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EXHIBIT 2
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
AMONG
SOUTHLAND NATIONAL INSURANCE CORPORATION,
SOUTHWIDE LIFE INSURANCE CORP.
AND
COLLATERAL INVESTMENT CORP.
AS OF OCTOBER 4, 1996
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 4, 1996 (the
"Agreement"), by and among Southland National Insurance Corporation, an Alabama
insurance company ("Southland"), Southwide Life Insurance Corp., an Alabama
insurance company ("Southwide Life"), said two corporations being merged as
hereinafter provided referred to as the "Constituent Corporations", and
Collateral Investment Corp., a Delaware corporation ("CIC").
The authorized capital stock of Southland consists of 1,250,000 shares
of Common Stock, $6.00 par value per share ("Southland Common Stock"), of which
250,453 shares are outstanding as of the date hereof.
Southwide Life is a wholly-owned subsidiary of CIC.
The respective Boards of Directors of Southland, CIC and Southwide
Life deem the merger provided for herein (the "Merger") desirable and in the
best interests of their respective shareholders.
The respective Boards of Directors of Southland, CIC and Southwide
Life have duly adopted resolutions approving the Agreement, and the Board of
Directors of Southland has directed that the Agreement be submitted for
approval by Southland's shareholders.
In consideration of the premises and the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
(a) The Merger. In accordance with the provisions of this
Agreement and the Alabama Business Corporation Act ("ABCA"), at the Effective
Time (as herein defined), Southwide Life shall be merged with and into Southland
and the separate existence of Southwide Life shall thereupon cease, and the name
of Southland, as the surviving corporation in the Merger (the "Surviving
Corporation"), shall be "Southland National Insurance Corporation."
(b) Effective Time. The Merger shall become effective when
properly executed Articles of Merger are duly filed with the Secretary of State
of Alabama, which filing shall be made as promptly as practicable after the
closing of the transactions contemplated by this Agreement in accordance with
Article VII hereof. As used herein, the term "Effective Time" shall mean the
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date and time at which such Articles are so filed or such later time as is
specified in the Articles of Merger.
(c) Effect of the Merger. At the Effective Time, the Surviving
Corporation thereupon and thereafter shall possess all the rights, immunities,
and franchises, of a public as well as of a private nature, of the Constituent
Corporations; and all property, real, personal and mixed, and all debts due of
each of the Constituent Corporations so merged, shall be taken and deemed to be
transferred and vested in the Surviving Corporation without further act or deed;
and title to any real estate, or an interest therein, vested in any of the
Constituent Corporations shall not revert nor in any way be impaired by reason
of the Merger. The Surviving Corporation shall be responsible and liable for all
the liabilities and obligations of each of the Constituent Corporations, and
neither the rights of creditors nor any liens upon the property of any of the
Constituent Corporations shall be impaired by the Merger. Any claim existing or
action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted, or continued, as if the Merger had not taken
place, or the Surviving Corporation may be substituted in the action or
proceeding for Southwide Life. The shares of Southland Common Stock shall be
converted into cash in the manner and on the basis described below and the
former holders of such shares shall be entitled only to the rights provided in
this Agreement or as provided under Article 13 of the ABCA.
(d) Articles of Incorporation. The Articles of Incorporation of
Southland in effect at the time of the Merger shall be the Articles of
Incorporation of the Surviving Corporation. Such Articles of Incorporation,
separate and apart from this Agreement, shall be, and may be separately
certified as, the Articles of Incorporation of the Surviving Corporation.
(e) By-Laws. The By-Laws of Southland in effect at the time of
the Merger shall be the By-Laws of the Surviving Corporation until altered,
amended or repealed.
(f) Directors and Officers. The directors and officers of the
Surviving Corporation at the Effective Time shall be individuals designated by
CIC to serve, in each case, until their successors shall have been elected and
qualified. If at the Effective Time a vacancy shall exist on the Board of
Directors or in any of the offices of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by the Articles of Incorporation
of the Surviving Corporation.
(g) Conversion of Shares. The manner and basis of converting and
exchanging the shares of Southland Common Stock and Southwide Life common stock,
and the manner and basis of
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making distributions, if any, to shareholders of Southland and Southwide Life,
shall be as follows:
(i) Each share of Southland Common Stock which is issued and
outstanding immediately prior to the Effective Time other than
Dissenting Southland Shares (as defined below) shall, by virtue of the
Merger and without any action on the part of the holder thereof, at
and after the Effective Time be converted into the right to receive
$38.00 in cash (subject to appropriate adjustment for any stock split,
reverse stock split, stock dividend or other similar distribution or
reclassification with respect to the outstanding shares of Southland
Common Stock from the date hereof to the Effective Time) (the "Merger
Consideration").
(ii) Each share of Southland Common Stock, if any, which is
issued and held in the treasury of Southland, shall, by virtue of the
Merger and without any action on the part of Southwide Life or of
Southland, at the Effective Time, be retired and canceled, and no cash
or other consideration shall be issued with respect thereto.
(iii) All shares of common stock of Southwide Life issued and
outstanding at the Effective Time shall be converted into and
exchanged, at the Effective Time, for (A) 250,453 shares of common
stock of the Surviving Corporation, so that the Surviving Corporation
shall become a wholly-owned subsidiary of CIC, plus (B) the right to
receive an amount in cash equal to the book value of Southwide Life,
determined in accordance with SAP (as defined in Article II (i) below)
as of the end of the month immediately preceding the Effective Time
(the "Southwide Cash Amount"). CIC as sole holder of the shares of
Southwide Life common stock outstanding immediately before the
Effective Time shall, as promptly as possible after the Effective Time,
surrender the certificate representing such shares of Southwide Life
common stock to the Surviving Corporation in exchange for a certificate
representing 250,453 shares of common stock of the Surviving
Corporation, which shall constitute all the outstanding shares of
capital stock of the Surviving Corporation, together with the aforesaid
cash amount.
(h) Surrender of Shares. As promptly as practicable after the
Effective Time, each holder of shares of Southland Common Stock shall, upon
presentation and surrender of the certificate or certificates therefor to the
Paying Agent (as defined below) for cancellation in accordance with the
transmittal materials described below, be entitled to receive in exchange
therefor a check or checks payable to such person representing payment of cash
into which such holder's shares of Southland Common Stock have been converted
at the Effective Time. Each certificate which represented issued and
outstanding shares of Southland
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Common Stock immediately prior to the Effective Time shall be deemed canceled
at the Effective Time and shall represent only the right to receive cash for
each share represented by such certificate. In no event shall the holder of any
such surrendered certificates be entitled to receive interest on any of the
funds to be received in the Merger.
(i) Designation of Paying Agent; Investment of Funds. CIC shall
make available to Southland, as paying agent, or another paying agent reasonably
satisfactory to Southland (the "Paying Agent") an amount in cash equal to the
product of the Merger Consideration times the number of shares of Southland
Common Stock outstanding immediately prior to the Effective Time, which shall
not include the number of shares of Southland Common Stock held in Southland's
treasury, less the number of Dissenting Southland Shares whose holders have
complied with the provisions of Article 13 of the ABCA at or prior to the
Effective Time and less any shares owned by CIC or any other subsidiary or
affiliate of CIC. CIC shall deposit with the Paying Agent the Southwide Cash
Amount immediately upon receipt and thereafter sufficient cash amounts as needed
to fund its obligations hereunder. The cash deposited with the Paying Agent
shall be invested by the Paying Agent as directed by CIC.
(j) Transmittal Materials. As promptly as practicable following
the Effective Time, CIC shall send or cause to be sent to each former holder of
record of shares of Southland Common Stock transmittal materials for use in
surrendering their certificate or certificates in exchange for cash. The letter
of transmittal will contain instructions with respect to the surrender of such
certificates. CIC shall instruct record date holders of Southland Common Stock
who hold such shares for the account of others to provide the respective
beneficial holders of such shares instructions with respect to the surrender of
their shares.
(k) Dissenting Southland Shares. Each outstanding share of
Southland Common Stock for which written notice of intent to demand payment
therefor is delivered in accordance with Article 13 of the ABCA and which is
not voted in favor of the Merger shall not be converted into or represent a
right to receive cash hereunder unless and until the holder thereof shall have
failed to perfect his demand for payment under Article 13 of the ABCA, at which
time his shares shall be converted into a right to receive cash in the same
manner and subject to the same conditions as provided for other outstanding
shares of Southland Common Stock in this Article I. All such shares of Southland
Common Stock for which such a written notice of intent to demand payment is so
delivered and which are not voted in favor of the Merger, except for such shares
of Southland Common Stock for which a demand for payment is not perfected in
accordance with the ABCA, are herein called "Dissenting Southland Shares."
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Southland shall give CIC and Southwide Life prompt notice upon receipt by
Southland of any such written notice of intent to demand payment for shares of
Southland Common Stock. Southland agrees that prior to the Effective Time it
will not, except with the prior written consent of CIC, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. Each holder of Dissenting Southland Shares who becomes entitled,
pursuant to Article 13 of the ABCA, to receive payment for the fair value of
his shares shall receive payment therefor from Southland as the Surviving
Corporation (but only after the amount thereof shall have been agreed upon or
finally determined pursuant to such provisions), and such shares shall be
retired and canceled.
(l) Termination of Paying Agent's Duties. Promptly following the
date which is twelve months after the Effective Time, the Paying Agent shall
deliver to CIC all cash and other documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a certificate formerly representing shares
of Southland Common Stock who has not previously surrendered such certificate
may surrender such certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefore the Merger Consideration.
(m) Closing of Southland's Transfer Books. At the Effective Time,
the stock transfer records of Southland shall be closed and no transfer of
shares of Southland Common Stock shall thereafter be made.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SOUTHLAND
Southland represents and warrants to CIC and Southwide Life as
follows:
(a) Organization and Standing of Southland. Southland is an
insurance company duly organized and validly existing under the laws of the
State of Alabama and has the corporate power to own or lease its properties and
to carry on its business as now being conducted.
(b) Southland Subsidiaries; Insurance Licenses. Section 2(b) of the
schedule delivered by Southland to CIC concurrently with the execution of this
Agreement (the "Southland Schedule") sets forth a list of all of Southland's
subsidiaries (hereinafter separately called a "Southland Subsidiary" and
collectively called the "Southland Subsidiaries"). The schedule sets forth the
authorized capital stock, the number of shares duly issued and outstanding, the
number so owned by Southland and the
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jurisdiction of incorporation of each Southland Subsidiary. The shares of
capital stock of the Southland Subsidiaries owned directly or indirectly by
Southland are validly issued, fully paid and non-assessable, and are owned free
and clear of any liens, claims, charges or encumbrances except as disclosed on
the Southland Schedule. Except as disclosed on such Schedule, neither Southland
nor any of the Southland Subsidiaries has any investment in any subsidiary or
any investment in any partnership, joint venture, limited liability company or
similar entity, all of which investments are owned free and clear of any liens,
claims, charges or encumbrances except as disclosed thereon. Each of the
Southland Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the corporate power to own or lease its properties and carry on its business as
now being conducted. Each of the Southland Subsidiaries is duly qualified or
otherwise authorized to transact business as a foreign corporation and is in
good standing in every jurisdiction in which such qualification or authorization
is required by law to carry on its business as now being conducted, except where
the failure to qualify or to be authorized would not have a material adverse
effect on the assets, properties, business or financial condition of Southland
or any of the Southland Subsidiaries. Each of Southland and Peoples Insurance
Company, an Alabama mutual aid association ("Peoples"), has all requisite power
and authority to carry on an insurance business pursuant to and to the extent of
the certificates of authority issued under the laws of the states listed in such
Schedule. The Southland Schedule indicates the line or lines of insurance which
is permitted to be written with respect to each certificate of authority listed.
No certificate of authority identified in such Schedule has been revoked,
restricted, suspended, limited or modified nor is any certificate of authority
the subject of, nor to the knowledge of Southland is there a basis for, a
proceeding for revocation, restriction, suspension, limitation or modification,
nor is either Southland or Peoples operating under any formal or informal
agreement or understanding with the licensing authority of any state which
restricts its authority to do business or requires either Southland or Peoples
to take, or refrain from taking, any action.
(c) Authorized Stock. The authorized capital stock of Southland
consists of 1,250,000 shares of Common Stock, par value $6.00 per share, of
which 250,453 shares are issued and outstanding as of the date hereof. All of
the issued and outstanding shares of Southland Common Stock have been validly
issued and are fully paid and non-assessable and free of preemptive rights.
There is no contract, understanding, restriction or agreement, including any
voting trust or other agreement or understanding with respect to the voting of
any of the capital stock of Southland, or any convertible, exchangeable or
exercisable security, option, warrant, call, or commitment on
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the part of Southland of any character relating to issued or unissued shares of
the capital stock of Southland.
(d) Authorization. The Board of Directors of Southland has adopted
resolutions approving the Agreement and the transactions contemplated hereby and
has authorized the execution and delivery of the Agreement and has directed by
resolution that the Agreement be submitted to a vote of the holders of shares of
Southland Common Stock taken at a meeting called for the purpose of considering
and acting upon this Agreement. Southland has full power and authority to enter
into this Agreement and, upon appropriate consent of its shareholders in
accordance with law, subject to obtaining all required regulatory approvals, to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Southland and constitutes the valid and legally
binding obligation of Southland, enforceable against it in accordance with its
terms, subject to bankruptcy, receivership, insolvency, reorganization,
moratorium or similar laws affecting or relating to creditors rights generally
and subject to general principles of equity.
(e) Articles of Incorporation and By-laws. Southland has delivered
to CIC true and complete copies of its and each of the Southland Subsidiaries'
Articles of Incorporation and By-Laws as in effect as of the date hereof.
(f) Consents and Approvals. Except for the consents and approvals
listed on Section 2(f) of the Southland Schedule, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Southland of the transactions contemplated by this
Agreement.
(g) Defaults and Conflicts. Neither Southland nor any Southland
Subsidiary is or immediately prior to the Effective Time will be in default
under its Articles of Incorporation or By-Laws, or in default under any material
indenture or under any material agreement or other material instrument to which
it is a party or by which it or any of its properties is bound or to which it is
subject. Subject to the receipt of all consents and approvals contemplated by
this Agreement, neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or the fulfillment of and
compliance with the terms and provisions hereof, will (i) violate any judicial,
administrative or arbitral order, writ, award, judgment, injunction or decree
involving Southland or any of the Southland Subsidiaries, (ii) conflict with the
terms, conditions or provisions of the charter or By-Laws of Southland or any
Southland Subsidiary, (iii) conflict with, result in a breach of, constitute a
default under or accelerate or permit the acceleration of the performance
required by, any material indenture or any material agreement or other material
instrument
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to which Southland or any Southland Subsidiary is a party or by which Southland
or any Southland Subsidiary is bound, (iv) result in the creation of any lien,
charge or encumbrance upon any of the assets of Southland or any Southland
Subsidiary under any such agreement or instrument, or (v) terminate or give any
party thereto the right to terminate any such indenture, agreement or
instrument. Except as disclosed in Section 2(g) of the Southland Schedule, no
consent of any third party to any indenture or any material agreement or other
material instrument to which Southland or any Southland Subsidiary is a party is
required in connection with the Merger. Southland agrees that prior to the
Effective Time it will use its best efforts to obtain all required consents to
the Merger of parties to any such indenture, agreement, or other instrument
which is material to the business of Southland or any Southland Subsidiary.
(h) SEC Reports; Financial Statements. Southland has filed all
required forms, reports, registration statements and documents with the
Securities and Exchange Commission (the "SEC") since December 31, 1990
(collectively, the "SEC Reports"), each of which, as of its respective date,
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As of their respective
dates, none of the SEC Reports, including, without limitation, any financial
statements or schedules included therein, 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. The audited
consolidated financial statements of Southland included in its Annual Report on
Form 10-KSB for the five years ended December 31, 1995, and the unaudited
consolidated interim financial statements included in its Quarterly Reports on
Form 10-QSB for the quarters ended March 31, 1996 and June 30, 1996, copies of
which have been furnished to CIC, fairly present in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto), the consolidated financial position
of Southland and the Southland Subsidiaries as of the dates thereof and their
consolidated statements of operations, stockholders' equity, and cash flows for
the periods then ended (in the case of any unaudited interim financial
statements, subject to (i) normal year-end adjustments and (ii) standard
limitations on the application of generally accepted accounting principles).
Except as and to the extent reflected in the interim consolidated
statement of financial position of Southland and the Southland Subsidiaries as
of June 30, 1996, and notes thereto included in Southland's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1996, (the "Southland June 30, 1996
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Balance Sheet") or in Section 2(h) of the Southland Schedule, neither Southland
nor any Southland Subsidiary had as of June 30, 1996, any liability or
obligation (absolute, contingent or otherwise) except for liabilities arising in
the ordinary course which are not required to be reflected in a balance sheet
prepared in accordance with generally accepted accounting principles. Except as
and to the extent disclosed in Section 2(h) of the Southland Schedule, neither
Southland nor any Southland Subsidiary has incurred any liability or obligation
(absolute, contingent or otherwise) since June 30, 1996, other than in the
ordinary course of business.
(i) Statutory Financial Statements and Other Filings. Southland has
furnished to CIC copies of the statutory financial statements (the "Statutory
Financial Statements") for each of Southland and Peoples for the five years
ended December 31, 1995 and the quarters ended March 31, 1996 and June 30, 1996
as filed with the Commissioner of Insurance of the State of Alabama ("Alabama
Commissioner"). The Statutory Financial Statements, including, without
limitation, the provisions made therein for investments and the valuation
thereof, reserves, policy and contract claims, together with the notes thereto,
fairly present the financial position, assets, liabilities, change in financial
position, surplus and other funds of Southland and Peoples as of the dates
thereof and the results of their operations for the periods indicated in
conformity with statutory accounting practices ("SAP") prescribed or permitted
by state law, rules and regulations of the insurance departments of their
respective states of domicile and the National Association of Insurance
Commissioners, applied on a basis consistent with prior periods, except as set
forth therein. Each such Statutory Financial Statement was in compliance with
applicable law and correct in every material respect when filed and there were
no material omissions therefrom. Except for liabilities and obligations
disclosed or provided for in the Statutory Financial Statements or in Section
2(i) of the Southland Schedule, neither Southland nor Peoples had, as of the
respective dates of each such Statutory Financial Statements, any liabilities or
obligations (whether absolute or contingent and whether due or to become due)
except for liabilities arising in the ordinary course which are not required to
be reflected in statutory financial statements prepared in accordance with SAP.
All books of account of each of Southland and Peoples fully and fairly disclose
all the transactions, properties, assets, investments, liabilities and
obligations of such Subsidiaries and all such books of account are in the
possession of such Subsidiary and are complete in all material respects.
Southland has filed all required forms of proxy and related proxy materials with
the Alabama Commissioner since December 31, 1990. All proxy materials mailed by
Southland to its shareholders since that date, copies of which have been
furnished to CIC (the "Southland Proxy Materials"), complied in all material
respects with all applicable requirements of the
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Alabama Commissioner. As of their respective dates, none of the Southland Proxy
Materials contained an 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.
(j) Changes Since June 30, 1996. Since June 30, 1996 there has been
no material adverse change in the assets, properties, business, financial
condition or results of operations of Southland or any of the Southland
Subsidiaries; except as disclosed in Section 2(j) of the Southland Schedule
neither Southland nor any Southland Subsidiary has, since June 30, 1996 (i) made
any change in its authorized capital stock, (ii) issued any stock options,
warrants or other rights calling for the issue, transfer, sale or delivery of
its capital stock or other securities, (iii) paid any stock dividend or made any
reclassification in respect of its outstanding shares of capital stock, (iv)
issued, transferred, sold or delivered any shares of its capital stock (or
securities convertible into or exchangeable, with or without additional
consideration, for such capital stock), (v) purchased or otherwise acquired for
a consideration any outstanding shares of its capital stock, (vi) disposed of a
material portion of Southland's or any of Southland Subsidiaries' assets,
properties or business other than in the ordinary course of business, or (vii)
authorized or made any distribution to Southland's shareholders of any assets of
Southland or the Southland Subsidiaries by way of cash dividends or otherwise.
(k) Properties.
(i) Real Estate and Mortgages. Section 2(k)(i) of the
Southland Schedule sets forth a list and summary description of (a) all
real property owned by Southland or any Southland Subsidiary and all
buildings and other structures located on such real property, (b) all
leases, subleases or other agreements under which Southland or any
Southland Subsidiary is the lessor or lessee of any real property, (c)
all unexpired options held by Southland or any Southland Subsidiary or
contractual obligations on its part to purchase or acquire any interest
in real property, (d) all unexpired options granted by Southland or any
Southland Subsidiary or contractual obligations on its part to sell or
dispose of any interest in real property, and (e) all mortgages held by
Southland or any Southland Subsidiary (other than as investment
securities), identifying all such mortgages, if any, for which
deficiency notices have been issued or that are otherwise not current.
Except as disclosed in Section 2(k)(i) of the Southland Schedule, as of
the date hereof such leases, subleases and other agreements are in full
force and effect and Southland or any
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Southland Subsidiary has not received any notice of any material
default thereunder. Each of the options disclosed in Section 2(k)(i) of
the Southland Schedule is in full force and effect.
(ii) Investment Securities. The common stock, preferred
stock, bonds, mortgage loans and other investments owned by Southland
or any Southland Subsidiary are evidenced by appropriate written
instruments and certificates (except where in non-certificated form),
are valid and genuine in all material respects and to the best of its
knowledge enforceable in accordance with their terms against all
persons against whom they purport to create an obligation, subject to
bankruptcy, receivership, insolvency, reorganization, moratorium, or
other similar laws affecting or relating to creditors' rights generally
and subject to general principles of equity. All such bonds, stocks,
mortgage loans and other investments conform in all material respects
to the requirements of applicable insurance laws. Except as disclosed
in Section 2(k)(ii) of the Southland Schedule, none of such investments
are in default on the payment of principal, interest or other required
distributions.
(iii) Title to Property. Except as disclosed in Section
2(k)(iii) of the Southland Schedule, Southland and each Southland
Subsidiary has good and marketable title to all real properties
reflected in Section 2(k)(i) and good and marketable title to all other
assets and properties shown as owned by it on the Southland June 30,
1996 Balance Sheet or acquired since that date (except properties
disposed of in the ordinary course of business subsequent to said
date), in each case free of all mortgages, liens, charges and
encumbrances of any nature whatsoever, other than (A) liens for Taxes
not yet due and payable and (B) such minor liens, charges and
encumbrances as, in the aggregate, do not and would not if asserted
have a material adverse effect on the assets, properties, business,
financial condition or results of operations of Southland or any
Southland Subsidiary.
(l) Environmental Laws. Except as disclosed in Section 2(l) of the
Southland Schedule, Southland and each Southland Subsidiary has conducted and is
conducting its business in compliance with all applicable federal, state, and
local laws, regulations and requirements currently in force relating to the
protection of the environment ("Environmental Laws") except where the failure to
so comply would not have a material adverse effect on the assets, properties,
business or financial conditions of Southland or any of the Southland
subsidiaries. There is no pending, or to the knowledge of Southland or any
Southland Subsidiary threatened, civil or criminal litigation, written
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notice of violation, or administrative proceeding relating to such Environmental
Laws involving Southland or any Southland Subsidiary. There is no condition
existing with respect to the release, emission, discharge or presence of
hazardous substances in connection with the business of Southland or any
Southland Subsidiary which could have a material adverse effect on the assets,
properties, business, financial condition or results of operations of Southland
or any Southland Subsidiary. Southland and each Southland Subsidiary has
received all approvals, consents, licenses, and permits with respect to
environmental matters necessary to carry on its business substantially as
currently conducted.
(m) Proprietary Rights. Section 2(m) of the Southland Schedule
discloses all the trademarks, trade names and service marks (and all
registrations and applications with respect thereto) (collectively the
"Proprietary Rights") used in the business of Southland or any Southland
Subsidiary. Except as otherwise disclosed in such Schedule, either Southland or
one of the Southland Subsidiaries owns or is duly authorized to use all of such
Proprietary Rights. Such Proprietary Rights as used by Southland or a Southland
Subsidiary in its business do not violate or infringe upon the proprietary
rights of any third party, and there is no claim, action, proceeding or
investigation pending or, to the best of Southland's knowledge, threatened
against Southland or any of the Southland Subsidiaries with respect to any such
Proprietary Rights.
(n) Receivables. The receivables shown on the Southland June 30,
1996 Balance Sheet, or which have been acquired since that date, have been
collected or are reasonably considered to be collectible in the amounts thereof
(net of applicable reserves) carried on the books of Southland or the Southland
Subsidiaries.
(o) Agreements. Except as set forth in Section 2(o) of the
Southland Schedule, neither Southland nor any Southland Subsidiary is a party to
nor is Southland or any Southland Subsidiary bound by any oral or written (i)
contract for the employment of any officer or employee which pursuant to its
terms is not terminable without liability on 30 days' (or less) notice or which
provides for any further payments following such termination, or contract with a
former officer or employee pursuant to which payments are required to be made at
any time following the date hereof, or contract with any labor union or
association representing any employee, (ii) stock ownership, profit-sharing,
bonus, deferred compensation, stock option, severance pay, pension, retirement
or similar plan or agreement, (iii) mortgage, indenture, note or installment
obligation the unpaid balance of which exceeds $10,000, or other instrument for
or relating to any borrowing of money by Southland or any of the Southland
Subsidiaries, the unpaid balance of which exceeds $10,000, (iv) guaranty of any
obligation for borrowings or
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otherwise which in the aggregate exceed $10,000, (v) agreement or arrangement
for the sale or lease of any material amount of its assets or part of its
business other than in the ordinary course of business or for the grant of
preferential rights to purchase or lease any material amount of its assets or
part of its business, (vi) agreement or arrangement obligating it to register
any of its outstanding shares or other securities with the SEC, (vii) agreement
or arrangement with any officer or director of Southland, any Southland
Subsidiary, or any other affiliate of Southland, (viii) reinsurance treaty or
agreement, (ix) agreement or contract with any insurance agent or producer other
than pursuant to the forms of agreement included in such Schedule or (x)
contract, agreement or other instrument which is material to the assets,
properties, business, financial condition or results of operations of Southland
or any Southland Subsidiary. All contracts, plans, mortgages, indentures,
guaranties and other agreements disclosed in Section 2(o) of the Southland
Schedule are in full force and effect, neither Southland nor any Southland
Subsidiary or to the knowledge of Southland or any Southland Subsidiary any
other party thereto is in default in any material respect as to any provision
thereof, and no party thereto may terminate any of such agreements by reason of
the transactions contemplated by this Agreement.
(p) Litigation. Section 2(p) of the Southland Schedule sets forth a
description of (i) each lawsuit in which punitive, exemplary or other
extra-contractual damages are sought against Southland or any Southland
Subsidiary, (ii) each lawsuit not involving insurance policies issued by
Southland or Peoples in which Southland or any Southland Subsidiary is a party,
and (iii) each claim or lawsuit involving an insurance policy issued by
Southland or Peoples. Except as disclosed in Section 2(p) of the Southland
Schedule, and except for insurance claims litigation arising in the ordinary
course of business for which reserves have been established in accordance with
Article II(aa) hereof, there are no actions, suits or proceedings pending, or to
the knowledge of Southland or any Southland Subsidiary threatened, against or
affecting Southland or any Southland Subsidiary or its properties or businesses,
at law or in equity, or before any governmental or administrative body or agency
or before any arbitrator which, alone or in the aggregate, could materially and
adversely affect the assets, properties, business, financial condition or
results of operations of Southland or any Southland Subsidiary or the ability of
Southland or any Southland Subsidiary to carry out the transactions contemplated
in this Agreement. Except as may be disclosed on such Schedule, there are no
unresolved disputes under any contract to which Southland or any Southland
Subsidiary is a party or by which Southland or any Southland Subsidiary is bound
involving in the aggregate an amount in excess of $10,000. Neither Southland nor
any Southland Subsidiary is in default with respect to any order, writ, award,
judgment, injunction or decree of any court, governmental or
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administrative body or agency, or arbitrator applicable to it which could have
a materially adverse effect on the assets, properties, business, financial
condition or results of operations of Southland or any Southland Subsidiary.
(q) Compliance with Laws. Southland and each of the Southland
Subsidiaries has complied with all laws, regulations, orders, ordinances,
judgments or decrees of all governmental authorities (federal, state, local,
foreign or otherwise) applicable to its businesses, except where the failure to
have so complied would not, individually or in the aggregate, have a material
adverse effect on the assets, properties, business, financial condition or
results of operations of Southland or any Southland Subsidiary. Except as
disclosed in Section 2(q) of the Southland Schedule, neither Southland nor any
Southland Subsidiary has received any notification of any asserted failure by it
to comply with any of such laws.
(r) Taxes.
(i) Except as disclosed in Section 2(r)(i) of the Southland
Schedule: (a) all Tax Returns (as defined below) required to be filed
with the appropriate taxing authorities have been filed by or on
behalf of Southland or any Southland Subsidiary and all Taxes (as
defined below) shown to be due on such Tax Returns have been paid or
provided for in full; (b) there are no liens for Taxes upon the assets
of Southland or any Southland Subsidiary except statutory liens for
Taxes not yet due; (c) there are no outstanding deficiencies in
respect of Taxes asserted or threatened or assessments of Taxes made
or threatened, nor any administrative or judicial proceedings pending
or threatened concerning Taxes, with respect to Southland or any
Southland Subsidiary and any deficiencies, assessments or proceedings
shown in the Southland Schedule are being contested in good faith
through appropriate proceedings; (d) Southland has established on the
financial statements described in Section 2(h) of this Agreement
reserves and accruals adequate for the payment of all Taxes accruing
with respect to or payable by Southland and each Southland Subsidiary
for all periods reflected therein; (e) there are no outstanding
agreements or waivers extending the statutory period of limitations
applicable to any Tax Returns required to be filed with respect to
Southland or any Southland Subsidiary; and (f) Neither Southland nor
any Southland Subsidiary has requested any extension of time within
which to file any Tax Return, which Tax Return has not been filed.
(ii) The appropriate income Tax Returns of Southland and each
Southland Subsidiary have been examined by (a) the Internal Revenue
Service or the statute of limitations has expired for all periods up
to and including December 31,
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1992 and (b) the taxing authorities of all of the states disclosed in
the Southland Schedule pursuant to Section 2(b) or the statute of
limitations has expired for all periods up to and including December
31, 1992, respectively, and there are no outstanding or unresolved
proposed adjustments.
(iii) Except as disclosed in Section 2(r)(iii) of the Southland
Schedule, no power of attorney has been granted by Southland or any
Southland Subsidiary with respect to any matter relating to Taxes which
is currently in force.
For purposes of this Agreement, the term "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including without limitation, all
net income, gross income, premium or privilege, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs duties, fees, assessments, or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any governmental authority (domestic or foreign) upon
Southland or any Southland Subsidiary and applicable to the period ending as of
the close of business on the date of the Effective Time, but excluding any tax
that accrues or arises as a result of the transactions contemplated by this
Agreement, and the term "Tax Returns" shall mean all returns, declarations,
reports, estimates, and statements, regarding Taxes, required to be filed under
United States federal, state, local or any foreign laws.
(s) Related Party Transactions. Except as disclosed in Section 2(s)
of the Southland Schedule, neither Southland nor any Southland Subsidiary has
made any loan to any director, officer or other affiliate of Southland or a
Southland Subsidiary which remains outstanding nor has Southland or any
Southland Subsidiary entered into any agreement, other than an agreement
referred to in Paragraph (o) hereof, for the purchase or sale of any property or
services from or to any director, officer or other affiliate of Southland or a
Southland Subsidiary.
(t) Employee Benefit Plans.
(i) Section 2(t)(i) of the Southland Schedule sets forth a true
and complete list of each employee benefit plan, as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and each other plan, arrangement and agreement providing
employee benefits (collectively the "Plans"), that covers current or
former employees of Southland or any Southland Subsidiary or affiliate
and is presently maintained by Southland or any Southland Subsidiary or
any affiliate thereof or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with Southland
would be deemed a
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"single employer" within the meaning of Section 4001 of ERISA. None of
the Plans is a "multi-employer plan," as defined in Section 3(37) of
ERISA. Southland has delivered or made available to CIC copies of all
such Plans; any related trust agreements, group annuity contracts,
insurance policies or other funding agreements or arrangements
relating thereto; the most recent determination letter, if any, from
the Internal Revenue Service with respect to each of the Plans which
is subject to ERISA ("ERISA Plans"); actuarial valuations, if
applicable, for the most recent plan year for which such valuations
are available; the current summary plan descriptions; and the annual
return/report on Form 5500 and summary annual reports for each of the
Plans for each of the last three years.
(ii) Each of the ERISA Plans is in substantial compliance with
all applicable provisions of law, including the Code and ERISA. Neither
Southland nor any ERISA Affiliate currently maintains or sponsors a
defined benefit pension plan as defined in Section 414(j) of the Code
and neither Southland nor any ERISA Affiliate has ever maintained or
sponsored any such plan that could give rise to a liability against
Southland or any Southland Subsidiary.
(iii) The written terms of each of the Plans, and any related
trust agreement, group annuity contract, insurance policy or other
funding arrangement are in substantial compliance with all applicable
laws including ERISA, the Code, and the Age Discrimination in
Employment Act, as applicable, and each of such Plans has been
administered in substantial compliance with such requirements.
(iv) Except with respect to income taxes on benefits paid or
provided, no income, excise or other tax or penalty (federal or state)
has been waived or excused, has been paid or is owed by any person
(including, but not limited to, any Plan, any Plan fiduciary, Southland
and ERISA Affiliates) with respect to the operations of, or any
transactions with respect to, any Plan. No action has been taken, nor
has there been any failure to take any action, nor is any action or
failure to take action contemplated, that would subject any person or
entity to any liability for any tax or penalty in connection with any
Plan. No reserve for any taxes or penalties has been established with
respect to any Plan, nor has any advice been given to any person with
respect to the need to establish such a reserve.
(v) There are no (A) actions, suits, arbitrations or claims
(other than routine claims for benefits), (B) legal, administrative or
other proceedings or governmental investigations or audits, or (C)
complaints to or by any
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governmental entity, which are pending, anticipated or threatened,
against the Plans or their assets.
(vi) The present value of the future cost to Southland and
ERISA Affiliates of post-retirement medical benefits that Southland or
any ERISA Affiliate is obligated to provide, calculated on the basis
of actuarial assumptions Southland considers reasonable estimates of
future experience and which have been provided to CIC, does not exceed
the amount specified in Section 2(t)(vi) of the Southland Schedule.
(vii) Neither Southland nor any ERISA Affiliate, nor any of
the ERISA Plans, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with
which Southland or any ERISA Affiliate, any of the ERISA Plans, any
such trust, or any trustee or administrator thereof, or any party
dealing with the ERISA Plans or any such trust could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code.
Neither Southland nor any ERISA Affiliate is, or, as a result of any
actions, omissions, occurrences or state of facts existing prior to
the Effective Time, may become liable for any tax imposed under
Section 4978 of the Code.
(u) Insurance. All properties of Southland and each Southland
Subsidiary are covered by valid and currently effective insurance policies
issued in favor of Southland or a Southland Subsidiary. Disclosed in Section
2(u) of the Southland Schedule is a list of all insurance policies covering
Southland and the Southland Subsidiaries. Southland or a Southland Subsidiary
is included as an insured party under such policies or has full rights as a
loss payee. No notice of cancellation or termination has been received with
respect to any such policy. Such policies will not be terminable or cancelable
by reason of this Agreement and the consummation of the transactions
contemplated hereby.
(v) Insurance Business. Except as disclosed in Section 2(v) of the
Southland Schedule, all policies of insurance issued by Southland and Peoples
as now in force are, to the extent required under applicable law, on forms
approved by applicable insurance regulatory authorities or which have been
filed and not objected to by such authorities within the period provided for
objection. Any premium rates required to be filed with or approved by insurance
regulatory authorities have been so filed or approved and premiums charged
conform thereto.
Each of the contracts between Southland or Peoples and its agents,
managers or brokers is in full force and effect. Neither Southland or Peoples
is and to the knowledge of Southland none of
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the agents are in default in any material respect thereunder, and no such party
thereto may terminate any such agreements by reason of the transactions
contemplated by this Agreement.
Each of Southland and Peoples has paid in full all guaranty fund
assessments required by any regulatory authority to be paid by either of them.
(w) Reinsurance. Section 2(w) of the Southland Schedule discloses
all reinsurance treaties or agreements to which Southland or Peoples is a party
or is a named reinsured or is the reinsurer. Except as disclosed in such
Schedule, all such treaties or agreements are in full force and effect through
the respective dates noted on such Schedule. Neither Southland nor Peoples is
in default under any agreement listed on Section 2(w) of the Southland Schedule
nor to the knowledge of Southland or Peoples is any other party in default
thereunder except as disclosed in such Schedule. No party may terminate any
such agreements by reason of the transactions contemplated by this Agreement.
(x) Regulatory Filings. Southland has made available for inspection
by CIC all registrations, filings or submissions made by Southland or Peoples
with any governmental or regulatory body and delivered to CIC each and every
annual and quarterly statutory financial statement filed with or submitted to
any state insurance governmental or regulatory body and any state insurance
reports of examinations issued by any such state insurance governmental or
regulatory body since December 31, 1990. Southland and each Southland Subsidiary
has filed all reports, statements, documents, registrations, filings or
submissions required to be filed by it with any governmental or regulatory body,
except (i) those with respect to which the imposition, levy or collection of all
fines, penalties, assessments, taxes, forfeitures, money judgments or sanctions
of any type are barred by statute of limitations, (ii) with respect to which the
failure to so file individually and in the aggregate does not have a material
adverse effect on the assets, properties, business, financial condition or
results of operations of Southland or any Southland Subsidiary, and (iii) as
otherwise agreed to in writing by the applicable governmental or regulatory
body. Except as disclosed in Section 2(x) of the Southland Schedule, (aa) all
such registrations, filings and submissions were in material compliance with
applicable law when filed, and (bb) no material deficiencies have been asserted
by any such governmental or regulatory body with respect to such registrations,
filings and submissions that have not been satisfied. Except as may be required
for the transactions contemplated by this Agreement, each of Southland and
Peoples has duly filed with appropriate insurance authorities, to the extent
that filing of the same is required by laws, rules or regulations, all annual
and quarterly statements and other
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statements, documents and reports (including, without limitation, any filings
required under applicable state insurance holding company systems acts) required
by the insurance and other laws of its state of domicile and in each of the
states in which it is licensed to conduct an insurance business. All such
statements and filings are correct as filed, and there are no omissions
therefrom, except as set forth in the Southland Schedule. The Southland Schedule
sets forth all reports of examination issued by any department of insurance or
regulatory body with respect to Southland or Peoples since December 31, 1990.
Except as disclosed in Section 2(x) of the Southland Schedule, Southland and
Peoples have resolved all issues raised in such reports to the satisfaction of
the issuer of such reports.
(y) Agents. Set forth in Section 2(y) of the Southland Disclosure
Schedule is a true and correct summary description of the compensation
arrangements of each of Southland and Peoples with its agents and general
agents.
(z) Powers of Attorney; Guarantees. Except as disclosed in Section
2(z) of the Southland Schedule, neither Southland nor any Southland Subsidiary
has any obligation to act under any outstanding power of attorney or any
obligation or liability, either accrued, accruing or contingent, as guarantor,
surety, co-signer, endorser (other than for purposes of collection in the
ordinary course of business of Southland or any Southland Subsidiary), co-maker
or indemnitor in respect of the obligation of any person, corporation,
partnership, joint venture, association, organization or other entity.
(aa) Reserves. Except as disclosed in Section 2(aa) of the Southland
Schedule, the insurance reserves and liabilities reflected in the annual
statutory financial statements and established on the books of Southland and
Peoples for all future insurance policy benefits, dividends, losses, claims and
expenses make a sufficient provision for all of their reasonably anticipated
matured and unmatured liabilities and obligations under all insurance policies
and reinsurance and coinsurance agreements or other similar contracts
outstanding at the foregoing dates pursuant to which either of them had or has
any liability or obligation. All such reserves are computed in all material
respects in accordance with applicable statutory accounting principles and
generally accepted loss reserving practices, consistently applied, are fairly
stated in accordance with sound loss reserving principles, are based on factors
relevant to the provisions in the related insurance contracts, and are in
material compliance with the requirements of the insurance laws of the
applicable jurisdiction. Each of Southland and Peoples owns assets which qualify
as admitted assets under applicable state insurance laws in an amount at least
equal to all of its required insurance reserves.
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(ab) Finders and Investment Bankers. Neither Southland nor any
Southland Subsidiary has retained any broker, finder or other agent or incurred
any liability for any brokerage fees, commissions or finders' fees with respect
to the Merger.
(ac) Third Party Discussions. Other than pursuant to this Agreement,
Southland is not currently entertaining discussions with any third party
regarding a possible sale or merger of Southland or any Southland Subsidiary or
a substantial portion of their assets or business.
(ad) Disclosure. No representation or warranty of Southland and no
statement or information relating to Southland or any Southland Subsidiary or
their respective businesses or properties contained in (i) this Agreement, (ii)
the Southland Schedule, or (iii) in any certificate furnished or to be furnished
to CIC or Southwide Life pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements made herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CIC
CIC represents and warrants to Southland as follows:
(a) Organization of CIC and Southwide Life. CIC is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Southwide Life is an insurance company duly organized and validly
existing under the laws of the State of Alabama; and each of them has the
corporate power to own or lease its properties and carry on its business as now
being conducted. Southwide Life has all requisite power and authority to carry
on an insurance business pursuant to and to the extent of the certificates of
authority issued under the laws of the states listed in Section 3(a) of the
schedule delivered by Southwide Life to Southland concurrently with the
execution of this Agreement (the "Southwide Life Schedule"). The Southwide Life
Schedule indicates the line or lines of insurance which Southwide Life is
permitted to write with respect to each certificate of authority listed. No
certificate of authority identified in such Schedule has been revoked,
restricted, suspended, limited or modified nor is any certificate of authority
the subject of, nor to the knowledge of Southwide Life is there a basis for, a
proceeding for revocation, restriction, suspension, limitation or modification,
nor is Southwide Life operating under any formal or informal agreement or
understanding with the licensing authority of any state which restricts its
authority to do business or requires it to take, or refrain from
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taking, any action. Southwide Life is a wholly-owned subsidiary of CIC.
(b) Authorization. The Board of Directors of each of CIC and
Southwide Life has adopted resolutions approving the transactions contemplated
by this Agreement and has authorized the execution and delivery of this
Agreement by CIC and Southwide Life, respectively. CIC and Southwide Life each
has full power and authority to enter into this Agreement and subject to
obtaining all required regulatory approvals, to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by CIC
and Southwide Life and constitutes the valid and legally binding obligation of
each of them, enforceable against them in accordance with its terms, subject to
bankruptcy, receivership, insolvency, reorganization, moratorium or similar laws
affecting or relating to creditors rights generally and subject to general
principles of equity.
(c) Consents and Approvals. Except for consents and approvals
listed on the schedule attached hereto (the "CIC Consent Schedule"), no filing
with, and no permit, authorization, consent or approval of, any public body or
authority is necessary for the consummation by CIC or Southwide Life of the
transactions contemplated by this Agreement.
(d) Defaults and Conflicts. Subject to the receipt of all consents
and approvals contemplated by this Agreement, neither the execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby nor
the fulfillment of and compliance with the terms and provisions hereof will (i)
violate any judicial or administrative order, writ, award, judgment, injunction
or decree involving CIC or Southwide Life, or (ii) conflict with any of the
terms, conditions or provisions of the charter or bylaws of CIC or Southwide
Life. No consent of any third party to any indenture or any material agreement
or other material instrument to which CIC or Southwide Life is a party is
required in connection with the Merger.
(e) Compliance with Laws. Southwide Life has complied with all
laws, regulations, orders, ordinances, judgments or decrees of all governmental
authorities (federal, state, local, foreign or otherwise) applicable to its
business, except where the failure to have so complied would not, individually
or in the aggregate, have a material adverse effect on its assets, properties,
business, financial condition or results of operations. Southwide Life has not
received any notification of any asserted failure by it to comply with any of
such laws.
(f) Proxy Statement Information. None of the information supplied
or to be supplied by CIC or Southwide Life in writing expressly for inclusion in
the proxy statement to be mailed to the shareholders of Southland in connection
with the Merger or in
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any amendments thereof or supplements thereto will, at the time of (i) the
first mailing thereof and (ii) the meeting of shareholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any 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.
(g) Funds Available. CIC has or at the Effective Time will have
available to it, subject to the availability to it of the Southwide Cash
Amount, sufficient funds to perform all of its obligations pursuant to the
Merger and shall make or cause to be made the payments required by Article I
hereof to be made by it.
ARTICLE IV
RIGHT TO INVESTIGATE
Southland shall afford to the officers and authorized representatives
of CIC free and full access to the offices, properties, books and records of
Southland in order that CIC may have full opportunity to make such
investigations as they shall desire of the affairs of Southland and the
Southland Subsidiaries, and the officers of Southland shall furnish CIC with
such additional financial and operating data and other information as to the
assets, properties and business of Southland and the Southland Subsidiaries as
CIC shall from time to time reasonably request. Southland and the Southland
Subsidiaries shall consent to the review by the officers and authorized
representatives of CIC of the reports and working papers of Southland's
independent auditors and to discussions by the officers and authorized
representatives of CIC with parties with which Southland and the Southland
Subsidiaries have business relationships. All such information shall be held in
confidence by CIC.
ARTICLE V
COVENANTS OF SOUTHLAND
(a) Ordinary Course. Between the date hereof and the Effective
Time of Merger, the respective businesses of Southland and the Southland
Subsidiaries will be conducted only in the ordinary course of business and
consistent with past practices.
(b) Liabilities. Between the date hereof and the Effective Time,
without the prior written consent of CIC, neither Southland nor any Southland
Subsidiary will agree to incur or to become subject to any material liability
or obligation (absolute, contingent or otherwise) except liabilities incurred
or obligations under contracts entered into in the ordinary course of business.
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(c) Changes in Stock. Between the date hereof and the Effective
Time, unless the prior written consent of CIC is first obtained, neither
Southland nor any Southland Subsidiary will (i) make any change in its
authorized capital stock, (ii) issue any stock options, nor issue any warrants,
or other rights calling for the issue, transfer, sale or delivery of its capital
stock or other securities, (iii) pay any stock dividend or make any
reclassification in respect of its outstanding shares of capital stock, (iv)
issue, sell, exchange or deliver any shares of its capital stock (or securities
convertible into or exchangeable, with or without additional consideration, for
such capital stock), (v) purchase or otherwise acquire for a consideration any
outstanding shares of its capital stock, or (vi) declare, pay or set apart in
respect of its capital stock any dividends or other distributions or payments.
(d) New Agreements. Except as disclosed in Section 5(d) of the
Southland Schedule, between the date hereof and the Effective Time, neither
Southland nor any Southland Subsidiary will, without the prior written consent
of CIC, amend in any material respect or enter into any contract, agreement or
other instrument of the types described in Article II(o) hereunder or pay any
bonus or make any special awards to any of the directors, officers, employees,
agents or affiliates of Southland.
(e) Consents. Southland shall, as soon as practicable, prepare or
cause to be prepared and made all necessary filings with all governmental or
regulatory bodies or other entities and shall use its best efforts to obtain all
consents, waivers, approvals, authorizations, rulings or orders from all
governmental or regulatory bodies or other entities listed in Section 2(f) of
the Southland Schedule and furnish true, correct and complete copies of each
thereof to CIC.
(f) Notice. Southland shall give prompt notice to CIC of (i) any
notice of, or other communication relating to, a default or event which with
notice or lapse of time or both would become a default, received by Southland or
any Southland Subsidiary subsequent to the date of this Agreement and prior to
the Effective Time, under its charter or by-laws or any indenture, or material
instrument or agreement, to which Southland is a party, by which it or any of
its properties is bound or to which it or any of its properties is subject, (ii)
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated hereby and (iii) any matter which, if it had occurred prior to the
date hereof, would have been required to be included on the Southland Schedule.
(g) Shareholders' Meeting. Southland shall duly call a meeting of
its shareholders to be held at the earliest practicable date for the purpose of
voting on the Agreement and,
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in connection therewith, Southland shall prepare and file with the Alabama
Commissioner, as soon as is reasonably practicable, the required proxy
materials with respect thereto and shall use its best efforts to obtain
clearance by the Alabama Commissioner of the mailing of such material to the
Southland shareholders. Southland agrees to use its best efforts to obtain the
necessary approval of the Agreement by the shareholders of Southland.
(h) No Solicitation. Southland, acting through any director or
officer or other agent, shall not, nor shall it knowingly permit any of the
Southland Subsidiaries to, nor shall it authorize or knowingly permit any
officer, director or employee of, or any investment banker, attorney, accountant
or other representative retained by, Southland or any of the Southland
Subsidiaries, to solicit or encourage, including by way of furnishing
information, any inquiry or the making of any proposal which may reasonably be
expected to lead to any Takeover Proposal with respect to Southland. Southland
shall promptly advise Southwide orally and in writing of any such inquiry or
proposal received by Southland after the date hereof. As used in this section,
"Takeover Proposal" shall mean any proposal for a merger or other business
combination involving Southland or any Southland Subsidiary or for the
acquisition of a substantial equity interest in Southland or any Southland
Subsidiary, or for the acquisition of a substantial portion of the assets of
Southland or any Southland Subsidiary, except for the Merger. Notwithstanding
the foregoing, Southland and the Southland Subsidiaries may furnish information
concerning Southland's business, properties or assets to a corporation,
partnership, person or other entity or group (a "Third Party") which has
initiated the possibility of effecting a transaction with Southland and has
expressed an intention to make a bona fide offer or proposal to acquire
Southland or any Southland Subsidiary and, following such receipt of such bona
fide offer or proposal, may negotiate and take any of the actions otherwise
prohibited by this section, including without limitation recommending the
transaction with the Third Party to the shareholders of Southland and entering
into appropriate agreements with such Third Party, if the Board of Directors of
Southland believes in good faith, after consultation with its financial adviser,
that such actions would result in a financial transaction for the Southland
shareholders superior to the Merger, and if Bradley, Arant, Rose & White or
other counsel of national reputation provides a written opinion to the Board of
Directors of Southland to the effect that the failure to furnish such
information, recommend the transaction with the Third Party to the shareholders
of Southland, negotiate or enter into appropriate agreements with such Third
Party would subject Southland directors to liability for breach of their
fiduciary duties. In the event that Southland shall receive an expression of
intention or offer or proposal of the type referred to in the
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foregoing sentence, it shall promptly inform CIC as to any such inquiry, offer
or proposal.
(i) Reports. Promptly after filing with the applicable authorities,
Southland shall provide to CIC copies of (i) its Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996 as filed with the SEC, which shall
conform to the requirements for SEC Reports specified in Article II(h) above;
and (ii) its statutory financial statements for the quarter ended September 30,
1996 as filed with the Alabama Commissioner, which shall conform to the
requirements for Statutory Financial Statements specified in Article II(i)
above.
(j) Closing Funds. Within ten (10) business days following the date
on which the last of the conditions set forth in Articles VIII(e), VIII(f),
VIII(k), VIII(l), VIII(m), IX(d), Article X(a) and X(b) have been satisfied (or,
except for Articles VIII(e) and X(b), waived), Southland shall take all actions
with respect to its invested funds as may be reasonably requested by CIC to
provide cash amounts sufficient for the payment to CIC of the Southwide Cash
Amount as contemplated by Article I(g)(iii)(B).
(k) Cooperation. Southland and the Southland Subsidiaries shall
execute such documents and other papers, provide such information, and take
such further actions as may be reasonably requested by CIC to carry out the
provisions hereof and to consummate the transactions contemplated hereby.
(l) Conditions Precedent. Southland and the Southland Subsidiaries
shall use their best efforts to cause all of the conditions precedent to the
consummation of the Merger applicable to them to be met.
ARTICLE VI
COVENANTS OF CIC
(a) Consents. CIC shall, as soon as practicable, prepare and make
all necessary filings with all governmental or regulatory bodies or other
entities and shall use its best efforts to obtain all consents, waivers,
approvals, authorizations, rulings or orders from all governmental or regulatory
bodies or other entities listed on the CIC Consent Schedule and furnish true,
correct and complete copies of each to Southland.
(b) Indemnification Provision.
(i) With respect to any claim that is made prior to
the period ending six (6) years after the Effective Time, Southland
shall, and CIC shall cause Southland to,
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indemnify, defend and hold harmless the present and former directors,
officers, employees and agents of Southland and its subsidiaries
(each, an "Indemnified Party") against all liabilities arising out of
actions or omissions occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement), to the
full extent permitted under the laws of the State of Alabama and by
Southland's bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of
any litigation. Without limiting the foregoing, in any case in which
approval by Southland or the Surviving Corporation is required to
effectuate any indemnification, CIC shall direct, at the election of
the Indemnified Party, that the determination of any such approval
shall be made by independent counsel mutually agreed upon between CIC
and the Indemnified Party. In no event shall CIC itself have any
indemnification obligations hereunder.
(ii) The Surviving Corporation shall not be liable for
any settlement effected without its prior written consent. The
Surviving Corporation shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law.
(iii) If the Surviving Corporation or any of its
successors or assigns shall consolidate with or merge into any other
person and shall not be the continuing or surviving person of such
consolidation or merger or shall transfer all or substantially all of
its assets to any person, then, and in each case, proper provision
shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Article
VI(b).
(iv) The provisions of this Article VI(b) are intended
to be for the benefit of, and enforceable by, each Indemnified Party,
his or her heirs and representatives.
(c) Cooperation. CIC shall execute and shall cause Southwide Life
to execute such documents and other papers, provide such information, and take
such further actions as may be reasonably requested by Southland to carry out
the provisions hereof and to consummate the transactions contemplated hereby.
(d) Conditions Precedent. CIC shall use its best efforts and shall
cause Southwide Life to cause all of the conditions precedent to the
consummation of the Merger applicable to it to be met.
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(e) Employee Matters. Following the Effective Time, CIC (or one of
its subsidiaries, including the Surviving Corporation), shall provide or cause
Southland to provide generally to persons serving as officers of or employed by
Southland and its subsidiaries employee benefits under employee benefit plans
(other than stock option or other plans involving the potential issuance of
Common Stock of CIC or its affiliates), on terms and conditions which, when
taken as a whole, are substantially similar to those currently provided by CIC
to its similarly situated officers and employees. CIC also shall cause the
Surviving Corporation and its subsidiaries to honor, in accordance with their
terms all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under any employee benefit plan of
Southland, provided however CIC itself shall not be obligated to make any such
payments. Except as otherwise contemplated in Article VIII(g) and VIII(h) of
this Agreement, the parties acknowledge that nothing in this Agreement shall be
construed as constituting an employment agreement between CIC or any of its
affiliates and any person serving as officers of or employed by Southland or
its subsidiaries as of the date hereof or immediately prior to the Effective
Time or as constituting an obligation on the part of CIC or any of its
affiliates to employ any such officers or employees.
(f) CIC Obligations. From and after the Effective Time, CIC shall
guarantee the performance of Southland's obligations under the (i) Deferred
Compensation and Non-Compete Agreement by and between Southland and Xxxxxxx
dated October 3, 1996 and (ii) the Consulting Agreement referenced in Article
VIII(g) hereof.
(g) Employment Agreements. Prior to Closing, CIC shall use its
best efforts to enter into employment agreements with Xxxxxx X. Xxxxxxx, Xxxxxx
Xxxxxxxx and Xxxxxx X. Xxxx in form mutually acceptable to the parties.
ARTICLE VII
CLOSING AND CLOSING DOCUMENTS
(a) Closing. The closing ("Closing") under this Agreement shall be
held at the offices of CIC at 10:00 a.m., Central Time, as promptly as
practicable after the fulfillment or waiver of all the terms and conditions
contained in Articles VII, VIII, IX and X of this Agreement, or at such other
place and time as shall be mutually agreeable to the parties. The required
number of fully executed and verified copies of the Articles of Merger shall be
filed immediately after the Closing with the Secretary of State of Alabama.
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(b) Southland Closing Documents. At the Closing, Southland shall
deliver, or cause to be delivered, to CIC:
(i) A certificate of Southland, signed by its
President, which shall confirm the compliance by Southland in all
material respects with its covenants and agreements contained in this
Agreement and the accuracy in all material respects of the
representations and warranties made by Southland in this Agreement at
and as of the Effective Time as if made at such time and as
contemplated by this Agreement.
(ii) The opinions of Phelps, Jenkins, Xxxxxx & Xxxxxx
and/or Bradley, Arant, Rose & White, counsel for Southland, dated the
Effective Time, and in form and substance satisfactory to CIC,
covering the matters set forth in Exhibit A hereto.
(iii) A certificate of Southland's inspector of elections
as to the vote taken at the meeting of the holders of shares of
Southland Common Stock with respect to this Agreement and as to the
holders of shares of Southland Common Stock that shall have demanded
payment of the fair value of their shares of Southland Common Stock
pursuant to the ABCA.
(iv) Written resignations, effective the Effective
Time, of those directors of Southland and the Southland Subsidiaries
specified on a schedule to be delivered by CIC to Southland prior to
the Closing (the "Directors Schedule").
(v) Articles of Incorporation of Southland and each of
the Southland Subsidiaries certified by the Judge of Probate of
Tuscaloosa County, State of Alabama within ten (10) days prior to the
Closing.
(vi) Certificate of good standing of Southland and each
of the Southland Subsidiaries certified by the Secretary of State of
Alabama (or the Judge of Probate of Tuscaloosa County or the Alabama
Commissioner, as applicable) dated the date of the Closing.
(c) CIC Closing Documents. At the Closing, CIC shall deliver, or
cause to be delivered, to Southland a Certificate of CIC, signed by its
President or Vice President, which shall confirm the compliance by CIC in all
material respects with its covenants and agreements contained in this Agreement
and the accuracy in all material respects of the representations and warranties
made by it in this Agreement at and as of the Effective Time as if made at such
time and as contemplated by this Agreement.
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF CIC
The obligations of CIC under this Agreement to cause this Agreement to
become effective and have the transactions contemplated hereby be consummated
are, at their option, subject to the conditions that:
(a) Validity of Representation and Warranties. The representations
and warranties of Southland herein contained shall be true in all material
respects when made and, in addition, shall be true in all material respects on
and at the Effective Time with the same force and effect as though made on and
at the Effective Time (provided that the representations and warranties which
are confined to a specific date shall speak only as of such date).
(b) Consents. All consents, waivers, approvals, authorizations or
orders listed in Section 2(f) of the Southland Schedule shall have been
obtained by Southland and copies of the same shall have been delivered to CIC.
(c) Compliance with Covenants. Southland shall have performed in
all material respects all obligations and agreements and complied with all
covenants and conditions contained in this Agreement to be performed and
complied with by it at or prior to the Effective Time.
(d) Opinion of Counsel. CIC shall have received the opinions of
counsel for Southland specified in Article VII(b)(ii).
(e) Approval of Southland Shareholders. This Agreement shall have
been approved and adopted at a duly called meeting of the shareholders of
Southland Common Stock by at least two-thirds of the issued and outstanding
shares of Southland Common Stock entitled to vote thereon.
(f) Dissenting Southland Shares. The holders of not more than 5%
of the issued and outstanding shares of Southland Common Stock at the Effective
Time shall have delivered written notice of intent to demand payment of the
fair value of their shares of Southland Common Stock pursuant to Article 13 of
the ABCA.
(g) Xxxxxxx Consulting Agreement. CIC shall have received from
Xxxxxxx X. Xxxxxxx a consulting agreement with Southland in the form previously
agreed to by the parties.
(h) Resignations. The directors of Southland and the Southland
Subsidiaries as specified in the Directors Schedule
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shall have tendered their resignations in writing, effective on the Effective
Time.
(i) Peoples Shares. All of the outstanding shares of stock of
Peoples not owned by Southland shall have been transferred to persons or
entities specified by CIC.
(j) Southland Book Value. The book value of Southland as of
September 30, 1996, determined in accordance with SAP, shall be at least
$5,166,000.
(k) Southland Investment Portfolio. The unrealized loss on
Southland's investment portfolio at September 30, 1996, to the extent not
included in the book value of Southland as of that date determined as specified
in Article VIII(j) above, and based on current quoted market values or other
methods of valuing investments reasonably satisfactory to CIC, shall be no
greater than $500,000.
(l) Licenses. Southland shall have delivered to CIC evidence
satisfactory to CIC that Southland's and Southland Subsidiaries' existing
licenses and governmental authorizations necessary for them to conduct business
remain in full force and effect and are not subject to any restriction.
(m) Southwide Cash Amount. CIC shall receive from Southland
evidence reasonably satisfactory to it that Southland will have available to it
immediately before the Effective Time the Southwide Cash Amount.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SOUTHLAND
The obligations of Southland under this Agreement to cause this
Agreement to become effective and have the transactions contemplated hereby be
consummated are, at its option, subject to the conditions that:
(a) Validity of Representations and Warranties. The representations
and warranties of CIC and Southwide Life herein contained shall have been in all
material respects true when made and, in addition, shall be true in all material
respects on and at the Effective Time with the same force and effect as though
made on and at the Effective Time.
(b) Consents. All consents, waivers, approvals, authorizations or
orders listed on the CIC Consent Schedule shall have been obtained by CIC and
copies of the same shall have been delivered to Southland.
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(c) Compliance with Covenants. CIC and Southwide Life shall have
performed in all material respects all obligations and agreements and complied
with all covenants and conditions contained in this Agreement to be performed
and complied with by them at or prior to the Effective Time.
(d) Fairness Opinion. The Board of Directors of Southland shall
have received no later than the close of business on October 9, 1996, an opinion
of Xxxxxx, White & Company, Inc. to the effect that the consideration to be
received by the shareholders of Southland pursuant to the Merger Agreement is
fair to the shareholders of Southland from a financial point of view and such
opinion shall not have been withdrawn as of the date of Southland's proxy
statement relating to the meeting of shareholders described in Article V(g).
Southland shall use its good faith, best efforts to cause the opinion described
above to be rendered to Southland on or before October 9, 1996.
(e) Availability of Funds. Southland shall receive from CIC
evidence reasonably satisfactory to Southland that CIC has, or immediately
before the Effective Time will have, available to it sufficient cash from which
to make the payments contemplated to be made by it pursuant to Article I hereof.
ARTICLE X
CONDITIONS APPLICABLE TO CIC, SOUTHWIDE LIFE AND SOUTHLAND
The obligations of CIC and Southwide Life and of Southland,
respectively, under this Agreement to cause this Agreement to become effective
and have the transactions contemplated hereby be consummated are subject to the
following terms and conditions:
(a) Governmental Approvals. A written order approving the Merger
and the transactions contemplated thereby from the Alabama Commissioner pursuant
to the Alabama insurance laws and any approvals of the Merger as may be required
by other insurance regulatory authorities shall have been obtained at or prior
to the Effective Time.
(b) Injunction. The consummation of the Merger shall not have been
restrained, enjoined or prohibited by any court or governmental authority of
competent jurisdiction. No material litigation or administrative proceeding
shall be pending or threatened as of the Effective Time seeking to restrain,
enjoin or prohibit the consummation of this Agreement or the Merger.
(c) Effective Time. The Effective Time shall be no later than 5:00
P.M. Central Time on December 31, 1996.
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ARTICLE XI
TERMINATION AND TERMINATION FEE
(a) Termination. This Agreement and the transactions contemplated
by this Agreement may be terminated at any time prior to the filing of the
Articles of Merger with the Secretary of State of Alabama, whether before or
after action by the shareholders of Southland as contemplated by Article V(h) of
this Agreement and without further approval by the outstanding shareholders of
Southland (i) by mutual written consent of the Boards of Directors of CIC and
Southland, (ii) by action of the Board of Directors of CIC in the event of a
failure of a condition set forth in Article VIII of this Agreement as of the
time such condition is required hereunder to be fulfilled, (iii) by action of
the Board of Directors of Southland in the event of failure of a condition set
forth in Article IX of this Agreement as of the time such condition is required
hereunder to be fulfilled, (iv) in the event Southland enters into an agreement
with a Third Party or recommends a transaction with a Third Party as
contemplated by Article V(h) hereof, or (v) by action of the Board of Directors
of either CIC or Southland in the event of a failure of a condition set forth in
Article X of this Agreement as of the time such condition is required hereunder
to be fulfilled.
(b) Termination Fee. If Southland and CIC fail to consummate the
Merger and Southland enters into a binding commitment or agreement with a Third
Party regarding a Takeover Proposal with any Third Party (as such terms are
defined in Article V(h) above), on or prior to June 30, 1997, then Southland
shall promptly pay to CIC in cash the sum of five hundred thousand dollars
($500,000); provided, however, that such amount shall not be payable by
Southland if Southland was entitled not to consummate the Merger with CIC
because of (i) a failure of CIC to satisfy its obligations under this Agreement,
or a breach by CIC of any provision of this Agreement which entitled Southland
not to consummate the Merger, or (ii) failure to obtain the approval of the
Merger and the transactions contemplated thereby from the Alabama Commissioner
pursuant to the Alabama insurance laws and any approvals of the Merger that may
be required by other insurance regulatory authorities. In addition, regardless
of whether or not there is a Takeover Proposal, if Southland and CIC fail to
consummate the Merger other than because of (i) the failure of CIC to satisfy
its obligations under the Agreement or a breach by CIC of any provision of this
Agreement which entitled Southland not to consummate the Merger, (ii) the
failure to obtain approval of the Merger and the transactions contemplated
thereby from the Alabama Commissioner pursuant to the Alabama Insurance laws and
any approvals of the Merger that may be required by other insurance regulatory
authorities or (iii) following a diligent and good faith effort by Southland and
after
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the recommendation by the Board of Directors of Southland of the transactions
contemplated by this Agreement, the failure to obtain the approval of the
shareholders of Southland contemplated by Article VIII(e), Southland shall
promptly pay to CIC its reasonable out of pocket expenses incurred in connection
with the Merger.
(c) Survival of Rights. Nothing in this Article XI or elsewhere in
this Agreement shall be construed as limiting the rights or remedies of any
party, including without limitation additional money damages, specific
performance or other injunctive relief, in the event of a breach by any party of
this Agreement.
ARTICLE XII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
Except for the covenants of CIC set forth in Articles I(h)-(l), Article
III(g), Articles VI(e)-(f) above, all of the representations, warranties and
covenants of the parties hereunder shall be deemed to be conditions of the
Merger and shall not survive the Closing.
ARTICLE XIII
MISCELLANEOUS
(a) Payment of Expenses. Except as provided in Article XI above,
whether or not the Merger shall be consummated, each party hereto shall pay its
own expenses incident to preparing for, entering and carrying out this
Agreement and to the consummation of the Merger.
(b) Entire Agreement. This Agreement (together with the Schedules
and Exhibits hereto and the documents referred to herein) contains, and is
intended as, a complete statement of all of the terms of the arrangements
between the parties with respect to the matters provided for herein, and
supersedes any previous agreements and understandings between the parties with
respect to those matters, including, without limitation, the agreement in
principle between CIC and Southland dated July 17, 1996.
(c) Modifications, Amendments and Waivers. At any time prior to the
Effective Time, the parties hereto may, by written agreement, (a) extend the
time for the performance of any of the obligations or other acts of the parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant hereto, (c)
waive compliance with any of the covenants or agreements contained in this
Agreement, or (d) make any other modification of this Agreement approved by the
respective Boards of Directors
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of the parties hereto. This Agreement shall not be altered or otherwise amended
except pursuant to an instrument in writing executed and delivered on behalf of
each of the parties hereto. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
(d) Assignment. This Agreement shall not be assignable by any of
the parties hereto and shall be construed in accordance with the laws of the
State of Alabama.
(e) Schedules. All information set forth in the Southland Schedule
shall be deemed a representation and warranty of Southland as to the accuracy
of such information.
(f) Press Releases. Except as may otherwise be required by law, no
publicity release or announcement concerning this Agreement or the transactions
contemplated hereby shall be made prior to the Effective Time without advance
approval thereof by Southland and CIC. Southland and CIC will cooperate with
each other in the development and distribution of all news releases and other
public information disclosures with respect to this Agreement or any of the
transactions contemplated hereby.
(g) Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, overnight
express service or confirmed facsimile transmission, if to CIC, addressed to
CIC, 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxxx X.
Xxxxxxxxxx, facsimile: (000) 000-0000 (with a copy to Lord, Bissell & Brook, 000
Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxx X. Xxxxxxx, Esq.
(facsimile: (000) 000-0000)); and if to Southland, addressed to Southland, 0000
Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxx,
facsimile: (000) 000-0000 (with a copies to Phelps, Jenkins, Xxxxxx & Xxxxxx,
0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx 00000-0000, Attention: Xxxxx X.
Xxxxxxx, Esq., facsimile: (000) 000-0000) and Bradley, Arant, Rose & White, 0000
Xxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000-0000, Attention: Xxxxxxx X. Xxxxxxxx, Esq.
(facsimile: (000) 000-0000)), or to such other persons as may be designated in
writing by the parties.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
Attest: COLLATERAL INVESTMENT CORP.
/s/ Xxxxxx Xxxxxxx
----------------------------------------- By: /s/ Xxxxx Xxxxxxxxxx
----------------------------------------- ---------------------
Attest: SOUTHWIDE LIFE INSURANCE COMPANY
/s/ Xxxxxx Xxxxxxx
----------------------------------------- By: /s/ Xxxxx Xxxxxxxxxx
----------------------------------------- ---------------------
Attest: SOUTHLAND NATIONAL INSURANCE
CORPORATION
/s/ Xxxxxx Xxxxxxx
----------------------------------------- By: /s/ Xxxxxxx Xxxxxxx
----------------------------------------- --------------------
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) The Merger . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Effective Time . . . . . . . . . . . . . . . . . . . . . 1
(c) Effect of the Merger . . . . . . . . . . . . . . . . . . 2
(d) Articles of Incorporation . . . . . . . . . . . . . . . 2
(e) By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) Directors and Officers . . . . . . . . . . . . . . . . . 2
(g) Conversion of Shares . . . . . . . . . . . . . . . . . . 2
(h) Surrender of Shares . . . . . . . . . . . . . . . . . . 3
(i) Designation of Paying Agent; Investment of Funds . . . . 3
(j) Transmittal Materials . . . . . . . . . . . . . . . . . 4
(k) Dissenting Southland Shares . . . . . . . . . . . . . . 4
(l) Termination of Paying Agent's Duties . . . . . . . . . . 4
(m) Closing of Southland's Transfer Books . . . . . . . . . 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SOUTHLAND . . . . . . . . . . 5
(a) Organization and Standing of Southland . . . . . . . . . 5
(b) Southland Subsidiaries; Insurance Licenses . . . . . . . 5
(c) Authorized Stock . . . . . . . . . . . . . . . . . . . . 6
(d) Authorization . . . . . . . . . . . . . . . . . . . . . 6
(e) Articles of Incorporation and By-laws . . . . . . . . . 6
(f) Consents and Approvals . . . . . . . . . . . . . . . . . 6
(g) Defaults and Conflicts . . . . . . . . . . . . . . . . . 6
(h) SEC Reports; Financial Statements . . . . . . . . . . . 7
(i) Statutory Financial Statements and Other Filings. . . . 8
(j) Changes Since June 30, 1996 . . . . . . . . . . . . . . 8
(k) Properties . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Real Estate and Mortgages . . . . . . . . . . . 9
(ii) Investment Securities . . . . . . . . . . . . . 9
(iii) Title to Property . . . . . . . . . . . . . . . 10
(l) Environmental Laws . . . . . . . . . . . . . . . . . . . 10
(m) Proprietary Rights . . . . . . . . . . . . . . . . . . . 10
(n) Receivables . . . . . . . . . . . . . . . . . . . . . . 10
(o) Agreements . . . . . . . . . . . . . . . . . . . . . . . 11
(p) Litigation . . . . . . . . . . . . . . . . . . . . . . . 11
(q) Compliance with Laws . . . . . . . . . . . . . . . . . . 12
(r) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 12
(s) Related Party Transactions . . . . . . . . . . . . . . . 13
(t) Employee Benefit Plans . . . . . . . . . . . . . . . . . 13
(u) Insurance . . . . . . . . . . . . . . . . . . . . . . . 15
(v) Insurance Business . . . . . . . . . . . . . . . . . . . 15
(w) Reinsurance . . . . . . . . . . . . . . . . . . . . . . 15
(x) Regulatory Filings . . . . . . . . . . . . . . . . . . . 16
-i-
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(y) Agents . . . . . . . . . . . . . . . . . . . . . . . . . 16
(z) Powers of Attorney; Guarantees . . . . . . . . . . . . . 16
(aa) Reserves . . . . . . . . . . . . . . . . . . . . . . . . 17
(ab) Finders and Investment Bankers . . . . . . . . . . . . . 17
(ac) Third Party Discussions . . . . . . . . . . . . . . . . 17
(ad) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CIC . . . . . . . . . . . . . 17
(a) Organization of CIC and Southwide Life . . . . . . . . . 17
(b) Authorization . . . . . . . . . . . . . . . . . . . . . 18
(c) Consents and Approvals . . . . . . . . . . . . . . . . . 18
(d) Defaults and Conflicts . . . . . . . . . . . . . . . . . 18
(e) Compliance with Laws . . . . . . . . . . . . . . . . . . 18
(f) Proxy Statement Information . . . . . . . . . . . . . . 19
(g) Funds Available . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV RIGHT TO INVESTIGATE . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V COVENANTS OF SOUTHLAND . . . . . . . . . . . . . . . . . . . . . 19
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . 19
(b) Liabilities . . . . . . . . . . . . . . . . . . . . . . 20
(c) Changes in Stock . . . . . . . . . . . . . . . . . . . . 20
(d) New Agreements . . . . . . . . . . . . . . . . . . . . . 20
(e) Consents . . . . . . . . . . . . . . . . . . . . . . . . 20
(f) Notice . . . . . . . . . . . . . . . . . . . . . . . . . 20
(g) Shareholders' Meeting . . . . . . . . . . . . . . . . . 20
(h) No Solicitation . . . . . . . . . . . . . . . . . . . . 21
(i) Reports . . . . . . . . . . . . . . . . . . . . . . . . 21
(j) Closing Funds . . . . . . . . . . . . . . . . . . . . . 22
(k) Cooperation . . . . . . . . . . . . . . . . . . . . . . 22
(l) Conditions Precedent . . . . . . . . . . . . . . . . . . 22
ARTICLE VI COVENANTS OF CIC . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Consents . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Indemnification Provision. . . . . . . . . . . . . . . . 22
(c) Cooperation . . . . . . . . . . . . . . . . . . . . . . 23
(d) Conditions Precedent . . . . . . . . . . . . . . . . . . 23
(e) Employee Matters . . . . . . . . . . . . . . . . . . . . 23
(f) CIC Obligations . . . . . . . . . . . . . . . . . . . . 24
(g) Employment Agreements . . . . . . . . . . . . . . . . . 24
ARTICLE VII CLOSING AND CLOSING DOCUMENTS . . . . . . . . . . . . . . . . . 24
(a) Closing . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Southland Closing Documents . . . . . . . . . . . . . . 24
(c) CIC Closing Documents . . . . . . . . . . . . . . . . . 25
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF CIC . . . . . . . . . . . . . . 25
(a) Validity of Representation and Warranties . . . . . . . 25
(b) Consents . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Compliance with Covenants . . . . . . . . . . . . . . . 25
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(d) Opinion of Counsel . . . . . . . . . . . . . . . . . . . 26
(e) Approval of Southland Shareholders . . . . . . . . . . . 26
(f) Dissenting Southland Shares . . . . . . . . . . . . . . 26
(g) Xxxxxxx Consulting Agreement . . . . . . . . . . . . . . 26
(h) Resignations . . . . . . . . . . . . . . . . . . . . . . 26
(i) Peoples Shares. . . . . . . . . . . . . . . . . . . . . 26
(j) Southland Book Value . . . . . . . . . . . . . . . . . . 26
(k) Southland Investment Portfolio . . . . . . . . . . . . . 26
(l) Licenses . . . . . . . . . . . . . . . . . . . . . . . . 26
(m) Southwide Cash Amount . . . . . . . . . . . . . . . . . 26
ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF SOUTHLAND . . . . . . . . . . . 27
(a) Validity of Representations and Warranties . . . . . . . 27
(b) Consents . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Compliance with Covenants . . . . . . . . . . . . . . . 27
(d) Fairness Opinion. . . . . . . . . . . . . . . . . . . . 27
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE X CONDITIONS APPLICABLE TO CIC, SOUTHWIDE LIFE AND SOUTHLAND . . . 27
(a) Governmental Approvals . . . . . . . . . . . . . . . . . 28
(b) Injunction . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Effective Time . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XI TERMINATION AND TERMINATION FEE . . . . . . . . . . . . . . . . 28
(a) Termination . . . . . . . . . . . . . . . . . . . . . . 28
(b) Termination Fee . . . . . . . . . . . . . . . . . . . . 28
(c) Survival of Rights . . . . . . . . . . . . . . . . . . . 29
ARTICLE XII SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Payment of Expenses . . . . . . . . . . . . . . . . . . 29
(b) Entire Agreement . . . . . . . . . . . . . . . . . . . . 29
(c) Modifications, Amendments and Waivers . . . . . . . . . 29
(d) Assignment . . . . . . . . . . . . . . . . . . . . . . . 30
(e) Schedules . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Press Releases . . . . . . . . . . . . . . . . . . . . . 30
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . 30
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Exhibits
Tab
---
Exhibit A -- Form of opinion of counsel for Southland . . 1
Schedules
CIC Consent Schedule . . . . . . . . . . . . . . . . . . 4
Southland Schedule . . . . . . . . . . . . . . . . . . . 5
Directors Schedule . . . . . . . . . . . . . . . . . . . 6
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