EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
by and between
ATLANTIC AMERICAN CORPORATION
and
XXXXX ENTERPRISES, INC.
Dated as of October 16, 1995
TABLE OF CONTENTS
ARTICLE 1 CERTAIN DEFINITIONS...................................1
1.01 Agreement.............................................1
1.02 American Safety.......................................1
1.03 Applicable Law........................................1
1.04 Automated Systems.....................................1
1.05 Automobile Safety.....................................1
1.06 Closing...............................................2
1.07 Code..................................................2
1.08 Companies.............................................2
1.09 ERISA.................................................2
1.10 Fed...................................................2
1.11 GAAP..................................................2
1.12 Georgia Insurance Code................................2
1.13 Florida Tax Litigation................................2
1.14 Governmental Authority................................2
1.15 Xxxx-Xxxxx Act........................................2
1.16 InterRedec............................................2
1.17 InterRedec Escrow.....................................2
1.18 InterRedec Note.......................................2
1.19 InterRedec Pledge.....................................2
1.20 Knowledge.............................................2
1.21 Material Adverse Effect...............................3
1.22 1933 Act..............................................3
1.23 1934 Act..............................................3
1.24 Person................................................3
1.25 Pledged Shares........................................3
1.26 Premier...............................................3
1.27 Prime Rate............................................3
1.28 Purchaser Disclosure Memorandum.......................3
1.29 Related Party.........................................3
1.30 SAP...................................................3
1.31 SEC...................................................3
1.32 Seller Disclosure Memorandum..........................4
1.33 Shares................................................4
1.34 Stockholders' Equity..................................4
1.35 Stock Purchase Agreement..............................4
1.36 Subsidiaries..........................................4
1.37 Tax Allocation Agreement..............................4
1.38 Tax Returns...........................................4
1.39 Taxes.................................................4
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ARTICLE 2 STOCK PURCHASE AND CLOSING.............................4
2.01 Purchase and Sale of the Shares.......................4
2.02 Consideration.........................................4
2.03 Payment of Purchase Price.............................4
2.04 Post-Closing Adjustment...............................5
2.05 Closing...............................................6
2.06 Deliveries and Proceedings at the Closing.............6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER..............6
3.01 Organization and Good Standing of Seller; Power and
Authority.............................................6
3.02 Organization and Good Standing of American Southern;
Power and Authority...................................6
3.03 Capitalization and Ownership..........................7
3.04 Subsidiaries..........................................7
3.05 Qualification.........................................7
3.06 No Violation of Applicable Laws or Agreements.........7
3.07 SEC Filings and Financial Statements..................8
3.08 Absence of Certain Changes............................9
3.09 Reserves..............................................10
3.10 Tax Matters...........................................10
3.11 Pending Litigation or Proceedings.....................11
3.12 Compliance With Applicable Laws.......................11
3.13 Consents and Approvals................................12
3.14 Legal Investments.....................................12
3.15 Investment Assets Custody.............................12
3.16 Insurance Issued......................................12
3.17 Insurance Agents......................................12
3.18 Title to Assets; Material Contracts...................12
3.19 Employee Benefit Plans................................13
3.20 Compensation Arrangements; Bank Accounts; Officers
and Directors.........................................15
3.21 Transactions With Related Parties.....................15
3.22 Labor Relations.......................................15
3.23 Brokerage.............................................16
3.24 Insurance.............................................16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER...........16
4.01 Purchaser's Organization and Good Standing; Power and
Authority.............................................16
4.02 No Violation of Applicable Laws or Agreements.........16
4.03 Pending Litigation or Proceedings.....................17
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4.04 Brokerage.............................................17
4.05 Investment Intent; Ability to Bear Risk...............17
4.06 SEC Filings and Financial Statements..................17
4.07 Absence of Certain Changes............................18
4.08 Consents and Approvals................................18
ARTICLE 5 CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS...........18
5.01 Operation of Business Pending Closing.................18
5.02 Access to Information.................................19
5.03 Supplements to Disclosure Memoranda...................19
5.04 Certain Tax Matters...................................20
5.05 Regulatory Approvals and Consents.....................24
5.06 Best Efforts..........................................25
5.07 Exclusive Dealings....................................25
5.08 Expenses..............................................25
5.09 Resignations..........................................25
5.10 Maintenance of Records................................26
5.11 Proposals.............................................26
5.12 Press Releases........................................26
5.13 GAAP Financial Statements.............................26
ARTICLE 6 CONDITIONS TO CLOSING.................................26
6.01 Conditions to Obligations of Purchaser................26
6.02 Conditions to Obligations of Seller...................27
ARTICLE 7 INDEMNIFICATION.......................................28
7.01 Indemnification by Seller.............................28
7.02 Indemnification by Purchaser..........................29
7.03 Indemnification Procedures............................30
7.04 Sole Remedy...........................................31
ARTICLE 8 TERMINATION...........................................32
8.01 When Agreement May be Terminated......................32
8.02 Final Termination.....................................32
8.03 Effect of Termination.................................32
ARTICLE 9 ARBITRATION...........................................32
9.01 Agreement to Arbitrate................................32
9.02 Initiating Arbitration................................32
9.03 Effect................................................33
9.04 Costs.................................................33
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ARTICLE 10 MISCELLANEOUS.........................................33
10.01 Nature and Survival of Representations................33
10.02 Amendment.............................................34
10.03 Waiver................................................34
10.04 Governing Law.........................................34
10.05 Notices...............................................34
10.06 Invalid Provision.....................................35
10.07 Subsequent SEC Filings................................35
10.08 Assignment............................................35
10.09 Binding Effect........................................35
10.10 Further Assurances....................................35
10.11 Headings..............................................35
10.12 Person and Gender.....................................36
10.13 Entire Agreement......................................36
10.14 Interpretations.......................................36
10.15 Execution in Counterparts.............................36
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THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of October 16, 1995
by and between ATLANTIC AMERICAN CORPORATION, a Georgia corporation
("Purchaser"), and XXXXX ENTERPRISES, INC. (formerly known as Vista Resources,
Inc.), a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller owns 100% of the issued and outstanding capital stock of
American Southern Insurance Company, a Georgia corporation ("American
Southern"); and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase, all of the capital stock of American Southern, in accordance with the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used herein, the following terms have the following respective meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
1.01 "Agreement" Agreement means this Stock Purchase Agreement and the
Exhibit hereto, as the same may be supplemented, modified or amended from time
to time.
1.02 "American Safety" American Safety means American Safety Insurance
Company, a Georgia corporation and wholly owned subsidiary of American
Southern.
1.03 "Applicable Law" Applicable Law means all applicable provisions of
constitutions, statutes, laws, rules, regulations and orders of all Governmental
Authorities.
1.04 "Automated Systems" Automated Systems means Automated Systems of
Georgia, Inc., a Georgia corporation and wholly owned subsidiary of American
Southern.
1.05 "Automobile Safety" Automobile Safety means Automobile Safety
Management, Inc., a Delaware corporation and wholly owned subsidiary of American
Southern.
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1.06"Closing" Closing means the consummation of the transactions described
in this Agreement, and "Closing Date" means the date upon which such
consummation occurs.
1.07 "Code" Code means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
1.08 "Companies" Companies means American Southern collectively with the
Subsidiaries.
1.09 "ERISA" ERISA means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
1.10 "Fed" Fed means the Board of Governors of the Federal Reserve System
and the Federal Reserve Bank of New York acting as bailee for the Board of
Governors.
1.11 "GAAP" GAAP means generally accepted accounting principles.
1.12 "Georgia Insurance Code" Georgia Insurance Code means Title 33 of the
Official Code of Georgia Annotated and all regulations promulgated thereunder.
1.13 "Florida Tax Litigation" Florida Tax Litigation means the premium tax
litigation with respect to the period from 1985 through 1990 involving American
Southern and the State of Florida Department of Revenue currently being
litigated in the District Court of Appeals, 1st District of Florida (Civil
Action No. 95-2588).
1.14 "Governmental Authority" Governmental Authority means any federal,
state, county, local, foreign or other governmental or public agency,
instrumentality, commission, authority, board or body.
1.15 "Xxxx-Xxxxx Act" Xxxx-Xxxxx Act means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and all regulations promulgated
thereunder.
1.16 "InterRedec" InterRedec means InterRedec Southern Company, Inc., a
Delaware corporation.
1.17 "InterRedec Escrow" InterRedec Escrow means that certain Escrow
Agreement dated as of October 11, 1991 by and among Seller, InterRedec and First
Union National Bank of Georgia.
1.18 "InterRedec Note" InterRedec Note means that certain Nonnegotiable
Note dated October 11, 1991 made by Seller, payable to InterRedec.
1.19 "InterRedec Pledge" InterRedec Pledge means that certain Pledge and
Security Agreement dated October 11, 1991 by and between Seller and InterRedec.
1.20 "Knowledge" Knowledge (i) with respect to Seller, means those facts
known, or which should have been known with reasonable diligence, by any of the
officers or directors of the Companies; and (ii) with respect to Purchaser,
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means those facts known, or which should have been known with reasonable
diligence, by any of the officers or directors of Purchaser.
1.21 "Material Adverse Effect" Material Adverse Effect means a material
adverse effect to the property, results of operations or financial condition of
(a) American Southern and the Subsidiaries taken as a whole, or (b) Purchaser,
as shall be applicable in the context in which the term is used; provided,
however, that a Material Adverse Effect shall not include the effect of any
matter which has or may have an industry-wide effect, or any general economic
conditions.
1.22 "1933 Act" 1933 Act means the Securities Act of 1933, as amended.
1.23 "1934 Act" 1934 Act means the Securities Exchange Act of 1934, as
amended.
1.24 "Person" Person means an individual, corporation, partnership,
association, trust or unincorporated organization, or a government or any agency
or political subdivision thereof.
1.25 "Pledged Shares" Pledged Shares means the 149,998 shares of American
Southern common stock pledged to InterRedec by Seller pursuant to the InterRedec
Pledge.
1.26 "Premier" Premier means Premier Adjusting and Claims Service, Inc., a
Georgia corporation and wholly owned subsidiary of American Southern.
1.27 "Prime Rate" Prime Rate means the prime rate as published in the
"Money Rates" column of The Wall Street Journal, Eastern Edition; in the event
that more than one such rate is reported, the Prime Rate shall equal the average
of such rates.
1.28 "Purchaser Disclosure Memorandum" Purchaser Disclosure Memorandum
means the written information entitled "Purchaser Disclosure Memorandum"
delivered to Seller prior to the date of this Agreement describing in reasonable
detail the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under which
such disclosure is being made. Information disclosed with respect to one Section
shall be deemed to be disclosed for purposes of all other Sections, provided
that the relevance to the Section from which any such matter is omitted is
apparent from the disclosure with respect to the Section in which such matter is
included.
1.29 "Related Party" Related Party means Seller; any of the officers or
directors of any of the Companies; any affiliate of Seller, any Company or any
of their respective officers or directors; or any business or entity in which
Seller, any Company, or any affiliate of any such person has any direct or
material indirect interest.
1.30 "SAP" SAP means the statutory accounting practices as prescribed or
permitted by the Georgia Insurance Department.
1.31 "SEC" SEC means the Securities and Exchange Commission.
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1.32 "Seller Disclosure Memorandum" Seller Disclosure Memorandum means the
written information entitled "Seller Disclosure Memorandum" delivered to
Purchaser prior to the date of this Agreement describing in reasonable detail
the matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall be deemed to be disclosed for purposes of all other Sections, provided
that the relevance to the Section from which any such matter is omitted is
apparent from the disclosure with respect to the Section in which such matter is
included.
1.33 "Shares" Shares means 100% of the issued and outstanding shares of
capital stock of American Southern.
1.34 "Stockholders'Equity" Stockholders' Equity means total assets minus
total liabilities of American Southern on a consolidated SAP basis.
1.35 "Stock Purchase Agreement" Stock Purchase Agreement means that
certain Stock Purchase Agreement dated as of September 17, 1991, among Seller,
Concorde Finance & Investment, Inc., InterRedec, Inc., InterRedec and American
Southern.
1.36 "Subsidiaries" Subsidiaries means American Safety, Automated
Systems, Automobile Safety and Premier.
1.37 "Tax Allocation Agreement" Tax Allocation Agreement means the tax
allocation agreement dated as of October 11, 1991 between Seller and American
Southern.
1.38 "Tax Returns" Tax Returns means all returns or reports, including
accompanying schedules, with respect to Taxes.
1.39 "Taxes" Taxes means all federal, state, local and foreign income,
premium, payroll, withholding, excise, sales, use, real and personal property,
use and occupation, mercantile, capital stock, franchise and other taxes,
including interest and penalties thereon and all estimated taxes.
ARTICLE 2
STOCK PURCHASE AND CLOSING
2.01 Purchase and Sale of the Shares. Upon and subject to the terms and
conditions of this Agreement, Seller shall sell, and Purchaser shall purchase,
the Shares.
2.02 Consideration. The aggregate consideration (the "Purchase Price")
to be paid by Purchaser to Seller for the Shares shall be $34,000,000,
subject to adjustment as described in Section 2.04.
2.03 Payment of Purchase Price. Purchaser shall pay the Purchase Price as
follows:
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(a) at Closing, Purchaser shall execute and deliver to Seller a promissory
note (the "Purchaser Note") in substantially the form attached hereto as Exhibit
2.03 in a principal amount equal to the total amount of the principal plus
accrued interest (as determined pursuant to Section 2(c) of the InterRedec Note)
owed by Seller under the InterRedec Note as of the Closing Date; and
(b) at Closing, Purchaser shall pay to Seller in cash the difference
between $34,000,000 and the principal amount of the Purchaser Note, by means of
a wire transfer of immediately available funds (U.S. Dollars) to an account
designated by Seller.
2.04 Post-Closing Adjustment.
(a) As soon as practicable, but in any event within thirty (30) days after
Closing, Purchaser shall, under the direction and supervision of Xxx X.
Xxxxxxxx, Xx., Xxxxx X. Xxxxxxxx and Xxxxxx X. Xxxx, or any of them, prepare and
deliver to Seller a balance sheet of American Southern as of the Closing Date
(the "Closing Balance Sheet"), prepared in accordance with SAP reporting
practices consistently applied (but subject to the provisions of Section
5.04(i)). Without limiting the generality of the foregoing sentence, the parties
expressly agree that the Closing Balance Sheet shall include amounts for
insurance liability reserves calculated in a manner and using methodologies and
assumptions consistent in all respects with American Southern's practice of
calculating such reserves during the 24-month period immediately prior to the
Closing Date.
(b) Seller shall have fifteen (15) days after receipt of the Closing
Balance Sheet in which to review such Closing Balance Sheet, and during such
15-day period, Purchaser shall make available to Seller and its representatives
all information regarding preparation of the Closing Balance Sheet as may be
reasonably requested by Seller, including, without limitation, access to all
employees, books, records and work papers. If within such 15-day period Seller
does not provide Purchaser with written notice of any objection to the Closing
Balance Sheet, the Closing Balance Sheet shall be deemed accepted by, and final
and binding upon, both parties. If Seller does provide Purchaser with written
notice of any objection within such 15-day period, then the parties shall in
good faith attempt to resolve such dispute within fifteen (15) days after
Purchaser's receipt of Seller's objection notice. If such dispute cannot be
resolved by the parties, the dispute shall be submitted to arbitration in
accordance with the provisions of Article 9 hereof, except that the third
arbitrator selected from a AAA list (as described in Section 9.02) must be an
independent certified public accountant knowledgeable about SAP.
(c) Once the Closing Balance Sheet has been deemed final and binding on
the parties, whether by failure of Seller to object, agreement of the parties or
arbitration, within five (5) business days thereafter, Seller shall pay to
Purchaser in immediately available funds the amount, if any, by which the
Stockholders' Equity reflected on the Closing Balance Sheet is less than
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$26,800,000, plus interest thereon at the Prime Rate in effect on the Closing
Date for the period of the Closing Date through the date of payment. If such
Stockholders' Equity as reflected on the Closing Balance Sheet is equal to or
greater than $26,800,000, neither party shall owe the other any additional
amounts.
(d) Notwithstanding anything to the contrary contained herein, the parties
agree that all payables of any of the Companies to Seller or any of its
affiliates shall be accrued on the Closing Balance Sheet and paid at Closing or
paid prior to Closing (in which case the Companies shall furnish Seller with
satisfactory evidence of such payment).
2.05 Closing. Closing shall be effective as of the close of business on
the last day of the month in which all of the conditions set forth in Article 6
are satisfied or waived, and Closing shall take place at such time and place as
the parties may agree.
2.06 Deliveries and Proceedings at the Closing. At the Closing, the
parties shall execute and deliver each agreement and instrument required or
contemplated by this Agreement to be so executed and delivered and not
theretofore executed and delivered. In addition, at the Closing, i) Purchaser
shall deliver to Seller the Purchase Price, and (ii) Seller shall deliver to
Purchaser the certificate or certificates evidencing the Shares, duly endorsed
in blank for transfer or accompanied by duly executed irrevocable stock powers
in blank, free and clear of all liens, encumbrances, pledges, options, voting
agreements, contractual rights or other claims whatsoever. All actions taken
at the Closing shall be deemed to occur simultaneously.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as of the date hereof
as follows:
3.01 Organization and Good Standing of Seller; Power and
Authority. Seller is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Seller has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of, and the
performance by Seller of its obligations under, this Agreement have been duly
and validly authorized by all necessary corporate action on the part of Seller.
No other corporate or shareholder proceedings on the part of Seller is necessary
to approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Seller and
constitutes Seller's valid and binding obligations, enforceable against Seller
in accordance with its terms.
3.02 Organization and Good Standing of American Southern; Power and
Authority. American Southern is a corporation duly organized, validly existing
and in good standing under the laws of Georgia. American Southern has all
requisite corporate power and authority to own or lease its properties and
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assets as now owned or leased. The copies of American Southern's articles of
incorporation and bylaws, as amended to date, which have been delivered to
Purchaser, are correct and complete and are in full force and effect.
3.03 Capitalization and Ownership. American Southern's authorized capital
stock consists solely of 300,000 shares of common stock, par value $10 per
share, 300,000 of which are currently issued and outstanding and none of which
are held in its treasury. All of such outstanding shares of American Southern
have been duly authorized, validly issued and are fully paid and nonassessable.
Such issued and outstanding shares constitute the Shares, all of which are owned
beneficially and of record by Seller, free and clear of any liens, encumbrances,
pledges, options, voting agreements, contractual rights or other claims
whatsoever, other than the security interest created pursuant to the InterRedec
Pledge. As of the Closing, the Shares will be solely owned, beneficially and of
record, free and clear of all liens, encumbrances, pledges, options, voting
agreements, contractual rights or other claims whatsoever. There are no
outstanding options, warrants, preemptive rights, agreements, calls,
commitments or demands of any character relating to the capital stock of
American Southern and no securities convertible into or exchangeable for any of
such capital stock.
3.04 Subsidiaries. American Southern owns, free and clear of all liens
and encumbrances whatsoever, 100% of the issued and outstanding capital stock of
each Subsidiary. All of such outstanding shares of the Subsidiaries have
been duly authorized, validly issued and are fully paid and nonassessable. There
are no outstanding options, warrants, rights, agreements, calls, commitments or
demands of any character relating to the capital stock of any Subsidiary and no
securities convertible into or exchangeable for any of such capital stock.
Section 3.04 of the Seller Disclosure Memorandum accurately sets forth the
number of shares, classes and par values of the authorized and issued shares of
the Subsidiaries. American Southern does not, directly or indirectly, own any
stock of, or any other interest in, any Person other than the Subsidiaries,
except that American Southern may own interests held for investment purposes
not exceeding 10% of any such single Person. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
incorporation, and each Subsidiary has all requisite corporate power and
authority to own or lease its properties and assets as now owned or leased. The
copies of the articles of incorporation and bylaws of each Subsidiary, as
amended to date, which have been delivered to Purchaser, are correct and
complete and are in full force and effect.
3.05 Qualification. Each of the Companies is duly qualified or licensed
to do business and is in good standing as a foreign corporation in each
jurisdiction in which such qualification or licensing is necessary under
Applicable Law, except where the failure to be so duly qualified or licensed or
in good standing would not have a Material Adverse Effect.
3.06 No Violation of Applicable Laws or Agreements. The execution and
delivery of this Agreement by Seller do not, and the consummation of the
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transactions contemplated by this Agreement and the compliance with the terms,
conditions and provisions of this Agreement by Seller, will not (a) violate or
conflict with any provision of Seller's or the Companies' articles of
incorporation or bylaws; (b) except as set forth in Section 3.06 of the Seller
Disclosure Memorandum, violate, conflict with or result in the breach or
termination of, or otherwise give any contracting party (which has not
consented to such execution, delivery and consummation) the right to change
the terms of, or to terminate or accelerate the maturity of, or constitute a
default under the terms of, any indenture, mortgage, loan or credit agreement
or any other material agreement or instrument to which any of Seller or the
Companies is a party or by which any of them or any of their assets may be bound
or affected, or any Applicable Law; (c) result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon any of the
Companies' assets or give to others any interests or rights therein; other than
any such conflicts, breaches, terminations, accelerations, defaults or
violations that would not, individually or in the aggregate, have a Material
Adverse Effect.
3.07 SEC Filings and Financial Statements.
(a) Seller has heretofore delivered to Purchaser copies of Seller's (i)
Annual Report on Form 10-K for the fiscal year ended December 31, 1994, (ii)
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, and
(iii) all other reports, registration statements and other documents filed by
Seller with the SEC since December 31, 1994 (collectively, the "Seller SEC
Filings"). Since December 31, 1994, Seller has timely filed all reports,
registration statements and other documents required to be filed with the SEC
under the rules and regulations of the SEC, and all such reports, registration
statements and other documents have complied in all material respects, as of
their respective filing dates and effective dates, as the case may be, with all
applicable requirements of the 1933 Act or the 1934 Act. As of their respective
filing and effective dates, none of such reports, registration statements or
other documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Seller has delivered, or prior to Closing will deliver, to Purchaser
complete and correct copies of the following financial statements:
(i)...the Annual Statements of each of American Southern and
American Safety filed with the Georgia Insurance Department for the years ending
December 31, 1992, 1993 and 1994, together with the exhibits and schedules
thereto (collectively the "Annual Statements");
(ii)..the Quarterly Statements of each of American Southern and
American Safety filed with the Georgia Insurance Department for the quarters
ending March 31, 1995 and June 30, 1995, together with the exhibits and
schedules thereto (collectively, the "Quarterly Statements");
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(iii).the audited balance sheets (on a SAP basis), statements of
income, statements of changes in capital and surplus, and statements of cash
flows of American Southern on an unconsolidated basis as of and for the years
ended December 31, 1992, 1993 and 1994 (such financial statements, including all
notes and schedules thereto and the independent auditors' report of Ernst &
Young LLP thereon, being the "Audited Statements") (the balance sheet as of
December 31, 1994 included in the Audited Statements is referred to herein as
the "1994 Balance Sheet"); and
(iv)..the unaudited balance sheet (on a SAP basis) of American
Southern on a consolidated basis (consolidating American Southern with the
Subsidiaries) as of June 30, 1995 (the "Balance Sheet Date"), and the unaudited
statement of income of American Southern on a consolidated basis for the
six-month period ending on the Balance Sheet Date (collectively, the "Interim
Unaudited Statements").
The statutory financial statements contained in the Annual Statements (and
with respect to clause (ii) below, other items contained in the Annual
Statements) and the Audited Statements (i) have been prepared in conformity with
SAP using comparable estimates and assumptions applied on a consistent basis
with the December 31, 1994 financial statements, except that the financial
statements contained in the Quarterly Statements are unaudited, (ii) are true,
correct and complete and in accordance with the books and records of each
Company, respectively, and (iii) present fully and fairly, on a SAP basis, the
financial condition, assets and liabilities of each of American Southern and
American Safety, as the case may be, as of the respective dates thereof and the
results of operations and cash flows for the respective periods indicated. The
financial statements contained in the Quarterly Statements include all
adjustments necessary for a fair presentation of the financial position of each
Company, respectively, and the results of its operations for the interim period
presented, subject to normal recurring year-end adjustments and the omission of
footnote disclosures. The Interim Unaudited Statements have been prepared in
accordance with SAP applied on a consistent basis throughout the period involved
and present fairly the financial condition, assets and liabilities of the
Companies as of the respective dates thereof and the results of operations for
the period indicated, subject to normal recurring year-end adjustments and the
omission of footnote disclosures.
(c) Seller has delivered to Purchaser complete and correct copies of the
Insurance Holding Company System Registration Statement on Form B as filed by
American Southern on behalf of itself and American Safety for the years ended
December 31, 1992, 1993 and 1994. Such Forms B, as well as the Annual Statements
and the Quarterly Statements, when filed complied in all material respects with
the Georgia Insurance Code.
3.08 Absence of Certain Changes. Except as disclosed in Section 3.08 of
the Seller Disclosure Memorandum, since the Balance Sheet Date (i) there has
been no occurrence having, or which would reasonably be expected to result in, a
Material Adverse Effect upon the Companies, and (ii)none of the Companies has
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taken any action that would be prohibited under Section 5.01 after the date
of this Agreement. Since the Balance Sheet Date, the business of the Companies
has been conducted only in the ordinary and usual course consistent with past
practice, except with respect to the transactions contemplated in this
Agreement.
3.09 Reserves. All losses and loss adjustment expenses established and
reflected in the 1994 Balance Sheet in respect of the Companies' insurance
policies was determined in accordance with generally accepted actuarial
standards, was based on actuarial estimates and assumptions that were reasonable
and appropriate to the relevant insurance policies and were recorded in
compliance with the applicable requirements of the Georgia Insurance Code.
3.10 Tax Matters. Except as set forth in Section 3.10 of the Seller
Disclosure Memorandum:
(a) None of the Companies (i) is, or since Seller's acquisition of the
Shares has been, a member of an affiliated group of corporations within the
meaning of Section 1504 of the Code filing a consolidated or combined Tax Return
other than (A) the affiliated group of which Seller is the common parent (the
"Seller Group") with respect to federal Tax Returns, and (B) an affiliated group
or groups consisting solely of American Southern and one or more of the
Subsidiaries with respect to state Tax Returns (a "Subsidiary Group"); or (ii)
has any liability for Taxes of any Person other than the members of the Seller
or Subsidiary Group.
(b) Each Seller Group and Subsidiary Group has (i) timely filed all Tax
Returns required to be filed by it; (ii) paid all Taxes shown to have become due
pursuant to such filed Tax Returns; and (iii) paid all other Taxes for which a
notice of assessment or demand for payment has been received, except where the
failure to file such Tax Returns or pay such Taxes would not have a Material
Adverse Effect. All Tax Returns of each Seller Group and Subsidiary Group (i)
have been prepared in accordance with all Applicable Laws, and (ii) accurately
reflect the taxable income (or other measure of tax) of the corporation or
corporations filing the same, except where the failure to do so has not had a
Material Adverse Effect on the Companies. All Taxes of the Companies for periods
after December 31, 1994 have been paid or are adequately reserved against on the
GAAP and SAP books of the Companies. The Companies have timely filed all
information returns or reports, including Forms 1099, that are required to be
filed and have accurately reported all information required to be included on
such returns or reports. True copies of federal income tax returns of the
Companies included in the consolidated Tax Returns for the Seller Group for each
of the fiscal years ended December 31, 1992 through December 31, 1994 have been
made available to Purchaser. True copies of the state Tax Returns of the
Companies filed most recently in each state, respectively, in which the
Companies have filed Tax Returns have been delivered to Purchaser.
(c) There are no proposed assessments of Taxes against the Companies, no
proposed adjustments to any Tax Return pending against the Seller Group with
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respect to the Companies' operations or assets, and no proposed adjustments to
the manner in which any Tax of the Seller Group is determined with respect to
the Companies' operations or assets. No claim has been made by a taxing
authority in a jurisdiction where the Companies do not file Tax Returns that any
of the Companies is or may be subject to taxation by that jurisdiction.
(d) Since Seller's acquisition of the Shares, none of the Companies has
(i) filed any consent agreement under Section 341(f) of the Code, (ii) executed
or been the subject of a waiver or consent extending any statute of limitation
for any Tax liability that remains outstanding, (iii) joined in or been required
to join in filing a consolidated or combined federal, state or local Tax Return
with any corporation other than a current or former member of the Seller Group
or Subsidiary Group, (iv) been the subject of a ruling of the Internal Revenue
Service or any state or local revenue authority that has continuing application
to the Companies, (v) been the subject of a closing agreement with any taxing
authority that has continuing effect, or (vi) granted a power of attorney with
respect to any Tax matters that has continuing effect. During the immediately
preceding three years, none of the Companies has agreed to make nor is it
required to make any adjustment under Section 481 of the Code by reason of a
change in accounting method or otherwise.
(e) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(f) Seller has no Knowledge of any matter involving Taxes with respect to
the Seller Group that would make the Companies subject to joint and severable
liability of Seller and is reasonably likely to have a Material Adverse Effect
on the Companies.
3.11 Pending Litigation or Proceedings. Except for claims under
insurance contracts against the Companies in the ordinary course of business,
or as set forth in Section 3.11 of the Seller Disclosure Memorandum, there
are no claims, suits, actions, proceedings, arbitrations or investigations
pending, or to the Knowledge of Seller threatened, against or otherwise
relating to or involving any of the Companies or any of their properties, the
outcome of which would reasonably be expected to have a Material Adverse Effect
or to affect the ability of Seller to consummate the transactions contemplated
by this Agreement. Except as set forth in Section 3.11 of the Seller Disclosure
Memorandum, with respect to American Southern and American Safety (i) no
investigation or examination by any insurance regulatory authority is pending,
and (ii) no such investigation or examination has occurred since the date upon
which Seller acquired the Shares. Section 3.11 of the Seller Disclosure
Memorandum describes each instance in which either American Southern or American
Safety has been the subject of a fine or penalty by an insurance regulatory
authority since the date upon which Seller acquired the Shares.
3.12 Compliance With Applicable Laws. None of the Companies is in
violation of any Applicable Law, except for possible violations that would
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not, individually or in the aggregate, have or be reasonably likely to have
a Material Adverse Effect. Each of the Companies holds all licenses, permits,
registrations and other authorizations required to conduct its business, and
all such licenses, permits, registrations and other authorizations are valid
and in full force and effect, except for those the absence of which are not
reasonably likely to have a Material Adverse Effect. Each of the Companies
is in compliance with all such licenses, permits, registrations and
authorizations, except for possible failures to be so in compliance which are
not reasonably likely to have a Material Adverse Effect.
3.13 Consents and Approvals. Except as set forth in Section 3.13 of the
Seller Disclosure Memorandum, except as required under the Xxxx-Xxxxx Act, and
except for the approval of the Georgia Insurance Department, the execution,
delivery and performance of this Agreement by Seller and the consummation of
the transactions contemplated hereby do not require any consent, approval or
authorization of, or registration or filing with, any Person or Governmental
Authority.
3.14 Legal Investments. The bonds, stocks and other investments owned
beneficially or of record by the Companies are permissible investments for them
under the Georgia Insurance Code.
3.15 Investment Assets Custody. Section 3.15 of the Seller Disclosure
Memorandum contains a complete and correct list of all custodians and
depositories for investment assets of any of the Companies, and lists the
persons having signatory authority or access thereto on behalf of any of the
Companies.
3.16 Insurance Issued. All insurance policies and contracts issued by
American Southern or American Safety now in force (other than policies and
contracts issued under applicable surplus lines laws) are on forms and at rates
approved by the insurance regulatory authority of the state or jurisdiction
where issued or have been filed with and not objected to by such authority
within the period provided for objection.
3.17 Insurance Agents. Section 3.17 of the Seller Disclosure Memorandum
contains a complete and correct list of all insurance agencies and agents
authorized to write insurance on behalf of American Southern or American Safety
as of the date shown on such list. To the Knowledge of Seller, all such
agencies and agents are duly licensed with the insurance regulatory
authority of the state or jurisdiction in which such agency or agent writes
insurance on behalf of American Southern or American Safety.
3.18 Title to Assets; Material Contracts.
(a) Each of the Companies has (i) good and marketable title, or valid and
binding leasehold rights in the case of leased property, to all material
personal property owned or leased by it, and (ii) valid and binding leasehold
rights to all real property leased by it, free and clear of any lien,
encumbrance, mortgage, pledge, charge or security interest whatsoever, other
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than those that would not, individually or in the aggregate, have a Material
Adverse Effect. None of the Companies owns any real property. Section 3.18(a) of
the Seller Disclosure Memorandum contains a complete and accurate list of all
real property leased by any of the Companies, including the date of expiration
of each such lease. All material items of personal property owned or leased by
the Companies are in good condition and repair, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with past
practices. All of the assets that are being used on a regular basis in the
business are being conveyed to Purchaser.
(b) Section 3.18(b) of the Seller Disclosure Memorandum contains a
complete and correct list of (i) all reinsurance agreements; (ii) all loan or
credit agreements, mortgages, indentures, or other agreements for borrowed
money; (iii) all employment or compensation agreements with officers, directors,
employees, agents (other than insurance agents), consultants and independent
contractors; and (iv) all other contracts, leases, agreements or legal
commitments of any kind, oral or written, formal or informal, pursuant to which
any of the Companies owes more than $50,000 per calendar year (the agreements
described in (i)-(iv) and those that cannot be terminated upon 30 days notice
without payment or penalty are collectively the "Material Contracts"). Except as
described in Section 3.18 of the Seller Disclosure Memorandum, all Material
Contracts are in full force and effect, and none of the Companies is in default
under, nor has any event occurred which with the passage of time or giving of
notice or both would result in any of the Companies being in default under, any
of the terms thereof.
3.19 Employee Benefit Plans.
(a) The only employee pension benefit plans (as defined in Section 3(2) of
ERISA), welfare benefit plans (as defined in Section 3(1) of ERISA), bonus,
stock purchase, stock ownership, stock option, deferred compensation, incentive
or other compensation plan or arrangement, and other employee fringe benefit
plans presently maintained by, or contributed to by the Companies or by Seller
for the benefit of any current or former employee of the Companies are those
listed in Section 3.19 of the Seller Disclosure Memorandum (the "Benefit
Plans"). None of the Benefit Plans are provided by Seller; all of such Benefit
Plans are provided by American Southern.
(b) American Southern and each of the Benefit Plans, are in compliance in
all material respects with the applicable provisions of ERISA and those
provisions of the Code applicable to the Benefit Plans.
(c) All contributions to, and payments from, the Benefit Plans which may
have been required to be made in accordance with the Benefit Plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have, in all
material respects, been timely made.
(d) There are (i) no pending investigations by any Governmental Authority
involving the Benefit Plans, (ii) no termination proceedings involving the
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Benefit Plans, (iii) to Seller's Knowledge, no threatened or pending claims
(except for claims for benefits payable in the normal operation of the Benefit
Plans), suits or proceedings against any Benefit Plan or asserting any rights or
claims to benefits under any Benefit Plan which could give rise to any material
liability and (iv) no facts which could give rise to any material liability in
the event of such investigation, claim, suit or proceeding.
(e) Neither the Benefit Plans, American Southern nor any employee of the
foregoing, nor, to Seller's Knowledge, any trusts created thereunder, or any
trustee, administrator or other fiduciary thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section 406
of ERISA) which could subject the Companies to the tax or penalty on prohibited
transactions imposed by such Section 4975 or the sanctions imposed under Title I
of ERISA. Neither the Benefit Plans nor any such trust has been terminated nor
to Seller's Knowledge have there been any "reportable events" (as defined in
Section 4043 of ERISA and the regulations thereunder) with respect to either
thereof.
(f) No Benefit Plan subject to Title IV of ERISA has incurred any material
liability to the Pension Benefit Guaranty Corporation other than for the payment
of premiums, all of which have been paid when due. No Benefit Plan has applied
for or received a waiver of the minimum funding standards imposed by Section 412
of the Code.
(g) At no time for which any relevant statute of limitations remains open
have (a) American Southern, (b) any employer that is, together with American
Southern, treated as a "single employer" under Section 414(b), 414(c) or 414(m)
of the Code (an "Affiliate"), or (c) any employer that was at any time after
September 2, 1984, an Affiliate of American Southern (a "Former Affiliate"),
incurred any liability which could subject Purchaser or American Southern to
liability under Section 4062, 4063 or 4064 of ERISA.
(h) At no time for which any relevant statute of limitations remains open
have American Southern or any Affiliate or Former Affiliate been required to
contribute to, or incurred any withdrawal liability within the meaning of
Section 4201 of ERISA, to any multiemployer pension plan, within the meaning of
Section 3(37) of ERISA, which liability has not been fully paid as of the date
hereof.
(i) American Southern has complied in all material respects with the
notice and continuation coverage requirements of Section 4980B of the Code and
the regulations thereunder with respect to each Benefit Plan that is, or was
during any taxable year of American Southern for which the statute of
limitations on the assessment of federal income taxes remains open, by consent
or otherwise, a group health plan within the meaning of Section 5000(b)(1) of
the Code.
(j) American Southern has not incurred and is not reasonably likely to
incur any liability that is or could reasonably be expected to become a material
liability of American Southern with respect to any plan or arrangement that
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would be included within the definition of "Benefit Plan" hereunder but for the
fact that such plan or arrangement was terminated before the date of this
Agreement.
(k) No payment which is or may be made by American Southern, or from any
Benefit Plan, to any employee, former employee, director or agent of American
Southern under the terms of any Benefit Plan, either alone or in conjunction
with any other payment, will or could be characterized as an excess parachute
payment under Section 28OG of the Code.
3.20 Compensation Arrangements; Bank Accounts; Officers and
Directors. Section 3.20 of the Seller Disclosure Memorandum sets forth the
following information:
(a) the name and current annual salary, including any bonus, if
applicable, of each of the present officers and employees of the Companies whose
current annual salary, including any promised or customary bonus, equals or
exceeds $100,000, together with a statement of the full amount of all cash
remuneration paid by the Companies to each such person and to any director of
the Companies, during the twelve-month period ending on August 31, 1995;
(b) the name of each bank in which any of the Companies has an account or
safe deposit box, the identifying numbers thereof, and the names of all persons
authorized to draw thereon or to have access thereto; and
(c) the name and title of each director and officer of each of the
Companies and of each trustee, fiduciary or plan administrator of each Benefit
Plan.
3.21 Transactions With Related Parties. Except as disclosed in Section
3.21 of the Seller Disclosure Memorandum, no Related Party:
(a) has borrowed money or loaned money to any of the Companies which
will not be repaid on or before Closing;
(b) has any contractual or other claim against any of the Companies;
or
(c) had, since January 1, 1993, any interest in any property or assets
used by the Companies in its business.
3.22 Labor Relations. Except as disclosed in Section 3.22 of the Seller
Disclosure Memorandum, (a) no employee of any of the Companies is represented
by any union or other labor organization; (b) there is no unfair labor
practice complaint against any of the Companies pending or overtly
threatened before the National Labor Relations Board; and (c) there is no labor
strike, dispute, slow down or stoppage actually pending or, to the Knowledge of
Seller, threatened against or involving any of the Companies.
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3.23 Brokerage. None of Seller or the Companies has made any
agreement or taken any other action which might cause anyone to become entitled
to a broker's fee or commission as a result of the transactions contemplated
hereby.
3.24 Insurance. All of the Companies' properties and assets of an
insurable nature and of a character usually insured by companies of similar size
and in similar businesses are insured by the Companies in such amounts and
against such losses, casualties or risks as is (a) usual in such companies and
for such properties, assets and businesses, or (b) required by any Applicable
Law. Section 3.24 of the Seller Disclosure Memorandum contains a complete and
accurate list of all insurance policies held or owned by the Companies relating
to their business now in force. All such policies are in full force and effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as of the date hereof
as follows:
4.01 Purchaser's Organization and Good Standing; Power and
Authority. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of Georgia. Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and
delivery of, and the performance by Purchaser of its obligations under, this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Purchaser. No other corporate or shareholder
proceedings on the part of Purchaser are necessary to approve this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Purchaser and
constitutes Purchaser's valid and binding obligation, enforceable against
Purchaser in accordance with its terms.
4.02 No Violation of Applicable Laws or Agreements. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and the compliance with the terms, conditions
and provisions of this Agreement by Purchaser, will not (a) violate or conflict
with any provision of Purchaser's articles of incorporation or bylaws; (b)except
as set forth in Section 4.02 of the Purchaser Disclosure Memorandum, violate,
conflict with or result in the breach or termination of, or otherwise give any
contracting party (which has not consented to such execution, delivery and
consummation) the right to change the terms of, or to terminate or accelerate
the maturity of, or constitute a default under the terms of, any indenture,
mortgage, loan or credit agreement or any other material agreement or instrument
to which Purchaser is a party or by which any of its assets may be bound or
affected, or any Applicable Law; (c) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of Purchaser's
assets or give to others any interests or rights therein; other than any
such conflicts, breaches, terminations, accelerations, defaults or violations
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that would not, individually or in the aggregate, have a Material Adverse
Effect.
4.03 Pending Litigation or Proceedings. Except as set forth in Section
4.03 of the Purchaser Disclosure Memorandum, there are no claims, suits,
actions, proceedings, arbitrations or investigations pending or, to the
Knowledge of Purchaser, threatened, against or otherwise relating to or
involving Purchaser or any of its properties, the outcome of which would
reasonably be expected to have a Material Adverse Effect or to affect the
ability of Purchaser to consummate the transactions contemplated by this
Agreement.
4.04 Brokerage. Purchaser has not made any agreement or taken any other
action which might cause anyone to become entitled to a broker's fee or
commission as a result of the transactions contemplated hereby.
4.05 Investment Intent; Ability to Bear Risk. Purchaser is acquiring the
Shares for investment for its own account and not with a view to, or for offer
or sale in connection with, ny public distribution thereof. Purchaser has not
been and is not involved with any Person concerning an Alternative Transaction
(as such term is defined in Section 5.07). Purchaser is familiar with the
property and casualty insurance business, and has the requisite knowledge and
experience to evaluate the merits and risks of its acquisition of the Shares.
4.06 SEC Filings and Financial Statements.
(a) Purchaser has heretofore delivered to Seller copies of Purchaser's (i)
Annual Report on Form 10-K for the fiscal year ended December 31, 1994, (ii)
1994 Annual Report to Shareholders, (iii) Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1995, and (iv) all other reports, registration
statements and other documents filed by Purchaser with the SEC since December
31, 1994 (collectively, the "Purchaser SEC Filings"). Since December 31, 1994,
Purchaser has timely filed all reports, registration statements and other
documents required to be filed with the SEC under the rules and regulations of
the SEC, and all such reports, registration statements and other documents have
complied in all material respects, as of their respective filing dates and
effective dates, as the case may be, with all applicable requirements of the
1933 Act or the 1934 Act. As of their respective filing and effective dates,
none of such reports, registration statements or other documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The audited consolidated financial statements and unaudited interim
consolidated financial statements of Purchaser contained or incorporated by
reference in the Purchaser SEC Filings have been prepared in conformity with
GAAP, and, together with the notes thereto, present fairly the consolidated
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financial position of Purchaser and its subsidiaries at the dates shown and the
consolidated results of their operations, changes in stockholders' equity and
cash flows for the periods then ended. The unaudited interim consolidated
financial statements as of, and for, the period ending June 30, 1995 include all
adjustments necessary for a fair presentation of the financial position of
Purchaser and its subsidiaries and the results of their respective operations
for the interim periods presented, subject to normal, recurring year-end
adjustments and the omission of footnote disclosures.
4.07 Absence of Certain Changes. Except as disclosed in Section 4.07
of the Purchaser Disclosure Memorandum or as specifically disclosed in the
Purchaser SEC Filings, since June 30, 1995 (i)there has been no occurrence
having, or which would reasonably be expected to result in, a Material Adverse
Effect upon Purchaser. Since June 30, 1995, the business of Purchaser has been
conducted only in the ordinary and usual course consistent with past practice,
except with respect to transactions contemplated in this Agreement.
4.08 Consents and Approvals. Except as set forth in Section 4.08 of the
Purchaser Disclosure Memorandum, except as required under the Xxxx-Xxxxx Act,
and except for the approval of the Georgia Insurance Department, the
execution, delivery and performance of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby do not require any consent,
approval or authorization of, or registration or filing with, any Person or
Governmental Authority.
ARTICLE 5
CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
5.01 Operation of Business Pending Closing. Prior to the Closing Date,
except with the prior consent of Purchaser and except as necessary to effect
the transactions contemplated in this Agreement, (a) Seller shall cause the
Companies to conduct their business in the usual and ordinary course as
currently being conducted, and (b) without limiting the generality of the
foregoing clause (a), Seller shall cause each of the Companies not to do any
of the following:
(i)...amend its articles of incorporation or bylaws, or merge,
consolidate, liquidate or dissolve;
(ii)..issue any capital stock, any securities convertible or
exchangeable into capital stock, or any options, warrants or rights with respect
to capital stock, or split, subdivide or reclassify its capital stock;
(iii).declare or pay any dividend or make any other distribution on
its capital stock other than cash dividends on the Shares in an amount not
exceeding $300,000 per month;
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(iv)..increase the compensation or benefits of officers or employees
of the Companies or pay any bonuses except for normal and customary increases
made or bonuses paid or accrued in accordance with past practices;
(v)...except in the ordinary course of business, create or incur any
lien, encumbrance, mortgage, pledge, charge or security interest whatsoever on
any of its properties; or, except for the issuance of insurance contracts or
policies and the settlement of insurance claims in the ordinary course of
business, incur or assume any guaranty or other liability to discharge an
obligation of another, or incur or assume any obligations for money borrowed, or
cancel or discount any material debt owed to it;
(vi)..enter into or terminate any Material Contract;
(vii).make any expenditure for fixed assets in excess of $25,000
for any single item or $100,000 in the aggregate;
(viii) do or fail to do anything that will cause a breach
of, or default under, any Material Contract; or
(ix)..make any change of a material nature in the Companies'
accounting procedures, methods, policies or practices or the manner in which the
Companies maintain their records.
5.02 Access to Information. Between the date hereof and the Closing Date,
Seller shall give, and shall cause the Companies to give, to Purchaser and its
authorized representatives, during normal business hours, access to all of the
Companies' properties, contracts, books and records, and Seller shall furnish,
and shall cause the Companies to furnish, to Purchaser and its authorized
representatives such additional financial, legal and other information with
respect to the Companies that Purchaser may reasonably request. Purchaser shall
use such information solely for the purpose of conducting business, legal
and financial reviews of the Companies and for such other purposes as may
be related to this Agreement. Purchaser shall maintain the confidentiality
of all such information (other than information that is in the public domain or
otherwise ascertainable from public or outside sources) except to the extent
that disclosure is required by judicial process or governmental regulatory
authorities, in which case Purchaser shall give Seller prompt notice in order
that Seller may seek to obtain a protective order.
5.03 Supplements to Disclosure Memoranda. At any time and from time to
time between the date hereof and the date that is two business days prior to the
Closing Date, Seller and Purchaser shall have the right and the continuing
obligation to supplement their respective Disclosure Memoranda with respect
to any matter arising or coming to the Knowledge of Seller or Purchaser
after the date hereof that, if existing, occurring or known at such date,
would have been required to be set forth or described in such Disclosure
Memorandum. A party receiving a supplemented Disclosure Memorandum within 10
days prior to the anticipated Closing Date may unilaterally extend the time of
the Closing up to 10 days from the receipt of the supplement for the sole
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purpose of reviewing the supplemental Disclosure Memorandum. If, in the
recipient party's reasonable determination, any such supplements provided by
the other party reveal any Material Adverse Effect or any condition or event
that would be reasonably likely to result in a Material Adverse Effect, the
recipient party may terminate this Agreement.
5.04 Certain Tax Matters.
(a) Except as otherwise provided in this Section 5.04, all tax sharing
agreements, arrangements, policies and guidelines, formal or informal, express
or implied, that may exist between the Companies and Seller or their affiliates
and all obligations thereunder shall terminate as of the Closing Date, and the
Companies shall have no liability thereunder for any and all amounts due in
respect to periods prior to the Closing Date. Notwithstanding any other
provision of this Agreement, Seller and the Companies may make reasonable
payments pursuant to such tax sharing agreements and understandings prior to the
Closing Date in amounts consistent with past practices and procedures under such
tax sharing agreements and the Tax Allocation Agreement shall remain in effect
until any overpayments or underpayments are adjusted in accordance with past
practices and procedures.
(b) The Companies shall continue to be included, up to and including the
Closing Date, in the Seller Group's consolidated federal income Tax Return and
any required state or local consolidated or combined income Tax Returns that
include any of the Companies (all such Tax Returns including taxable periods of
the Companies ending on or before the Closing Date are hereinafter referred to
as "Pre-Closing Consolidated Returns").
Seller shall timely (which shall not preclude obtaining or filing
normal or customary extensions) prepare and file (or cause to be prepared and
filed) all Pre-Closing Consolidated Returns and all other Tax Returns required
to be filed on or before the Closing Date with respect to the Companies (the
"Seller Group Returns"). Seller shall timely pay (or cause to be paid) all Taxes
shown as due and payable on the Seller Group Returns ("Seller's Taxes").
Purchaser and Seller agree that if the Companies are permitted under
any Applicable Law relating to state or local income tax to treat the Closing
Date as the last day of a taxable period, Purchaser and Seller shall treat (and
cause their respective affiliates to treat) the Closing Date as the last day of
a taxable period, and any Tax Return for such a period shall be considered a
Seller Group Return for purposes hereof.
(c) Purchaser shall timely (which shall not preclude obtaining or filing
normal or customary extensions) prepare and file (or cause to be filed) all Tax
Returns required by Applicable Law for the Companies that are not required to be
prepared and filed by Seller pursuant to Section 5.04(b) ("Purchaser's
Returns"). Any Purchaser's Return including a period prior to the Closing Date
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shall be prepared in a manner consistent with prior practice and copies of such
Purchaser's Returns shall be delivered to Seller. Purchaser shall timely pay (or
cause to be paid) all Taxes shown as due and payable on the Purchaser's Returns
("Purchaser's Taxes").
(d) After the Closing Date, Seller shall submit to Purchaser blank Tax
Return workpaper packages reasonably necessary for Seller to prepare any Seller
Group Returns. Purchaser shall cause the Companies to prepare completely and
accurately all information that Seller shall reasonably request in such
workpaper packages and shall submit to Seller such packages within the later of
90 days after Purchaser's receipt thereof or 60 days after the close of the
taxable period to which a workpaper package relates. Each party shall cooperate
with the other in connection with any tax filing, investigation, audit or other
proceeding. Purchaser and Seller and their subsidiaries shall preserve all
information, returns, books, records and documents relating to any liabilities
for Taxes with respect to a taxable period until the later of the expiration of
all applicable statutes of limitation and extensions thereof, or the conclusion
of all litigation with respect to Taxes for such period.
(e) After the Closing Date, Seller shall indemnify and hold harmless
Purchaser from and against any Tax liability with respect to (i) any Seller's
Taxes; (ii) the Florida Tax Litigation; and (iii) any increase in Tax liability
resulting from the Companies being severally liable for any Taxes of the Seller
Group or any other consolidated group of which any of the Companies was a member
prior to the Closing Date pursuant to Treasury Regulations Section 1.1502-6 or
any analogous state or local tax provision; provided that Seller's liability
under clause (ii) shall be subject to the limitation of paragraph 7.01(c) and
shall be treated, solely for purposes of such subparagraph, as Damages and Costs
and, provided, further, that Seller shall have no indemnification obligations
with respect to amounts that have been accrued in the Audited Statements and the
Interim Unaudited Statements (as such terms are defined in Section 3.07(b)
hereof) and any regularly prepared financial statements for a period after June
30, 1995. Subject to the provisions of the third paragraph of Section 5.04(f),
Seller shall pay such amounts as they are obligated to pay to Purchaser under
the preceding sentence within 15 days after payment of any applicable Tax
liability by Purchaser or the Companies and, to the extent not paid by Seller
within such 15-day period, shall thereafter include interest thereon at the
Prime Rate (reported as of the last day of such 15-day period).
After the Closing Date, Purchaser and the Companies shall indemnify
and hold harmless Seller and its affiliates from and against any Tax liability
with respect to Purchaser's Taxes that are allocable to or apportioned to a
period after the Closing Date. Purchaser shall pay such amounts within 15 days
after payment of any such Tax liability by Seller or any of their affiliates and
to the extent not paid by Purchaser within such 15-day period shall thereafter
include interest thereon at the Prime Rate (reported as of the last day of such
15-day period).
(f) In the event that Purchaser or any of the Companies receives notice,
whether orally or in writing, of any pending or threatened federal, state,
local, municipal or foreign tax examinations, claims settlements, proposed
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adjustments, assessments or reassessments or related matters with respect to
Taxes that could affect the Seller Group, or if Seller receives notice of
matters that could affect Purchaser or the Companies, the party receiving notice
shall notify in writing the potentially affected party within 10 days thereof.
The failure of any party to give the notice required by this paragraph shall not
impair that party's rights under this Agreement except to the extent that the
other parties demonstrate that they have been damaged thereby.
Subject to Section 5.04(g), each of Seller and Purchaser (as applicable,
the "Controlling Party") shall have the right to control any audit or
examination by any taxing authority, initiate any claim for refund, file any
amended return, contest, resolve, settle and defend against any assessment,
notice of deficiency or other adjustment or proposed adjustment relating to or
with respect to those Tax Returns that each is required to prepare and file
pursuant to Sections 5.04(b) and (c); provided that, in the event that any such
adjustment could have an adverse effect on the Tax liability of the other party
(or affect the Purchaser by having an adverse effect on the Tax liability of the
Companies, or affect Seller by having an adverse effect on the Tax liability of
the Seller Group) (the "Affected Party"), the Controlling Party (i) shall give
the Affected Party written notice of any such adjustment, (ii) shall permit the
Affected Party to participate in the proceeding to the extent the adjustment may
adversely affect the Tax liability of the Affected Party and (iii) shall not
settle or otherwise compromise such proceeding without the prior written consent
of the Affected Party, which consent shall not be unreasonably withheld or
delayed. Except as specified in Section 5.04(g) or the following sentence,
Seller and Purchaser shall each be entitled to retain for its own account any
refunds of Taxes attributable to those Tax Returns that each is required to
prepare and file pursuant to Sections 5.04(b) and (c) and shall pay to the other
the amount of any refund to which the other is entitled within 15 days after the
receipt of such refund and, to the extent not paid within such 15-day period,
shall thereafter include interest at the Prime Rate (reported as of the last day
of such 15-day period). In the case of Purchaser, a refund attributable to any
Purchaser's Return including a period prior to the Closing Date shall be divided
between Purchaser and Seller by recomputing the portion of Tax as readjusted
that is allocable to a period prior to the Closing Date.
Notwithstanding the foregoing, but subject to Section 5.04(g), Seller
shall have the exclusive right to direct and to control the Florida Tax
Litigation and to initiate any claim for refund, file any amended return and
contest, resolve, settle and defend against such litigation. Purchaser shall use
its best efforts to assist Seller in connection with the Florida Tax Litigation,
including, without limitation, providing Seller access to information relating
to the Florida Tax Litigation that is in Purchaser's or the Companies'
possession and making available the officers and employees of Purchaser and the
Companies to provide assistance and information in connection therewith and to
continue to have the Companies participate as litigants in the Florida Tax
Litigation.
(g) To the extent permitted under applicable law, neither Purchaser nor
the Companies shall carry back any tax attribute ("Purchaser Tax Attribute") to
a period ending on or before the Closing Date ("Pre-Closing Period").
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Notwithstanding anything to the contrary contained in this Section 5.04(g), if
the failure to carry back a Purchaser Tax Attribute is not permitted by law or
would be unreasonably burdensome to Purchaser, Purchaser may request Seller to
waive the restrictions imposed by this Section 5.04(g), and Seller shall agree
to such request unless Seller's obligations hereunder would be unreasonably
burdensome to Seller. If Seller agrees to such request, and Purchaser carries
back a Purchaser Tax Attribute to a Pre-Closing Period, Seller shall promptly
file (or cause to be filed) a claim for refund and shall pay (or cause to be
paid) to Purchaser the full amount of any resulting Tax Benefit within 30 days
of the date such Tax Benefit is realized, but only to the extent that Seller
would not otherwise have been entitled to utilize such Tax Attribute. The Tax
Benefit shall be recomputed and any payment made in excess of the redetermined
Tax Benefit shall be refunded if and to the extent that Seller subsequently
realizes tax attributes that could have been utilized but for the carryback of
Purchaser Tax Attributes pursuant to this Section 5.04(g). Such recomputation
shall assume that the tax attributes of Seller were utilized first and that the
Purchaser Tax Attributes carried back by Purchaser were then utilized in
accordance with Applicable Law. For purposes hereof, "Tax Benefit" shall mean
(i)...in the case of any Tax Return, the sum of the amount by which
the Tax liability is reduced (or the Tax refund is increased) plus any interest
(net of Taxes, if any, thereon) relating to such Tax liability (or Tax refund),
and in the case of a consolidated federal income Tax Return or unconsolidated,
combined, unitary or similar state, local or other Tax return, the sum of the
amount by which the Tax liability of the affiliated group of corporations is
reduced (or Tax refund is increased) plus any interest (net of Taxes, if any,
thereon) from such government or jurisdiction relating to such Tax liability or
Tax refund;
(ii)..a Tax Benefit shall be deemed to have been realized (A) at the
time any refund of Taxes is received, (B) at the time any refund of Taxes is
applied against other Taxes due (which, in the case of refunds so applied in the
course of an audit or other proceeding, shall be the date on which the audit or
other proceeding is finalized) or (C) at the time a liability for Taxes is
otherwise reduced (which, in each case, shall be 2 1/2 months after the close of
the year in which such liability for Taxes arose); and
(iii).where a party has other losses, deductions, credits or similar
items available to it, losses, deductions, credits or items for which the other
party would be entitled to a payment under this Agreement shall be treated as
the last items utilized to produce a Tax Benefit.
(h) Purchaser and Seller agree that any indemnification payments made
pursuant to this Section 5.04 or Article 7 shall be treated for tax purposes as
an adjustment to the Purchase Price unless otherwise required by Applicable Law.
(i) Notwithstanding SAP accrual requirements, in preparing the Closing
Balance Sheet, an accrual of liability for Taxes(to the extent not paid prior to
Closing), will be included in such Closing Balance Sheet and shall only reflect
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(as a liability for amounts unpaid net of amounts prepaid) the portion of the
Companies' Taxes allocable to the period up to and including the Closing Date
("the Companies' Accrued Taxes"). Such allocable portion shall, in the case of
Taxes that are based on income or gross receipts, be determined as if the
Closing Date were the last day of any applicable taxable period and, in the case
of other Taxes, be apportioned ratably on a daily basis. Except as specified in
the preceding sentence or the Tax Allocation Agreement, the Closing Balance
Sheet specifically shall not reflect a liability for Taxes allocable to Seller
Group Returns, which Taxes are solely the responsibility of Seller.
(j) Seller agrees that upon Purchaser's request it shall file, or caused
to be filed, all documents reasonably necessary for the making of an election
under Section 338(h)(10) of the Code (or, at Purchaser's request, any analogous
provision of any state or local tax law) and in such case shall file or cause to
be filed all tax returns consistent with such election or elections. Seller
agrees to provide Purchaser with all relevant information to analyze the impact
of a Section 338(h)(10) election. In the event Purchaser determines to make such
an election, Purchaser shall provide to Seller in writing a determination of the
allocation of the Purchase Price among the assets of the Companies. Seller shall
accept any such reasonable allocation by Purchaser, and Seller, Purchaser and
the Companies shall file all Tax Returns in a manner consistent with such
allocation.
5.05 Regulatory Approvals and Consents.
(a) As soon as practicable, but in any event within 30 days, after the
date hereof:
(i)...Each of Purchaser and Seller will make all necessary filings
under the Xxxx-Xxxxx Act. Each party shall pay the expenses of preparing its own
filing, and Purchaser shall pay the $45,000 filing fee.
(ii)..Purchaser shall file with the Georgia Insurance Department all
Form(s) A required to request such Department's approval of the changes in
control of American Southern and American Safety that will be effected by the
transfer of the Shares. Seller shall cause the Companies to cooperate reasonably
with Purchaser in preparing the Form(s) A. Not less than 10 days prior to making
such filing, Purchaser shall deliver a copy of the filing materials to American
Southern, and American Southern shall be entitled to provide comments thereon to
Purchaser within 5 days after receipt. Seller shall, and shall cause the
Companies to, support such filing by Purchaser, so long as it is consistent with
this Agreement, and Purchaser shall use its best efforts to obtain the approval
of the Georgia Insurance Department for the changes in control. All costs and
fees of making such filings shall be paid by Purchaser.
(b) Seller and Purchaser shall promptly advise the other of all oral, and
promptly provide each other with copies of all written, communications,
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requests, inquiries or other notifications received from any Governmental
Authorities with respect to the transactions contemplated hereby.
(c) Seller shall take all reasonable action required to obtain prior to
Closing all consents with respect to the material agreements listed in Section
5.05(c) of the Seller Disclosure Memorandum. To the extent any such consent has
not been obtained, Seller shall continue its efforts to obtain such consent
after the Closing. In order, however, that the full value of every such material
agreement may be realized by Purchaser, at Purchaser's request, direction and
expense, Seller shall take all such action as shall be reasonably necessary or
appropriate (i) in order to preserve for the benefit of Purchaser the rights and
obligations of Seller under such agreements, and (ii) to facilitate the
collection of any monies due and payable, or to become due and payable, to
Seller pursuant to such agreements, and Seller shall remit such monies to
Purchaser within five business days of collection. Purchaser shall be entitled
to the benefits accruing after the Closing Date of any such agreements, and
Purchaser, at its expense, shall perform all of Seller's obligations due to be
performed under any such agreements to the extent (i) Purchaser can perform such
obligations without violating the terms of such agreements, and (ii) Purchaser
is being provided the benefits of such agreements.
(d) Purchaser shall take all reasonable action required to obtain all
consents and approvals listed in Section 5.05(d) of the Purchaser Disclosure
Memorandum.
5.06 Best Efforts. Each of the parties hereto agrees to use its best
efforts to take, or to cause to be taken, all reasonable actions and to do, or
to cause to be done, all reasonable things necessary, proper or advisable under
Applicable Laws to consummate the transactions contemplated by this
Agreement. None of the parties hereto will intentionally take or intentionally
permit to be taken any action that would be in breach of the terms or provisions
of this Agreement or that would cause any of the representations contained
herein to be or become untrue.
5.07 Exclusive Dealings. Unless and until this Agreement is terminated
prior to Closing pursuant to Article 8, neither of the Seller nor any of
Seller's affiliates, officers, directors, agents or advisers shall, directly
or indirectly, solicit, encourage or initiate any discussions or negotiations
with, provide any information to, or otherwise cooperate in any other way with
any Person (other than Purchaser) concerning any direct or indirect
purchase of the Shares or of any substantial amount of the assets or properties
of the Companies (an "Alternative Transaction").
5.08 Expenses. Whether or not the Closing occurs, except as otherwise
stated herein, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring such expense.
5.09 Resignations. At Closing, Seller will deliver written resignations
of the Companies' directors.
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5.10 Maintenance of Records. For a period of 7 years after Closing, or for
any longer period (i) as may be required by any federal, state, local or
foreign Governmental Authority, (ii) as may be reasonably necessary in
respect of the prosecution or defense of any suit, action, litigation or
administrative, arbitration or other proceeding or investigation that is pending
or threatened at the time of any notice to Purchaser while such records are
still maintained, or (iii) that is equivalent to the period established by
any applicable statute of limitations (or any extension or waiver thereof) with
respect to matters pertaining to Taxes, Purchaser shall maintain and shall allow
Seller, during normal business hours, through its employees and representatives,
the right, at Seller's expense, to examine and make copies of, the books and
records of the Companies pertaining to the Companies' business prior to the
Closing Date, for any reasonable business purpose.
5.11 Proposals. Purchaser shall promptly notify Seller of any inquiries
or proposals by any Person concerning an Alternative Transaction.
5.12 Press Releases. Except as otherwise required by Applicable Law,
Purchaser and Seller shall consult with each other in advance concerning any
proposed press release or public announcement pertaining to the transactions
contemplated by this Agreement, and no such release or announcement shall be
made unless both parties have agreed as to the timing, manner and content
thereof in their reasonable judgment.
5.13 GAAP Financial Statements. Promptly following the Closing, Purchaser
shall cause the Companies to prepare and deliver to Seller GAAP financial
statements of the Companies from January 1, 1995 through the Closing Date.
ARTICLE 6
CONDITIONS TO CLOSING
6.01 Conditions to Obligations of Purchaser. The obligations of Purchaser
to proceed with the Closing under this Agreement are subject to the fulfillment
prior to or at Closing of the following conditions (any one or more of which
may be waived in whole or in part by Purchaser at Purchaser's option):
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects on and as of the
time of Closing, with the same force and effect as though such representations
and warranties had been made on, as of and with reference to such time and
Purchaser shall have received a certificate to such effect signed by an
authorized officer of Seller.
(b) Seller shall have performed in all material respects all of the
covenants and complied in all material respects with all of the provisions
required by this Agreement to be performed or complied with by it on or before
the Closing, and Purchaser shall have received a certificate to such effect
signed by an authorized officer of Seller.
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(c) The applicable waiting period under the Xxxx-Xxxxx Act (and any
extension thereof) shall have expired or been terminated.
(d) The Georgia Insurance Department shall have approved the changes in
control of American Southern and American Safety effected by the transfer of the
Shares.
(e) Seller shall have obtained a release from the InterRedec Pledge and
the InterRedec Escrow of all of the shares subject to the InterRedec Pledge.
(f) No order of any court or administrative agency shall be in effect
which enjoins or prohibits the transactions contemplated hereby or which would
limit or materially adversely affect Purchaser's ownership or control of the
Companies or the business of the Companies, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Authority (i) challenging any of the transactions contemplated
by this Agreement or seeking monetary relief by reason of the consummation of
such transactions or (ii) which might have a Material Adverse Effect on the
future conduct of the business of the Companies.
(g) There shall not have occurred any Material Adverse Effect with respect
to the Companies, or any condition or event which is reasonably likely to result
in a Material Adverse Effect, subsequent to June 30, 1995.
6.02 Conditions to Obligations of Seller. The obligations of Seller
to proceed with the Closing under this Agreement are subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in part by Seller at Seller's option):
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects on and as of the
time of Closing, with the same force and effect as though such representations
and warranties had been made on, as of and with reference to such time, and
Seller shall have received a certificate to such effect signed by an authorized
officer of Purchaser.
(b) Purchaser shall have performed in all material respects all of the
covenants and complied in all material respects with all of the provisions
required by this Agreement to be performed or complied with by it on or before
the Closing, and Seller shall have received a certificate to such effect signed
by an authorized officer of Purchaser.
(c) The applicable waiting period under the Xxxx-Xxxxx Act (and any
extension thereof) shall have expired or been terminated.
(d) All consents listed on Schedule 5.05(d) shall have been obtained and
the Georgia Insurance Department shall have approved the changes in control of
American Southern and American Safety effected by the transfer of the Shares.
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(e) Seller shall have obtained a release from the InterRedec Pledge and
the InterRedec Escrow of all of the Shares subject to such InterRedec Pledge.
(f) No order of any court or administrative agency shall be in effect
which enjoins or prohibits the transactions contemplated hereby, and there shall
not have been threatened, nor shall there be pending, any action or proceeding
by or before any Governmental Authority (i) challenging any of the transactions
contemplated by this Agreement or seeking monetary relief by reason of the
consummation of such transactions or (ii) which might have a Material Adverse
Effect on the future conduct of the business of the Companies.
(g) No Material Adverse Effect. There shall not have occurred any Material
Adverse Effect with respect to Purchaser, or any condition or event which is
reasonably likely to result in a Material Adverse Effect, subsequent to June 30,
1995.
ARTICLE 7
INDEMNIFICATION
7.01 Indemnification by Seller.
(a) Seller hereby agrees to indemnify and hold harmless Purchaser and the
Companies from and against (i) any loss, liability, claim, obligation, damage or
deficiency (any "Damage") of or to Purchaser or any of the Companies (other than
any relating to Taxes, for which indemnification provisions are set forth in
Section 5.04(e)) arising out of or resulting from any misrepresentation, breach
of warranty or nonfulfillment of any covenant or agreement on the part of Seller
contained in this Agreement or in any statement or certificate furnished or to
be furnished to Purchaser pursuant hereto or in connection with the transactions
contemplated hereby, and (ii) any actions, judgments, costs and expenses
(including reasonable attorneys' fees and all other expenses incurred in
investigating, preparing or defending any litigation or proceeding, commenced or
threatened) (any "Costs") incident to any of the foregoing or the enforcement of
this Section 7.01.
(b) No action or claim for Damages resulting from breaches of the
representations and warranties of Seller or pursuant to Section 5.04(e) shall be
brought or made after the third anniversary of the Closing Date, except that
such time limitation shall not apply to (i) any breach of the representations
contained in Sections 3.03 or 3.04 or (ii) any claims which exist prior to the
third anniversary of the Closing Date, and which have been the subject of a
written notice from Purchaser to Seller prior to such date, which notice
specified in reasonable detail the nature of the claim.
(c) Seller shall be liable to Purchaser only to the extent the cumulative
total of Damages and Costs under this Section 7.01 and Section 5.04(e) exceeds
$200,000 (at which time rights to indemnification may be asserted for such
$200,000 amount and amounts in excess thereof) and in no event shall Seller be
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liable under this Section 7.01 for any amount in excess of $5,000,000; provided,
however, no limitation of liability provided in this paragraph (c) shall apply
to any Damage or Cost arising out of or resulting from common law fraud in
connection with the transactions contemplated by this Agreement.
(d) Any indemnification payment by Seller under this Agreement shall be
reduced by the amount of any Purchaser's Tax Effect. For purposes hereof,
"Purchaser's Tax Effect" shall mean an amount equal to the amount of the
federal, state, local or foreign tax savings attributable to Purchaser's payment
of any Damage or Cost for which it receives an indemnification payment under
this Section 7.01 or under Section 5.04(e) (after taking into account the tax
effect, if any, of receipt of any indemnification payment). To the extent the
parties cannot agree whether any tax benefit exists or on the appropriate
treatment of any tax benefit, such disagreement shall be resolved by either an
accounting firm or a law firm with a nationally recognized tax practice selected
jointly by Purchaser and Seller. If such parties cannot agree on a firm as
specified in the prior sentence, the firm shall be selected jointly by the
independent auditors of such parties.
7.02 Indemnification by Purchaser.
(a) Purchaser hereby agrees to indemnify and hold harmless Seller from and
against (i) any Damage (other than any relating to Taxes, for which
indemnification provisions are set forth in Section 5.04(e)) arising out of or
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of Purchaser contained in this Agreement,
or in any statement or certificate furnished or to be furnished to Seller in
connection with the transactions contemplated hereby, and (ii) any Costs
incident to any of the foregoing or the enforcement of this Section.
(b) No action or claim for Damages resulting from breaches of the
representations and warranties of Purchaser shall be brought or made after the
third anniversary of the Closing Date, except that such time limitation shall
not apply to any claims which exist prior to the third anniversary of the
Closing Date and which have been the subject of a written notice from Seller to
Purchaser prior to such date, which notice specified in reasonable detail the
nature of the claim.
(c) Purchaser shall be liable to Seller only to the extent the cumulative
total of Damages and Costs under this Section 7.02 and Section 5.04(e) exceeds
$200,000 (at which time rights to indemnification may be asserted for such
$200,000 amount and amounts in excess thereof) and in no event shall Purchaser
be liable under this Section 7.02 for any amount in excess of $5,000,000;
provided, however, no limitation of liability provided in this paragraph (c)
shall apply to any Damage or Cost arising out of or resulting from common law
fraud in connection with the transactions contemplated by this Agreement or the
failure of Purchaser to make payments under the Purchaser Note in accordance
with the terms thereof.
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(d) Any indemnification payment by Purchaser under this Agreement shall be
reduced by the amount of any Seller's Tax Effect. For purposes hereof, "Seller's
Tax Effect" shall mean an amount equal to the amount of the federal, state,
local or foreign tax savings attributable to Seller's payment of any Damage or
Cost for which it receives an indemnification payment under this Section 7.02 or
under Section 5.04(e) (after taking into account the tax effect, if any, of
receipt of any indemnification payment). To the extent the parties cannot agree
whether any tax benefit exists or on the appropriate treatment of any tax
benefit, such disagreement shall be resolved by either an accounting firm or a
law firm with a nationally recognized tax practice selected jointly by Purchaser
and Seller. If such parties cannot agree on a firm as specified in the prior
sentence, the firm shall be selected jointly by the independent auditors of such
parties.
7.03 Indemnification Procedures.
(a) If a claim is made, or any suit or action is commenced for which
defense or indemnity is claimed to be due under Section 5.04(e), 7.01 or 7.02,
or if knowledge is received of any other state of facts which, if not corrected,
may give rise to a right of defense or indemnification under Section 5.04(e),
7.01 or 7.02, the party seeking defense or indemnity ("Indemnified Party") shall
give written notice to the party claimed to be liable on the defense or
indemnity obligation ("Indemnifying Party") as soon as practicable after, but in
no event (i) more than 10 days following notice to the Indemnified Party of any
claim, suit or action for which defense or indemnity will be sought, or (ii)
more than 30 days following the Indemnified Party's knowledge of any other state
of facts which may give rise to a right to defense or indemnity under Section
5.04(e), 7.01 or 7.02. A failure to give prompt notice shall not relieve an
Indemnifying Party of its obligation to defend or indemnify, except to the
extent the Indemnifying Party is prejudiced by such failure. The Indemnified
Party shall make available to the Indemnifying Party and its counsel and
accountants at reasonable times and for reasonable periods, during normal
business hours, all books and records of the Indemnified Party relating to the
matter for which defense or indemnity has been claimed, and each party hereunder
will render to the other such assistance as the other may reasonably require in
order to assure prompt and adequate defense of any suit, claim or proceeding to
which this Section 7.03 applies.
(b) If defense or indemnification is sought with respect to a claim, suit
or other proceeding against the Indemnified Party, the Indemnifying Party shall
have the right to defend, compromise and settle the matter in the name of the
Indemnified Party to the extent that the Indemnifying Party may be liable to the
Indemnified Party under Section 5.04(e), 7.01 or 7.02 hereof; provided, however,
that the Indemnifying Party shall not compromise or settle a suit, claim or
proceeding unless it assumes the obligation to indemnify for all losses relating
thereto. The Indemnifying Party shall notify the Indemnified Party promptly if
the Indemnifying Party elects to assume the defense of any such claim, suit or
action. In assuming the defense of a matter hereunder, the Indemnifying Party
shall have the right to select counsel, provided that the Indemnified Party does
not object to such counsel in a reasonable exercise of its discretion. The
Indemnified Party shall have the right to employ its own counsel who may
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associate with the counsel designated by the Indemnifying Party (upon the
Indemnifying Party's assumption of the defense of the matter), but the fees and
expenses of such counsel shall be at the Indemnified Party's expense.
(c) The Indemnified Party may at any time notify the Indemnifying Party of
its intention to settle or compromise any claim, suit or action against the
Indemnified Party in respect of which indemnification payments may be sought
from the Indemnifying Party hereunder, but shall not settle nor compromise any
matter for which indemnification may be sought, notwithstanding this Section
7.03(c), in excess of $1,000 without the consent of the Indemnifying Party,
which shall not be unreasonably withheld. Any settlement or compromise of any
claim, suit or action in accordance with the preceding sentence, or any final
judgment or decree entered on or in, any claim, suit or action in which the
Indemnifying Party did not assume the defense in accordance herewith, shall be
deemed to have been consented to by, and shall be binding upon, the Indemnifying
Party as fully as if the Indemnifying Party had assumed the defense thereof and
a final judgment or decree had been entered in such suit or action, or with
regard to such claim, by a court of competent jurisdiction for the amount of
such settlement, compromise, judgment or decree.
(d) The Indemnifying Party shall be subrogated to any claims or rights of
the Indemnified Party as against any other persons with respect to any amount
paid by the Indemnifying Party under this Article 7 or under Section 5.04(e).
The Indemnified Party shall cooperate with the Indemnifying Party, at the
Indemnifying Party's expense, in the assertion by the Indemnifying Party of any
such claim against other persons.
7.04 Sole Remedy.
(a) Purchaser's sole and exclusive remedy for any breach of this Agreement
by Seller shall be the provisions in Sections 5.04(e) and 7.01, and Purchaser
hereby waives any and all other remedies which may be available at law or equity
for any breach or alleged breach of this Agreement.
(b) Seller's sole and exclusive remedy for any breach of this Agreement by
Purchaser shall be the provisions in Sections 5.04(e) and 7.02, and Seller
hereby waives any and all other remedies which may be available at law or equity
for any breach or alleged breach of this Agreement.
(c) Notwithstanding anything to the contrary contained herein, if the
Closing occurs no claim for indemnification may be asserted under this Agreement
or any document delivered in connection herewith with respect to any matter
discovered or known to the party otherwise entitled to seek indemnification on
or before the Closing Date.
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ARTICLE 8
TERMINATION
8.01 When Agreement May be Terminated. This Agreement may be terminated
prior to Closing:
(a) By mutual written consent of Purchaser and Seller;
(b) By Seller in the event that it has not obtained a letter of credit to
be used as substitute collateral under the InterRedec Pledge by December 31,
1995 for the reasons described in the second sentence of Section 5.13(b); or
(c) In accordance with Section 5.03.
8.02 Final Termination. This Agreement will terminate on January 31, 1996
if the Closing has not yet occurred.
8.03 Effect of Termination. In the event of termination of this
Agreement by either Seller or Purchaser, as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of any party or
any party's officers or directors, except for liabilities arising from a breach
of this Agreement prior to such termination; provided, however, that the
obligations of the parties set forth in Article 7 shall survive such
termination.
ARTICLE 9
ARBITRATION
9.01 Agreement to Arbitrate. Except as set forth in Sections 7.01(d) and
7.02(d), any claim, controversy or dispute arising out of or relating to this
Agreement, on which an amicable understanding cannot be reached, to the maximum
extent allowed by applicable law and irrespective of the type of relief sought,
shall be submitted to and resolved by arbitration, and such arbitration shall
be the sole remedy for such matter. Such arbitration shall be heard and
conducted in Atlanta, Georgia and shall be conducted expeditiously and
confidentially in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"), as such rules shall be in effect on
the date of delivery of demand for arbitration, with the exception that the
arbitrators may not award any punitive or exemplary damages or any damages
other than compensatory, and except as such rules may be otherwise
inconsistent with the express provisions of this Article 9.
9.02 Initiating Arbitration. To initiate arbitration, a party shall
notify the other party in writing of its desire to arbitrate, stating the nature
of its dispute and the remedy sought. The receiving party shall acknowledge
receipt of the notice in writing within 5 days, and thereafter the parties
shall attempt in good faith to resolve the dispute within 15 days. If the
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dispute cannot be resolved within such 15-day period, any party may file a
written demand for arbitration by filing a written notice with the AAA and
with the other party, complying with the AAA's prescribed procedures for
such notices. Within 15 days of delivery of such demand for arbitration,
each party shall appoint one arbitrator, and the arbitrators so selected
shall, within 15 days of their appointment, appoint an additional arbitrator.
In the event that the arbitrators selected by the parties are unable to agree
upon the selection of the additional arbitrator after reasonable efforts
within such 15-day period, a list of 7 qualified and available persons
shall be requested from the AAA. The parties shall take turns striking one
person each from the list with the last remaining person being the additional
selected arbitrator. Once selected, the arbitration panel shall meet as
expeditiously as possible, select a chairman, schedule the arbitration
hearing, and notify the parties in writing of the date, time and place of the
hearing. With respect to any arbitration pursuant to Section 2.04, the
provisions of Section 2.04 shall apply where inconsistent with this Article 9.
9.03 Effect. All conclusions of law reached by the arbitrators shall
be made in accordance with the internal laws of the State of Georgia without
regard for its conflict of laws doctrine. Any award rendered by the arbitrators
shall be accompanied by a written opinion setting forth the findings of fact and
conclusions of law relied upon in reaching their decision. The award rendered by
the arbitrators shall be final, binding and non-appealable, and judgment upon
such award may be entered by any court having jurisdiction thereof. The parties
agree that the existence, conduct and content of any such arbitration shall be
kept confidential and no party shall disclose to any person any information
about such arbitration, except as may be required by law or for financial
reporting purposes in each party's financial statements.
9.04 Costs. Each party shall pay the fees of its own arbitrator,
attorneys, expenses of witnesses and all other expenses in connection with the
presentation of such party's case. The remaining costs of the arbitration,
including, without limitation, fees of the additional arbitrator, costs of
records or transcripts and administrative fees, shall be paid as designated by
the arbitrators.
ARTICLE 10
MISCELLANEOUS
10.01 Nature and Survival of Representations. The representations,
warranties, covenants and agreements of Purchaser and Seller contained in this
Agreement shall survive the Closing and shall not merge in the performance of
any obligation by any party hereto. Seller acknowledges and agrees that prior to
Closing, Purchaser intends to perform such investigation of the Companies as it
deems necessary or appropriate; however, no investigation by Purchaser will
diminish or obviate any of the representations, warranties, covenants or
agreements made or to be performed by Seller pursuant to this Agreement, or
Purchaser's right to rely upon such representations, warranties, covenants and
agreements.
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10.02 Amendment. This Agreement may not be amended or modified without
the prior written consent of all parties.
10.03 Waiver. Failure to insist upon strict compliance with any of the
terms or conditions of this Agreement at any one time shall not be deemed a
waiver of such term or condition at any other time; nor shall any waiver or
relinquishment of any right or power granted herein at any time be deemed a
waiver or relinquishment of the same or any other right or power at any other
time.
10.04 Governing Law. Notwithstanding the place where this Agreement
may be executed by any of the parties, the parties expressly agree that this
Agreement shall in all respects be governed by, and construed in
accordance with, the laws of the State of Georgia, without regard for its
conflict of laws doctrine.
10.05 Notices. Any notice or other communication to be given
hereunder shall be in writing and shall be deemed sufficient when (i) mailed by
United States certified mail, return receipt requested, (ii) mailed by overnight
express mail, (iii) sent by facsimile or telecopy machine, followed by
confirmation mailed by first-class mail or overnight express mail, or (iv)
delivered in person, at the address set forth below, or such other address as a
party may provide to the other in accordance with the procedure for notices set
forth in this Section:
If to Purchaser:
Atlantic American Corporation
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Hilton X. Xxxxxx, Xx.
Telephone: 000-000-0000
Telecopy: 404-231-2123
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxxx
2300 Xxxx Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
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If to Seller:
Xxxxx Enterprises, Inc.
One Atlantic Center, Suite 5000
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx, Xx.
Telephone: 000-000-0000
Telecopy: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
10.06 Invalid Provision. If any provision of this Agreement shall be
determined by arbitrators (acting in accordance with Article 9) to be invalid or
unenforceable, this Agreement shall be deemed amended to delete such provision
and the remainder of this Agreement shall be enforceable by its terms.
10.07 Subsequent SEC Filings. After the Closing, the parties agree to
furnish information to each other (on a GAAP and SAP basis) so that each party
may prepare any filings required to be made with the SEC or any other
Governmental Authorities. The parties shall each be responsible for their own
costs and expenses (including, without limitation professional fees and
expenses) incurred in preparing such filings.
10.08 Assignment. This Agreement may not be assigned or delegated by
any party without the prior written consent of all other parties.
10.09 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
10.10 Further Assurances. Each party agrees to execute and deliver all
such further instruments and do all such further acts as may be reasonably
necessary or appropriate to effectuate this Agreement.
10.11 Headings. Headings and captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision.
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10.12 Person and Gender. The masculine gender shall include the
feminine and neuter genders and the singular shall include the plural.
10.13 Entire Agreement. This Agreement, together with the Seller
Disclosure Memorandum, Purchaser Disclosure Memorandum and the Exhibit
referenced herein, constitute the entire agreement of the parties with respect
to matters set forth in this Agreement and supersede any prior understanding or
agreement, oral or written, with respect to such matters.
10.14 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party hereto,
whether under any rule of construction or otherwise. No party shall be
considered the draftsman. On the contrary, this Agreement has been reviewed,
negotiated and accepted by all parties and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all parties hereto.
10.15 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all such
counterparts shall constitute one and the same Agreement, binding on all the
parties notwithstanding that all the parties are not signatories to the
same counterpart.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATLANTIC AMERICAN CORPORATION
By:
----------------------------------
Attest: Name: Hilton X. Xxxxxx, Xx.
Title: President
----------------------------
Secretary
XXXXX ENTERPRISES, INC.
By:
----------------------------------
Attest: Name: Xxxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
-----------------------------
Secretary
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