. 

 

(B)Addressees and Addresses. Any party giving a Notice shall address the Notice to the appropriate person at the receiving party (the "Addressee") at the address listed on the signature page of this Agreement or to another Addressee or another address as designated by a party i n a Notice given pursuant to this Section 5.2. 

 

(C)Effectiveness of a Notice. A Notice is effective only if the party giving the Notice has complied with Sections 5.2 (A) and (B) of this Agreement and if the Addressee has received the Notice. A Notice shall be deemed to have been received as follows: 

 

(i)if a Notice is delivered in person, then upon delivery to the recipient's address; 

 

(ii) if a Notice is sent by registered or certified U.S. Mail or nationally recognized overnight courier, three (3) business days after being mailed or delivered to such courier;

 

(ii i) if a Notice is sent by facsimile, upon receipt by the party giving the Notice of an acknowledgment or transmission report generated by the machine from which the facsimile was sent indicating that the facsimile was sent i n its entirety to the Addressee's facsimile number; or

 

(iv) if the Addressee rejects or otherwise refuses to accept the Notice, or if the Notice cannot be delivered because of a change in address for which no Notice was given, then upon the rejection, refusal or inability to deliver the Notice.

 

5.3.Arbitration. All controversies and claims arising under or relating to this Agreement, or the relationships or transactions contemplated hereby, are to be resolved by arbitration in accordance with the rules of the American Arbitration Association before a panel of three (3) arbitrators selected in accordance with those rules. Any such arbitration is to be conducted in Stamford, Connecticut. Such arbitrators are to apply the laws of the State of Connecticut, without regard to its conflict of laws principles. Each party shall submit to any court of competent jurisdiction for purposes of enforcing any award, order or judgment. Any award, order or judgment pursuant to the arbitration is final and may be entered and enforced exclusively in any Connecticut state or federal court of competent jurisdiction. The arbitration specified in this Section 5.3 is intended to be the exclusive remedy available to each such party to this Agreement, except as set forth in Section 4.5. 

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5.4.Amendments. The parties hereto may amend this Agreement only a written agreement of all the parties hereto that identifies itself as an amendment to this Agreement. 

 

5.5.Waivers 

 

(A)No Oral Waivers. The parties hereto may waive this Agreement or any part hereof only by a writing executed by the party or parties against whom the waiver is sought to be enforced. 

 

(B)Effect of Failure, Delay or Course of Dealing. No fai\lure or delay (i) in exercising any right or remedy, or (ii) in requiring the satisfaction of any condition, under this Agreement, and no act, omission or course of dealing between the parties shall operate as a waiver or estoppel of any right, remedy or condition. 

 

(C)Each Waiver for a Specific Purpose. A waiver made in writing on one occasion shall be effective only in that instance and only for the purpose stated therein. A waiver once given shall not be construed as a waiver of any future occasion. 

 

5.6.Severability. If any provision of this Agreement is determined to be invalid, illegal or  

unenforceable, the remaining provisions of this Agreement shall remain in full force and effect, so long as the essential terms and conditions of this Agreement for each party hereto remain valid, binding and enforceable.

 

5.7.Entire Agreement. Except as expressly stated i n this Agreement: (i) this Agreement constitutes the final agreement among the parties hereto; (i i) it is the complete and exclusive expression of the parties' agreement on the matters contained in this Agreement; (ii i) all prior and contemporaneous negotiations and agreements among and between the parties on the matters contained in this Agreement  are hereby expressly merged into and superseded by this Agreement; (iv) the provisions of this Agreement may not be explained, supplemented or qualified through evidence of trade usage or a prior course of dealings; (v) in entering into this Agreement, neither party hereto has relied upon any statement, representation, warranty or agreement of the other party; and (vi) there are no conditions precedent to the effectiveness of this Agreement. 

 

5.8.Counterparts. The parties hereto may execute this Agreement in multiple counterparts, each of which constitutes an original, and all of which, collectively, constitute only one agreement. The signatures of all of the parties need not appear on the same counterpart, and delivery of an executed counterpart signature page by facsimile is as effective as executing and delivering this Agreement in the presence of the other parties to this Agreement. This Agreement is effective upon delivery of one executed counterpart from each party hereto to each other party. 

 

5.9.Third-Party Beneficiaries.   Other than as expressly stated herein, this Agreement does not, and is not intended to, confer any rights or remedies upon any person other than the signatories. 

 

5.10.Successors. This Agreement shall be binding upon, and shall inure to the benefit of,  

the Employee and the Employee's estate.   The Employee may not assign or pledge this Agreement or any rights arising hereunder, except to the extent permitted under the terms of the benefit plans in which the Employee participates. The Company may assign this Agreement without the Employee's consent to any successor to its business that agrees in writing to be bound by this Agreement, after which assignment any reference to the "Company" in this Agreement shall be deemed to be a reference to such successor, and the Company thereafter shall have no further primary, secondary or other responsibilities, obligations or liabilities under this Agreement of any kind.

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5.11.Additional Acknowledgements 

 

(A)THE EMPLOYEE ACKNOWLEDGES THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND THE EMPLOYEE RELATING TO THE SUBJECTS COVERED BY THIS AGREEMENT ARE CONTAINED IN IT AND THAT THE EMPLOYEE HAS ENTERED INTO THIS AGREEMENT VOLUNTARILY AN D NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT. 

 

(B)THE EMPLOYEE FURTHER ACKNOWLEDGES  THAT THE EMPLOYEE HAS CAREFULLY READ THIS AGREEMENT, THAT THE EMPLOYEE UNDERSTANDS ALL OF IT, AND THAT THE EMPLOYEE HAS BEEN GIVEN THE OPPORTUNITY TO DISCUSS TH IS AGREEMENT WITH THE EMPLOYEE'S PRIVATE LEGAL COUNSEL AND HAS AVAILED HERSELF OF THAT OPPORTUNITY TO THE EXTENT THE EMPLOYEE WISHES TO DO SO. THE EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT THE EMPLOYEE IS GIVING U P HER RIGHT TO A JURY TRIAL AS TO CLAIMS ASSERTED PURSUANT TO SECTION 5.3. 

 

5.12.409A Tax Liability. 

 

(A)This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A") or an exemption thereunder and shall be construed and administered in accordance with Section 409A.  Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maxim um extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a "separation from service" under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Employee on account of non-compliance with Section 409A. 

 

(B)Notwithstanding any other provision of this Agreement, if at the time of the Employee's termination of employment, he or she is a "specified employee," determined in accordance with Section 409A, any payments and benefits provided under this Agreement that constitute "nonqualified deferred compensation" subject to Section 409A that are provided to the Employee on account of his or her separation from service shall be delayed for six (6) months. Any payments that Would otherwise have been made during such six-month period shall be paid in a lump sum within fifteen (15) days after the end of such six-month period without interest. If the Employee dies during such six­ month period, any delayed payment shall be paid to the Employee's estate i n a lump sum within fifteen ( 15) days following the Employee's death. 

 

(C)To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following: 

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(i)the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; 

 

(ii)any reimbursement of an eligible expense shall be paid to the Employee on or before the last day of the calendar year following the calendar year in which the expense was incurred; and 

 

(iii)) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit. 

 

(D)   Any tax gross-up payments provided under this Agreement shall be paid to the Employee on or before December 31st of the calendar year immediately following the calendar year i n which the Employee remits the related taxes.

 

[Signature page follows.]

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THE PARTIES HERETO, INTENDING TO BE LEGALLY BOUND, have executed this

Agreement as of the date first set forth above.

 

 

Independence Holding Company, 

 

Ms. Colleen Maggi, 

a Delaware limited liability company 

 

an individual resident in the State of  

 

 

New York  

 

 

 

 

 

 

By:  /s/ Teresa A. Herbert  

 

/s/ Colleen Maggi 

Name:Ms. Teresa A. Herbert  

 

 

Title:Chief Financial Officer and Senior  

 

 

Vice President  

 

 

 

 

 

 

 

 

96 Cummings Point Road 

 

3 Bisbee Lane 

Stamford, CT 06902 

 

South Salem, NY 10590 

Telephone No.:  (203) 358-8000 

 

Telephone No.:  (914) 763-9062 

 

 

 

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EXHIBIT 10.19EXECUTION VERSION 

FIRST AMENDMENT TO THE STOCK PURCHASE AGREEMENT

This FIRST AMENDMENT TO THE STOCK PURCHASE AGREEMENT (this “Amendment”), dated as of June 28, 2021, is by and among Independence American Holdings Corp., a Delaware corporation (“Parent”), IHC SB Holdings, LLC, a Delaware limited liability company (“Seller”), Iguana PP Holdings, Inc., a Delaware corporation (“Purchaser”), Iguana Capital, Inc., a Delaware corporation (“Purchaser Parent”), and JAB Holdings B.V., a private limited liability company incorporated under the laws of the Netherlands (“JAB Holdings”) (solely for purposes of Section 9.12 of the Stock Purchase Agreement and the other provisions of Article IX of the Stock Purchase Agreement).  JAB Holdings, Purchaser, Purchaser Parent, Parent and Seller are collectively referred to herein as the “Parties” and each, a “Party”.

W I T N E S S E T H:

WHEREAS, the Parties entered into that certain Stock Purchase Agreement, dated as of May 17, 2021 (the “Stock Purchase Agreement”);

WHEREAS, the Parties wish to amend the Stock Purchase Agreement in the manner set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

1.Amendment.   

(a)The first sentence of Section 2.05(g)(i) of the Stock Purchase Agreement is hereby amended and restated to read in its entirety as follows: “If the Final Closing Consideration exceeds the Estimated Closing Consideration, then within two (2) Business Days after the later of (A) the date the Final Closing Statement is determined and (B) the consummation of the transactions contemplated by the IAHC Purchase Agreement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account to Seller an aggregate amount equal to the Purchase Price Adjustment Holdback Amount.” 

(b)The first sentence of Section 2.05(g)(ii) of the Stock Purchase Agreement is hereby amended and restated to read in its entirety as follows:  “If the Final Closing Consideration is less than or equal to the Estimated Closing Consideration, then within two (2) Business Days after the later of (A) the date the Final Closing Statement is determined and (B) the consummation of the transactions contemplated by the IAHC Purchase Agreement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account: (A) to the Purchaser, the lesser of (I) the Purchase Price Adjustment Holdback Amount and (II) the absolute value of the dollar amount by which the Estimated Closing Consideration exceeds the Final Closing Consideration, by wire transfer of immediately available funds to the account or accounts designated in writing by Purchaser; and (B) to Seller, any remaining amount of the Purchase Price Adjustment Holdback Amount, if any, following the payment to Purchaser made pursuant to this Section 2.05(g)(ii); provided, that if the absolute value of the difference between the Estimated Closing Consideration and the Final Closing Consideration is greater than the Purchase Price  

Adjustment Holdback Amount, then Seller shall pay to Purchaser the difference between the absolute value of such difference and the Purchase Price Adjustment Holdback Amount by wire transfer or delivery of other immediately available funds.”

2.Capitalized Terms.  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Stock Purchase Agreement. 

3.Effect of Amendment.  This Amendment shall not constitute an amendment or waiver of any provision of the Stock Purchase Agreement not expressly amended or waived herein and shall not be construed as an amendment, waiver or consent to any action that would require an amendment, waiver or consent, except as expressly stated herein.  The Stock Purchase Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is in all respects ratified and confirmed hereby. 

4.Counterparts.  This Amendment may be executed in one or more counterparts, each of which will be deemed to constitute an original, but all of which shall constitute one and the same agreement, and may be delivered by facsimile or other electronic means intended to preserve the original graphic or pictorial appearance of a document. 

[The remainder of this page is intentionally blank.]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. 

INDEPENDENCE AMERICAN HOLDINGS CORP. 

 

By: /s/ Teresa A. Herbert  

Name:Teresa A. Herbert  

Title:Vice President – Finance  

IHC SB HOLDINGS, LLC 

 

By: /s/ Vincent J. Furfaro  

Name:Vincent J. Furfaro  

Title:President 

[Signature Page to First Amendment to the Stock Purchase Agreement]

IGUANA CAPITAL, INC. 

 

 

By:  /s/ Joachim Creus  

Name:Joachim Creus  

Title:President 

 

 

IGUANA PP HOLDINGS, INC. 

 

 

By: /s/ Joachim Creus  

Name:Joachim Creus  

Title:President 

 

 

JAB HOLDINGS B.V. 

 

 

By:  /s/ Joachim Creus  

Name:Joachim Creus  

Title:Managing Director  

 

 

 

By: /s/ Frank Engelen  

Name:Frank Engelen  

Title:Managing Director 

[Signature Page to First Amendment to the Stock Purchase Agreement]

 

 

EXECUTION VERSION

EXHIBIT 10.20 

STOCKHOLDERS AGREEMENT

dated as of June 30, 2021

by and among

IGUANA CAPITAL, INC.,

 

IGUANA HOLDINGS LTD.,

 

IGUANA ACQUISITION LLC

 

and

 

IHC SB HOLDINGS, LLC

TABLE OF CONTENTS

Page

SECTION 1.DEFINITIONS1 

SECTION 2.CORPORATE GOVERNANCE6 

2.1Size of the Board6 

2.2Board Composition6 

2.3Failure to Designate a Board Member7 

2.4Removal of Board Members; Vacancies7 

2.5Reimbursement7 

2.6Consents7 

2.7Exculpation8 

SECTION 3.INFORMATION RIGHTS8 

SECTION 4.PREEMPTIVE RIGHTS8 

4.1Preemptive Rights8 

SECTION 5.TRANSFER RESTRICTIONS10 

5.1Transfer Restrictions; Effect of Failure to Comply10 

5.2Permitted Transfers10 

SECTION 6.TAG-ALONG RIGHTS AND DRAG-ALONG RIGHTS11 

6.1Tag-Along Rights Generally11 

6.2Exceptions to Tag-Along Rights12 

6.3Drag-Along Rights12 

SECTION 7.IPO14 

7.1IPO Demand Right14 

7.2No Requirement for an IPO15 

SECTION 8.CALL RIGHT16 

8.1Call Right Defined16 

8.2Manner of Exercise of Call Right16 

8.3Tax17 

SECTION 9.IAIC PUT/CALL RIGHT17 

9.1Put Right Defined17 

9.2Manner of Exercise of Put Right17 

9.3Special Call Right Defined17 

9.4Manner of Exercise of Special Call Right17 

9.5Tax18 

SECTION 10.REMEDIES18 

10.1Covenants of the Company18 

10.2Specific Enforcement18 

10.3Remedies Cumulative18 

SECTION 11.TERM19 

SECTION 12.CONFIDENTIALITY19 

SECTION 13.OTHER BUSINESSES AND OPPORTUNITIES19 

13.1Corporate Opportunity19 

13.2Other Investments20 

13.3Affirmative Covenants20 

SECTION 14.ACTIONS REQUIRING THE CONSENT OF THE IHC STOCKHOLDER20 

SECTION 15.STOCK LEGENDS21 

15.1Restrictive Legend21 

SECTION 16.MISCELLANEOUS22 

16.1Successors and Assigns22 

16.2Governing Law22 

16.3Counterparts; Facsimile22 

16.4Notices22 

16.5Amendment and Waiver23 

16.6Delays or Omissions23 

16.7Severability24 

16.8Entire Agreement24 

16.9Manner of Voting24 

16.10Further Assurances24 

16.11Consent to Jurisdiction24 

16.12Waiver of Jury Trial24 

16.13Recapitalization, etc.25 

16.14Capitalization of the Company25 

16.15Interpretation25 

i 

STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT (this “Agreement”) is made and entered into as of June 30, 2021 by and among Iguana Capital, Inc., a Delaware corporation (the “Company”), Iguana Holdings Ltd., a private company limited by shares organized under the laws of England and Wales (“Iguana UK”), Iguana Acquisition LLC, a Delaware limited liability company (“Iguana Acquisition”, together with Iguana UK, “JAB Holder”), and IHC SB Holdings, LLC, a Delaware limited liability company (the “IHC Stockholder” and together with the JAB Holder and each other Person that executes a Joinder (as defined below), the “Stockholders”, and each, a “Stockholder”).   

RECITALS

WHEREAS, Independence American Holdings Corp., the IHC Stockholder, Iguana PP Holdings, Inc., a Delaware corporation, the Company, and JAB Holdings, B.V., a private limited liability company incorporated under the laws of the Netherlands (solely for purposes of Section 9.12 and the other provisions of Article IX), are parties to the Stock Purchase Agreement, dated as of May 17, 2021 (the “PetPartners SPA”), pursuant to which the Company, indirectly, acquired 85% of the capital stock of PetPartners, Inc., a Delaware corporation;

WHEREAS, Independence Holding Company, a Delaware corporation, Madison Investors Corp., a Delaware corporation, AMIC Holdings Inc., a Delaware corporation, the JAB Holder, and JAB Holdings B.V., a private limited liability company incorporated under the laws of the Netherlands (solely for purposes of Section 9.12 and the other provisions of Article IX), are parties to the Stock Purchase Agreement, dated as of May 17, 2021 (the “IAIC SPA”), pursuant to which the Company, indirectly, shall acquire all of the capital stock of Independence American Insurance Company, a Delaware corporation;

WHEREAS, as of the date hereof, each of Iguana UK, Iguana Acquisition and the IHC Stockholder own the number of shares (“Shares”) of the common stock, par value $0.01 per share of the Company (the “Common Stock”) set forth opposite such Stockholder’s name on Schedule I attached hereto;

WHEREAS, the parties hereto desire to enter into this Agreement to provide for certain rights and restrictions with respect to their Shares.  

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Stockholders agree as follows:

Section 1.Definitions.  For purposes of this Agreement: 

“Act” has the meaning set forth in Section 16.1 hereof.

“Action” shall mean any action, arbitration, audit, charge, claim, complaint, hearing, proceeding, investigation, litigation or suit (whether civil, criminal, administrative, investigative

11

or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or arbitrator(s) or mediator(s).

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person.  For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by Contract or otherwise; and the terms “controls” and “controlled” have meanings correlative to the foregoing.  With respect to the JAB Holder, each of JAB Consumer Fund SCA SICAR and JAB Holdings B.V. shall be deemed an Affiliate.   

“Agreement” has the meaning set forth in the introduction above.

“Board” means the Board of Directors of the Company as constituted from time to time.

“Business Day” means a day other than a Saturday, Sunday or any other day that banks are authorized or required to close in New York, New York.

“Buyout Notice” has the meaning set forth in Section 7.2(a) hereof.

“Buyout Right” has the meaning set forth in Section 7.2(a) hereof.

“Buyout Shares” has the meaning set forth in Section 7.2(a) hereof.

“Buyout Stockholder” has the meaning set forth in Section 7.2(a) hereof.

“Call Notice” has the meaning set forth in Section 8.2 hereof.

“Call Right” has the meaning set forth in Section 8.1 hereof.

“Call Shares” has the meaning set forth in Section 8.1 hereof.

“Call Stockholders” has the meaning set forth in Section 8.1 hereof.

“Capital Stock” means (a) shares of Common Stock (whether now outstanding or hereafter issued in any context), and (b) any stock options, warrants or other securities of the Company exercisable for or convertible into shares of Common Stock, in each case now owned or subsequently acquired by any Stockholder, or their respective successors or permitted transferees or assigns.  With respect to any Person other than the Company, “Capital Stock” shall means any and all shares of, interests in, rights to purchase, warrants to purchase, options for, participations in or other equivalents of or interests in (however designated) stock issued by such Person.

“Cause” means (a) any conviction of, or the entering of a plea of guilty or nolo contendere to, a crime that constitutes a felony, (b) willful misconduct or gross negligence in the performance of such Person’s duties to the Company that causes material financial harm to the Company or any of its Subsidiaries, or (c) an act of fraud or embezzlement.  For purposes of this

2

definition, an act or failure to act shall be considered “willful” only if done or omitted to be done without a good faith reasonable belief that such act or failure to act was in the best interests of the Company.  Any determination of Cause by the Company will be made by resolution approved by a majority of the members of the Board, provided that no such determination may be made until such Person has been given written notice detailing the specific cause event and a period of thirty (30) days following receipt of such notice to cure such event (if susceptible to cure) to the reasonable satisfaction of the Board.

“Change of Control” means the occurrence of one of the following, whether in a single transaction or a series of transactions:

(a)any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) (other than Geneve Holdings, Inc. and its Affiliates), directly or indirectly, of 50% or more of the total voting power of the Voting Stock of Independence Holding, other than as a result of a transaction in which (1) the holders of securities that represented 100% of the Voting Stock of Independence Holding immediately prior to such transaction are substantially the same as the holders of securities that represent a majority of the Voting Stock of the surviving Person or its Parent Entity immediately following such transaction and (2) the holders of securities that represented 100% of the Voting Stock of Independence Holding immediately prior to such transaction own directly or indirectly Voting Stock of the surviving Person or its Parent Entity in substantially the same proportion to each other as immediately prior to such transaction; or 

(b)the merger or consolidation of Independence Holding with or into another Person or the merger of another Person with or into Independence Holding, or the sale, transfer or lease of all or substantially all of the assets of Independence Holding (determined on a consolidated basis), whether in a single transaction or a series of transactions, to another Person, or any recapitalization, reclassification or other transaction in which all or substantially all of the Capital Stock is exchanged for or converted into cash, securities or other property, other than a transaction following which (1) in the case of a merger or consolidation transaction, holders of securities that directly or indirectly represented 100% of the Voting Stock of Independence Holding immediately prior to such transaction own directly or indirectly (in substantially the same proportion to each other as immediately prior to such transaction, other than changes in proportionality as a result of any cash/stock election provided under the terms of the definitive agreement regarding such transaction) at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction, and (2) in the case of a sale, transfer or lease of all or substantially all of the assets of Independence Holding, other than to a Subsidiary or a Person that becomes a Subsidiary of Independence Holding. 

“Common Stock” has the meaning set forth in the Recitals.

“Company” has the meaning set forth in the introduction above.

“Contract” means any written or oral contract, agreement, commitment, lease, sublease, license or other obligation.

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“Covered Person” has the meaning set forth in Section 2.7 hereof.

“Demand Shares” has the meaning set forth in Section 7.1(a) hereof.

“Demanding Party” has the meaning set forth in Section 7.1(a) hereof.

“Drag-Along Holder” has the meaning set forth in Section 6.3(b) hereof.

“Drag-Along Notice” has the meaning set forth in Section 6.3(b) hereof.

“Drag-Along Transfer” has the meaning set forth in Section 6.3(a) hereof.

“Escrow Agent” has the meaning set forth in Section 6.3(f) hereof.

“Excepted Person” has the meaning set forth in Section 13.1 hereof.

“Exempt Issuance” has the meaning set forth in Section 4.1(f) hereof.

“Fully-Diluted Shares” means, as of any time, all Shares then issued and outstanding, including any Shares issuable upon the exercise of any outstanding options or other convertible securities.

“GAAP” means generally accepted accounting principles in the United States, consistently applied.

“Governmental Entity” means any U.S., international or foreign federal, national, state, provincial, local or other government, or any governmental, regulatory or administrative authority, agency or commission of any of the foregoing, including any office of a state attorney general, or any court, tribunal, or judicial or arbitral body.

“IAIC SPA” has the meaning set forth in the Recitals.

“Iguana Acquisition” has the meaning set forth in the introduction above.

“Iguana UK” has the meaning set forth in the introduction above.

“IHC Stockholder” has the meaning set forth in the introduction above.

“IHC Stockholders Directors” has the meaning set forth in Section 2.2(a) hereof.

“Independence Holding” means Independence Holding Company.

“IPO” means an initial public offering of the common stock of the Company (or any successor thereof) on Form S-1 (or any equivalent or successor form).

“IPO Demand” has the meaning set forth in Section 7.1(a).

“JAB Holder” has the meaning set forth in the introduction above.

4

“JAB Holder Group” has the meaning set forth in Section 14(a).

“Joinder” has the meaning set forth in Section 5.2(c).

“Law” means any statute, law, ordinance, requirement, decree, regulation, rule, code or order of any Governmental Entity.

“New Issue Offer Notice” has the meaning set forth in Section 4.1(b) hereof.

“New Securities” has the meaning set forth in Section 4.1(f) hereof.

“Non-JAB Holder” means any Stockholder that is not JAB Holder (or its Affiliates).

“Parent Entity” means, with respect to any Person, any other Person of which such first Person is a direct or indirect wholly owned Subsidiary.

“Per Share Purchase Price” has the meaning set forth in Section 7.2(b) hereof.

“Permitted Liens” means any liens or encumbrances arising under this Agreement, the Company’s certificate of incorporation, the Company’s bylaws or applicable securities laws.

“Permitted Transfer” has the meaning set forth in Section 5.2(b)(i).

“Permitted Transferee” has the meaning set forth in Section 5.2(b)(i).

“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

“PetPartners SPA” has the meaning set forth in the Recitals.

“Pro Rata Share” has the meaning set forth in Section 4.1(a) hereof.

“Put Notice” has the meaning set forth in Section 9.2.

“Put Right” has the meaning set forth in Section 9.1.

“Put Shares” has the meaning set forth in Section 9.1.

“Put Stockholder” has the meaning set forth in Section 9.1.

“Representatives” has the meaning set forth in Section 12 hereof.

“SEC” means the United States Securities and Exchange Commission and any successor agency performing comparable functions.

“Shares” has the meaning set forth in the Recitals.

“Special Call Notice” has the meaning set forth in Section 9.2.

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“Special Call Right” has the meaning set forth in Section 9.1.

“Special Call Shares” has the meaning set forth in Section 9.1.

“Special Call Stockholder” has the meaning set forth in Section 9.1.

“Specified Obligation” has the meaning set forth in Section 6.1(c) hereof.

“Stock Power” has he meaning set forth in Section 7.2(c) hereof.

“Stockholders” has the meaning set forth in the introduction above.

“Subsidiary” of a Person means a corporation, partnership, joint venture, association, limited liability company or other entity of which such Person owns, directly or indirectly, more than 50% of the outstanding voting stock or other ownership interests.

“Tag-Along Notice” has the meaning set forth in Section 6.1(b) hereof.

“Tag-Along Transfer” has the meaning set forth in Section 6.1(a) hereof.

“Tag Exercise Period” has the meaning set forth in Section 6.1(b) hereof.

“Transfer” has the meaning set forth in Section 5.1(a) hereof.

“Transferring Stockholder” has the meaning set forth in Section 6.1(a) hereof.

“Voting Stock” means with respect to any Person, all Capital Stock of such Person having the right to vote generally in any election of directors of the board of directors of such Person or other similar governing body.

Section 2.Corporate Governance. 

2.1Size of the Board.  The initial size of the Board shall be seven (7) directors and thereafter, subject to the terms and conditions of the Company’s certificate of incorporation and bylaws, the size of the Board may be increased or decreased (but not fewer than five (5)) by resolution of the Board at any time. 

2.2Board Composition.  Each of the Stockholders agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, in whatever manner as shall be necessary to ensure that at each annual or special meeting of Stockholders at which an election of directors is held or pursuant to any written consent of the Stockholders, the following persons shall be elected to the Board: 

(a)Subject to Section 2.2(b), the IHC Stockholder will be entitled to designate two (2) individuals to serve as members of the Board (the “IHC Stockholder Directors”). 

(b)If the IHC Stockholder and its Affiliates beneficially own less than 15% of the Fully Diluted Shares, (not taking into consideration any dilution of such Persons  

6

resulting from any Exempt Issuance), then the IHC Stockholder shall promptly cause one of such IHC Stockholder Directors to resign and the number of IHC Stockholder Directors permissible hereunder shall be permanently reduced to one. If the IHC Stockholder and its Affiliates beneficially own less than 10% of the Fully Diluted Shares (not taking into consideration any dilution of such Persons resulting from any Exempt Issuance), then the IHC Stockholder shall promptly cause a second IHC Stockholder Director to resign and the number of IHC Stockholder Directors permissible hereunder shall be permanently reduced to zero.

(c)The JAB Holder shall have the right to designate to serve as members of the Board such number of individuals not to exceed the then-current size of the Board (including any vacancies) minus the number of people serving as the IHC Stockholder Directors, if any. 

2.3Failure to Designate a Board Member.  In the absence of any designation from the JAB Holder or the IHC Stockholder as specified above, any director previously designated by it and then serving shall be reelected if still eligible to serve. 

2.4Removal of Board Members; Vacancies.  Each Stockholder agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, in whatever manner as shall be necessary to ensure that: 

(a)no director elected pursuant to Section 2.2 of this Agreement may be removed from any office other than for Cause unless (i) such removal is directed or approved by the respective designator entitled under Section 2.2 to designate that director or (ii) the applicable designator entitled under Section 2.2 to designate that director is no longer so entitled to designate such director under Section 2.2;  

(b)subject to Section 2.2, any director requested by a designator to be removed is so removed;  

(c)any vacancies created by the resignation, removal or death of a director elected pursuant to Section 2.2 shall be filled as directed by the respective designator of such director in accordance with the provisions of this Section 2; and 

(d)any vacancies created by a change in the size of the Board shall be filled as directed by the JAB Holder and the IHC Stockholder in accordance with the provisions of this Section 2.  

2.5Reimbursement.  The Company shall pay all reasonable and documented reimbursable out-of-pocket costs and expenses incurred by each member of the Board in the course of their service hereunder, including in connection with attending regular and special meetings of the Board, any board of managers or board of directors of each of the Company’s Subsidiaries or any of their respective committees. 

2.6Consents.  Each Stockholder agrees to execute any written consents required to effect the purposes of this Agreement, and, the Stockholders agree, at the request of any Stockholder entitled to designate directors under Section 2.2, to call or cause to be called, a special meeting of Stockholders for the purpose of electing directors. 

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2.7Exculpation.  Notwithstanding any other provisions of this Agreement, whether express or implied, or any obligation or duty at law or in equity, neither the directors of the Company, any of the Stockholders, any Representatives of either of the foregoing, nor any Representatives of the Company or any of its Affiliates (individually, a “Covered Person” and, collectively, the “Covered Persons”) shall be liable to the Company or any other Person for any act or omission taken or omitted by a Covered Person in the reasonable belief that such act or omission was in or was not contrary to the best interests of the Company; provided, that such act or omission does not constitute fraud, willful misconduct or bad faith or limit any duty owed to the Company. 

Section 3.Information Rights.  So long as the IHC Stockholder and its Affiliates owns at least 10% of the Fully Diluted Shares (not taking into consideration any dilution of such Persons resulting from any Exempt Issuance), the Company shall provide the IHC Stockholder with: 

(a)copies of all periodic reports (including as to valuation) that are provided to executive officers of the Company and each principal operating Subsidiary at such time as such reports are actually provided to such executive officers, which shall be no later than thirty (30) days following the end of any applicable period; provided, that the form and content of any reports referred to by this clause (a) shall be determined by the Board in its sole discretion; and 

(b)such financial information or documents in the possession of the Company and any of its Subsidiaries as the IHC Stockholder may reasonably request in writing in connection with the preparation of Independence Holding’s public earnings releases or other press releases, Current Reports on Form 8-K, Annual Reports to Shareholders, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any other proxy, information and registration statements, reports, notices, prospectuses and any other filings made by Independence Holding with the SEC or any other Governmental Entity, including Independence Holding’s unaudited quarterly financial statements and annual audited financial statements. 

Section 4.Preemptive Rights.   

4.1Preemptive Rights. 

(a)If, prior to an IPO, the Company or any of its Subsidiaries issues or sells or authorizes the issuance or sale of any New Securities, the Company shall, or shall cause its Subsidiary to, as applicable, offer to each Stockholder a portion of such New Securities (and if more than one class of securities is included in the New Securities, then a portion of the amount of each such class of securities included in the New Securities) equal to the quotient determined by dividing (A) the number of Fully-Diluted Shares held by such Stockholder, by (B) the aggregate number of Fully-Diluted Shares held by all Stockholders, in each case determined before giving effect to the issuance of New Securities (the “Pro Rata Share”). 

(b)The Company shall give written notice (a “New Issue Offer Notice”) of any proposed issuance or sale described in Section 4.1(a) to each Stockholder,  

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stating (i) the number of such New Securities proposed to be issued or sold, and (ii) the price and terms, if any, upon which it proposes to issue or sell such New Securities.  

(c)The Stockholders shall have a right of oversubscription such that if any Stockholder fails to purchase its Pro Rata Share of the New Securities proposed to be sold by the Company, the other Stockholders shall, among them, have the right to purchase up to the balance of the New Securities not so purchased.  Such right of oversubscription may be exercised by a Stockholder by accepting the offer contained in the New Issue Offer Notice as to more than its Pro Rata Share.  If, as a result thereof, such oversubscriptions exceed the total number of New Securities available in respect of such oversubscription privilege, the oversubscribing Stockholders shall be cut back with respect to their oversubscriptions on a pro rata basis in accordance with their respective Pro Rata Share or as they may otherwise agree among themselves. 

(d)If a Stockholder desires to purchase all or any part of the New Securities, such Stockholder shall notify the Company in writing thereof within 15 Business Days of the date of the New Issue Offer Notice, which notice shall state the number of New Securities such Stockholder desires to purchase.  Such notice shall, when taken in conjunction with the New Issue Offer Notice, be deemed to constitute a valid, legally binding, and enforceable agreement for the sale and purchase of such New Securities (subject to the limitations set forth above as to a Stockholder’s right to purchase more than its Pro Rata Share of the New Securities).  Sales of the New Securities to be sold to the purchasing Stockholders pursuant to this Section 4.1 shall be made at the offices of the Company on the 30th Business Day after the date of the New Issue Offer Notice.  Such sales shall be effected by the issuance by the Company of a certificate or certificates evidencing the New Securities to be purchased by the purchasing Stockholder, against payment to the Company of the purchase price therefore by such purchasing Stockholder.  New Securities purchased by Stockholders pursuant to this Section 4.1 shall immediately become subject to this Agreement upon completion of such purchase. 

(e)If the Stockholders do not purchase all of the New Securities, the New Securities not so purchased may be sold by the Company to any Person at any time within 90 days after the date the New Issue Offer Notice was made.  Any such sale shall occur at not less than the price and upon other terms and conditions, if any, not more favorable to the buyer than those specified in the New Issue Offer Notice. 

(f)For purposes hereof, “New Securities” means any equity securities of the Company or any of its Subsidiaries, or any securities containing options or rights to acquire equity securities of the Company or any of its Subsidiaries, other than (i) securities issued in connection with any stock split, stock dividend or recapitalization by the Company, (ii) securities issued to a Person other than the JAB Holder or any of its Affiliates as consideration for the acquisition of or investment in another company or business (whether through a purchase of securities, a merger, consolidation, purchase of assets or otherwise), (iii) securities issued in an IPO, (iv) issuances of securities to a Person other than the JAB Holder Group or any Person employed by or affiliated with the JAB Holder Group (other than any Person who is an employee, director or officer of the Company or its Subsidiaries) pursuant to any employment contract, employee or benefit plan, stock purchase plan, stock ownership plan, stock option or equity compensation plan or other similar plan where stock is being issued or offered to a  

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Person, trust, other entity or otherwise, to or for the benefit of any employees, consultants, potential employees, officers or directors of the Company or its Affiliates; provided, that such issuances shall not be greater than 10% of the Fully Diluted Shares; provided, further, that the Board may increase such amount of total issuances in its sole discretion or (v) securities issued as additional yield or return in respect of institutional indebtedness for borrowed money to a Person other than the JAB Holder or any of its Affiliates ((i) through (v), each an “Exempt Issuance”).

Section 5.Transfer Restrictions. 

5.1Transfer Restrictions; Effect of Failure to Comply. 

(a)No Stockholder may, directly or indirectly, sell, transfer, distribute, pledge or otherwise encumber (“Transfer”) any Shares without complying with the provisions of this Agreement.  Any Transfer of Shares not made in compliance with the requirements of this Agreement shall be null and void, shall not be recorded on the books of the Company or its transfer agent and shall not be recognized by the Company.  Each party hereto acknowledges and agrees that any breach of this Agreement would result in substantial harm to the other parties hereto for which monetary damages alone could not adequately compensate.  Therefore, the parties hereto unconditionally and irrevocably agree that any non-breaching party hereto shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity (including seeking specific performance or the rescission of Transfer of Shares not made in strict compliance with this Agreement); provided that any Stockholder may pledge stock to the Company to secure obligations to the Company. 

(b)In furtherance, and not in limitation of the foregoing, from the closing of the transactions contemplated by the PetPartners SPA until the IPO and subject to Section 6, Section 7 and Section 8, the IHC Stockholder shall not, directly or indirectly, Transfer any Shares without the prior written consent of the JAB Holder, except as permitted by Section 5.2 and Section 7.1(c).   

5.2Permitted Transfers. 

(a)Subject to compliance with this Section 5, the JAB Holder and any Affiliate of the JAB Holder that is a Stockholder may directly or indirectly Transfer any Shares at any time to any Person. 

(b)Notwithstanding the foregoing or anything to the contrary herein, a Stockholder may: 

(i)(1) Transfer Shares following an IPO, (2) Transfer Shares in connection with a tender or exchange offer, a merger or consolidation, or an underwritten public offering of the Shares or (3) at any time to any Affiliate of a Stockholder (a “Permitted Transferee” and any such Transfer under clause (1), (2) or (3), a “Permitted Transfer”); provided, that no such Transfer (other than the sale of Shares in an IPO or thereafter in an open market sale through a broker) of Shares shall be made to any Person that is, or that is an Affiliate of, a competitor of any of the Company or its principal operating Subsidiaries;  

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provided, further, that the consummation of any Permitted Transfer under clause (3) shall be subject to the transferor and transferee complying with Section 5.2(c).

(c)Except for Transfers following an IPO, no Stockholder may Transfer ownership over any Shares, and it shall be a condition precedent to the Company’s recognition of such Transfer that, the transferee or assignee thereof (unless already a party to this Agreement) shall agree to be subject to and bound by the terms of this Agreement by executing and delivering a joinder in the form of Exhibit A hereto (“Joinder”).  Upon the execution and delivery of such joinder, such transferee shall be deemed to be a party hereto as if such transferee’s signature appeared on the signature pages of this Agreement and shall be deemed to be a Stockholder under this Agreement.  The Company shall not permit the Transfer of the Shares subject to this Agreement on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with all applicable Laws and the terms of this Section 5.2.  For the avoidance of doubt, a Transfer of Shares in an IPO or thereafter (or to Affiliates of the transferor) shall not be subject to this Section 5.2(c). 

Section 6.Tag-Along Rights and Drag-Along Rights. 

6.1Tag-Along Rights Generally. 

(a)In the case of a proposed Transfer (a “Tag-Along Transfer”) of any Shares held by the JAB Holder or its Affiliates (collectively, the “Transferring Stockholder”), the IHC Stockholder (or its Permitted Transferee) may exercise tag-along rights in accordance with the terms, conditions and procedures set forth in this Section 6.1. 

(b)The Transferring Stockholder shall promptly give written notice (a “Tag-Along Notice”) to the IHC Stockholder of any Tag-Along Transfer, setting forth the number of Shares proposed to be Transferred, the name and address of the proposed transferee, the proposed amount and form of consideration for Shares, a copy of the definitive agreement(s) setting forth the terms of such Tag-Along Transfer and any other material terms and conditions of the Tag-Along Transfer. The IHC Stockholder shall have a period of thirty (30) days from the date of the Tag-Along Notice (the “Tag Exercise Period”) during which the IHC Stockholder may elect to sell up to its “pro rata portion” of Shares proposed to be Transferred in connection with such Tag-Along Transfer. For purposes of this Section, “pro rata portion” means a fraction, the numerator of which is the number of Shares held by the IHC Stockholder (including its Permitted Transferee) immediately prior to the Transfer and the denominator of which is the total number of Shares outstanding immediately prior to the Transfer. The IHC Stockholder may exercise such right by delivery of an irrevocable written notice to the Transferring Stockholder specifying the number of Shares the IHC Stockholder desires to include in the Tag-Along Transfer, accompanied by (i) any certificates representing such Shares, duly endorsed, to be held in escrow pending the Tag-Along Transfer and (ii) a limited power of attorney authorizing the Transferring Stockholder to sell or otherwise dispose of the applicable number of the IHC Stockholder’s Shares. If the Transferring Stockholder is unable to cause the transferee to purchase all the Shares proposed to be Transferred by the Transferring Stockholder and the IHC Stockholder, then the number of Shares that each of the IHC Stockholder and the Transferring Stockholder shall be permitted to sell in such Tag-Along Transfer shall be scaled back on a pro rata basis. The Transferring Stockholder shall have a period ending ninety (90) days following  

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the expiration of the Tag Exercise Period to complete the Transfer contemplated by the Tag-Along Notice, on the payment terms specified in the Tag-Along Notice, following which time no Transfer by the Transferring Stockholder may take place until the Transferring Stockholder has delivered a new Tag-Along Notice and otherwise complied with the provisions of this Section 6.1 with respect to such new Tag-Along Notice.

(c)The IHC Stockholder shall be paid the same amount and form of consideration per Share as the Transferring Stockholder, and shall agree to the same terms and conditions to the Transfer as the Transferring Stockholder agrees; provided, that the IHC Stockholder shall not be required to give any representation or warranty other than as to (i) title and the absence of liens with respect to its Shares being sold, and (ii) authority and capacity to enter into the applicable sale agreement; provided, however, that the Transferring Stockholder and the IHC Stockholder shall agree to be severally liable on a pro rata basis based on the relative number of Shares Transferred by each of them for any indemnification obligations in connection with such transaction as a result of (x) a breach of any Company representations and warranties or (y) other liabilities of the Company (other than liabilities resulting from the breach by the Company of any covenant contained in any agreement giving effect to the Transfer) (any such indemnification obligation, whether funded pursuant to an escrow or otherwise, a “Specified Obligation”), it being agreed that each of the IHC Stockholder and the Transferring Stockholder shall be solely liable for its own representations, warranties and covenants, including those described in clauses (i) and (ii) above.  Notwithstanding the foregoing, in no event shall the IHC Stockholder’s aggregate liability pursuant to the indemnification provisions of the applicable transaction documentation exceed the U.S. dollar value of the total consideration paid by the transferee to the IHC Stockholder. 

6.2Exceptions to Tag-Along Rights.  The provisions of Section 6.1 shall not be applicable to any Transfer of Shares from the JAB Holder to any of its Affiliates (other than the Company or any of its Subsidiaries). 

6.3Drag-Along Rights. 

(a)If the JAB Holder and its Affiliates agree to Transfer, directly or indirectly, at any time, in any single or series of related transactions, greater than fifty percent (50%) of the then outstanding Shares (a “Drag-Along Transfer”) to a party other than the JAB Holder and its Affiliates, the JAB Holder may exercise drag-along rights in accordance with the terms, conditions and procedures set forth in this Section 6.3. 

(b)The JAB Holder shall promptly give notice (a “Drag-Along Notice”) to each Non-JAB Holder (each, a “Drag-Along Holder”) of any election by the JAB Holder to exercise its drag-along rights under this Section 6.3, setting forth the name and address of the transferee, the total number of Shares proposed to be Transferred by the JAB Holder and its Affiliates, the proposed amount and form of consideration for such Shares, and all other material terms and conditions of the Drag-Along Transfer. Such notice shall also specify the aggregate number of Shares such Drag-Along Holder shall be required to Transfer, which shall be up to the product of (x) the total number of Shares held by such Drag-Along Holder and (y) a fraction, the numerator of which is the total number of Shares proposed to be Transferred by the JAB Holder and its Affiliates, and the denominator of which is the total number of Shares held  

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by the JAB Holder or its Affiliates immediately prior to the Transfer.  Any Transfer of Shares by such Drag-Along Holder pursuant to the terms hereof shall be for the same amount and form of consideration per Share as the JAB Holder and its Affiliates will receive in such Transfer, as specified in the Drag-Along Notice. Within ten (10) days of delivery of the Drag-Along Notice, such Drag-Along Holder shall deliver to the JAB Holder (i) any certificates representing the Shares subject to the Drag-Along Transfer, duly endorsed, to be held in escrow pending the Drag-Along Transfer and (ii) a limited power of attorney authorizing the JAB Holder to sell or otherwise dispose of the applicable number of such Drag-Along Holder’s Shares.

(c)Each Drag-Along Holder shall be paid the same amount and form of consideration per Share as the JAB Holder and its Affiliates, and shall agree to the same terms and conditions to the Transfer as the JAB Holder agrees; provided, that each Drag-Along Holder shall not be required to (A) give any representation or warranty other than as to (i) title and the absence of liens with respect to its Shares being sold, and (ii) authority and capacity to enter into the applicable sale agreement or (B) execute any non-competition agreements; provided, however that the JAB Holder and each Drag-Along Holder shall agree to be severally liable on a pro rata basis based on the relative number of Shares Transferred by each of them for any indemnification obligations in connection with such transaction as a result of Specified Obligations, it being agreed that the JAB Holder and each Drag-Along Holder shall be solely liable for its own representations, warranties and covenants, including those described in clauses (i) and (ii) above.  In no event shall any Drag-Along Holder’s aggregate liability pursuant to the indemnification provisions of the applicable transaction documentation exceed the U.S. dollar value of the total consideration paid by the transferee to such Drag-Along Holder. 

(d)In the event that any Transfer pursuant to this Section 6.3 is structured as a merger, consolidation, sale of all or substantially all of the assets of the Company (or any successor thereof) or business combination, each Drag-Along Holder must further agree to (i) vote or provide a written consent in favor of the transaction, (ii) take such other action within its power, at no cost to it (other than fees and expenses payable to its advisors (which shall be paid by such Drag-Along Holder)), as may be required to effect such transaction, and (iii) take all action to waive any dissenters, appraisal or other similar rights with respect thereto.  

(e)Solely for purposes of Section 6.3(d) and in order to secure the performance of such Drag-Along Holder’s obligations under Section 6.3(d), each Drag-Along Holder hereby irrevocably appoints the JAB Holder as its attorney-in-fact and proxy of such Drag-Along Holder (with full power of substitution) to vote, provide a written consent or take any other action with respect to its Shares as described in this paragraph if, and only in the event that, such Drag-Along Holder fails to vote or provide a written consent with respect to its Shares in accordance with the terms of Section 6.3(d)(i) or fails to take any other action in accordance with the terms of Section 6.3(d)(ii) or Section 6.3(d)(iii) within five (5) Business Days of a request for such vote, written consent or action.  Upon such failure, the JAB Holder shall have and is hereby irrevocably granted a proxy to vote or provide a written consent with respect to such Drag-Along Holder’s Shares for the purposes of taking the actions required by Section 6.3(d).  Each Drag-Along Holder intends this proxy to be, and it shall be, irrevocable and coupled with an interest, and such Drag-Along Holder shall take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy.   

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(f)If a Drag-Along Holder fails to Transfer to the drag-along transferee the Shares to be sold pursuant to this Section 6.3, the JAB Holder may, at its option, in addition to all other remedies it may have, deposit the purchase price (including any promissory note constituting all or any portion thereof) for such Shares with any national bank or trust company (the “Escrow Agent”), and thereupon all of such Drag-Along Holder’s rights in and to such Shares shall terminate. Thereafter, upon delivery to the Company by such Drag-Along Holder of appropriate documentation evidencing the Transfer of such Shares to the drag-along transferee, the JAB Holder shall instruct the Escrow Agent to deliver the purchase price (without any interest from the date of the closing to the date of such delivery, any such interest to accrue to the Company) to such Drag-Along Holder, less any holdback or escrow of such purchase price made on a pro rata basis to any holdback or escrow agreed by the JAB Holder with respect to the consideration received by the JAB Holder for its Shares. 

(g)Any transaction costs, including transfer taxes and legal, accounting and investment banking fees incurred by the Company or the JAB Holder in connection with a Transfer of Shares covered by this Section 6.3 shall, unless the applicable purchaser refuses, be borne by the Company in the event of a merger, consolidation, sale of assets or similar business combination and shall otherwise be borne by the Stockholders on a pro rata basis based on the consideration received by each Stockholder with respect to such transaction. 

Section 7.IPO. 

7.1IPO Demand Right. 

(a)For so long as the IHC Stockholder holds any Shares acquired on the date hereof or pursuant to Section 4 hereof, at any time between April 1-April 30 or September 1-September 30 beginning on the third anniversary of the closing of the IAIC SPA and at any time between thereafter, the IHC Stockholder (the “Demanding Party”) shall be entitled to demand that, upon written notice to the Company and the JAB Holder, the Company complete an IPO as soon as reasonably practicable, but in any event no later than 180 days after receipt of such notice (an “IPO Demand”); provided, that the Demanding Party will irrevocably commit to include in such proposed IPO not less than one hundred percent (100%) of the Shares held by it and its Affiliates (all such Shares held by the Demanding Party, the “Demand Shares”); provided, further, that, subject to the good faith judgment of the managing underwriter, the Demand Shares shall have priority for inclusion in the proposed IPO.   

(b)Subject to Section 7.2, within forty-five (45) days of the receipt of an IPO Demand, the Company shall file a registration statement with the Securities and Exchange Commission with respect to such an IPO and the Company and the JAB Holder shall use their best efforts to cause such registration statement to be declared effective as promptly as practicable.  The Company, the JAB Holder and the Demanding Party shall provide all information required pursuant to U.S. securities laws and shall enter into customary agreements and deliver such other documents with respect to such offering as may be reasonably requested by the managing underwriter, in each case at the Company’s expense. 

(c)Following the delivery by the IHC Stockholder of an IPO Demand, if the JAB Holder does not exercise the Buyout Right and breaches this Section 7.1, then,  

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notwithstanding anything contained in Section 5 hereof or anything else in this Agreement to the contrary, the IHC Stockholder shall be entitled to Transfer all or any portion of their Shares without restriction.  Such transferee shall succeed to all of the rights (but none of the obligations) of the IHC Stockholder as if such transferee acquired such Shares on the date hereof as the “IHC Stockholder,” including with respect to the rights set forth in Section 2, Section 3, Section 4, Section 6.1, Section 7, Section 13.3 and Section 14.  Neither the IHC Stockholder nor any transferee pursuant to this Section 7.1(c) shall have any obligations pursuant to this Agreement whatsoever (other than pursuant to Section 14), including pursuant to Section 5, Section 6.3 or Section 8.  In the event that the IHC Stockholder seeks to Transfer any of its Shares pursuant to this Section 7.1(c), the Company and the JAB Holder shall use their best efforts to facilitate such Transfer, including by entering into customary confidentiality agreements with any prospective transferee in order to permit the sharing of confidential information regarding the Company and providing any and all information regarding the Company as reasonably requested by the IHC Stockholder or its proposed transferee in connection with such transfer.

7.2No Requirement for an IPO. 

(a)If the IHC Stockholder makes an IPO Demand pursuant to Section 7.1, the Company shall not be required to complete an IPO pursuant to Section 7.1, if the JAB Holder or any of its Affiliates purchases all, but not less than all, of the Shares (the “Buyout Shares”) held by the IHC Stockholder (including its Permitted Transferees) (the “Buyout Stockholder”), free and clear of all liens and encumbrances (other than Permitted Liens) on the terms provided in this Section 7.2 (the “Buyout Right”), at the Per Share Purchase Price, provided that in the case of Buyout Shares represented by options and warrants to purchase Capital Stock, the amount payable to the holder of such options or warrants shall equal the excess of the aggregate Per Share Purchase Price payable to such Person over the aggregate exercise price of such options or warrants held by such Person.  In the event the JAB Holder or any of its Affiliates desires to exercise the Buyout Right, promptly, but in any event no later than fifteen (15) days following the IPO Demand by the Demanding Party, the JAB Holder or its Affiliate, as applicable, shall deliver a written notice to the Demanding Party of its intention to do so (the “Buyout Notice”). 

(b)The purchase price per share (the “Per Share Purchase Price”) to be paid by the JAB Holder for the Buyout Shares or the Call Shares, as applicable, upon exercise of the Buyout Right or the Call Right, as applicable, will be based upon the equity valuation of the Company as set forth in the then latest available equity valuation as prepared by Bank of America, N.A. or its successor and as used by JAB Holding Company S.à r.l. and its Affiliates for fund reporting purposes.  Amounts paid to individual Buyout Stockholders or Call Stockholders, as applicable, shall be less the exercise price of any Capital Stock held by such Buyout Stockholder or Call Stockholder, as applicable, that is an option, warrant or similar security exercisable for or convertible into shares of Common Stock.  For the avoidance of doubt, in no event shall the Per Share Purchase Price be less than zero.  

(c)Within one hundred-eighty (180) days after the date of the Buyout Notice (provided that such one hundred-eighty (180) day period shall be extended to up to sixty (60) days in the event any required approval from any Governmental Entity with respect to such transaction has not then been obtained), the purchase of the Buyout Shares will be consummated.   

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The Buyout Stockholders shall deliver to the JAB Holder, at the principal place of business of the JAB Holder or such other location as the JAB Holder may specify in the Buyout Notice, the certificates representing the Buyout Shares owned by such Buyout Stockholder free and clear of all liens and encumbrances (other than Permitted Liens), which certificates shall have affixed thereto stock powers in the form attached hereto as Exhibit B (the “Stock Power”), representing the Buyout Shares and such transfer instruments and other documents as are reasonably requested by the JAB Holder in order to effect the Buyout Right, including with respect to the purchase and sale of the Buyout Shares, stock purchase agreements in a form agreed upon by the JAB Holder and the Buyout Stockholders containing customary terms (which for the avoidance of doubt will not include any restrictive covenants), representations and warranties of the Buyout Stockholders and customary indemnification from the Buyout Stockholders for the benefit of the JAB Holder in the event of any breach or failure to be true and correct of such representations and warranties.

(d)The parties hereto intend that, until such time, if any, that the Buyout Right is exercised, the Buyout Right shall have no effect on the ownership of the Capital Stock of the Company for income tax purposes. 

Section 8.Call Right. 

8.1Call Right Defined.  Upon a Change of Control of Independence Holding, each Non-JAB Holder (collectively, the “Call Stockholders”) hereby irrevocably grants to the JAB Holder the right to purchase free and clear of all liens and encumbrances (other than Permitted Liens) on the terms provided in this Section 8 (the “Call Right”) all (but not less than all) of the Shares then held by the Call Stockholders (the “Call Shares”) at the Per Share Purchase Price, provided that in the case of Call Shares represented by options or warrants to purchase Capital Stock, the amount payable to the holder of such options or warrants shall equal the excess of the aggregate Per Share Purchase Price payable to such Person over the aggregate exercise price of such options or warrants held by such Person. 

8.2Manner of Exercise of Call Right.  The JAB Holder may exercise its Call Right by giving written notice to the Company and Call Stockholders of its intention to do so (the “Call Notice”).  Within thirty (30) days after the date of the Call Notice (provided that such sixty (60) day period shall be extended to up to another sixty (60) days in the event any required approval from any Governmental Entity with respect to such transaction has not then been obtained), the purchase of the Call Shares will be consummated.  The Call Stockholders shall deliver to the JAB Holder, at the principal place of business of the JAB Holder or such other location as the JAB Holder may specify in the Call Notice, the certificates representing the Call Shares owned by such Call Stockholder free and clear of all liens and encumbrances (other than Permitted Liens), which certificates shall have affixed thereto the Stock Power, representing the Call Shares and such transfer instruments and other documents as are reasonably requested by the JAB Holder in order to effect the Call Right, including with respect to the purchase and sale of the Call Shares, stock purchase agreements in a form agreed upon by the JAB Holder and the Call Stockholders containing customary terms (which for the avoidance of doubt will not include any restrictive covenants), representations and warranties of the Call Stockholders and customary indemnification from the Call Stockholders for the benefit of JAB Holder in the event of any breach or failure to be true and correct of such representations and warranties.  

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8.3Tax.  The parties hereto intend that, until such time, if any, that the Call Right is exercised, the Call Right shall have no effect on the ownership of the Capital Stock of the Company for income tax purposes. 

Section 9.IAIC Put/Call Right. 

9.1Put Right Defined.  If the IAIC SPA is terminated for any reason, the JAB Holder (collectively, the “Put Stockholder”) shall be entitled to require that the IHC Stockholder purchase free and clear of all liens and encumbrances (other than Permitted Liens) on the terms provided in this Section 9 (the “Put Right”) all (but not less than all) of the Shares then held by the Put Stockholder (the “Put Shares”) at an aggregate price equal to the sum of all costs and expenses (including taxes and financing costs) incurred by the Put Stockholder and its Affiliates in connection with (a) the exercise of the Put Right and (b) the consummation of the PetPartners SPA and the transactions contemplated thereby, including, for the avoidance of doubt, any capital contributions made to the Company. 

9.2Manner of Exercise of Put Right.  The Put Stockholder may exercise its Put Right by giving written irrevocable notice to the IHC Stockholder of its intention to do so (the “Put Notice”).  Within thirty (30) days after the date of the Put Notice (provided that such sixty (60) day period shall be extended to up to another sixty (60) days in the event any required approval from any Governmental Entity with respect to such transaction has not then been obtained), the purchase of the Put Shares will be consummated.  The Put Stockholder shall deliver to the IHC Stockholder, at the principal place of business of the IHC Stockholder, the certificates representing the Put Shares owned by the Put Stockholder free and clear of all liens and encumbrances (other than Permitted Liens), which certificates shall have affixed thereto the Stock Power, representing the Put Shares and such transfer instruments and other documents as are reasonably requested by the IHC Stockholder in order to effect the Put Right, including with respect to the purchase and sale of the Put Shares, stock purchase agreements in a form agreed upon by the Put Stockholder and the IHC Stockholder containing customary terms.  

9.3Special Call Right Defined.  If the IAIC SPA is terminated for any reason, and the JAB Holder has not exercised its Put Right pursuant to Section 9.1 and 9.2 hereof during a period of four months after such termination, the IHC Stockholder (collectively, the “Special Call Stockholder”) shall be entitled to require that the JAB Holder sell free and clear of all liens and encumbrances (other than Permitted Liens) on the terms provided in this Section 9 (the “Special Call Right”) all (but not less than all) of the Shares then held by the JAB Holder (the “Special Call Shares”) at an aggregate price equal to the sum of all costs and expenses (including taxes and financing costs) incurred by the JAB Holder and its Affiliates in connection with (a) the exercise of the Call Right and (b) the consummation of the PetPartners SPA and the transactions contemplated thereby, including, for the avoidance of doubt, any capital contributions made to the Company. 

9.4Manner of Exercise of Special Call Right.  The Special Call Stockholder may exercise its Special Call Right by giving irrevocable written notice to the JAB Holder of its intention to do so (the “Special Call Notice”).  Within thirty (30) days after the date of the Special Call Notice (provided that such sixty (60) day period shall be extended to up to another sixty (60) days in the event any required approval from any Governmental Entity with respect to  

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such transaction has not then been obtained), the purchase of the Special Call Shares will be consummated.  The JAB Holder shall deliver to the Call Stockholder, at the principal place of business of the IHC Stockholder, the certificates representing the Special Call Shares owned by the JAB Holder free and clear of all liens and encumbrances (other than Permitted Liens), which certificates shall have affixed thereto the Stock Power, representing the Special Call Shares and such transfer instruments and other documents as are reasonably requested by the IHC Stockholder in order to effect the Special Call Right, including with respect to the purchase and sale of the Special Call Shares, stock purchase agreements in a form agreed upon by the Special Call Stockholder and the JAB Holder containing customary terms.

9.5Tax.  The parties hereto intend that, until such time, if any, that the Put Right or Special Call Right is exercised, the Put Right or Special Call Right shall have no effect on the ownership of the Capital Stock of the Company for income tax purposes.  

Section 10.Remedies. 

10.1Covenants of the Company.  The Company agrees to use its best efforts, within the requirements of applicable Law, to ensure that the rights granted under this Agreement are effective and that the Stockholders enjoy the benefits of this Agreement.  Such actions include the use of the Company’s best efforts to cause the nomination and election of the directors as provided in this Agreement. 

10.2Specific Enforcement.  The parties hereto agree that monetary damages would not be an adequate remedy in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is expressly agreed that the parties hereto shall be entitled to equitable relief, including injunctive relief and specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or in equity. 

10.3Remedies Cumulative.  All remedies, either under this Agreement or by Law or otherwise afforded to any party, shall be cumulative and not alternative. 

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Section 11.Term.  This Agreement shall be effective as of the date hereof and shall continue in effect until the earlier to occur of (a) the sale of all outstanding Capital Stock to any Person (whether pursuant to the Buyout Right, Call Right, Put Right, drag-along right or otherwise); and (b) termination upon the mutual written consent of the Stockholders; provided, however, that following an IPO, Sections 2, 3, 4, 5, 6, 7, 8, 9, 13, and 14 shall cease to be of any effect. 

Section 12.Confidentiality.  Each Non-JAB Holder agrees that it will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement, unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 12 by such Non-JAB Holder), (b) is or has been independently developed or conceived by such Non-JAB Holder without use of the Company’s confidential information, (c) is or has been made known or disclosed to such Non-JAB Holder by a third party without a breach of any obligation of confidentiality such third party may have to the Company or (d) is required pursuant to public reporting obligations of the Stockholder or its Affiliates; provided, however, that such Non-JAB Holder may disclose confidential information (i) to its attorneys, accountants, consultants, and other engaged professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to its Affiliate, partner, member, Stockholder, or wholly owned subsidiary in the ordinary course of business (such Persons in clauses (i) and (ii), “Representatives”), provided that such Non-JAB Holder Stockholder informs such Representative that such information is confidential and directs such Representative to maintain the confidentiality of such information; or (iii) as may otherwise be required by Law, provided that such Non-JAB Holder promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.  

Section 13.Other Businesses and Opportunities. 

13.1Corporate Opportunity.  Each of the Company and the Stockholders acknowledges and agrees that none of the Stockholders or any of their respective Affiliates or its or their Covered Persons (an “Excepted Person”) shall have any obligation to present any business opportunity to the Company or any of its Subsidiaries, even if the opportunity is one that the Company or its Subsidiary might have pursued or had the ability or desire to pursue, in each case, if granted the opportunity to do so and no such Excepted Person shall be liable to the Company, any of its Subsidiaries any other Stockholder or any of their respective Affiliates or its or their Covered Persons for breach of any fiduciary or other duty, as a Stockholder or otherwise, by reason of the fact that an Excepted Person pursues or acquires such business opportunity, directs such business opportunity to another Person or fails to present such business opportunity, or information regarding such business opportunity, to the Company or any of its Subsidiaries.  Each Excepted Person may have other business and financial interests and investments and may engage in any other business or trade, profession or employment whatsoever, on its own account, or in partnership with, or as an employee, officer, director, creditor, advisor or Stockholder of any other Person, and no Excepted Person shall be required to devote its or his entire time to the business of the Company or any of its Subsidiaries. 

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13.2Other Investments.  Each of the Company and the Stockholders acknowledges and agrees that the JAB Holder and its Affiliates may (a) engage in the same or similar activities or lines of business as the Company or any of its Subsidiaries or develop or market any products or services that compete, directly or indirectly, with those of the Company or any of its Subsidiaries, (b) invest or own any interest publicly or privately in, or develop a business relationship with, any Person engaged in the same or similar activities or lines of business as, or otherwise in competition with, the Company or any of its Subsidiaries and (c) do business with any client or customer of the Company or any of its Subsidiaries.  Neither the Company, any of its Subsidiaries, any other Stockholder, nor any of their respective Affiliates shall have any rights in and to any such independent venture or the income or profits derived therefrom, regardless of whether or not such venture was presented to a Stockholder or one of its respective Affiliates as a direct or indirect result of its or his or her connection with the Company or any of its Subsidiaries. 

13.3Affirmative Covenants.  The Company shall use its commercially reasonable efforts to, and shall cause its Subsidiaries to use commercially reasonable efforts to, at all times (a) cause to be done all things necessary to maintain, preserve and renew its existence and all material licenses, authorizations and permits necessary to the conduct of its businesses, (b) maintain proper books of record and account which present fairly in all material respects its financial condition and results of operations and make provisions on its financial statements for all such proper reserves as in each case are required in accordance with GAAP, (c) comply with all applicable laws, rules and regulations of all governmental authorities, the violation of which would reasonably be expected to have a material adverse effect upon the financial condition, operating results, assets, operations or business prospects of the Company and its Subsidiaries taken as a whole, and (d) apply for and continue in force with good and responsible insurance companies adequate insurance covering risks of such types and in such amounts as are customary for companies of similar size engaged in similar lines of business. 

Section 14.Actions Requiring the Consent of the IHC Stockholder.  For so long as the IHC Stockholder and its Affiliates hold at least 10% of the Fully Diluted Shares (not taking into consideration any dilution of such Persons resulting from any Exempt Issuance), neither the Company nor any of its Subsidiaries shall, without the prior written consent of the IHC Stockholder: 

(a)enter into, amend, modify, restate or supplement any transaction with the JAB Holder or any of its Affiliates (other than the Company and its Subsidiaries) (the “JAB Holder Group”) unless one of the following conditions is satisfied in connection with such a transaction:  (i) such transaction is of the type that the IHC Stockholder is offered the right to purchase such security pursuant to Section 4; or (ii) such transaction is conducted at arms’-length and in a commercially reasonable manner with the JAB Holder Group and is no less favorable to the Company or any of its Subsidiaries as those that could reasonably be expected to be obtained by the Company or any of its Subsidiaries at that time in a comparable arm’s-length transaction with a Person that is not a member of the JAB Holder Group; 

(b)amend, modify, restate or supplement any governing documents, including the certificate of incorporation and bylaws, of the Company in a manner which would have a disproportionate and adverse impact on the IHC Stockholder; 

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(c)pay any management, advisory fees or other compensation to any employee or director affiliated with the JAB Holder Group (other than compensation or fees to any Person who is an employee or officer of the Company or any of its Subsidiaries); 

(d)solely with respect to the Company, liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction (including making or permitting any change in the manner in which such entity is treated for federal income tax purposes); 

(e)take any action to commence any suit, case, proceeding or other action (x) under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors seeking to have an order for relief entered with respect to the Company or any of its Subsidiaries, or seeking to adjudicate the Company or any of its Subsidiaries as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to the Company or any of its Subsidiaries, or (y) appoint a receiver, trustee, custodian or other similar official for the Company or any of its Subsidiaries, or for all or any material portion of the assets of the Company or any of its Subsidiaries, or making a general assignment for the benefit of the creditors of the Company or any of its Subsidiaries; 

(f)appoint or remove the auditors of the Company or any of its material Subsidiaries;  

(g)adopt any new accounting policies, except as required by applicable law or in accordance with GAAP; 

(h)enter into any agreement that would (or is designed to) circumvent any of the terms and conditions set forth in this Agreement; and/or 

(i)agree or commit to any of the foregoing. 

Section 15.Stock Legends. 

15.1Restrictive Legend.  A copy of this Agreement shall be filed with the Secretary of the Company and kept with the records of the Company.  Each of the Stockholders agrees that the following legend shall be placed on the certificates representing any Shares, now or hereafter owned by them: 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON JUNE 30, 2021 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). ANY TRANSFER OF SUCH SECURITIES IS SUBJECT TO COMPLIANCE WITH, OR THE AVAILABILITY OF EXEMPTIONS FROM COMPLIANCE WITH, THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND CERTAIN OTHER

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CONDITIONS, AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT DATED AS OF JUNE 30, 2021, AS MAY BE AMENDED (COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF IGUANA CAPITAL, INC. (TOGETHER WITH ITS SUCCESSORS, THE “COMPANY”) AND WHICH WILL BE MAILED TO A STOCKHOLDER WITHOUT CHARGE WITHIN TEN (10) DAYS AFTER RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR FROM SUCH STOCKHOLDER).  THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.”

Section 16.Miscellaneous. 

16.1Successors and Assigns. 

(a)The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  Subject to Section 5.2, this Agreement, and the rights and obligations of each Stockholder hereunder, may be assigned by such Stockholder to any person or entity to which Shares are Transferred as permitted pursuant to Section 5, including compliance by the transferee with Section 5.2(c).  

(b)The Company may not assign its rights under this Agreement. 

16.2Governing Law.  This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, without giving effect to any principles of conflicts of law thereof that could mandate the application of the laws of another jurisdiction. 

16.3Counterparts; Facsimile.  This Agreement may be executed and delivered by facsimile signature or by email delivery of a “.pdf” format data file and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  

16.4Notices.  Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by facsimile or overnight courier:   

If to the JAB Holder or the Company:

 

1701 Pennsylvania Avenue NW, Suite 801 

Washington, DC 20006 

Attn:Joachim Creus 

Email:Joachim.Creus@jabse.eu 

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If to the IHC Stockholder:

 

c/o The IHC Group 

96 Cummings Point Road, 

Stamford, CT, 069 

Attention: Marla Di Resta 

General Counsel 

mdiresta@sslicny.com

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon:  actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by facsimile or electronic mail; or on the next business day after deposit with an overnight courier, if sent by an overnight courier.

16.5Amendment and Waiver. 

(a)This Agreement may be amended or modified and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (the Stockholders and the Company. 

(b)Notwithstanding the foregoing: 

(i)this Agreement may not be amended or terminated, and the observance of any term of this Agreement may not be waived with respect to any Stockholder, in each case in a manner adverse to any Stockholder, without the written consent of the Stockholder adversely affected thereby, unless such amendment, termination or waiver effects all Stockholders, as the case may be, in the same fashion; and 

(ii)any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party. 

(c)The Company shall give prompt written notice of any amendment, termination or waiver hereunder to any party that did not consent in writing thereto.  Any amendment, termination or waiver effected in accordance with this Section 16.5 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver. 

16.6Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default  

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previously or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

16.7Severability.  The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision. 

16.8Entire Agreement.  This Agreement (including the Exhibits hereto) constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way. 

16.9Manner of Voting.  The voting of Shares pursuant to this Agreement may be effected in person, by proxy, by written consent or in any other manner permitted by applicable Law. 

16.10Further Assurances.  At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder. 

16.11Consent to Jurisdiction. Each party hereto hereby irrevocably and unconditionally (i) consents to the submission to the exclusive jurisdiction of the courts of the State of Delaware and of the United States of America located in the State of Delaware, county of Wilmington, for any Actions arising out of or relating to this Agreement or the breach, termination or validity thereof and the transactions contemplated by this Agreement, (ii) agrees not to commence any Action relating thereto except in such courts and in accordance with the provisions of this Agreement, (iii) agrees that service of any process, summons, notice, or document by U.S. registered mail or as otherwise provided in this Agreement shall be effective service of process for any Action brought in any such court, (iv) waives any objection to the laying of venue of any Action arising out of this Agreement or the transactions contemplated by this Agreement in the courts of the State of Delaware or the United States of America located in the State of Delaware, and (v) agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum. 

16.12Waiver of Jury Trial.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS  

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AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF 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) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.12.

16.13Recapitalization, etc.  The provisions of this Agreement shall apply to any and all Shares or shares of stock of any successor or assign of the Company (whether by merger, consolidation, transfer or sale of assets, conversion or otherwise) which may be issued in respect of, in exchange for, or in substitution of, any Shares by reason of any reorganization, any recapitalization, reclassification, merger, consolidation, partial or complete liquidation, sale of assets, spin-off, stock dividend, split, distribution to Stockholders, or combination of the Shares or any other change in the Company’s capital structure, in order to preserve fairly and equitably as far as practicable, the original rights and obligations of the parties hereto under this Agreement. 

16.14Capitalization of the Company.  As of the date hereof, the authorized capital stock of the Company consists of 10,000,000 shares of Common Stock, par value $0.01 per share, of which 1,125,410.8557 are outstanding and are held of record as set forth on Schedule I.  As of the date hereof, there are no outstanding options, warrants, scrip, rights to subscribe to, purchase rights, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any equity interests or securities containing any equity features of the Company, or contracts, commitments, understandings or arrangements, by which the Company is or may become bound to issue additional equity interests or options, warrants, scrip, rights to subscribe to, purchase rights, calls or commitments of any character whatsoever, relating to, or securities or rights convertible into, any equity interests. 

16.15Interpretation. 

(a)When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, (i) the date that is the reference date in calculating such period shall be excluded and (ii) if the last day of such period is a not a Business Day, the period in question shall end on the next succeeding Business Day. 

(b)When a reference is made herein to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 

(c)Whenever the words “include,” “includes” or “including” are used herein, they shall be deemed to be followed by the words “without limitation.” 

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(d)The words “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used herein shall refer to this Agreement as a whole and not to any particular provision of this Agreement. 

(e)The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” 

(f)Any law or regulation defined or referred to herein means such law or regulation as from time to time amended, modified or supplemented, unless otherwise specifically indicated. 

(g)References to a person are also to its successors and permitted assigns. 

(h)The annexes and exhibits to this Agreement are incorporated and made a part hereof and are an integral part of this Agreement. Any capitalized term used in any annex or exhibit but not otherwise defined therein shall have the meaning given to such term herein. 

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Stockholders Agreement as of the date first written above.

IGUANA CAPITAL, INC. 

 

By:  /s/ Joachim Creus  

Name:Joachim Creus  

Title:President 

IGUANA HOLDINGS LTD.

 

By:  /s/ Joachim Creus  

Name:Joachim Creus  

Title:Director 

IGUANA ACQUISITION LLC 

 

By:  /s/ Joachim Creus  

Name:Joachim Creus  

Title:President 

IHC SB HOLDINGS, LLC 

 

By:  /s/ Vincent Furfaro  

Name:Vincent Furfaro  

Title:President 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

CERTIFICATION

 

I, Roy T. K. Thung certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Independence Holding Company;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:  August 9, 2021

 

 

 

/s/ Roy T. K. Thung

Roy T. K. Thung

Chief Executive Officer and Chairman of the Board of Directors

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

CERTIFICATION

 

I, Colleen P. Maggi, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Independence Holding Company;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:  August 9, 2021

 

 

 

/s/ Colleen P. Maggi

Colleen P. Maggi

Corporate Vice President and Chief Financial Officer

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Independence Holding Company (the "Company") on Form 10-Q for the quarter ended June 30, 2021 as filed with the Securities and Exchange Commission (the "SEC") on the date hereof (the "Report"), I, Roy T. K. Thung, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

 

 

August 9, 2021

 

 

 

/s/ Roy T. K. Thung   *

Roy T. K. Thung

Chief Executive Officer and Chairman of the Board of Directors

 

 

* A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

 

 

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Independence Holding Company (the "Company") on Form 10-Q for the quarter ended June 30, 2021 as filed with the Securities and Exchange Commission (the "SEC") on the date hereof (the "Report"), I, Colleen P. Maggi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

 

 

August 9, 2021

 

 

 

/s/ Colleen P. Maggi   *

Colleen P. Maggi

Corporate Vice President and Chief Financial Officer

 

 

* A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.