STOCK PURCHASE AGREEMENT
This Agreement made as of the 15th day of January, 1996 between National
Affiliated Corporation, a Louisiana corporation and registered
insurance holding corporation ("Seller" or "NAC") and The
Southern Group, Inc., a Maryland corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller has 10,538,972 authorized but unissued
shares of Common Stock, no par value per share ("Common
Stock"), comprising approximately 75% of the total number of
authorized shares of Common Stock as well as 181,539 shares of
Common Stock issued and held by the Seller as treasury stock.
WHEREAS, Seller owns 100% of the outstanding shares of
(i) National Affiliated Investors Life Insurance Company, a
Louisiana domiciled life insurance company ("NAIL"), (ii)
National Affiliated Marketing Company, a Louisiana company,
formerly known as Affiliated Investment Marketing ("NAMC")
(iii) and National Affiliated Finance Company, a Louisiana
company ("NAFC") and (iv) Practical Leasing Unlimited Systems,
a Louisiana company ("PLUS") (NAIL, NAMC, NAFC and PLUS are
also individually referred to as Subsidiary or collectively as
Subsidiaries).
WHEREAS, Buyer wishes to purchase from Seller, and Seller
wishes to sell to Buyer, shares of Common Stock having a value
of approximately $6 million for the purchase price and upon the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, the
provisions and the respective agreements hereinafter set forth,
the parties hereto hereby agree as follows:
1. Agreement to Purchase and Sell.
Upon the terms and subject to the conditions set forth in
this Agreement and based upon the representations and
warranties made herein by each of the parties to the other, on
the Closing Date (as such term is hereinafter defined), Seller
shall sell, grant, convey, assign, transfer, and deliver to
Buyer, and Buyer shall purchase and acquire from Seller
10,355,045 shares of the authorized but unissued shares of NAC
Common Stock (the "NAC Shares").
2. Purchase Price.
2.1 The purchase price for the NAC Shares (the
"Purchase Price") shall be $6,800,000 (Six Million Eight
Hundred Thousand Dollars). Buyer shall pay the Purchase Price
at closing (the "Closing") by the delivery to Seller of the
assets described in Schedule 2.1 of this Agreement (the
"Transferred Assets"), which Transferred Assets shall have a
value, on the books of Buyer, of not less than the Purchase
Price, at December 31, 1995 as audited by Coopers & Xxxxxxx,
and at the Closing Date, as adjusted as provided in Section
2.2.
2.2 If the independent auditors of NAC determine that a
reserve for litigation in excess of $75,000 is warranted prior
to closing, the Purchase Price will be adjusted accordingly.
In the event any state in which NAIL is authorized to engage in
business as of the date of this Agreement prohibits or
otherwise restricts NAIL from conducting such business in any
manner before the Closing Date, the Purchase Price will be
reduced by $15,000 (Fifteen Thousand Dollars) per state which
takes any such action to restrict NAIL's business activities.
3. Closing.
3.1 The Closing shall take place at such time and place
as Seller and Buyer may agree within ten days following the
satisfaction of all conditions to Closing, including the
receipt of all required consents and approvals referred to
below (the "Closing Date"), unless otherwise agreed to by the
parties hereto in writing.
3.2 At the Closing, Seller shall deliver to Buyer: (a)
certificates representing the NAC Shares, free and clear of all
liens and encumbrances; (b) the certificate required by Section
11.1; (c) the legal opinion required by Section 11.2; (d) an
executed registration rights agreement in the form of Exhibit
3.2 to this Agreement; and, (e) such other documents may be
required to be delivered by Seller by the terms of this
Agreement.
3.3 At the Closing, Buyer shall deliver to Seller: (a)
the Purchase Price as provided in Section 2 herein; (b) the
certificate required by Section 10.1; (c) the legal opinion
required by Section 10.2; (d) an executed registration rights
agreement in the form of Exhibit 3.2 to this Agreement and, (e)
such other documents as may be required to be delivered by
Buyer by the terms of this Agreement.
4. Representations and Warranties of Seller.
Seller, as to itself and as to each Subsidiary, and each
Subsidiary, as to itself only, represent and warrant to Buyer,
as of the date hereof and as of the Closing Date that as
follows:
4.1 Seller has not less than 10,538,972 authorized but
unissued shares of Common Stock, comprising approximately 75%
of the total authorized shares of Common Stock and there is no
existing impediment to the sale and transfer of all such NAC
Shares to Buyer except as disclosed in this Agreement. Such
shares are free and clear of all liens, security interests,
encumbrances, pledges, loans, or claims by or on the part of
any person, firm or corporation whatsoever.
4.2 There are no outstanding contracts, agreements,
options, warrants, calls, commitments or rights of any nature
to acquire any shares of any class of the capital stock of
Seller or of any Subsidiary, and no issued and outstanding
shares of NAC or its Subsidiaries are the subject of any voting
trust agreement or other agreement relating to the voting
thereof or restricting in any way the sale or transfer thereof,
other than this Agreement and options held by directors,
officers and employees of NAC listed on Schedule 4.2.
4.3 NAIL is a stock life insurance corporation, duly
organized, validly existing, and in good standing under the
laws of the State of Louisiana and each of NAC, NAMC, NAFC and
PLUS are corporations duly organized, validly existing, and in
good standing under the laws of the State of Louisiana.
4.4 NAIL is duly qualified to transact the business of
a life insurance company in the State of Louisiana and in each
of the states listed on Schedule 4.4 and has all corporate
powers and authority necessary to engage in such business in
such state and to own its own properties.
4.5 Each of NAC, NAMC, NAFC and PLUS is duly qualified
to transact its respective business in the State of Louisiana
and each other state in which it conducts business and has all
corporate powers and authority necessary to engage in such
business in such state and to own its own properties, except to
the extent that any failure to possess such powers or authority
does not have material adverse effect on the businesses or
operations of such company.
4.6 Except as provided in Section 4.4, there are no
pending or, to the knowledge of management, threatened
proceedings which would affect the right of NAC or any
Subsidiary to continue such business in Louisiana or in any
other state in which such companies operate and none of such
companies has failed to comply with any law or regulation of
any applicable jurisdiction in the conduct of its business and
corporate affairs which failure in any respect has materially
adversely affected, or reasonably might be expected to
materially adversely affect, such company's business,
operations, properties, assets or financial condition, except
that the decline in such company's capital as of December 31,
1995, as disclosed to Buyer, may result in regulatory action in
certain jurisdictions to limit or terminate NAIL's activities
there.
4.7 The Quarterly Statement for the nine months ending
September 30, 1995, filed with the Department of Insurance for
the State of Louisiana fairly presents the financial position
of NAIL as of said date and the results of NAIL's operations
for the nine months then ended, and is properly prepared in
accordance with statutory accounting principles prescribed or
authorized by the Department of Insurance of the State of
Louisiana.
4.8 The Quarterly Statement of NAC for the nine month
period ending September 30, 1995 fairly presents the financial
position of NAC as of September 30, 1995 and the results of its
operations for the nine months then ended, and is properly
prepared in accordance with generally accepted accounting
principles.
4.9 Each of NAC and its subsidiaries have timely and
accurately filed all local, state and federal tax returns and
reports of every kind, which are required to be so filed (or
has obtained valid extensions to file the same) and has timely
and fully paid all taxes (including premium taxes), interest,
penalties, assessments or deficiencies which have become due
except for amounts which may be contested in good faith by
appropriate proceedings. Adequate provision for payment of
taxes accrued as of the dates of such statements has been made
in the financial statements of NAC and its Subsidiaries
referred to in Section 4.7 and Section 4.8. All statements,
permits, fees, and any other filings or charges imposed or
required of NAC or its Subsidiaries by the State of Louisiana,
or any other jurisdiction including premium taxes, have been
filed, paid or adequate provision for payment thereof has been
made in the aforesaid financial statements for all years and
periods through and including the dates of such financial
statements, except for amounts which may be contested in good
faith by appropriate proceedings.
4.10 There is no waiver or agreement for the extension
of time for the assessment of any tax liability of NAC and its
Subsidiaries. Seller knows of no pending or proposed audit by
the Internal Revenue Service (the "IRS"), or other taxing
authority, with respect to NAC and its Subsidiaries.
4.11 Attached hereto as Schedule 4.11 is a complete and
accurate list of all material contracts ("Material Contracts"),
with respect to which NAC or its Subsidiaries have any
liability or obligation exceeding in amount of $20,000
(including any lease or rental agreement covering real or
personal property, any consulting or other service agreement,
any purchase agreement, any promissory note or other instrument
or security evidencing any indebtedness of NAC or its
Subsidiaries, any mortgage or deed of trust securing real or
personal property, any security agreement or financing
statement covering personal property, or any employment,
deferred compensation or agency contract or other contract or
agreement with any employee).
4.12 Except as described in Schedule 4.12 attached
hereto, NAC and its Subsidiaries are not a subject of or, to
the knowledge of management, threatened by, any material
lawsuit or litigation, proceeding or controversy before any
court, administrative agency, arbitration, or other
governmental authority, which, if adversely determined, might
result in any material adverse change in the business,
operations, properties or assets, or in the condition,
financial or otherwise of NAC and its Subsidiaries, taken as a
whole, and NAC and its Subsidiaries are not in violation of,
nor are they in default with respect to (a) their respective
certificates of incorporation or bylaws, (b) any Material
Contract or material investment to which NAC or its
Subsidiaries is a party or by which NAC or its Subsidiaries or
any of their assets is bound (including any deed of trust,
mortgage, indenture or security agreement, or (c) any judgment,
order, writ, injunction, decree, rule or regulation of any
court, administrative agency arbitration, or other governmental
authority.
4.13 Since September 30, 1995, NAC and its Subsidiaries
have continued to conduct their business in the regular and
normal course as in the past. Since September 30, 1995 and
except as set forth in Schedule 4.13, there has not been:
(a) any material change in the condition
(financial or otherwise) of the properties, assets or
business of NAC or of its Subsidiaries except changes in
the ordinary course of business and changes in the make-
up of the investment portfolio, which in the aggregate
are not materially adverse, provided that NAC's operating
losses have continued at a rate consistent with the first
nine months of 1995;
(b) any material damages, destruction or loss
(whether or not covered by insurance) materially and
adversely affecting the properties, assets or business of
NAC or its Subsidiaries;
(c) any material change in the generally accepted
accounting methods or practices followed by NAC or its
Subsidiaries;
(d) any material increase in compensation or in
the rate of compensation or commissions payable or to
become payable by NAC and its Subsidiaries to any
director, officer or salaried employee earning $50,000
per annum or more during the preceding 12 months, or in
the rate of compensation payable or to become payable to
NAC or its Subsidiaries' hourly employees, or any
material payment of any bonus, profit sharing or other
extraordinary compensation to any employee or any entry
into or amendment of any employment or deferred
compensation agreement between NAC or its Subsidiaries
and any officer, director, employee or agent (except for
agents contracts entered into in the ordinary course of
business);
(e) any material labor strike or other material
occurrence, event or condition relating to the labor
relations of NAC and its Subsidiaries adversely affecting
the property, assets, or business of NAC and its
Subsidiaries in a material way;
(f) any material transaction entered into by NAC
and its Subsidiaries other than the ordinary course of
business, other than the Coinsurance Agreement between
NAIL and Maryland Southern Life Insurance Company dated
December 31, 1995 (the "Coinsurance Agreement");
(g) any declaration or payment of dividends or
other distribution of any capital shares of NAC, any
repurchase of capital shares by NAC, or any other payment
or distribution to or on behalf of Seller;
(h) any creation of any mortgage, lien or other
encumbrance or security interest (other than liens for
current taxes not yet due), including, without
limitation, any deposit for security made or created on
or in any asset or property of NAC and its Subsidiaries,
or assumed by NAC and its Subsidiaries with respect to
any such asset or property other than the Coinsurance
Agreement;
(i) any material indebtedness or other material
liability or obligation (whether absolute, accrued,
contingent or otherwise) incurred, or other material
transaction engaged in, except in the ordinary course of
business by NAC or its Subsidiaries;
(j) any material obligation or liability
discharged or satisfied, other than the current
liabilities reflected in the balance sheet of NAC and its
Subsidiaries as of September 30, 1995, and current
liabilities incurred since the date thereof in the
ordinary course of business;
(k) any sale, transfer or other disposition of
any assets or properties of NAC or its Subsidiaries,
except in the ordinary course of business other than the
Coinsurance Agreement;
(l) any amendment, termination or waiver of any
material right of NAC or its Subsidiaries under any
Material Contract or agreement or governmental license or
permit other than any such terminations that may result
from the decline in such company's capital.
(m) except as otherwise set forth in the
financial statements of NAC or its Subsidiaries as of
December 31, 1994 and for the period ended September 30,
1995, any material change in any of the practices and
policies customarily followed by NAC or its Subsidiaries
(including, without limitation, any underwriting,
actuarial, financial or accounting practices or
policies).
For the purpose of this Section 4.13 and Section 5.7, a
material change shall mean a change in any category listed
herein which by itself causes a change in financial condition
in excess of $20,000, or causes a change in financial condition
in excess of $50,000 in the aggregate when combined with all
other changes during such period.
4.14 Except as described in Schedule 4.14, there are no
material liabilities of NAC or its Subsidiaries related to
policyholder claims, and there are no other material
liabilities, whether such liabilities are contingent, absolute,
direct, indirect, mature, unmatured or otherwise, which do not
appear on the financial statements of NAC or its Subsidiaries
as of September 30, 1995, or liability substantially similar in
nature that were incurred thereafter in the ordinary course of
business.
4.15 Since September 30, 1995, neither NAC nor any of
the Subsidiaries has (a) issued or granted any capital stock,
corporate bonds, debentures, trust or premium certificates or
other income, surplus, debt (other than in the ordinary and
normal course of business or pursuant to this Agreement) or
capital obligations or securities, (b) paid or accrued any
bonuses, or (c) modified the rights of any of its equity or
debt holders.
4.16 NAC and each of its Subsidiaries has good and
marketable title to all of its respective material properties
and assets, included in the records of each such company and in
each case such assets and properties are free and clear of all
mortgages, pledges, liens, leases, restrictions, security
interests, encumbrances or charges whatsoever, and of every
kind and nature, except as disclosed in the financial
statements referred to in Sections 4.6 and 4.7 herein or on
Schedule 4.16 or in the Annual Statement of NAC for the year
ended December 31, 1994.
4.17 The capital stock of NAC consists of one class of
common stock, no par value per share, which shares are equal
and the same in all rights and respects and nonassessable and
of which (a) 14,000,000 shares are authorized for issuance; (b)
3,461,028 shares are issued and outstanding of which 181,539
shares are held in NAC's treasury; (c) 10,538,972 shares are
authorized but unissued; and (d) 385,466 shares are subject to
issuance upon exercise of existing stock options.
4.18 NAC and its Subsidiaries are not a party nor
sponsor of any profit sharing plan, stock bonus plan, stock
option plan, retirement plan, pension plan or similar employee
benefit plan for its employees or agents, other than the
director's, officer's and employee's stock option plan and the
401K plan described on Schedule 4.18.
4.19 NAC and its Subsidiaries have delivered to Buyer
complete and correct copies of the certificate of incorporation
and bylaws of NAC and its Subsidiaries as amended through the
date of this Agreement.
4.20 This Agreement has been duly authorized by all
necessary corporate actions and duly executed and delivered by
Seller and its Subsidiaries and is the valid and legally
binding obligation of Seller, enforceable in accordance with
its terms, subject to the discretion of a court of equity and
subject to bankruptcy, insolvency and similar laws affecting
the rights of credits generally. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby will not result in the acceleration of any
indebtedness or other obligation of Seller or any of its
affiliates, and are not prohibited by, do not violate any
provision of, and do not result in a default under (a) the
certificate of incorporation or bylaws of Seller or its
Subsidiaries; (b) any material contract, agreement or other
instrument to which Seller or its Subsidiaries any of their
affiliates is a party or by which it is bound; (c) any
regulation, rule, order, judgment or decree of any court or
government agency; or (d) any law applicable to Seller or its
Subsidiaries or any of their affiliates, except for the
Louisiana Insurance Holding Company System Regulatory Act to
the extent it requires prior approval for the sale of the NAC
Shares by the Louisiana Insurance Commissioner and the
insurance laws of other states where NAIL or its affiliates is
admitted.
4.21 All insurance policies or contracts issued by NAIL
are valid policies or contracts, in all material respects, the
form of which has been approved, where required, by the
applicable state insurance departments. No Subsidiary, other
than NAIL and NAMC, is engaged in any insurance business,
including the issuance of any policies or contracts.
4.22 The reserves for policy liabilities of NAIL set
forth as of September 30, 1995 have been computed in accordance
with generally accepted actuarial methods and principles
consistently applied and are, to the knowledge of management,
properly computed and adequate under the applicable
requirements of the laws of the State of Louisiana.
4.23 Schedule 4.11 sets forth a true and complete list
of all reinsurance agreements to which NAIL is a party. All
such agreements are in full force and effect as of the date
hereof.
5. Representations and Warranties of Buyer.
Buyer covenants, represents, and warrants to Seller as
follows:
5.1 Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maryland and has all necessary corporate power to execute and
deliver this Agreement and to consummate the purchase of the
NAC Shares, to convey to NAC the Transferred Assets and the
other transactions contemplated hereby.
5.2 This Agreement has been duly authorized by all
necessary corporate action and duly executed and delivered by
Buyer and is the valid and legally binding obligation of Buyer,
enforceable in accordance with its terms, subject to the
discretion of a court of equity and subject to bankruptcy,
insolvency and similar laws affecting the rights of creditors
generally. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will
not result in the acceleration of any indebtedness or other
obligation of Buyer or any of its affiliates and are not
prohibited by, do not violate any provision of, and do not
result in a default under (a) the certificate of incorporation
or bylaws of Buyer or its subsidiaries; (b) any contract,
agreement or other instrument to which Buyer or any of its
affiliates is a party or by which it is bound; (c) any
regulation, rule, order, judgment or decree of any county or
governmental agency; or (d) any law applicable to Buyer, except
for the Louisiana Insurance Holding Company System Regulatory
Act to the extent it requires prior approval of the sale of the
NAC Shares by the Louisiana Insurance Commissioner.
5.3 The balance sheet of Buyer as of November 30, 1995,
has been prepared in accordance with generally accepted
accounting principles. Such balance sheet has been prepared
from Buyer's books and records, which accurately and fairly
reflect the transactions and dispositions of assets and
incurrence of liabilities by Buyer, and present fairly the
financial condition of Buyer as of the date indicated.
5.4 Since November 30, 1995 there has not been any
material adverse change in the financial condition of Buyer or
its subsidiaries.
5.5 There are no pending or, to the knowledge of
management, threatened proceedings which would affect the right
of Buyer or its subsidiaries to continue its business and Buyer
has not failed to comply with any law or regulation of any
applicable jurisdiction in the conduct of its business and
corporate affairs which failure in any respect has materially
adversely affected, or reasonably might be expected to
materially adversely affect, Buyer's business, operations,
properties, assets or financial condition.
5.6 Buyer is not a subject of or, to the knowledge of
management, threatened by, any material lawsuit or litigation,
proceeding or controversy before any court, administrative
agency, arbitration, or other governmental authority, which, if
adversely determined, might result in any material change in
the business, operations, properties or assets, or in the
conditions, financial or otherwise of Buyer and Buyer is not in
violation of, nor is it in default with respect to (a) its
certificate of incorporation or bylaws, (b) any material
contract or material investment to which it is a party or by
which it or any of its assets is bound (including any deed of
trust, mortgage, indenture or security agreement), or (c) any
judgment, order, writ, injunction, decree, rule or regulation
of any court, administrative agency arbitration, or other
governmental authority.
5.7 Since November 30, 1995, Buyer has continued to
conduct its business in the regular and normal course as in the
past. Since November 30, 1995 there has not been:
(a) any material adverse change in the
condition (financial or otherwise) of the properties,
assets (including the Transferred Assets) or business of
Buyer or its subsidiaries, except changes in the ordinary
course of business which in the aggregate are not
materially adverse;
(b) any material damages, destruction or
loss (whether or not covered by insurance) materially and
adversely affecting the properties, assets (including the
Transferred Assets) or business of Buyer;
(c) any material change in the generally
accepted accounting methods or practices followed by
Buyer;
(d) any sale, transfer or other disposition
of any Transferred Assets, other than the Coinsurance
Agreement;
5.8 Buyer has, or will as of Closing have, good and
marketable title to all of the Transferred Assets, including
the records of Buyer with respect thereto and in each case such
Transferred Assets are free and clear of all mortgages,
pledges, liens, leases, restrictions, security interests,
encumbrances or charges whatsoever, and of every kind and
nature. The execution and delivery of this Agreement and all
other documents and instruments contemplated hereby to be
executed and delivered by Buyer will be sufficient at the
Closing to convey and vest in Seller good and marketable title
to the Transferred Assets, free and clear of all mortgages,
pledges, liens, leases, restrictions, security interest,
encumbrances or charges whatsoever, and of every kind and
nature.
5.9 Schedule 2.1 is a true and correct description of
the Transferred Assets, which have a comparable quality and
composition to the similar assets of NAC. Buyer shall include
a more detailed description of the Transferred Assets as a part
of the Form A filing with the Louisiana Department of
Insurance. Seller acknowledges and agrees that the Transferred
Assets will be contributed to NAC and that fifty percent (50%)
of such Transferred Assets will be contributed to NAIL, upon
consummation of the transactions contemplated by this
Agreement, as selected by the Board of Directors of NAC as such
Board shall be constituted following the election of the
members of the Board of Directors of NAC named by Buyer.
Except as noted on Schedule 2.1, the Transferred Assets will
qualify as admitted assets under applicable State of Louisiana
insurance laws and regulations. Buyer shall be entitled to
substitute an asset listed on Schedule 2.1 and to amend the
Schedule 2.1 with a new asset of equal or greater quality, with
the quality of assets judged according to the National
Association of Insurance Commissioners risk capital rankings.
(a) The receivables listed on Schedule 2.1
that constitute a portion of the Transferred Assets
have arisen from bona fide transactions in the
ordinary course, are collectible in the ordinary
course and are not subject to any defenses, offset
or counterclaim.
(b) Subject to any required approvals of
the applicable regulatory agencies, the deferred
policy acquisition costs listed on Schedule 2.1
that constitute a portion of the Transferred Assets
represent valid acquisition costs incurred by Buyer
in connection with valid, binding and enforceable
insurance policies issued by the Buyer in the
ordinary course of business, which policies are in
full force and effect. Buyer has performed and is
performing all material obligations to be performed
by it under such policies and there is not under
any such policies any existing default, event of
default, breach or event that, with notice or lapse
of time or both, would constitute a default or
breach. There has been no termination or
threatened termination or notice of default or
breach under any such policy.
5.10 Buyer's financial statements as of December 31,
1995, as audited by Coopers & Xxxxxxx, will reflect sufficient
assets for Buyer to consummate this transaction.
6. Covenants of Seller.
Seller convents to Buyer as follows:
6.1 Upon delivery to Buyer of the NAC Shares at the
Closing, such shares shall be free and clear of all liens,
security interests, encumbrances, pledges, loans, or claims by
or on the part of any person, firm or corporation whatsoever.
6.2 From and after the date of this Agreement up to and
including the Closing Date, Seller shall cause NAC and its
subsidiaries to continue to timely and accurately file all
local, state and federal tax returns and reports of every kind,
which are required to be so filed (or obtain valid extensions
to file same) and timely and fully pay all taxes (including
premium taxes), interest, penalties, assessments or
deficiencies except for amounts which may be contested in good
faith by appropriate proceedings.
6.3 Seller shall furnish to Buyer upon Buyer's
reasonable request, at any time prior to or after the Closing,
copies of any Material Contracts and any further information
that Buyer may reasonably request in connection therewith.
6.4 From and after the date of this Agreement up to and
including the Closing Date, neither NAC nor any Subsidiary
will: (a) issue or grant any capital stock, corporate bonds,
debentures, trust or premium certificates or other income,
surplus, debt (other than in the ordinary and normal course of
business or pursuant to this Agreement) or capital obligations
or securities, (b) pay or accrue any bonuses; or (c) modify the
rights of any of its equity or debt holders.
6.5 Buyer shall have the right, at any time prior to
Closing Date, to examine the books and records of NAC during
reasonable business hours. No such examination, however, shall
constitute a waiver or relinquishment by Buyer of its right to
rely upon Seller's covenants, representations, and warranties
as made herein or pursuant hereto. Buyer shall bring to
Seller's attention any material violation of this Agreement by
Seller that Buyer discovers during the course of such
examination. Buyer will hold in confidence all information so
obtained, and any document or instrument heretofore or
hereafter obtained by Buyer in connection herewith shall be
held in express trust for and on behalf of Seller. The
obligations of Buyer set forth in the Confidentiality Letter
dated September 28, 1995, as amended by letter agreement dated
November 14, 1995, executed by Buyer (the "Confidentiality
Letter") shall survive the execution and Closing of this
Agreement.
6.6 At or before the time of Closing, Seller will
furnish Buyer a list of all bank accounts, investment custodial
accounts and safety deposit boxes in the name of NAC and its
subsidiaries and the names of all persons authorized to draw
therefrom or having access thereto.
6.7 NAC and its subsidiaries shall, between the date
hereof and the time of Closing:
(a) continue to conduct their business in the
same manner as in the past and in the normal and ordinary
course of business;
(b) use their reasonable best efforts to preserve
intact their present business organization and to keep
available the services of its respective present
officers;
(c) except in the ordinary course of business and
not without the prior consent of Buyer (which consent
shall not be unreasonably withheld), not grant any salary
increase to any officer or other employee or enter into,
or amend or alter materially any bonus, savings,
retirement, pension, profit-sharing, stock option, group
insurance, death benefit or other fringe benefit plan,
trust agreement or arrangement or any employment agency
(except routine agents contracts entered into the
ordinary course of business), brokerage or consulting
agreement;
(d) not create, incur, assume, guarantee or
otherwise become liable with respect to any material
indebtedness, except in the ordinary course of business;
(e) maintain their books, accounts and records in
the usual, regular and ordinary manner;
(f) not amend their respective certificates of
incorporation or bylaws, or take any action with respect
to any such prohibited amendment;
(g) maintain their corporate existence and power;
(h) not dispose of or encumber any of their
properties or assets except in the ordinary course of
business;
(i) not merge or consolidate with any other
corporation or, except for portfolio investments, acquire
or agree to acquire any stock or assets of any other
person, firm, association, corporation or other business
organization;
(j) not authorize or issue any shares of capital
stock or enter into any contract relating to or grant any
option, warrant or right calling for the authorization or
issuance of any such shares or create or issue any
securities convertible into any such shares or
convertible into securities in turn so convertible, or
issue any options, warrants or rights to purchase any
such convertible securities;
(k) not enter into, assume or amend any contract,
agreement, obligation, lease, license or commitment,
except in the ordinary course of business; and
(l) in good faith, cooperate with Buyer in
seeking any required governmental approvals of the
transactions contemplated by this Agreement.
7. Covenants of Buyer.
Buyer covenants to Seller as follows:
7.1 Seller shall have the right, at any time prior to
the Closing Date, to examine the books and records of Buyer
concerning, or with respect to, the Transferred Assets during
reasonable business hours. No such examination, however, shall
constitute a waiver or relinquishment by Seller of its right to
rely upon Buyer's covenants, representations, and warranties as
made herein or pursuant hereto. Seller shall bring to Buyer's
attention any material violation of this Agreement by Buyer
that Seller discovers during the course of such examination.
Seller will hold in confidence all information so obtained, and
any document or instrument heretofore or hereafter obtained by
Seller in connection herewith shall be held in express trust
for and on behalf of Buyer.
7.2 Buyer further covenants that it shall, between the
date hereof and the time of Closing,
(a) continue to conduct its business in the same
manner as in the past and in the normal and ordinary
course of business;
(b) use its reasonable best efforts to preserve
intact its present business organization and to keep
available the services of its respective present
officers;
(c) not create, incur, assume, guarantee or
otherwise become liable with respect to any material
indebtedness related to or concerning the Transferred
Assets;
(d) maintain its books, accounts and records
related to or concerning the Transferred Assets in the
usual, regular and ordinary manner;
(e) not dispose of or encumber any of the
Transferred Assets; and
(f) not merge or consolidate with any other
corporation or, except for portfolio investments, acquire
or agree to acquire any stock or assets of any other
person, firm, association, corporation or other business
organization.
7.3 Without the prior written consent of Seller, Buyer
shall not take any action that would cause or tend to cause the
conditions to the obligations of the parties hereto to effect
the transactions contemplated hereby not to fulfilled,
including, without limitation, taking, or causing to be taken,
or permitting or suffering to be taken or to exist any action,
condition or thing that would cause the representations and
warranties made by Buyer herein not to be true, correct and
accurate as of the Closing.
7.4 Buyer shall promptly file or submit and diligently
prosecute any and all applications or notices with public
authorities, federal, state or local, domestic or foreign, and
all other requests for approvals to any private persons, the
filing or granting of which is necessary, or is deemed
necessary or appropriate by any party hereto, for the
consummation of the transactions contemplated hereby.
7.5 Buyer shall take all reasonable steps which are
within its power to cause to be fulfilled those of the
conditions precedent to the obligation of Seller to consummate
the transactions contemplated hereby which are dependent upon
the actions of Buyer.
7.6 Buyer will cause Coopers & Xxxxxxx to complete an
audit of Buyer's assets which include the Transferred Assets as
of December 31, 1995 and will upon completion of such audit,
which shall occur prior to Closing, deliver a copy of same to
Seller along with a letter from Xxxxxx & Xxxxxxx authorizing
Seller to rely upon such audit in the transactions contemplated
by this Agreement.
7.7 Buyer acknowledges that the NAC Shares have not
been registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon the exemption provided
by Section 4(2) of said Act for transactions by an issuer not
involving any public offering and, in connection therewith, it
is agreed by the parties that:
a) Buyer acknowledges receipt of a copy of
Seller's Form 10-KSB Report for its fiscal year ended
December 31, 1994, Seller's Form 10-QSB Report for its
fiscal quarter ended September 30, 1995, a copy of
Seller's Annual Report to Stockholders and Proxy
Statement for its annual stockholder's meeting held on
August 29, 1995, and that Buyer has had an opportunity to
ask any questions Buyer might have concerning the
operation and financial condition of Seller. Buyer has
relied on its own due diligence review of Seller's
business, operations and records in connection with its
investment in the NAC shares pursuant to this Agreement
and has not relied upon any financial projections
contained in Seller's Subordinated Debenture Offering
Memorandum dated March 20, 1995.
b) The certificates for the NAC Shares
will bear a restrictive legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE
SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL FOR THE
COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED."
c) Buyer hereby confirms that the NAC
shares will be acquired for investment for its account,
not as nominee or agent, and not with a view to the
resale for distribution of any part thereof in a manner
which would require registration under the Securities Act
or any applicable state securities laws, and that Buyer
has no present intention of selling, granting any
participation in, or otherwise distributing the same.
7.8 Buyer agrees that before Closing it will not
interfere with the conduct of the ordinary business activities
of the employees, agents, customers of the Seller or its
Subsidiaries, except to the limited extent reasonably required
for the continued analysis and of the condition of the Seller
and its Subsidiaries.
7.9 Buyer agrees that before Closing it will not
purchase any NAC Shares, except pursuant to a written agreement
with NAC.
8. Approvals of Regulatory Authorities.
As soon as reasonably practical after the execution and
delivery of this Agreement:
8.1 Buyer shall duly apply to the Louisiana Department
of Insurance for approval to acquire control of NAC.
8.2 Buyer shall file or submit any and all other
notifications and applications to public authorities, federal,
state or local, and all other requests for approvals to any
private persons, the granting or filing of which is necessary
or appropriate in connection with this Agreement.
8.3 Buyer shall use its best efforts to obtain all
required consents and approvals as promptly as possible.
Seller shall furnish to Buyer any information concerning Seller
or NAIL or its subsidiaries reasonably required in connection
with any such filings, notifications or applications.
9. Further Agreements.
Seller and Buyer agree:
9.1 Seller and Buyer each shall execute and deliver or
cause to be executed and delivered at or prior to the Closing,
such additional documents, instruments and agreements and shall
each take and cause to be taken such other actions as the other
may reasonably request for the purpose of effectuating the
transactions contemplated hereby.
9.2 Seller shall make available to Buyer's counsel,
accountants, and other representatives full and complete
access, during normal business hours throughout the period
prior to the time of Closing, to all of NAC's respective
properties, books of account, files, contracts, tax returns,
commitment, and records, and shall furnish to Buyer during such
period all such information concerning the affairs of NAC and
its subsidiaries as Buyer may request, subject to terms of the
Confidentiality Letter.
9.3 Buyer shall make available to Seller's counsel,
accountants, and other representatives full and complete
access, during normal business hours throughout the period
prior to the time of Closing, to all of the Transferred Assets,
and books of account, files, contracts, tax returns,
commitment, and records, and shall furnish to Seller during
such period all such information concerning the affairs of
Buyer concerning or relating to the Transferred Assets as
Seller may request.
10. Conditions to Obligation Of Seller to Sell the NAC
Shares.
The obligation of Seller to consummate the transactions
contemplated by this Agreement is conditioned upon fulfillment
at the Closing of each of the following:
10.1 Each representation and warranty of Buyer set forth
in this Agreement shall have been true and accurate in all
material respects on the date of this Agreement, and, as
reaffirmed by a certificate of Buyer dated the Closing Date,
shall be true and accurate in all material respect as of and on
the Closing Date. Buyer shall have performed and compiled in
all material respects with each and every covenant, agreement
and condition required to be performed or complied with prior
to the Closing Date.
10.2 Seller shall have received an opinion from Buyer's
counsel, dated the Closing Date, in terms that are mutually
agreeable to Buyer and Seller, to the effect that:
(a) Buyer is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Maryland and has all necessary corporate
power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
(b) Buyer has all necessary corporate power to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
(c) The execution and delivery by Buyer of this
Agreement, and the other instruments and documents
executed and delivered by Buyer pursuant to this
Agreement and the performance of Buyer's obligations
hereafter and thereunder have been duly and validly
authorized by all necessary corporate action, and this
Agreement is legally binding and enforceable upon Buyer
in accordance with its terms, subject to the discretion
of a court of equity and subject to bankruptcy,
insolvency and similar law affecting the rights of
creditors generally
10.3 Seller and Buyer shall have received all consents
and approvals of public authorities, federal, state or local,
including but nor limited to the approval of the Department of
Insurance of the State of Louisiana, the granting of which is
necessary for the consummation of this Agreement and the
transactions contemplated hereby.
10.4 No action or proceeding shall have been instituted
or, as far as is known by Buyer or Seller, shall have been
threatened, before a court or other governmental body or any
public authority against Seller, Buyer to restrain or prohibit
the transactions contemplated hereby.
10.5 Buyer shall have suffered no material adverse
change in its corporate status or financial condition since
December 31, 1994, and there shall have been no material
decrease in the value of Transferred Assets since December 31,
1995.
11. Conditions to Obligation of Buyer to Buy the NAC Shares.
The Obligation of Buyer to consummate the transactions
contemplated by this Agreement is conditioned upon fulfillment
at the Closing of each of the following:
11.1 Each representation and warranty of Seller set
forth in this Agreement shall have been true and accurate in
all material respects on the date of this Agreement, and as
reaffirmed by a certificate of Seller dated the Closing Date,
shall be true and accurate in all material respects as of the
Closing Date. Seller shall have performed and complied in all
material respects with each and every covenant, agreement, and
condition required to be performed or complied with by it on or
prior to the Closing Date.
11.2 Buyer shall have received an opinion from Seller's
counsel dated the Closing Date, in terms that are duly
agreeable to Buyer and Seller, to the effect that:
(a) Each of NAC and its subsidiaries is a duly
and validly organized and existing corporation in good
standing under the laws of the State of Louisiana and
with full corporate power to own its properties and carry
on the business in which it is engaged.
(b) Seller has all necessary corporate power to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
(c) The execution and delivery by Seller of this
Agreement, and the other instruments and documents
executed and delivered by Seller pursuant to this
Agreement and the performance of Seller's obligations
hereunder and thereunder have been duly and validly
authorized by all necessary corporate action, and this
Agreement is legally binding and enforceable upon Seller
in accordance with its terms, subject to the discretion
of a court of equity and subject to bankruptcy,
insolvency and similar laws affecting the rights of
creditors generally.
11.3 Buyer and Seller shall have received all consents
and approvals of public authorities, federal, state or local,
including but not limited to the approvals of the Department of
Insurance of the State of Louisiana, the granting of which is
necessary for the consummation of this Agreement and the
transactions contemplated hereby.
11.4 No action or proceeding shall have been instituted
or, as far as is known by Buyer or Seller, shall have been
threatened, before a court or other governmental body or any
public authority against Seller, Buyer or NAC to restrain or
prohibit the transactions contemplated hereby.
11.5 Buyer shall have received on or before the Closing
Date (i) the resignations of at least two (2) members of the
NAC Board of Directors or such number of members of the Board
of Directors as shall leave no more than five (5) current
members in place, including Xxxxxxxx Xxxx, and (ii) a
certificate of the secretary of the NAC and its Chairman of the
Board that at least six (6) additional board seats have been
duly filled by the persons nominated by the Buyer.
11.6 Seller shall deliver a Certificate of the State of
Louisiana dated within thirty (30) days of the Closing Date
certifying NAIL's good standing as a corporation under the laws
of the State of Louisiana, along with evidence as reasonably
requested by Buyer to reflect NAIL's authority to act as an
insurance company in the State of Louisiana.
11.7 Seller shall have delivered to Buyer, on or before
the Closing Date, a certificate dated on or before the Closing
Date signed by NAIL's independent actuary certifying that the
reserves for policy liabilities of NAIL as set forth in the
December 31, 1994 statutory balance sheet have been computed in
accordance with generally accepted actuarial methods and
principles consistently applied and are adequate under the
requirements of applicable law.
11.8 Except as set forth on Schedule 11.8, NAC shall
have suffered no material adverse change in its corporate
status, business, operations, assets, properties or financial
condition since September 30, 1995.
12. Indemnification and Reimbursement.
12.1 Subject to the limitations hereinafter set forth,
Seller agrees to defend, indemnify and hold harmless Buyer and
its successors and assigns against and in respect of any and
all loss or damage and related expenses (including reasonable
attorneys fees) incurred by Buyer resulting from (a) any
misrepresentation or breach of warranty by Seller made as part
of or contained in this Agreement or in any schedule,
certificate or document executed or delivered in connection
with this Agreement or the transaction contemplated hereby or
thereby; or (b) any failure by Seller to perform or otherwise
fulfill any agreement, covenant or obligation hereunder (the
"Indemnifiable Matters"). Buyer agrees to notify Seller
promptly in writing of the occurrence or happening of any event
or matter with respect to which Buyer has the right to
indemnification hereunder. In the event Buyer or any of its
affiliates is a party to any action, suit or proceeding with
respect to which Buyer intends to seek indemnification
hereunder, Seller shall have the right, exercisable by
notifying Buyer within twenty days after receipt of such notice
from Buyer to assume the entire control of the defense,
compromise, or settlement thereof, all at Seller's expense,
including employment of counsel, and in connection therewith
Buyer shall cooperate fully to make available to Seller all
pertinent information under its control. Buyer may, at its
expense if it so elects, designate its own counsel to
participate with counsel designated by Seller in the conduct of
such defense. If the defense of any such Indemnifiable Matter
is tendered to Seller by notice as set forth above and Buyer is
entitled to indemnification pursuant hereto with respect to
such matter, and Seller declines or otherwise fails to (i)
promptly pay or settle the same, or (ii) vigorously investigate
and defend the same, Buyer may investigate and defend the same
and Seller will reimburse Buyer for all judgments, settlement
payments and reasonable expenses, including reasonable
attorney's fees incurred and paid by it in connection
therewith, provided that no settlement will be entered into
without Seller's consent, which will not be unreasonably
withheld.
12.2 Subject to the limitations hereinafter set forth,
Buyer agrees to defend, indemnify and hold harmless Seller and
its successors and assigns against and in respect to any and
all loss or damage and related expenses (including reasonable
attorneys fees) incurred by Seller resulting directly or
indirectly from (a) any misrepresentation or breach of warranty
by Buyer made as a part of or contained in this Agreement or in
any schedule, certificate or document executed or delivered in
connection with this Agreement or the transactions contemplated
hereby or thereby; or (b) any failure by Buyer to perform or
otherwise fulfill any agreement, covenant or obligation
hereunder (the "Indemnifiable Matters"). Seller agrees to
notify Buyer promptly in writing of the occurrence or happening
of any event or manner with respect to which Seller has the
right to seek indemnification hereunder, in the event Seller or
any of its affiliates is a party to any action, suit or
proceeding with respect to which Seller intends to seek
indemnification hereunder, Buyer shall have the right,
exercisable by notifying Seller within twenty days after
receipt of such notice from Seller to assume the entire control
of the defense, compromise or settlement thereof, all at
Buyer's expense, including employment of counsel, and in
connection therewith Seller shall cooperate fully to make
available to Buyer all pertinent information under its control.
Seller may, at its expense, if it so pleases, designate its own
counsel to participate with counsel designated by Buyer in the
conduct of such defense. If the defense of any such
Indemnifiable Matter is tendered to Buyer by notice as set
forth above and Seller is entitled to indemnification pursuant
hereto with respect to such matter, and Buyer declines or
otherwise fails to (i) promptly pay or settle the same, or (ii)
vigorously investigate and defend the same, Seller may
investigate and defend the same and Buyer will reimburse Seller
for all judgments, settlement payments and reasonable expenses
including reasonable attorneys fees, incurred and paid by it in
connection therewith, provided that no settlement will be
entered into without Buyer's consent, which will not be
unreasonably withheld.
12.3 Notwithstanding the provisions of any other Section
hereof, Buyer or Seller shall not be entitled to
indemnification under any Section hereof except to the extent
that the total of all such indemnifications exceeds $110,000.
13. Termination.
13.1 Either Buyer or Seller may terminate this Agreement
at any time in the event of a material breach by the other of
any of its representations, warranties and agreements contained
herein, if such breach shall continue, without cure, for a
period of ten (10) business days after written notice from the
other party.
13.2 Either Buyer or Seller may terminate this Agreement
if the Closing does not occur by March 31, 1996, unless such
date is otherwise extended by the parties hereto in writing,
for any reason other than the failure of the party seeking to
terminate this Agreement to perform its obligations hereunder;
provided, however that the Closing shall be extended, at the
sole option of the Buyer, until the date that the applicable
regulators approve or reject the transactions contemplated by
this Agreement, if on or before March 31, 1996, Buyer and
Seller complete a transaction such as described in that Letter
Agreement of even date herewith, having the purpose of
generating sufficient capital and surplus of NAIL to enable
NAIL to report an aggregate Two Million Dollars ($2,000,000) of
capital and surplus.
13.3 Seller may terminate this Agreement if the Buyer
fails to file the Form A with the Louisiana Department of
Insurance on or before the fifth business day following the day
that the Buyer receives an executed copy of this Agreement from
the Seller.
14. Broker's Commissions and Fees.
Each of Buyer and Seller represents and warrants to the
other party that there is not a broker's fee payable in
connection with the transactions provided for herein, except
that Buyer will be liable for such a fee to Xxxxxxx and
Xxxxxxxx and Seller will be liable for such a fee to Firemark.
Except as provided herein, each of Buyer and Seller agrees to
hold and save the other party harmless from any such fees,
compensation or commissions, by reason of this transactions
contemplated by this Agreement. Each party hereto shall bear
its own counsel fees, costs and expenses relative to this
transaction.
15. Entire Agreement.
This Agreement, the Coinsurance Agreement and the
Confidentiality Letter contain the entire agreement of the
parties with respect to the transactions contemplated hereby
and supersede all other agreements between the parties, oral or
written, relating to the subject matter of this Agreement, the
Coinsurance Agreement and the Confidentiality Letter. Except
as expressly set out in this Agreement, Seller makes no
representation, warranty or agreement, either oral or written,
express or implied.
16. No Assignment.
This Agreement may be assigned by the Buyer to an
affiliate of Buyer with the prior written consent of Seller,
which consent shall not be unreasonably withheld.
17. Notices.
All notices hereunder shall be in writing and effective
when mailed, by certified or registered mail, postage prepaid,
return receipt requested, to the attention of:
If to Buyer: If to Seller:
Xxx X. Xxxxxxxxx, President Xxxxxx X. Xxxxxxx, President
The Southern Group, Inc. National Affiliated Corporation
0000 Xxx Xxxxx Xxxx 0000 Xxx Xxxxxx, Xxxxx X
Xxxxx Xxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
18. Amendment.
This Agreement may be amended only by an agreement in
writing signed by each of the parties hereto, and no waiver or
compliance with any provision or condition hereof and no
consent provided for herein shall be effective unless evidence
by an instrument in writing duly executed by the party hereto
sought to be charged with such waiver or consent.
19. Cooperation.
Each of the parties hereto shall fully cooperate with
each other and shall use their reasonable best efforts and will
cause all entities controlled by them to use their reasonable
best efforts, to satisfy and/or perform all conditions
necessary to be satisfied and/or performed as a condition in
the obligation of the other party hereto to consummate the
transactions contemplated hereby.
20. Counterparts.
This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
21. Survival of Warranties.
The warranties, representations and agreements set forth
herein shall survive the closing of this transaction for a
period of one year.
22. Successors and Assigns.
This Agreement shall inure to the benefit of and be
binding upon Seller and Buyer and their respective successors
and assigns.
23. Headings.
The section and paragraph headings, if any, contained in
this Agreement are for reference purposes only and shall not
limit, modify or expand in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the day and year first above written.
SELLER:
NATIONAL AFFILIATED CORPORATION
By:______________________________
Name:___________________________
Its:______________________________
SUBSIDIARIES:
NATIONAL AFFILIATED INVESTORS LIFE INSURANCE COMPANY
By:______________________________
Name:___________________________
Its:______________________________
NATIONAL AFFILIATED MARKETING COMPANY
By:______________________________
Name:___________________________
Its:______________________________
AFFILIATED INVESTMENT MARKETING
By:______________________________
Name:___________________________
Its:______________________________
NATIONAL AFFILIATED FINANCE COMPANY
By:______________________________
Name:___________________________
Its:______________________________
PRACTICAL LEASING UNLIMITED SYSTEMS
By:______________________________
Name:___________________________
Its:______________________________
BUYER:
THE SOUTHERN GROUP, INC.
By:______________________________
Name:___________________________
Its:______________________________
