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EXHIBIT 2(b)
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ATLANTIC AMERICAN CORPORATION
AND
XXXXX ENTERPRISES, INC.
DATED AS OF OCTOBER 16, 1995
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TABLE OF CONTENTS
ARTICLE 1 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 American Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.04 Automated Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.05 Automobile Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.06 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.07 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.08 Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.09 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Fed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Georgia Insurance Code . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Florida Tax Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Xxxx-Xxxxx Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 InterRedec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 InterRedec Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 InterRedec Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.19 InterRedec Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.20 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.21 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25 Pledged Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 Premier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27 Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.28 Purchaser Disclosure Memorandum . . . . . . . . . . . . . . . . . . . . . 3
1.29 Related Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.30 SAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.31 SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.32 Seller Disclosure Memorandum . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.35 Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.36 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 Tax Allocation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.38 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.39 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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ARTICLE 2 STOCK PURCHASE AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . . . . 4
2.02 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.03 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 4
2.04 Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.05 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.06 Deliveries and Proceedings at the Closing . . . . . . . . . . . . . . . . 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . 6
3.01 Organization and Good Standing of Seller; Power and Authority . . . . . . 6
3.02 Organization and Good Standing of American Southern; Power and Authority . 6
3.03 Capitalization and Ownership. . . . . . . . . . . . . . . . . . . . . . . 7
3.04 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.05 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.06 No Violation of Applicable Laws or Agreements. . . . . . . . . . . . . . . 7
3.07 SEC Filings and Financial Statements . . . . . . . . . . . . . . . . . . . 8
3.08 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . 9
3.09 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.11 Pending Litigation or Proceedings . . . . . . . . . . . . . . . . . . . . 11
3.12 Compliance With Applicable Laws . . . . . . . . . . . . . . . . . . . . . 11
3.13 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 Legal Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Investment Assets Custody . . . . . . . . . . . . . . . . . . . . . . . . 12
3.16 Insurance Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.17 Insurance Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.18 Title to Assets; Material Contracts . . . . . . . . . . . . . . . . . . . 12
3.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.20 Compensation Arrangements; Bank Accounts; Officers and Directors . . . . . 15
3.21 Transactions With Related Parties . . . . . . . . . . . . . . . . . . . . 15
3.22 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.23 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.24 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . 16
4.01 Purchaser's Organization and Good Standing; Power and Authority . . . . . 16
4.02 No Violation of Applicable Laws or Agreements . . . . . . . . . . . . . . 16
4.03 Pending Litigation or Proceedings . . . . . . . . . . . . . . . . . . . . 17
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4.04 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.05 Investment Intent; Ability to Bear Risk . . . . . . . . . . . . . . . . . 17
4.06 SEC Filings and Financial Statements . . . . . . . . . . . . . . . . . . . 17
4.07 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . 18
4.08 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5 CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . 18
5.01 Operation of Business Pending Closing . . . . . . . . . . . . . . . . . . 18
5.02 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.03 Supplements to Disclosure Memoranda . . . . . . . . . . . . . . . . . . . 19
5.04 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.05 Regulatory Approvals and Consents . . . . . . . . . . . . . . . . . . . . 24
5.06 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.07 Exclusive Dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.08 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.09 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Maintenance of Records . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.11 Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.12 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.13 GAAP Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 6 CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.01 Conditions to Obligations of Purchaser . . . . . . . . . . . . . . . . . . 26
6.02 Conditions to Obligations of Seller . . . . . . . . . . . . . . . . . . . 27
ARTICLE 7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.01 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . 28
7.02 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . 29
7.03 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . 30
7.04 Sole Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.01 When Agreement May be Terminated . . . . . . . . . . . . . . . . . . . . . 32
8.02 Final Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.03 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 9 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.01 Agreement to Arbitrate . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.02 Initiating Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.03 Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.04 Costs 33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.01 Nature and Survival of Representations . . . . . . . . . . . . . . . . . . 33
10.02 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.03 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.04 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.06 Invalid Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.07 Subsequent SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.08 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.09 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.12 Person and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.14 Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.15 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 36
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THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of October 16,
1995 by and between ATLANTIC AMERICAN CORPORATION, a Georgia corporation
("Purchaser"), and XXXXX ENTERPRISES, INC. (formerly known as Vista Resources,
Inc.), a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller owns 100% of the issued and outstanding capital stock of
American Southern Insurance Company, a Georgia corporation ("American
Southern"); and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase, all of the capital stock of American Southern, in accordance with the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used herein, the following terms have the following respective meanings
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined):
1.01 "Agreement" means this Stock Purchase Agreement and the Exhibit
hereto, as the same may be supplemented, modified or amended from time to time.
1.02 "American Safety" means American Safety Insurance Company, a Georgia
corporation and wholly owned subsidiary of American Southern.
1.03 "Applicable Law" means all applicable provisions of constitutions,
statutes, laws, rules, regulations and orders of all Governmental Authorities.
1.04 "Automated Systems" means Automated Systems of Georgia, Inc., a
Georgia corporation and wholly owned subsidiary of American Southern.
1.05 "Automobile Safety" means Automobile Safety Management, Inc., a
Delaware corporation and wholly owned subsidiary of American Southern.
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1.06 "Closing" means the consummation of the transactions described in this
Agreement, and "Closing Date" means the date upon which such consummation
occurs.
1.07 "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
1.08 "Companies" means American Southern collectively with the Subsidiaries.
1.09 "ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
1.10 "Fed" means the Board of Governors of the Federal Reserve System and
the Federal Reserve Bank of New York acting as bailee for the Board of
Governors.
1.11 "GAAP" means generally accepted accounting principles.
1.12 "Georgia Insurance Code" means Title 33 of the Official Code of
Georgia Annotated and all regulations promulgated thereunder.
1.13 "Florida Tax Litigation" means the premium tax litigation with respect
to the period from 1985 through 1990 involving American Southern and the State
of Florida Department of Revenue currently being litigated in the District
Court of Appeals, 1st District of Florida (Civil Action No. 95-2588).
1.14 "Governmental Authority" means any federal, state, county, local,
foreign or other governmental or public agency, instrumentality, commission,
authority, board or body.
1.15 "Xxxx-Xxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and all regulations promulgated thereunder.
1.16 "InterRedec" means InterRedec Southern Company, Inc., a Delaware
corporation.
1.17 "InterRedec Escrow" means that certain Escrow Agreement dated as of
October 11, 1991 by and among Seller, InterRedec and First Union National Bank
of Georgia.
1.18 "InterRedec Note" means that certain Nonnegotiable Note dated October
11, 1991 made by Seller, payable to InterRedec.
1.19 "InterRedec Pledge" means that certain Pledge and Security Agreement
dated October 11, 1991 by and between Seller and InterRedec.
1.20 "Knowledge" (i) with respect to Seller, means those facts known, or
which should have been known with reasonable diligence, by any of the officers
or directors of the Companies; and (ii) with respect to Purchaser, means those
facts known, or which
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should have been known with reasonable diligence, by any of the officers or
directors of Purchaser.
1.21 "Material Adverse Effect" means a material adverse effect to the
property, results of operations or financial condition of (a) American Southern
and the Subsidiaries taken as a whole, or (b) Purchaser, as shall be applicable
in the context in which the term is used; provided, however, that a Material
Adverse Effect shall not include the effect of any matter which has or may have
an industry-wide effect, or any general economic conditions.
1.22 "1933 Act" means the Securities Act of 1933, as amended.
1.23 "1934 Act" means the Securities Exchange Act of 1934, as amended.
1.24 "Person" means an individual, corporation, partnership, association,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
1.25 "Pledged Shares" means the 149,998 shares of American Southern common
stock pledged to InterRedec by Seller pursuant to the InterRedec Pledge.
1.26 "Premier" means Premier Adjusting and Claims Service, Inc., a Georgia
corporation and wholly owned subsidiary of American Southern.
1.27 "Prime Rate" means the prime rate as published in the "Money Rates"
column of The Wall Street Journal, Eastern Edition; in the event that more than
one such rate is reported, the Prime Rate shall equal the average of such
rates.
1.28 "Purchaser Disclosure Memorandum" means the written information
entitled "Purchaser Disclosure Memorandum" delivered to Seller prior to the
date of this Agreement describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section shall be deemed to be
disclosed for purposes of all other Sections, provided that the relevance to
the Section from which any such matter is omitted is apparent from the
disclosure with respect to the Section in which such matter is included.
1.29 "Related Party" means Seller; any of the officers or directors of any
of the Companies; any affiliate of Seller, any Company or any of their
respective officers or directors; or any business or entity in which Seller,
any Company, or any affiliate of any such person has any direct or material
indirect interest.
1.30 "SAP" means the statutory accounting practices as prescribed or
permitted by the Georgia Insurance Department.
1.31 "SEC" means the Securities and Exchange Commission.
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1.32 "Seller Disclosure Memorandum" means the written information entitled
"Seller Disclosure Memorandum" delivered to Purchaser prior to the date of this
Agreement describing in reasonable detail the matters contained therein and,
with respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
Information disclosed with respect to one Section shall be deemed to be
disclosed for purposes of all other Sections, provided that the relevance to
the Section from which any such matter is omitted is apparent from the
disclosure with respect to the Section in which such matter is included.
1.33 "Shares" means 100% of the issued and outstanding shares of capital
stock of American Southern.
1.34 "Stockholders' Equity" means total assets minus total liabilities
of American Southern on a consolidated SAP basis.
1.35 "Stock Purchase Agreement" means that certain Stock Purchase Agreement
dated as of September 17, 1991, among Seller, Concorde Finance & Investment,
Inc., InterRedec, Inc., InterRedec and American Southern.
1.36 "Subsidiaries" means American Safety, Automated Systems, Automobile
Safety and Premier.
1.37 "Tax Allocation Agreement" means the tax allocation
agreement dated as of October 11, 1991 between Seller and American Southern.
1.38 "Tax Returns" means all returns or reports, including accompanying
schedules, with respect to Taxes.
1.39 "Taxes" means all federal, state, local and foreign income, premium,
payroll, withholding, excise, sales, use, real and personal property, use and
occupation, mercantile, capital stock, franchise and other taxes, including
interest and penalties thereon and all estimated taxes.
ARTICLE 2
STOCK PURCHASE AND CLOSING
2.01 Purchase and Sale of the Shares. Upon and subject to the terms and
conditions of this Agreement, Seller shall sell, and Purchaser shall purchase,
the Shares.
2.02 Consideration. The aggregate consideration (the "Purchase Price") to
be paid by Purchaser to Seller for the Shares shall be $34,000,000, subject to
adjustment as described in Section 2.04.
2.03 Payment of Purchase Price. Purchaser shall pay the Purchase Price as
follows:
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(a) at Closing, Purchaser shall execute and deliver to Seller a promissory
note (the "Purchaser Note") in substantially the form attached hereto as
Exhibit 2.03 in a principal amount equal to the total amount of the principal
plus accrued interest (as determined pursuant to Section 2(c) of the InterRedec
Note) owed by Seller under the InterRedec Note as of the Closing Date; and
(b) at Closing, Purchaser shall pay to Seller in cash the difference between
$34,000,000 and the principal amount of the Purchaser Note, by means of a wire
transfer of immediately available funds (U.S. Dollars) to an account designated
by Seller.
2.04 Post-Closing Adjustment.
(a) As soon as practicable, but in any event within thirty (30) days after
Closing, Purchaser shall, under the direction and supervision of Xxx X.
Xxxxxxxx, Xx., Xxxxx X. Xxxxxxxx and Xxxxxx X. Xxxx, or any of them, prepare
and deliver to Seller a balance sheet of American Southern as of the Closing
Date (the "Closing Balance Sheet"), prepared in accordance with SAP reporting
practices consistently applied (but subject to the provisions of Section
5.04(i)). Without limiting the generality of the foregoing sentence, the
parties expressly agree that the Closing Balance Sheet shall include amounts
for insurance liability reserves calculated in a manner and using methodologies
and assumptions consistent in all respects with American Southern's practice of
calculating such reserves during the 24-month period immediately prior to the
Closing Date.
(b) Seller shall have fifteen (15) days after receipt of the Closing Balance
Sheet in which to review such Closing Balance Sheet, and during such 15-day
period, Purchaser shall make available to Seller and its representatives all
information regarding preparation of the Closing Balance Sheet as may be
reasonably requested by Seller, including, without limitation, access to all
employees, books, records and work papers. If within such 15-day period Seller
does not provide Purchaser with written notice of any objection to the Closing
Balance Sheet, the Closing Balance Sheet shall be deemed accepted by, and final
and binding upon, both parties. If Seller does provide Purchaser with written
notice of any objection within such 15-day period, then the parties shall in
good faith attempt to resolve such dispute within fifteen (15) days after
Purchaser's receipt of Seller's objection notice. If such dispute cannot be
resolved by the parties, the dispute shall be submitted to arbitration in
accordance with the provisions of Article 9 hereof, except that the third
arbitrator selected from a AAA list (as described in Section 9.02) must be an
independent certified public accountant knowledgeable about SAP.
(c) Once the Closing Balance Sheet has been deemed final and binding on the
parties, whether by failure of Seller to object, agreement of the parties or
arbitration, within five (5) business days thereafter, Seller shall pay to
Purchaser in immediately available funds the amount, if any, by which the
Stockholders' Equity reflected on the Closing Balance Sheet is less than
$26,800,000, plus interest thereon at the Prime Rate in
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effect on the Closing Date for the period of the Closing Date through the date
of payment. If such Stockholders' Equity as reflected on the Closing Balance
Sheet is equal to or greater than $26,800,000, neither party shall owe the
other any additional amounts.
(d) Notwithstanding anything to the contrary contained herein, the parties
agree that all payables of any of the Companies to Seller or any of its
affiliates shall be accrued on the Closing Balance Sheet and paid at Closing or
paid prior to Closing (in which case the Companies shall furnish Seller with
satisfactory evidence of such payment).
2.05 Closing. Closing shall be effective as of the close of business on the
last day of the month in which all of the conditions set forth in Article 6 are
satisfied or waived, and Closing shall take place at such time and place as the
parties may agree.
2.06 Deliveries and Proceedings at the Closing. At the Closing, the parties
shall execute and deliver each agreement and instrument required or
contemplated by this Agreement to be so executed and delivered and not
theretofore executed and delivered. In addition, at the Closing, (i) Purchaser
shall deliver to Seller the Purchase Price, and (ii) Seller shall deliver to
Purchaser the certificate or certificates evidencing the Shares, duly endorsed
in blank for transfer or accompanied by duly executed irrevocable stock powers
in blank, free and clear of all liens, encumbrances, pledges, options, voting
agreements, contractual rights or other claims whatsoever. All actions taken
at the Closing shall be deemed to occur simultaneously.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as of the date hereof as
follows:
3.01 Organization and Good Standing of Seller; Power and Authority. Seller
is a corporation duly organized, validly existing and in good standing under
the laws of Delaware. Seller has the requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of, and the performance by
Seller of its obligations under, this Agreement have been duly and validly
authorized by all necessary corporate action on the part of Seller. No other
corporate or shareholder proceedings on the part of Seller is necessary to
approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Seller and
constitutes Seller's valid and binding obligations, enforceable against Seller
in accordance with its terms.
3.02 Organization and Good Standing of American Southern; Power and
Authority. American Southern is a corporation duly organized, validly existing
and in good standing under the laws of Georgia. American Southern has all
requisite corporate power and authority to own or lease its properties and
assets as now owned or leased.
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The copies of American Southern's articles of incorporation and bylaws, as
amended to date, which have been delivered to Purchaser, are correct and
complete and are in full force and effect.
3.03 Capitalization and Ownership. American Southern's authorized capital
stock consists solely of 300,000 shares of common stock, par value $10 per
share, 300,000 of which are currently issued and outstanding and none of which
are held in its treasury. All of such outstanding shares of American Southern
have been duly authorized, validly issued and are fully paid and nonassessable.
Such issued and outstanding shares constitute the Shares, all of which are
owned beneficially and of record by Seller, free and clear of any liens,
encumbrances, pledges, options, voting agreements, contractual rights or other
claims whatsoever, other than the security interest created pursuant to the
InterRedec Pledge. As of the Closing, the Shares will be solely owned,
beneficially and of record, free and clear of all liens, encumbrances, pledges,
options, voting agreements, contractual rights or other claims whatsoever.
There are no outstanding options, warrants, preemptive rights, agreements,
calls, commitments or demands of any character relating to the capital stock of
American Southern and no securities convertible into or exchangeable for any of
such capital stock.
3.04 Subsidiaries. American Southern owns, free and clear of all liens and
encumbrances whatsoever, 100% of the issued and outstanding capital stock of
each Subsidiary. All of such outstanding shares of the Subsidiaries have been
duly authorized, validly issued and are fully paid and nonassessable. There
are no outstanding options, warrants, rights, agreements, calls, commitments or
demands of any character relating to the capital stock of any Subsidiary and no
securities convertible into or exchangeable for any of such capital stock.
Section 3.04 of the Seller Disclosure Memorandum accurately sets forth the
number of shares, classes and par values of the authorized and issued shares of
the Subsidiaries. American Southern does not, directly or indirectly, own any
stock of, or any other interest in, any Person other than the Subsidiaries,
except that American Southern may own interests held for investment purposes
not exceeding 10% of any such single Person. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
incorporation, and each Subsidiary has all requisite corporate power and
authority to own or lease its properties and assets as now owned or leased.
The copies of the articles of incorporation and bylaws of each Subsidiary, as
amended to date, which have been delivered to Purchaser, are correct and
complete and are in full force and effect.
3.05 Qualification. Each of the Companies is duly qualified or licensed to
do business and is in good standing as a foreign corporation in each
jurisdiction in which such qualification or licensing is necessary under
Applicable Law, except where the failure to be so duly qualified or licensed or
in good standing would not have a Material Adverse Effect.
3.06 No Violation of Applicable Laws or Agreements. The execution and
delivery of this Agreement by Seller do not, and the consummation of the
transactions
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contemplated by this Agreement and the compliance with the terms, conditions
and provisions of this Agreement by Seller, will not (a) violate or conflict
with any provision of Seller's or the Companies' articles of incorporation or
bylaws; (b) except as set forth in Section 3.06 of the Seller Disclosure
Memorandum, violate, conflict with or result in the breach or termination of,
or otherwise give any contracting party (which has not consented to such
execution, delivery and consummation) the right to change the terms of, or to
terminate or accelerate the maturity of, or constitute a default under the
terms of, any indenture, mortgage, loan or credit agreement or any other
material agreement or instrument to which any of Seller or the Companies is a
party or by which any of them or any of their assets may be bound or affected,
or any Applicable Law; (c) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the Companies'
assets or give to others any interests or rights therein; other than any such
conflicts, breaches, terminations, accelerations, defaults or violations that
would not, individually or in the aggregate, have a Material Adverse Effect.
3.07 SEC Filings and Financial Statements.
(a) Seller has heretofore delivered to Purchaser copies of Seller's (i)
Annual Report on Form 10-K for the fiscal year ended December 31, 1994, (ii)
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, and
(iii) all other reports, registration statements and other documents filed by
Seller with the SEC since December 31, 1994 (collectively, the "Seller SEC
Filings"). Since December 31, 1994, Seller has timely filed all reports,
registration statements and other documents required to be filed with the SEC
under the rules and regulations of the SEC, and all such reports, registration
statements and other documents have complied in all material respects, as of
their respective filing dates and effective dates, as the case may be, with all
applicable requirements of the 1933 Act or the 1934 Act. As of their
respective filing and effective dates, none of such reports, registration
statements or other documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) Seller has delivered, or prior to Closing will deliver, to Purchaser
complete and correct copies of the following financial statements:
(i) the Annual Statements of each of American Southern and American
Safety filed with the Georgia Insurance Department for the years ending
December 31, 1992, 1993 and 1994, together with the exhibits and schedules
thereto (collectively the "Annual Statements");
(ii) the Quarterly Statements of each of American Southern and American
Safety filed with the Georgia Insurance Department for the quarters ending
March 31, 1995 and June 30, 1995, together with the exhibits and schedules
thereto (collectively, the "Quarterly Statements");
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(iii) the audited balance sheets (on a SAP basis), statements of income,
statements of changes in capital and surplus, and statements of cash flows of
American Southern on an unconsolidated basis as of and for the years ended
December 31, 1992, 1993 and 1994 (such financial statements, including all
notes and schedules thereto and the independent auditors' report of Ernst &
Young LLP thereon, being the "Audited Statements") (the balance sheet as of
December 31, 1994 included in the Audited Statements is referred to herein as
the "1994 Balance Sheet"); and
(iv) the unaudited balance sheet (on a SAP basis) of American Southern
on a consolidated basis (consolidating American Southern with the Subsidiaries)
as of June 30, 1995 (the "Balance Sheet Date"), and the unaudited statement of
income of American Southern on a consolidated basis for the six-month period
ending on the Balance Sheet Date (collectively, the "Interim Unaudited
Statements").
The statutory financial statements contained in the Annual Statements (and
with respect to clause (ii) below, other items contained in the Annual
Statements) and the Audited Statements (i) have been prepared in conformity
with SAP using comparable estimates and assumptions applied on a consistent
basis with the December 31, 1994 financial statements, except that the
financial statements contained in the Quarterly Statements are unaudited, (ii)
are true, correct and complete and in accordance with the books and records of
each Company, respectively, and (iii) present fully and fairly, on a SAP basis,
the financial condition, assets and liabilities of each of American Southern
and American Safety, as the case may be, as of the respective dates thereof and
the results of operations and cash flows for the respective periods indicated.
The financial statements contained in the Quarterly Statements include all
adjustments necessary for a fair presentation of the financial position of each
Company, respectively, and the results of its operations for the interim period
presented, subject to normal recurring year-end adjustments and the omission of
footnote disclosures. The Interim Unaudited Statements have been prepared in
accordance with SAP applied on a consistent basis throughout the period
involved and present fairly the financial condition, assets and liabilities of
the Companies as of the respective dates thereof and the results of operations
for the period indicated, subject to normal recurring year-end adjustments and
the omission of footnote disclosures.
(c) Seller has delivered to Purchaser complete and correct copies of
the Insurance Holding Company System Registration Statement on Form B as filed
by American Southern on behalf of itself and American Safety for the years
ended December 31, 1992, 1993 and 1994. Such Forms B, as well as the Annual
Statements and the Quarterly Statements, when filed complied in all material
respects with the Georgia Insurance Code.
3.08 Absence of Certain Changes. Except as disclosed in Section 3.08 of
the Seller Disclosure Memorandum, since the Balance Sheet Date (i) there has
been no occurrence having, or which would reasonably be expected to result in,
a Material Adverse Effect upon the Companies, and (ii) none of the Companies
has taken any action
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that would be prohibited under Section 5.01 after the date of this Agreement.
Since the Balance Sheet Date, the business of the Companies has been conducted
only in the ordinary and usual course consistent with past practice, except
with respect to the transactions contemplated in this Agreement.
3.09 Reserves. All losses and loss adjustment expenses established and
reflected in the 1994 Balance Sheet in respect of the Companies' insurance
policies was determined in accordance with generally accepted actuarial
standards, was based on actuarial estimates and assumptions that were
reasonable and appropriate to the relevant insurance policies and were recorded
in compliance with the applicable requirements of the Georgia Insurance Code.
3.10 Tax Matters. Except as set forth in Section 3.10 of the Seller
Disclosure Memorandum:
(a) None of the Companies (i) is, or since Seller's acquisition of the
Shares has been, a member of an affiliated group of corporations within the
meaning of Section 1504 of the Code filing a consolidated or combined Tax
Return other than (A) the affiliated group of which Seller is the common parent
(the "Seller Group") with respect to federal Tax Returns, and (B) an affiliated
group or groups consisting solely of American Southern and one or more of the
Subsidiaries with respect to state Tax Returns (a "Subsidiary Group"); or (ii)
has any liability for Taxes of any Person other than the members of the Seller
or Subsidiary Group.
(b) Each Seller Group and Subsidiary Group has (i) timely filed all Tax
Returns required to be filed by it; (ii) paid all Taxes shown to have become
due pursuant to such filed Tax Returns; and (iii) paid all other Taxes for
which a notice of assessment or demand for payment has been received, except
where the failure to file such Tax Returns or pay such Taxes would not have a
Material Adverse Effect. All Tax Returns of each Seller Group and Subsidiary
Group (i) have been prepared in accordance with all Applicable Laws, and (ii)
accurately reflect the taxable income (or other measure of tax) of the
corporation or corporations filing the same, except where the failure to do so
has not had a Material Adverse Effect on the Companies. All Taxes of the
Companies for periods after December 31, 1994 have been paid or are adequately
reserved against on the GAAP and SAP books of the Companies. The Companies
have timely filed all information returns or reports, including Forms 1099,
that are required to be filed and have accurately reported all information
required to be included on such returns or reports. True copies of federal
income tax returns of the Companies included in the consolidated Tax Returns
for the Seller Group for each of the fiscal years ended December 31, 1992
through December 31, 1994 have been made available to Purchaser. True copies
of the state Tax Returns of the Companies filed most recently in each state,
respectively, in which the Companies have filed Tax Returns have been delivered
to Purchaser.
(c) There are no proposed assessments of Taxes against the Companies,
no proposed adjustments to any Tax Return pending against the Seller Group with
respect to
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the Companies' operations or assets, and no proposed adjustments to the manner
in which any Tax of the Seller Group is determined with respect to the
Companies' operations or assets. No claim has been made by a taxing authority
in a jurisdiction where the Companies do not file Tax Returns that any of the
Companies is or may be subject to taxation by that jurisdiction.
(d) Since Seller's acquisition of the Shares, none of the Companies has
(i) filed any consent agreement under Section 341(f) of the Code, (ii) executed
or been the subject of a waiver or consent extending any statute of limitation
for any Tax liability that remains outstanding, (iii) joined in or been
required to join in filing a consolidated or combined federal, state or local
Tax Return with any corporation other than a current or former member of the
Seller Group or Subsidiary Group, (iv) been the subject of a ruling of the
Internal Revenue Service or any state or local revenue authority that has
continuing application to the Companies, (v) been the subject of a closing
agreement with any taxing authority that has continuing effect, or (vi) granted
a power of attorney with respect to any Tax matters that has continuing effect.
During the immediately preceding three years, none of the Companies has agreed
to make nor is it required to make any adjustment under Section 481 of the Code
by reason of a change in accounting method or otherwise.
(e) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(f) Seller has no Knowledge of any matter involving Taxes with respect
to the Seller Group that would make the Companies subject to joint and
severable liability of Seller and is reasonably likely to have a Material
Adverse Effect on the Companies.
3.11 Pending Litigation or Proceedings. Except for claims under
insurance contracts against the Companies in the ordinary course of business,
or as set forth in Section 3.11 of the Seller Disclosure Memorandum, there are
no claims, suits, actions, proceedings, arbitrations or investigations pending,
or to the Knowledge of Seller threatened, against or otherwise relating to or
involving any of the Companies or any of their properties, the outcome of which
would reasonably be expected to have a Material Adverse Effect or to affect the
ability of Seller to consummate the transactions contemplated by this
Agreement. Except as set forth in Section 3.11 of the Seller Disclosure
Memorandum, with respect to American Southern and American Safety (i) no
investigation or examination by any insurance regulatory authority is pending,
and (ii) no such investigation or examination has occurred since the date upon
which Seller acquired the Shares. Section 3.11 of the Seller Disclosure
Memorandum describes each instance in which either American Southern or
American Safety has been the subject of a fine or penalty by an insurance
regulatory authority since the date upon which Seller acquired the Shares.
3.12 Compliance With Applicable Laws. None of the Companies is in
violation of any Applicable Law, except for possible violations that would not,
individually or in the
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aggregate, have or be reasonably likely to have a Material Adverse Effect.
Each of the Companies holds all licenses, permits, registrations and other
authorizations required to conduct its business, and all such licenses,
permits, registrations and other authorizations are valid and in full force and
effect, except for those the absence of which are not reasonably likely to have
a Material Adverse Effect. Each of the Companies is in compliance with all
such licenses, permits, registrations and authorizations, except for possible
failures to be so in compliance which are not reasonably likely to have a
Material Adverse Effect.
3.13 Consents and Approvals. Except as set forth in Section 3.13 of the
Seller Disclosure Memorandum, except as required under the Xxxx-Xxxxx Act, and
except for the approval of the Georgia Insurance Department, the execution,
delivery and performance of this Agreement by Seller and the consummation of
the transactions contemplated hereby do not require any consent, approval or
authorization of, or registration or filing with, any Person or Governmental
Authority.
3.14 Legal Investments. The bonds, stocks and other investments owned
beneficially or of record by the Companies are permissible investments for them
under the Georgia Insurance Code.
3.15 Investment Assets Custody. Section 3.15 of the Seller Disclosure
Memorandum contains a complete and correct list of all custodians and
depositories for investment assets of any of the Companies, and lists the
persons having signatory authority or access thereto on behalf of any of the
Companies.
3.16 Insurance Issued. All insurance policies and contracts issued by
American Southern or American Safety now in force (other than policies and
contracts issued under applicable surplus lines laws) are on forms and at rates
approved by the insurance regulatory authority of the state or jurisdiction
where issued or have been filed with and not objected to by such authority
within the period provided for objection.
3.17 Insurance Agents. Section 3.17 of the Seller Disclosure Memorandum
contains a complete and correct list of all insurance agencies and agents
authorized to write insurance on behalf of American Southern or American Safety
as of the date shown on such list. To the Knowledge of Seller, all such
agencies and agents are duly licensed with the insurance regulatory authority
of the state or jurisdiction in which such agency or agent writes insurance on
behalf of American Southern or American Safety.
3.18 Title to Assets; Material Contracts.
(a) Each of the Companies has (i) good and marketable title, or valid
and binding leasehold rights in the case of leased property, to all material
personal property owned or leased by it, and (ii) valid and binding leasehold
rights to all real property leased by it, free and clear of any lien,
encumbrance, mortgage, pledge, charge or security interest whatsoever, other
than those that would not, individually or in the
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aggregate, have a Material Adverse Effect. None of the Companies owns any real
property. Section 3.18(a) of the Seller Disclosure Memorandum contains a
complete and accurate list of all real property leased by any of the Companies,
including the date of expiration of each such lease. All material items of
personal property owned or leased by the Companies are in good condition and
repair, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with past practices. All of the assets that are
being used on a regular basis in the business are being conveyed to Purchaser.
(b) Section 3.18(b) of the Seller Disclosure Memorandum contains a
complete and correct list of (i) all reinsurance agreements; (ii) all loan or
credit agreements, mortgages, indentures, or other agreements for borrowed
money; (iii) all employment or compensation agreements with officers,
directors, employees, agents (other than insurance agents), consultants and
independent contractors; and (iv) all other contracts, leases, agreements or
legal commitments of any kind, oral or written, formal or informal, pursuant to
which any of the Companies owes more than $50,000 per calendar year (the
agreements described in (i)-(iv) and those that cannot be terminated upon 30
days notice without payment or penalty are collectively the "Material
Contracts"). Except as described in Section 3.18 of the Seller Disclosure
Memorandum, all Material Contracts are in full force and effect, and none of
the Companies is in default under, nor has any event occurred which with the
passage of time or giving of notice or both would result in any of the
Companies being in default under, any of the terms thereof.
3.19 Employee Benefit Plans.
(a) The only employee pension benefit plans (as defined in Section 3(2)
of ERISA), welfare benefit plans (as defined in Section 3(1) of ERISA), bonus,
stock purchase, stock ownership, stock option, deferred compensation, incentive
or other compensation plan or arrangement, and other employee fringe benefit
plans presently maintained by, or contributed to by the Companies or by Seller
for the benefit of any current or former employee of the Companies are those
listed in Section 3.19 of the Seller Disclosure Memorandum (the "Benefit
Plans"). None of the Benefit Plans are provided by Seller; all of such Benefit
Plans are provided by American Southern.
(b) American Southern and each of the Benefit Plans, are in compliance
in all material respects with the applicable provisions of ERISA and those
provisions of the Code applicable to the Benefit Plans.
(c) All contributions to, and payments from, the Benefit Plans which
may have been required to be made in accordance with the Benefit Plans and,
when applicable, Section 302 of ERISA or Section 412 of the Code, have, in all
material respects, been timely made.
(d) There are (i) no pending investigations by any Governmental
Authority involving the Benefit Plans, (ii) no termination proceedings
involving the Benefit Plans,
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(iii) to Seller's Knowledge, no threatened or pending claims (except for claims
for benefits payable in the normal operation of the Benefit Plans), suits or
proceedings against any Benefit Plan or asserting any rights or claims to
benefits under any Benefit Plan which could give rise to any material liability
and (iv) no facts which could give rise to any material liability in the event
of such investigation, claim, suit or proceeding.
(e) Neither the Benefit Plans, American Southern nor any employee of
the foregoing, nor, to Seller's Knowledge, any trusts created thereunder, or
any trustee, administrator or other fiduciary thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 4975 of the Code
or Section 406 of ERISA) which could subject the Companies to the tax or
penalty on prohibited transactions imposed by such Section 4975 or the
sanctions imposed under Title I of ERISA. Neither the Benefit Plans nor any
such trust has been terminated nor to Seller's Knowledge have there been any
"reportable events" (as defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof.
(f) No Benefit Plan subject to Title IV of ERISA has incurred any
material liability to the Pension Benefit Guaranty Corporation other than for
the payment of premiums, all of which have been paid when due. No Benefit Plan
has applied for or received a waiver of the minimum funding standards imposed
by Section 412 of the Code.
(g) At no time for which any relevant statute of limitations remains
open have (a) American Southern, (b) any employer that is, together with
American Southern, treated as a "single employer" under Section 414(b), 414(c)
or 414(m) of the Code (an "Affiliate"), or (c) any employer that was at any
time after September 2, 1984, an Affiliate of American Southern (a "Former
Affiliate"), incurred any liability which could subject Purchaser or American
Southern to liability under Section 4062, 4063 or 4064 of ERISA.
(h) At no time for which any relevant statute of limitations remains
open have American Southern or any Affiliate or Former Affiliate been required
to contribute to, or incurred any withdrawal liability within the meaning of
Section 4201 of ERISA, to any multiemployer pension plan, within the meaning of
Section 3(37) of ERISA, which liability has not been fully paid as of the date
hereof.
(i) American Southern has complied in all material respects with the
notice and continuation coverage requirements of Section 4980B of the Code and
the regulations thereunder with respect to each Benefit Plan that is, or was
during any taxable year of American Southern for which the statute of
limitations on the assessment of federal income taxes remains open, by consent
or otherwise, a group health plan within the meaning of Section 5000(b)(1) of
the Code.
(j) American Southern has not incurred and is not reasonably likely to
incur any liability that is or could reasonably be expected to become a
material liability of American Southern with respect to any plan or arrangement
that would be included within
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the definition of "Benefit Plan" hereunder but for the fact that such plan or
arrangement was terminated before the date of this Agreement.
(k) No payment which is or may be made by American Southern, or from
any Benefit Plan, to any employee, former employee, director or agent of
American Southern under the terms of any Benefit Plan, either alone or in
conjunction with any other payment, will or could be characterized as an excess
parachute payment under Section 28OG of the Code.
3.20 Compensation Arrangements; Bank Accounts; Officers and Directors.
Section 3.20 of the Seller Disclosure Memorandum sets forth the following
information:
(a) the name and current annual salary, including any bonus, if
applicable, of each of the present officers and employees of the Companies
whose current annual salary, including any promised or customary bonus, equals
or exceeds $100,000, together with a statement of the full amount of all cash
remuneration paid by the Companies to each such person and to any director of
the Companies, during the twelve-month period ending on August 31, 1995;
(b) the name of each bank in which any of the Companies has an account
or safe deposit box, the identifying numbers thereof, and the names of all
persons authorized to draw thereon or to have access thereto; and
(c) the name and title of each director and officer of each of the
Companies and of each trustee, fiduciary or plan administrator of each Benefit
Plan.
3.21 Transactions With Related Parties. Except as disclosed in Section
3.21 of the Seller Disclosure Memorandum, no Related Party:
(a) has borrowed money or loaned money to any of the Companies which
will not be repaid on or before Closing;
(b) has any contractual or other claim against any of the Companies; or
(c) had, since January 1, 1993, any interest in any property or assets
used by the Companies in its business.
3.22 Labor Relations. Except as disclosed in Section 3.22 of the Seller
Disclosure Memorandum, (a) no employee of any of the Companies is represented
by any union or other labor organization; (b) there is no unfair labor practice
complaint against any of the Companies pending or overtly threatened before the
National Labor Relations Board; and (c) there is no labor strike, dispute, slow
down or stoppage actually pending or, to the Knowledge of Seller, threatened
against or involving any of the Companies.
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3.23 Brokerage. None of Seller or the Companies has made any agreement
or taken any other action which might cause anyone to become entitled to a
broker's fee or commission as a result of the transactions contemplated hereby.
3.24 Insurance. All of the Companies' properties and assets of an
insurable nature and of a character usually insured by companies of similar
size and in similar businesses are insured by the Companies in such amounts and
against such losses, casualties or risks as is (a) usual in such companies and
for such properties, assets and businesses, or (b) required by any Applicable
Law. Section 3.24 of the Seller Disclosure Memorandum contains a complete and
accurate list of all insurance policies held or owned by the Companies relating
to their business now in force. All such policies are in full force and
effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as of the date hereof as
follows:
4.01 Purchaser's Organization and Good Standing; Power and Authority.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of Georgia. Purchaser has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of, and the
performance by Purchaser of its obligations under, this Agreement have been
duly and validly authorized by all necessary corporate action on the part of
Purchaser. No other corporate or shareholder proceedings on the part of
Purchaser are necessary to approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes Purchaser's valid and
binding obligation, enforceable against Purchaser in accordance with its terms.
4.02 No Violation of Applicable Laws or Agreements. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and the compliance with the terms, conditions
and provisions of this Agreement by Purchaser, will not (a) violate or conflict
with any provision of Purchaser's articles of incorporation or bylaws; (b)
except as set forth in Section 4.02 of the Purchaser Disclosure Memorandum,
violate, conflict with or result in the breach or termination of, or otherwise
give any contracting party (which has not consented to such execution, delivery
and consummation) the right to change the terms of, or to terminate or
accelerate the maturity of, or constitute a default under the terms of, any
indenture, mortgage, loan or credit agreement or any other material agreement
or instrument to which Purchaser is a party or by which any of its assets may
be bound or affected, or any Applicable Law; (c) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of Purchaser's assets or give to others any interests or rights therein;
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other than any such conflicts, breaches, terminations, accelerations, defaults
or violations that would not, individually or in the aggregate, have a Material
Adverse Effect.
4.03 Pending Litigation or Proceedings. Except as set forth in Section
4.03 of the Purchaser Disclosure Memorandum, there are no claims, suits,
actions, proceedings, arbitrations or investigations pending or, to the
Knowledge of Purchaser, threatened, against or otherwise relating to or
involving Purchaser or any of its properties, the outcome of which would
reasonably be expected to have a Material Adverse Effect or to affect the
ability of Purchaser to consummate the transactions contemplated by this
Agreement.
4.04 Brokerage. Purchaser has not made any agreement or taken any other
action which might cause anyone to become entitled to a broker's fee or
commission as a result of the transactions contemplated hereby.
4.05 Investment Intent; Ability to Bear Risk. Purchaser is acquiring
the Shares for investment for its own account and not with a view to, or for
offer or sale in connection with, any public distribution thereof. Purchaser
has not been and is not involved with any Person concerning an Alternative
Transaction (as such term is defined in Section 5.07). Purchaser is familiar
with the property and casualty insurance business, and has the requisite
knowledge and experience to evaluate the merits and risks of its acquisition of
the Shares.
4.06 SEC Filings and Financial Statements.
(a) Purchaser has heretofore delivered to Seller copies of Purchaser's
(i) Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
(ii) 1994 Annual Report to Shareholders, (iii) Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1995, and (iv) all other reports,
registration statements and other documents filed by Purchaser with the SEC
since December 31, 1994 (collectively, the "Purchaser SEC Filings"). Since
December 31, 1994, Purchaser has timely filed all reports, registration
statements and other documents required to be filed with the SEC under the
rules and regulations of the SEC, and all such reports, registration statements
and other documents have complied in all material respects, as of their
respective filing dates and effective dates, as the case may be, with all
applicable requirements of the 1933 Act or the 1934 Act. As of their
respective filing and effective dates, none of such reports, registration
statements or other documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) The audited consolidated financial statements and unaudited interim
consolidated financial statements of Purchaser contained or incorporated by
reference in the Purchaser SEC Filings have been prepared in conformity with
GAAP, and, together with the notes thereto, present fairly the consolidated
financial position of Purchaser and
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its subsidiaries at the dates shown and the consolidated results of their
operations, changes in stockholders' equity and cash flows for the periods then
ended. The unaudited interim consolidated financial statements as of, and for,
the period ending June 30, 1995 include all adjustments necessary for a fair
presentation of the financial position of Purchaser and its subsidiaries and
the results of their respective operations for the interim periods presented,
subject to normal, recurring year-end adjustments and the omission of footnote
disclosures.
4.07 Absence of Certain Changes. Except as disclosed in Section 4.07 of
the Purchaser Disclosure Memorandum or as specifically disclosed in the
Purchaser SEC Filings, since June 30, 1995 (i) there has been no occurrence
having, or which would reasonably be expected to result in, a Material Adverse
Effect upon Purchaser. Since June 30, 1995, the business of Purchaser has been
conducted only in the ordinary and usual course consistent with past practice,
except with respect to transactions contemplated in this Agreement.
4.08 Consents and Approvals. Except as set forth in Section 4.08 of the
Purchaser Disclosure Memorandum, except as required under the Xxxx-Xxxxx Act,
and except for the approval of the Georgia Insurance Department, the execution,
delivery and performance of this Agreement by Purchaser and the consummation of
the transactions contemplated hereby do not require any consent, approval or
authorization of, or registration or filing with, any Person or Governmental
Authority.
ARTICLE 5
CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
5.01 Operation of Business Pending Closing. Prior to the Closing Date,
except with the prior consent of Purchaser and except as necessary to effect
the transactions contemplated in this Agreement, (a) Seller shall cause the
Companies to conduct their business in the usual and ordinary course as
currently being conducted, and (b) without limiting the generality of the
foregoing clause (a), Seller shall cause each of the Companies not to do any of
the following:
(i) amend its articles of incorporation or bylaws, or merge,
consolidate, liquidate or dissolve;
(ii) issue any capital stock, any securities convertible or exchangeable
into capital stock, or any options, warrants or rights with respect to capital
stock, or split, subdivide or reclassify its capital stock;
(iii) declare or pay any dividend or make any other distribution on its
capital stock other than cash dividends on the Shares in an amount not
exceeding $300,000 per month;
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(iv) increase the compensation or benefits of officers or employees of
the Companies or pay any bonuses except for normal and customary increases made
or bonuses paid or accrued in accordance with past practices;
(v) except in the ordinary course of business, create or incur any lien,
encumbrance, mortgage, pledge, charge or security interest whatsoever on any of
its properties; or, except for the issuance of insurance contracts or policies
and the settlement of insurance claims in the ordinary course of business,
incur or assume any guaranty or other liability to discharge an obligation of
another, or incur or assume any obligations for money borrowed, or cancel or
discount any material debt owed to it;
(vi) enter into or terminate any Material Contract;
(vii) make any expenditure for fixed assets in excess of $25,000 for any
single item or $100,000 in the aggregate;
(viii) do or fail to do anything that will cause a breach of, or default
under, any Material Contract; or
(ix) make any change of a material nature in the Companies' accounting
procedures, methods, policies or practices or the manner in which the Companies
maintain their records.
5.02 Access to Information. Between the date hereof and the Closing
Date, Seller shall give, and shall cause the Companies to give, to Purchaser
and its authorized representatives, during normal business hours, access to all
of the Companies' properties, contracts, books and records, and Seller shall
furnish, and shall cause the Companies to furnish, to Purchaser and its
authorized representatives such additional financial, legal and other
information with respect to the Companies that Purchaser may reasonably
request. Purchaser shall use such information solely for the purpose of
conducting business, legal and financial reviews of the Companies and for such
other purposes as may be related to this Agreement. Purchaser shall maintain
the confidentiality of all such information (other than information that is in
the public domain or otherwise ascertainable from public or outside sources)
except to the extent that disclosure is required by judicial process or
governmental regulatory authorities, in which case Purchaser shall give Seller
prompt notice in order that Seller may seek to obtain a protective order.
5.03 Supplements to Disclosure Memoranda. At any time and from time to
time between the date hereof and the date that is two business days prior to
the Closing Date, Seller and Purchaser shall have the right and the continuing
obligation to supplement their respective Disclosure Memoranda with respect to
any matter arising or coming to the Knowledge of Seller or Purchaser after the
date hereof that, if existing, occurring or known at such date, would have been
required to be set forth or described in such Disclosure Memorandum. A party
receiving a supplemented Disclosure Memorandum within 10 days prior to the
anticipated Closing Date may unilaterally extend the time of the
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Closing up to 10 days from the receipt of the supplement for the sole purpose
of reviewing the supplemental Disclosure Memorandum. If, in the recipient
party's reasonable determination, any such supplements provided by the other
party reveal any Material Adverse Effect or any condition or event that would
be reasonably likely to result in a Material Adverse Effect, the recipient
party may terminate this Agreement.
5.04 Certain Tax Matters.
(a) Except as otherwise provided in this Section 5.04, all tax sharing
agreements, arrangements, policies and guidelines, formal or informal, express
or implied, that may exist between the Companies and Seller or their affiliates
and all obligations thereunder shall terminate as of the Closing Date, and the
Companies shall have no liability thereunder for any and all amounts due in
respect to periods prior to the Closing Date. Notwithstanding any other
provision of this Agreement, Seller and the Companies may make reasonable
payments pursuant to such tax sharing agreements and understandings prior to
the Closing Date in amounts consistent with past practices and procedures under
such tax sharing agreements and the Tax Allocation Agreement shall remain in
effect until any overpayments or underpayments are adjusted in accordance with
past practices and procedures.
(b) The Companies shall continue to be included, up to and including
the Closing Date, in the Seller Group's consolidated federal income Tax Return
and any required state or local consolidated or combined income Tax Returns
that include any of the Companies (all such Tax Returns including taxable
periods of the Companies ending on or before the Closing Date are hereinafter
referred to as "Pre-Closing Consolidated Returns").
Seller shall timely (which shall not preclude obtaining or filing
normal or customary extensions) prepare and file (or cause to be prepared and
filed) all Pre-Closing Consolidated Returns and all other Tax Returns required
to be filed on or before the Closing Date with respect to the Companies (the
"Seller Group Returns"). Seller shall timely pay (or cause to be paid) all
Taxes shown as due and payable on the Seller Group Returns ("Seller's Taxes").
Purchaser and Seller agree that if the Companies are permitted under
any Applicable Law relating to state or local income tax to treat the Closing
Date as the last day of a taxable period, Purchaser and Seller shall treat (and
cause their respective affiliates to treat) the Closing Date as the last day of
a taxable period, and any Tax Return for such a period shall be considered a
Seller Group Return for purposes hereof.
(c) Purchaser shall timely (which shall not preclude obtaining or
filing normal or customary extensions) prepare and file (or cause to be filed)
all Tax Returns required by Applicable Law for the Companies that are not
required to be prepared and filed by Seller pursuant to Section 5.04(b)
("Purchaser's Returns"). Any Purchaser's Return including a period prior to
the Closing Date shall be prepared in a manner consistent with prior
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practice and copies of such Purchaser's Returns shall be delivered to Seller.
Purchaser shall timely pay (or cause to be paid) all Taxes shown as due and
payable on the Purchaser's Returns ("Purchaser's Taxes").
(d) After the Closing Date, Seller shall submit to Purchaser blank Tax
Return workpaper packages reasonably necessary for Seller to prepare any Seller
Group Returns. Purchaser shall cause the Companies to prepare completely and
accurately all information that Seller shall reasonably request in such
workpaper packages and shall submit to Seller such packages within the later of
90 days after Purchaser's receipt thereof or 60 days after the close of the
taxable period to which a workpaper package relates. Each party shall
cooperate with the other in connection with any tax filing, investigation,
audit or other proceeding. Purchaser and Seller and their subsidiaries shall
preserve all information, returns, books, records and documents relating to any
liabilities for Taxes with respect to a taxable period until the later of the
expiration of all applicable statutes of limitation and extensions thereof, or
the conclusion of all litigation with respect to Taxes for such period.
(e) After the Closing Date, Seller shall indemnify and hold harmless
Purchaser from and against any Tax liability with respect to (i) any Seller's
Taxes; (ii) the Florida Tax Litigation; and (iii) any increase in Tax liability
resulting from the Companies being severally liable for any Taxes of the Seller
Group or any other consolidated group of which any of the Companies was a
member prior to the Closing Date pursuant to Treasury Regulations Section
1.1502-6 or any analogous state or local tax provision; provided that Seller's
liability under clause (ii) shall be subject to the limitation of paragraph
7.01(c) and shall be treated, solely for purposes of such subparagraph, as
Damages and Costs and, provided, further, that Seller shall have no
indemnification obligations with respect to amounts that have been accrued in
the Audited Statements and the Interim Unaudited Statements (as such terms are
defined in Section 3.07(b) hereof) and any regularly prepared financial
statements for a period after June 30, 1995. Subject to the provisions of the
third paragraph of Section 5.04(f), Seller shall pay such amounts as they are
obligated to pay to Purchaser under the preceding sentence within 15 days after
payment of any applicable Tax liability by Purchaser or the Companies and, to
the extent not paid by Seller within such 15-day period, shall thereafter
include interest thereon at the Prime Rate (reported as of the last day of such
15-day period).
After the Closing Date, Purchaser and the Companies shall indemnify and
hold harmless Seller and its affiliates from and against any Tax liability with
respect to Purchaser's Taxes that are allocable to or apportioned to a period
after the Closing Date. Purchaser shall pay such amounts within 15 days after
payment of any such Tax liability by Seller or any of their affiliates and to
the extent not paid by Purchaser within such 15-day period shall thereafter
include interest thereon at the Prime Rate (reported as of the last day of such
15-day period).
(f) In the event that Purchaser or any of the Companies receives
notice, whether orally or in writing, of any pending or threatened federal,
state, local, municipal or foreign tax examinations, claims settlements,
proposed adjustments, assessments or
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reassessments or related matters with respect to Taxes that could affect the
Seller Group, or if Seller receives notice of matters that could affect
Purchaser or the Companies, the party receiving notice shall notify in writing
the potentially affected party within 10 days thereof. The failure of any
party to give the notice required by this paragraph shall not impair that
party's rights under this Agreement except to the extent that the other parties
demonstrate that they have been damaged thereby.
Subject to Section 5.04(g), each of Seller and Purchaser (as applicable,
the "Controlling Party") shall have the right to control any audit or
examination by any taxing authority, initiate any claim for refund, file any
amended return, contest, resolve, settle and defend against any assessment,
notice of deficiency or other adjustment or proposed adjustment relating to or
with respect to those Tax Returns that each is required to prepare and file
pursuant to Sections 5.04(b) and (c); provided that, in the event that any such
adjustment could have an adverse effect on the Tax liability of the other party
(or affect the Purchaser by having an adverse effect on the Tax liability of
the Companies, or affect Seller by having an adverse effect on the Tax
liability of the Seller Group) (the "Affected Party"), the Controlling Party
(i) shall give the Affected Party written notice of any such adjustment, (ii)
shall permit the Affected Party to participate in the proceeding to the extent
the adjustment may adversely affect the Tax liability of the Affected Party and
(iii) shall not settle or otherwise compromise such proceeding without the
prior written consent of the Affected Party, which consent shall not be
unreasonably withheld or delayed. Except as specified in Section 5.04(g) or
the following sentence, Seller and Purchaser shall each be entitled to retain
for its own account any refunds of Taxes attributable to those Tax Returns that
each is required to prepare and file pursuant to Sections 5.04(b) and (c) and
shall pay to the other the amount of any refund to which the other is entitled
within 15 days after the receipt of such refund and, to the extent not paid
within such 15-day period, shall thereafter include interest at the Prime Rate
(reported as of the last day of such 15-day period). In the case of Purchaser,
a refund attributable to any Purchaser's Return including a period prior to the
Closing Date shall be divided between Purchaser and Seller by recomputing the
portion of Tax as readjusted that is allocable to a period prior to the Closing
Date.
Notwithstanding the foregoing, but subject to Section 5.04(g), Seller shall
have the exclusive right to direct and to control the Florida Tax Litigation
and to initiate any claim for refund, file any amended return and contest,
resolve, settle and defend against such litigation. Purchaser shall use its
best efforts to assist Seller in connection with the Florida Tax Litigation,
including, without limitation, providing Seller access to information relating
to the Florida Tax Litigation that is in Purchaser's or the Companies'
possession and making available the officers and employees of Purchaser and the
Companies to provide assistance and information in connection therewith and to
continue to have the Companies participate as litigants in the Florida Tax
Litigation.
(g) To the extent permitted under applicable law, neither Purchaser nor
the Companies shall carry back any tax attribute ("Purchaser Tax Attribute") to
a period ending on or before the Closing Date ("Pre-Closing Period").
Notwithstanding anything
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to the contrary contained in this Section 5.04(g), if the failure to carry back
a Purchaser Tax Attribute is not permitted by law or would be unreasonably
burdensome to Purchaser, Purchaser may request Seller to waive the restrictions
imposed by this Section 5.04(g), and Seller shall agree to such request unless
Seller's obligations hereunder would be unreasonably burdensome to Seller. If
Seller agrees to such request, and Purchaser carries back a Purchaser Tax
Attribute to a Pre-Closing Period, Seller shall promptly file (or cause to be
filed) a claim for refund and shall pay (or cause to be paid) to Purchaser the
full amount of any resulting Tax Benefit within 30 days of the date such Tax
Benefit is realized, but only to the extent that Seller would not otherwise
have been entitled to utilize such Tax Attribute. The Tax Benefit shall be
recomputed and any payment made in excess of the redetermined Tax Benefit shall
be refunded if and to the extent that Seller subsequently realizes tax
attributes that could have been utilized but for the carryback of Purchaser Tax
Attributes pursuant to this Section 5.04(g). Such recomputation shall assume
that the tax attributes of Seller were utilized first and that the Purchaser
Tax Attributes carried back by Purchaser were then utilized in accordance with
Applicable Law. For purposes hereof, "Tax Benefit" shall mean
(i) in the case of any Tax Return, the sum of the amount by which the
Tax liability is reduced (or the Tax refund is increased) plus any interest
(net of Taxes, if any, thereon) relating to such Tax liability (or Tax refund),
and in the case of a consolidated federal income Tax Return or unconsolidated,
combined, unitary or similar state, local or other Tax return, the sum of the
amount by which the Tax liability of the affiliated group of corporations is
reduced (or Tax refund is increased) plus any interest (net of Taxes, if any,
thereon) from such government or jurisdiction relating to such Tax liability or
Tax refund;
(ii) a Tax Benefit shall be deemed to have been realized (A) at the time
any refund of Taxes is received, (B) at the time any refund of Taxes is applied
against other Taxes due (which, in the case of refunds so applied in the course
of an audit or other proceeding, shall be the date on which the audit or other
proceeding is finalized) or (C) at the time a liability for Taxes is otherwise
reduced (which, in each case, shall be 2 1/2 months after the close of the year
in which such liability for Taxes arose); and
(iii) where a party has other losses, deductions, credits or similar
items available to it, losses, deductions, credits or items for which the other
party would be entitled to a payment under this Agreement shall be treated as
the last items utilized to produce a Tax Benefit.
(h) Purchaser and Seller agree that any indemnification payments made
pursuant to this Section 5.04 or Article 7 shall be treated for tax purposes as
an adjustment to the Purchase Price unless otherwise required by Applicable
Law.
(i) Notwithstanding SAP accrual requirements, in preparing the Closing
Balance Sheet, an accrual of liability for Taxes(to the extent not paid prior
to Closing), will be included in such Closing Balance Sheet and shall only
reflect (as a liability for
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amounts unpaid net of amounts prepaid) the portion of the Companies' Taxes
allocable to the period up to and including the Closing Date ("the Companies'
Accrued Taxes"). Such allocable portion shall, in the case of Taxes that are
based on income or gross receipts, be determined as if the Closing Date were
the last day of any applicable taxable period and, in the case of other Taxes,
be apportioned ratably on a daily basis. Except as specified in the preceding
sentence or the Tax Allocation Agreement, the Closing Balance Sheet
specifically shall not reflect a liability for Taxes allocable to Seller Group
Returns, which Taxes are solely the responsibility of Seller.
(j) Seller agrees that upon Purchaser's request it shall file, or
caused to be filed, all documents reasonably necessary for the making of an
election under Section 338(h)(10) of the Code (or, at Purchaser's request, any
analogous provision of any state or local tax law) and in such case shall file
or cause to be filed all tax returns consistent with such election or
elections. Seller agrees to provide Purchaser with all relevant information to
analyze the impact of a Section 338(h)(10) election. In the event Purchaser
determines to make such an election, Purchaser shall provide to Seller in
writing a determination of the allocation of the Purchase Price among the
assets of the Companies. Seller shall accept any such reasonable allocation by
Purchaser, and Seller, Purchaser and the Companies shall file all Tax Returns
in a manner consistent with such allocation.
5.05 Regulatory Approvals and Consents.
(a) As soon as practicable, but in any event within 30 days, after the
date hereof:
(i) Each of Purchaser and Seller will make all necessary filings under
the Xxxx-Xxxxx Act. Each party shall pay the expenses of preparing its own
filing, and Purchaser shall pay the $45,000 filing fee.
(ii) Purchaser shall file with the Georgia Insurance Department all
Form(s) A required to request such Department's approval of the changes in
control of American Southern and American Safety that will be effected by the
transfer of the Shares. Seller shall cause the Companies to cooperate
reasonably with Purchaser in preparing the Form(s) A. Not less than 10 days
prior to making such filing, Purchaser shall deliver a copy of the filing
materials to American Southern, and American Southern shall be entitled to
provide comments thereon to Purchaser within 5 days after receipt. Seller
shall, and shall cause the Companies to, support such filing by Purchaser, so
long as it is consistent with this Agreement, and Purchaser shall use its best
efforts to obtain the approval of the Georgia Insurance Department for the
changes in control. All costs and fees of making such filings shall be paid by
Purchaser.
(b) Seller and Purchaser shall promptly advise the other of all oral,
and promptly provide each other with copies of all written, communications,
requests,
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inquiries or other notifications received from any Governmental Authorities
with respect to the transactions contemplated hereby.
(c) Seller shall take all reasonable action required to obtain prior to
Closing all consents with respect to the material agreements listed in Section
5.05(c) of the Seller Disclosure Memorandum. To the extent any such consent
has not been obtained, Seller shall continue its efforts to obtain such consent
after the Closing. In order, however, that the full value of every such
material agreement may be realized by Purchaser, at Purchaser's request,
direction and expense, Seller shall take all such action as shall be reasonably
necessary or appropriate (i) in order to preserve for the benefit of Purchaser
the rights and obligations of Seller under such agreements, and (ii) to
facilitate the collection of any monies due and payable, or to become due and
payable, to Seller pursuant to such agreements, and Seller shall remit such
monies to Purchaser within five business days of collection. Purchaser shall
be entitled to the benefits accruing after the Closing Date of any such
agreements, and Purchaser, at its expense, shall perform all of Seller's
obligations due to be performed under any such agreements to the extent (i)
Purchaser can perform such obligations without violating the terms of such
agreements, and (ii) Purchaser is being provided the benefits of such
agreements.
(d) Purchaser shall take all reasonable action required to obtain all
consents and approvals listed in Section 5.05(d) of the Purchaser Disclosure
Memorandum.
5.06 Best Efforts. Each of the parties hereto agrees to use its best
efforts to take, or to cause to be taken, all reasonable actions and to do, or
to cause to be done, all reasonable things necessary, proper or advisable under
Applicable Laws to consummate the transactions contemplated by this Agreement.
None of the parties hereto will intentionally take or intentionally permit to
be taken any action that would be in breach of the terms or provisions of this
Agreement or that would cause any of the representations contained herein to be
or become untrue.
5.07 Exclusive Dealings. Unless and until this Agreement is terminated
prior to Closing pursuant to Article 8, neither of the Seller nor any of
Seller's affiliates, officers, directors, agents or advisers shall, directly or
indirectly, solicit, encourage or initiate any discussions or negotiations
with, provide any information to, or otherwise cooperate in any other way with
any Person (other than Purchaser) concerning any direct or indirect purchase of
the Shares or of any substantial amount of the assets or properties of the
Companies (an "Alternative Transaction").
5.08 Expenses. Whether or not the Closing occurs, except as otherwise
stated herein, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
5.09 Resignations. At Closing, Seller will deliver written resignations
of the Companies' directors.
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5.10 Maintenance of Records. For a period of 7 years after Closing, or
for any longer period (i) as may be required by any federal, state, local or
foreign Governmental Authority, (ii) as may be reasonably necessary in respect
of the prosecution or defense of any suit, action, litigation or
administrative, arbitration or other proceeding or investigation that is
pending or threatened at the time of any notice to Purchaser while such records
are still maintained, or (iii) that is equivalent to the period established by
any applicable statute of limitations (or any extension or waiver thereof) with
respect to matters pertaining to Taxes, Purchaser shall maintain and shall
allow Seller, during normal business hours, through its employees and
representatives, the right, at Seller's expense, to examine and make copies of,
the books and records of the Companies pertaining to the Companies' business
prior to the Closing Date, for any reasonable business purpose.
5.11 Proposals. Purchaser shall promptly notify Seller of any inquiries
or proposals by any Person concerning an Alternative Transaction.
5.12 Press Releases. Except as otherwise required by Applicable Law,
Purchaser and Seller shall consult with each other in advance concerning any
proposed press release or public announcement pertaining to the transactions
contemplated by this Agreement, and no such release or announcement shall be
made unless both parties have agreed as to the timing, manner and content
thereof in their reasonable judgment.
5.13 GAAP Financial Statements. Promptly following the Closing,
Purchaser shall cause the Companies to prepare and deliver to Seller GAAP
financial statements of the Companies from January 1, 1995 through the Closing
Date.
ARTICLE 6
CONDITIONS TO CLOSING
6.01 Conditions to Obligations of Purchaser. The obligations of
Purchaser to proceed with the Closing under this Agreement are subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in part by Purchaser at Purchaser's option):
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects on and as of the
time of Closing, with the same force and effect as though such representations
and warranties had been made on, as of and with reference to such time and
Purchaser shall have received a certificate to such effect signed by an
authorized officer of Seller.
(b) Seller shall have performed in all material respects all of the
covenants and complied in all material respects with all of the provisions
required by this Agreement to be performed or complied with by it on or before
the Closing, and Purchaser shall have received a certificate to such effect
signed by an authorized officer of Seller.
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(c) The applicable waiting period under the Xxxx-Xxxxx Act (and any
extension thereof) shall have expired or been terminated.
(d) The Georgia Insurance Department shall have approved the changes in
control of American Southern and American Safety effected by the transfer of
the Shares.
(e) Seller shall have obtained a release from the InterRedec Pledge and
the InterRedec Escrow of all of the shares subject to the InterRedec Pledge.
(f) No order of any court or administrative agency shall be in effect
which enjoins or prohibits the transactions contemplated hereby or which would
limit or materially adversely affect Purchaser's ownership or control of the
Companies or the business of the Companies, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any Governmental Authority (i) challenging any of the transactions contemplated
by this Agreement or seeking monetary relief by reason of the consummation of
such transactions or (ii) which might have a Material Adverse Effect on the
future conduct of the business of the Companies.
(g) There shall not have occurred any Material Adverse Effect with
respect to the Companies, or any condition or event which is reasonably likely
to result in a Material Adverse Effect, subsequent to June 30, 1995.
6.02 Conditions to Obligations of Seller. The obligations of Seller to
proceed with the Closing under this Agreement are subject to the fulfillment
prior to or at Closing of the following conditions (any one or more of which
may be waived in whole or in part by Seller at Seller's option):
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects on and as of the
time of Closing, with the same force and effect as though such representations
and warranties had been made on, as of and with reference to such time, and
Seller shall have received a certificate to such effect signed by an authorized
officer of Purchaser.
(b) Purchaser shall have performed in all material respects all of the
covenants and complied in all material respects with all of the provisions
required by this Agreement to be performed or complied with by it on or before
the Closing, and Seller shall have received a certificate to such effect signed
by an authorized officer of Purchaser.
(c) The applicable waiting period under the Xxxx-Xxxxx Act (and any
extension thereof) shall have expired or been terminated.
(d) All consents listed on Schedule 5.05(d) shall have been obtained
and the Georgia Insurance Department shall have approved the changes in control
of American Southern and American Safety effected by the transfer of the
Shares.
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(e) Seller shall have obtained a release from the InterRedec Pledge and
the InterRedec Escrow of all of the Shares subject to such InterRedec Pledge.
(f) No order of any court or administrative agency shall be in effect
which enjoins or prohibits the transactions contemplated hereby, and there
shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any Governmental Authority (i) challenging any of the
transactions contemplated by this Agreement or seeking monetary relief by
reason of the consummation of such transactions or (ii) which might have a
Material Adverse Effect on the future conduct of the business of the Companies.
(g) No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect with respect to Purchaser, or any condition or event
which is reasonably likely to result in a Material Adverse Effect, subsequent
to June 30, 1995.
ARTICLE 7
INDEMNIFICATION
7.01 Indemnification by Seller.
(a) Seller hereby agrees to indemnify and hold harmless Purchaser and
the Companies from and against (i) any loss, liability, claim, obligation,
damage or deficiency (any "Damage") of or to Purchaser or any of the Companies
(other than any relating to Taxes, for which indemnification provisions are set
forth in Section 5.04(e)) arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of Seller contained in this Agreement or in any statement
or certificate furnished or to be furnished to Purchaser pursuant hereto or in
connection with the transactions contemplated hereby, and (ii) any actions,
judgments, costs and expenses (including reasonable attorneys' fees and all
other expenses incurred in investigating, preparing or defending any litigation
or proceeding, commenced or threatened) (any "Costs") incident to any of the
foregoing or the enforcement of this Section 7.01.
(b) No action or claim for Damages resulting from breaches of the
representations and warranties of Seller or pursuant to Section 5.04(e) shall
be brought or made after the third anniversary of the Closing Date, except
that such time limitation shall not apply to (i) any breach of the
representations contained in Sections 3.03 or 3.04 or (ii) any claims which
exist prior to the third anniversary of the Closing Date, and which have been
the subject of a written notice from Purchaser to Seller prior to such date,
which notice specified in reasonable detail the nature of the claim.
(c) Seller shall be liable to Purchaser only to the extent the
cumulative total of Damages and Costs under this Section 7.01 and Section
5.04(e) exceeds $200,000 (at which time rights to indemnification may be
asserted for such $200,000 amount and amounts in excess thereof) and in no
event shall Seller be liable under this Section 7.01 for
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any amount in excess of $5,000,000; provided, however, no limitation of
liability provided in this paragraph (c) shall apply to any Damage or Cost
arising out of or resulting from common law fraud in connection with the
transactions contemplated by this Agreement.
(d) Any indemnification payment by Seller under this Agreement shall be
reduced by the amount of any Purchaser's Tax Effect. For purposes hereof,
"Purchaser's Tax Effect" shall mean an amount equal to the amount of the
federal, state, local or foreign tax savings attributable to Purchaser's
payment of any Damage or Cost for which it receives an indemnification payment
under this Section 7.01 or under Section 5.04(e) (after taking into account the
tax effect, if any, of receipt of any indemnification payment). To the extent
the parties cannot agree whether any tax benefit exists or on the appropriate
treatment of any tax benefit, such disagreement shall be resolved by either an
accounting firm or a law firm with a nationally recognized tax practice
selected jointly by Purchaser and Seller. If such parties cannot agree on a
firm as specified in the prior sentence, the firm shall be selected jointly by
the independent auditors of such parties.
7.02 Indemnification by Purchaser.
(a) Purchaser hereby agrees to indemnify and hold harmless Seller from
and against (i) any Damage (other than any relating to Taxes, for which
indemnification provisions are set forth in Section 5.04(e)) arising out of or
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of Purchaser contained in this Agreement,
or in any statement or certificate furnished or to be furnished to Seller in
connection with the transactions contemplated hereby, and (ii) any Costs
incident to any of the foregoing or the enforcement of this Section.
(b) No action or claim for Damages resulting from breaches of the
representations and warranties of Purchaser shall be brought or made after the
third anniversary of the Closing Date, except that such time limitation shall
not apply to any claims which exist prior to the third anniversary of the
Closing Date and which have been the subject of a written notice from Seller to
Purchaser prior to such date, which notice specified in reasonable detail the
nature of the claim.
(c) Purchaser shall be liable to Seller only to the extent the
cumulative total of Damages and Costs under this Section 7.02 and Section
5.04(e) exceeds $200,000 (at which time rights to indemnification may be
asserted for such $200,000 amount and amounts in excess thereof) and in no
event shall Purchaser be liable under this Section 7.02 for any amount in
excess of $5,000,000; provided, however, no limitation of liability provided in
this paragraph (c) shall apply to any Damage or Cost arising out of or
resulting from common law fraud in connection with the transactions
contemplated by this Agreement or the failure of Purchaser to make payments
under the Purchaser Note in accordance with the terms thereof.
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(d) Any indemnification payment by Purchaser under this Agreement shall
be reduced by the amount of any Seller's Tax Effect. For purposes hereof,
"Seller's Tax Effect" shall mean an amount equal to the amount of the federal,
state, local or foreign tax savings attributable to Seller's payment of any
Damage or Cost for which it receives an indemnification payment under this
Section 7.02 or under Section 5.04(e) (after taking into account the tax
effect, if any, of receipt of any indemnification payment). To the extent the
parties cannot agree whether any tax benefit exists or on the appropriate
treatment of any tax benefit, such disagreement shall be resolved by either an
accounting firm or a law firm with a nationally recognized tax practice
selected jointly by Purchaser and Seller. If such parties cannot agree on a
firm as specified in the prior sentence, the firm shall be selected jointly by
the independent auditors of such parties.
7.03 Indemnification Procedures.
(a) If a claim is made, or any suit or action is commenced for which
defense or indemnity is claimed to be due under Section 5.04(e), 7.01 or 7.02,
or if knowledge is received of any other state of facts which, if not
corrected, may give rise to a right of defense or indemnification under Section
5.04(e), 7.01 or 7.02, the party seeking defense or indemnity ("Indemnified
Party") shall give written notice to the party claimed to be liable on the
defense or indemnity obligation ("Indemnifying Party") as soon as practicable
after, but in no event (i) more than 10 days following notice to the
Indemnified Party of any claim, suit or action for which defense or indemnity
will be sought, or (ii) more than 30 days following the Indemnified Party's
knowledge of any other state of facts which may give rise to a right to defense
or indemnity under Section 5.04(e), 7.01 or 7.02. A failure to give prompt
notice shall not relieve an Indemnifying Party of its obligation to defend or
indemnify, except to the extent the Indemnifying Party is prejudiced by such
failure. The Indemnified Party shall make available to the Indemnifying Party
and its counsel and accountants at reasonable times and for reasonable periods,
during normal business hours, all books and records of the Indemnified Party
relating to the matter for which defense or indemnity has been claimed, and
each party hereunder will render to the other such assistance as the other may
reasonably require in order to assure prompt and adequate defense of any suit,
claim or proceeding to which this Section 7.03 applies.
(b) If defense or indemnification is sought with respect to a claim,
suit or other proceeding against the Indemnified Party, the Indemnifying Party
shall have the right to defend, compromise and settle the matter in the name of
the Indemnified Party to the extent that the Indemnifying Party may be liable
to the Indemnified Party under Section 5.04(e), 7.01 or 7.02 hereof; provided,
however, that the Indemnifying Party shall not compromise or settle a suit,
claim or proceeding unless it assumes the obligation to indemnify for all
losses relating thereto. The Indemnifying Party shall notify the Indemnified
Party promptly if the Indemnifying Party elects to assume the defense of any
such claim, suit or action. In assuming the defense of a matter hereunder, the
Indemnifying Party shall have the right to select counsel, provided that the
Indemnified Party does not object to such counsel in a reasonable exercise of
its discretion. The Indemnified Party shall have the right to employ its own
counsel who may associate with
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the counsel designated by the Indemnifying Party (upon the Indemnifying Party's
assumption of the defense of the matter), but the fees and expenses of such
counsel shall be at the Indemnified Party's expense.
(c) The Indemnified Party may at any time notify the Indemnifying Party
of its intention to settle or compromise any claim, suit or action against the
Indemnified Party in respect of which indemnification payments may be sought
from the Indemnifying Party hereunder, but shall not settle nor compromise any
matter for which indemnification may be sought, notwithstanding this Section
7.03(c), in excess of $1,000 without the consent of the Indemnifying Party,
which shall not be unreasonably withheld. Any settlement or compromise of any
claim, suit or action in accordance with the preceding sentence, or any final
judgment or decree entered on or in, any claim, suit or action in which the
Indemnifying Party did not assume the defense in accordance herewith, shall be
deemed to have been consented to by, and shall be binding upon, the
Indemnifying Party as fully as if the Indemnifying Party had assumed the
defense thereof and a final judgment or decree had been entered in such suit or
action, or with regard to such claim, by a court of competent jurisdiction for
the amount of such settlement, compromise, judgment or decree.
(d) The Indemnifying Party shall be subrogated to any claims or rights
of the Indemnified Party as against any other persons with respect to any
amount paid by the Indemnifying Party under this Article 7 or under Section
5.04(e). The Indemnified Party shall cooperate with the Indemnifying Party, at
the Indemnifying Party's expense, in the assertion by the Indemnifying Party of
any such claim against other persons.
7.04 Sole Remedy.
(a) Purchaser's sole and exclusive remedy for any breach of this
Agreement by Seller shall be the provisions in Sections 5.04(e) and 7.01, and
Purchaser hereby waives any and all other remedies which may be available at
law or equity for any breach or alleged breach of this Agreement.
(b) Seller's sole and exclusive remedy for any breach of this Agreement
by Purchaser shall be the provisions in Sections 5.04(e) and 7.02, and Seller
hereby waives any and all other remedies which may be available at law or
equity for any breach or alleged breach of this Agreement.
(c) Notwithstanding anything to the contrary contained herein, if the
Closing occurs no claim for indemnification may be asserted under this
Agreement or any document delivered in connection herewith with respect to any
matter discovered or known to the party otherwise entitled to seek
indemnification on or before the Closing Date.
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ARTICLE 8
TERMINATION
8.01 When Agreement May be Terminated. This Agreement may be terminated
prior to Closing:
(a) By mutual written consent of Purchaser and Seller;
(b) By Seller in the event that it has not obtained a letter of credit
to be used as substitute collateral under the InterRedec Pledge by December 31,
1995 for the reasons described in the second sentence of Section 5.13(b); or
(c) In accordance with Section 5.03.
8.02 Final Termination. This Agreement will terminate on January 31,
1996 if the Closing has not yet occurred.
8.03 Effect of Termination. In the event of termination of this
Agreement by either Seller or Purchaser, as provided above, this Agreement
shall forthwith terminate and there shall be no liability on the part of any
party or any party's officers or directors, except for liabilities arising from
a breach of this Agreement prior to such termination; provided, however, that
the obligations of the parties set forth in Article 7 shall survive such
termination.
ARTICLE 9
ARBITRATION
9.01 Agreement to Arbitrate. Except as set forth in Sections 7.01(d)
and 7.02(d), any claim, controversy or dispute arising out of or relating to
this Agreement, on which an amicable understanding cannot be reached, to the
maximum extent allowed by applicable law and irrespective of the type of relief
sought, shall be submitted to and resolved by arbitration, and such arbitration
shall be the sole remedy for such matter. Such arbitration shall be heard and
conducted in Atlanta, Georgia and shall be conducted expeditiously and
confidentially in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"), as such rules shall be in effect on
the date of delivery of demand for arbitration, with the exception that the
arbitrators may not award any punitive or exemplary damages or any damages
other than compensatory, and except as such rules may be otherwise inconsistent
with the express provisions of this Article 9.
9.02 Initiating Arbitration. To initiate arbitration, a party shall
notify the other party in writing of its desire to arbitrate, stating the
nature of its dispute and the remedy sought. The receiving party shall
acknowledge receipt of the notice in writing within 5 days, and thereafter the
parties shall attempt in good faith to resolve the dispute within 15 days. If
the dispute cannot be resolved within such 15-day period, any party may file a
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written demand for arbitration by filing a written notice with the AAA and with
the other party, complying with the AAA's prescribed procedures for such
notices. Within 15 days of delivery of such demand for arbitration, each party
shall appoint one arbitrator, and the arbitrators so selected shall, within 15
days of their appointment, appoint an additional arbitrator. In the event that
the arbitrators selected by the parties are unable to agree upon the selection
of the additional arbitrator after reasonable efforts within such 15-day
period, a list of 7 qualified and available persons shall be requested from the
AAA. The parties shall take turns striking one person each from the list with
the last remaining person being the additional selected arbitrator. Once
selected, the arbitration panel shall meet as expeditiously as possible, select
a chairman, schedule the arbitration hearing, and notify the parties in writing
of the date, time and place of the hearing. With respect to any arbitration
pursuant to Section 2.04, the provisions of Section 2.04 shall apply where
inconsistent with this Article 9.
9.03 Effect. All conclusions of law reached by the arbitrators shall be
made in accordance with the internal laws of the State of Georgia without
regard for its conflict of laws doctrine. Any award rendered by the
arbitrators shall be accompanied by a written opinion setting forth the
findings of fact and conclusions of law relied upon in reaching their decision.
The award rendered by the arbitrators shall be final, binding and
non-appealable, and judgment upon such award may be entered by any court having
jurisdiction thereof. The parties agree that the existence, conduct and
content of any such arbitration shall be kept confidential and no party shall
disclose to any person any information about such arbitration, except as may be
required by law or for financial reporting purposes in each party's financial
statements.
9.04 Costs. Each party shall pay the fees of its own arbitrator,
attorneys, expenses of witnesses and all other expenses in connection with the
presentation of such party's case. The remaining costs of the arbitration,
including, without limitation, fees of the additional arbitrator, costs of
records or transcripts and administrative fees, shall be paid as designated by
the arbitrators.
ARTICLE 10
MISCELLANEOUS
10.01 Nature and Survival of Representations. The representations,
warranties, covenants and agreements of Purchaser and Seller contained in this
Agreement shall survive the Closing and shall not merge in the performance of
any obligation by any party hereto. Seller acknowledges and agrees that prior
to Closing, Purchaser intends to perform such investigation of the Companies as
it deems necessary or appropriate; however, no investigation by Purchaser will
diminish or obviate any of the representations, warranties, covenants or
agreements made or to be performed by Seller pursuant to this Agreement, or
Purchaser's right to rely upon such representations, warranties, covenants and
agreements.
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10.02 Amendment. This Agreement may not be amended or modified without
the prior written consent of all parties.
10.03 Waiver. Failure to insist upon strict compliance with any of the
terms or conditions of this Agreement at any one time shall not be deemed a
waiver of such term or condition at any other time; nor shall any waiver or
relinquishment of any right or power granted herein at any time be deemed a
waiver or relinquishment of the same or any other right or power at any other
time.
10.04 Governing Law. Notwithstanding the place where this Agreement may
be executed by any of the parties, the parties expressly agree that this
Agreement shall in all respects be governed by, and construed in accordance
with, the laws of the State of Georgia, without regard for its conflict of laws
doctrine.
10.05 Notices. Any notice or other communication to be given hereunder
shall be in writing and shall be deemed sufficient when (i) mailed by United
States certified mail, return receipt requested, (ii) mailed by overnight
express mail, (iii) sent by facsimile or telecopy machine, followed by
confirmation mailed by first-class mail or overnight express mail, or (iv)
delivered in person, at the address set forth below, or such other address as a
party may provide to the other in accordance with the procedure for notices set
forth in this Section:
If to Purchaser:
Atlantic American Corporation
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Hilton X. Xxxxxx, Xx.
Telephone: 000-000-0000
Telecopy: 404-231-2123
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxxx
2300 Xxxx Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
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If to Seller:
Xxxxx Enterprises, Inc.
One Atlantic Center, Suite 5000
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx, Xx.
Telephone: 000-000-0000
Telecopy: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
10.06 Invalid Provision. If any provision of this Agreement shall be
determined by arbitrators (acting in accordance with Article 9) to be invalid
or unenforceable, this Agreement shall be deemed amended to delete such
provision and the remainder of this Agreement shall be enforceable by its
terms.
10.07 Subsequent SEC Filings. After the Closing, the parties agree to
furnish information to each other (on a GAAP and SAP basis) so that each party
may prepare any filings required to be made with the SEC or any other
Governmental Authorities. The parties shall each be responsible for their own
costs and expenses (including, without limitation professional fees and
expenses) incurred in preparing such filings.
10.08 Assignment. This Agreement may not be assigned or delegated by any
party without the prior written consent of all other parties.
10.09 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
10.10 Further Assurances. Each party agrees to execute and deliver all
such further instruments and do all such further acts as may be reasonably
necessary or appropriate to effectuate this Agreement.
10.11 Headings. Headings and captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way
define, limit, extend or prescribe the scope of this Agreement or the intent of
any provision.
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10.12 Person and Gender. The masculine gender shall include the feminine
and neuter genders and the singular shall include the plural.
10.13 Entire Agreement. This Agreement, together with the Seller
Disclosure Memorandum, Purchaser Disclosure Memorandum and the Exhibit
referenced herein, constitute the entire agreement of the parties with respect
to matters set forth in this Agreement and supersede any prior understanding or
agreement, oral or written, with respect to such matters.
10.14 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party hereto,
whether under any rule of construction or otherwise. No party shall be
considered the draftsman. On the contrary, this Agreement has been reviewed,
negotiated and accepted by all parties and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all parties hereto.
10.15 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all such
counterparts shall constitute one and the same Agreement, binding on all the
parties notwithstanding that all the parties are not signatories to the same
counterpart.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATLANTIC AMERICAN CORPORATION
By: /s/ Hilton X. Xxxxxx, Xx.
-----------------------------
Attest:/s/ Xxxxx X. Xxxx Name: Hilton X. Xxxxxx, Xx.
------------------------------ Title: President
Secretary
XXXXX ENTERPRISES, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
-----------------------------
Attest:/s/ Xxxxxxx X. Xxxxxxxxx Name: Xxxxxxxx X. Xxxxxx
----------------------------- Title: President and Chief
Secretary Executive Officer
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EXHIBIT 2.03
PROMISSORY NOTE
$_______________ Date:____________, 1995
FOR VALUE RECEIVED, the undersigned, ATLANTIC AMERICAN CORPORATION, hereby
promises to pay to the order of XXXXX ENTERPRISES, INC. (f/k/a Vista Resources,
Inc. and hereinafter, together with its successors and assigns, referred to as
the "Holder") at the offices of the Holder located at 0000 Xxxx Xxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, or at such other place as the
Holder may designate in writing to the undersigned, an amount equal to the
aggregate amount of all payments of principal (including the Additional Amounts
and accrued interest added to principal in accordance with Section 2(c) of the
InterRedec Note both before and after the date hereof) and interest paid by the
Holder after the date hereof under that certain Nonnegotiable Note dated
October 11, 1991 ((the "InterRedec Note"); terms used herein and not defined
herein have their respective defined meaning as set forth in the InterRedec
Note) executed and delivered by the Holder in favor of InterRedec Southern
Company, Inc. (together with its successors and assigns including, but not
limited to, the Board of Governors of the Federal Reserve System or any person
or entity to whom the InterRedec Note may be pledged, "InterRedec"), a copy of
which is attached hereto as Exhibit A. Payments under this Note shall be due
and payable in the exact amounts and at the exact times as the amounts owing by
the Holder to InterRedec are originally scheduled to become due and payable
under the InterRedec Note; it being the intent of the undersigned and, by
acceptance hereof, the Holder, that the undersigned shall pay the Holder an
amount equal to each amount of principal (including the Additional Amounts and
accrued interest added to principal in accordance with Section 2(c) of the
InterRedec Note both before and after the date hereof) and interest paid from
the date hereof by the Holder to InterRedec (or its successors and assigns)
under the InterRedec Note simultaneously with each such payment by the Holder
to InterRedec.
The undersigned acknowledges that, as of the date hereof, the principal
amount (including the Additional Amounts that have now accrued pursuant to
paragraphs 2(c), 6, 7 and 8 of the InterRedec Note) due and owing by the Holder
under the InterRedec Note equals $___________, which amount includes $________
of accrued and unpaid interest added to the principal amount of the InterRedec
Note in accordance with Section 2(c) of the InterRedec Note.
The undersigned further acknowledges that the originally scheduled amounts
payable under the InterRedec Note may be reduced pursuant to paragraphs 10, 11
and 16 thereof. Whether and to what extent the amounts due and owing under the
InterRedec Note, and therefore this Note, are reduced pursuant to such
paragraphs shall be matters solely between the Holder and InterRedec and any
payment, agreement, settlement, arbitration or judicial award, or refund or
return of monies with respect to such matters
44
shall, for purposes of this Note and the amounts owing by the undersigned
hereunder, be binding upon the undersigned and the undersigned shall not be
entitled to withhold or offset any amount owing hereunder in the event the
undersigned disputes the amount or time any payment is made by the Holder under
the InterRedec Note with respect to such matters. In this connection, if,
pursuant to paragraph 16 of the Note, the Holder has a claim for Damages (as
such term is used in the InterRedec Note) and the Holder pays an amount of
proceeds due under the InterRedec Note into escrow as contemplated therein, the
undersigned shall simultaneously pay an amount of proceeds due under this Note
into escrow pursuant to such terms and arrangements as the undersigned and the
Holder shall mutually and reasonably agree. To the extent any Damages paid
into escrow by the Holder are returned or refunded to the Holder (whether
pursuant to mutual agreement or arbitration or judicial award), the escrow
arranged between the Holder and the undersigned shall provide that the
undersigned shall be entitled to receive the same amount of funds so refunded
or returned to the Holder. To the extent InterRedec is entitled to receive
(whether by mutual agreement or arbitration or judicial award) any Damages paid
into escrow by the Holder, the escrow arrangements between the Holder and the
undersigned shall provide that the Holder shall be entitled to receive the same
amount of funds so received by InterRedec. Notwithstanding any provisions
contained herein to the contrary, any payment by InterRedec to the Holder that
is in satisfaction of a liability of American Southern that has been paid by
American Southern shall be promptly paid to the undersigned. Pursuant to
Sections 5.04(e) and 7.01 of the Stock Purchase Agreement (as defined below),
the undersigned may have a separate cause of action against the Holder with
respect to any such dispute relating to such matters.
The undersigned shall have the right at any time and from time to time to
prepay the indebtedness represented by this Note in whole or in part without
premium or penalty, but with accrued interest to the date of such prepayment on
the principal amount prepaid. By acceptance hereof, during the time this Note
is outstanding, the Holder agrees not to exercise its right to prepay all or a
portion of the principal of the InterRedec Note prior to its stated maturity
pursuant to paragraph 9 of the InterRedec Note.
If, pursuant to paragraph 12 of the InterRedec Note, InterRedec pays the
Holder any Offset Amount thereby increasing the outstanding amount of the
InterRedec Note, the Holder may, at its option, either (i) immediately pay such
amount directly to the undersigned whereupon the principal amount outstanding
under this Note shall be automatically increased by such amount or (ii) retain
such payment by InterRedec whereupon the outstanding amount of this Note shall
remain reduced by the amount of such amount retained.
In no event shall the amount of interest due or payable under this Note
exceed the maximum rate of interest allowed by applicable law and, in the event
any such payment is inadvertently paid by the undersigned or inadvertently
received by the Holder, then such excess sum shall be credited as a payment of
principal, unless the undersigned shall notify the Holder in writing that the
undersigned elects to have such excess sum returned to it forthwith. It is the
express intent of the parties hereto that the undersigned not pay and
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the Holder not receive, directly or indirectly, in any manner whatsoever,
interest in excess of that which may be lawfully paid by the undersigned under
applicable law.
Each of the following events shall constitute an "Event of Default" under
this Note: (i) failure of the undersigned to pay any amount due hereunder when
due and the continuance of such failure for a period of five business days
after written demand therefor, or the undersigned shall in any way fail to
comply with the other terms, covenants or conditions contained in this Note or
in the Stock Purchase Agreement; (ii) any oral or written representation or
warranty made at any time by the undersigned to the Holder under the Stock
Purchase Agreement or otherwise shall prove to have been incorrect or
misleading in any material respect when made; (iii) the undersigned shall (a)
commence a voluntary case under the Bankruptcy Code of 1978, as amended or
other federal bankruptcy law (as now or hereafter in effect); (b) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or composition
for adjustment of debts; (c) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case under
such bankruptcy laws or other laws; (d) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking
of possession by, a receiver, custodian, trustee, or liquidator of itself or of
a substantial part of its property, domestic or foreign; (e) be unable to, or
admit in writing its inability to, pay its debts as they become due; (f) make a
general assignment for the benefit of creditors; or (g) make a conveyance
fraudulent as to creditors under any state or federal law; or (iv) a case or
other proceeding shall be commenced against the undersigned in any court of
competent jurisdiction seeking (a) relief under the Bankruptcy Code of 1978, as
amended or other federal bankruptcy law (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts or (b) the appointment of a
trustee, receiver, custodian, liquidator or the like for the undersigned or all
or any substantial part of the assets, domestic or foreign, of the undersigned.
Upon the occurrence of an Event of Default (other than an Event of Default
described in clause (iii) or (iv) of the definition thereof), at the option of
the Holder, and without demand or notice of any kind, all outstanding amounts
under this Note (as determined by the then outstanding amounts under the
InterRedec Note) may be immediately declared, and thereupon shall immediately
become, in default and due and payable and the Holder may exercise any and all
rights and remedies available to it at law, in equity or otherwise. Upon the
occurrence of an Event of Default described in clause (iii) or (iv) of the
definition thereof, all outstanding amounts owing under this Note (as
determined by the then outstanding amounts under the InterRedec Note), without
demand or notice of any kind, shall immediately become in default and due and
payable and the Holder may exercise any and all rights and remedies available
to it at law, in equity or otherwise.
Upon the occurrence of an Event of Default under this Note, interest shall
accrue on the outstanding principal amount of this Note (including all
Additional Amounts) at the
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lower of (i) the Prime Rate (as defined in the InterRedec Note) plus two
percentage points (2%) or eighteen percent (18%) per annum, such interest, and
such principal, being payable on demand.
The Holder shall maintain a ledger or other statement of account regarding
the amounts due under the InterRedec Note and therefore this Note; provided,
however, that the failure of the Holder to maintain such ledger or statement
shall in no way affect its rights or the undersigned's obligations hereunder.
The entries in such ledger or statement shall be binding and conclusive upon
the undersigned absent manifest error.
The undersigned shall pay all expenses incurred by the Holder in the
collection of this Note, including, without limitation, the reasonable fees and
disbursements of counsel to the Holder if this Note is collected by or through
an attorney-at-law. However, the undersigned shall not be liable for any costs
of collection, including attorneys' fees and disbursements, paid by the Holder
to InterRedec.
Time is of the essence of this Note.
The undersigned agrees that all of its payment obligations hereunder shall
be absolute, unconditional and, for the purposes of making payments hereunder,
the undersigned hereby waives any right to assert any setoff, counterclaim or
cross-claim including any right to setoff amounts due and owing hereunder by
reason of any claim for indemnification under the Stock Purchase Agreement.
Any such claim for indemnification shall be made in a separate cause of action
and shall not affect, impair, reduce or modify the amounts owing by the
undersigned hereunder.
No delay or failure on the part of the Holder in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial exercise
by the Holder of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
All amendments to this Note, and any waiver or consent of the Holder, must
be in writing and signed by the Holder and the undersigned.
The undersigned hereby waives presentment, demand, notice of dishonor,
protests and all other notices whatever.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF GEORGIA.
This Note is the Purchaser Note referred to in Section 2.03(a) of that
certain Stock Purchase Agreement dated as of October 16, 1995 (the "Stock
Purchase Agreement") by and between the initial Holder and the undersigned and
is subject to, and is entitled to the benefits of, the terms and provisions of
the Stock Purchase Agreement.
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This Note shall be binding upon the successors and assigns of the
undersigned. A Holder of this Note may assign or transfer this Note to any
person or entity without notice to, or the consent of, the undersigned.
Any notice to be given hereunder shall be in writing, shall be sent to such
person's address set forth below its signature hereto and shall be deemed
received (i) on the earlier of the date of receipt or the date three business
days after deposit of such notice in the United States mail, if sent postage
prepaid, certified mail, return receipt requested or (ii) when actually
received, if personally delivered or (iii) one business day after deposit of
such notice with a recognized overnight courier or (iv) when confirmation of
transmission has been received by the sender, if via facsimile transmission.
[SIGNATURES ON NEXT PAGE]
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[SIGNATURE PAGE TO AAC/XXXXX PROMISSORY NOTE DATED ______________, 1995]
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Promissory Note under seal as of the date and year first written above.
ATLANTIC AMERICAN CORPORATION
By:
-----------------------------
Name:
----------------------
Title:
---------------------
ATTEST:
By:
-----------------------------
Name:
----------------------
Title:
---------------------
[CORPORATE SEAL]
Address for Notices:
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attn.: Hilton X. Xxxxxx, Xx.
Telecopy No.: (000) 000-0000
Accepted:
XXXXX ENTERPRISES, INC.
By:
----------------------------
Name:
---------------------
Title:
--------------------
Address for Notices:
One Atlantic Center, Suite 5000
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn.: Xxxx X. Xxxxx, Xx.
Telecopy No.: (000) 000-0000
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EXHIBIT A
NONNEGOTIABLE NOTE
$8,000,000.00 October 11, 1991
FOR VALUE RECEIVED, the undersigned, Vista Resources, Inc. ("Vista"),
promises to pay to InterRedec Southern Company, Inc. ("InterRedec"), at such
place as InterRedec may designate in writing, the original principal sum of
Eight Million Dollars and no cents ($8,000,000.00), on October 11, 1996; plus
accrued and unpaid interest on the unpaid balance of such principal amount, at
the rate of interest and at the times described below, until full and final
payment.
1. Interest on the unpaid principal balance of this Note shall
accrue at an annual rate (computed on the basis of actual days elapsed over a
365-day year) of the Prime Rate (as defined below). Vista shall pay all costs
of collection, including reasonable attorney's fees, if this Note is collected
by legal action or through an attorney at law.
2. All principal and interest shall be paid in immediately
available funds and in lawful money of the United States of America as follows:
(a) Principal shall be due and payable in full on October
11, 1996, together with all accrued and unpaid interest.
(b) One-half of the interest accruing on the outstanding
principal amount of this Note from the date hereof until such
principal amount is paid in full shall be payable quarterly on the
last day of each calendar quarter (March 31, June 30, September 30,
and December 31) during the term of this Note.
(c) One-half of the interest accruing on the outstanding
principal amount of this Note from the date hereof until such
principal amount is paid in full shall be added to the principal
amount of this Note and shall be due and payable in full (without
interest) on October 11, 1996.
(d) Whenever a payment under this Note becomes due on a
day which is not a business day, the due date for such payment shall
be extended to the next succeeding business day, and interest
applicable to such amount shall accrue during any such extension.
3. "Prime Rate" shall mean the rate stated in the Wall Street
Journal on the first business day of each calendar month as the prime rate.
Any change in the interest rate hereunder resulting from a change in the Prime
Rate shall be effective as of the beginning of the first calendar day of each
calendar month on which the Prime Rate changes.
50
4. The annual interest rate accruing on this Note on the date of
its execution equals eight percent (8%).
5. This Note is issued pursuant to, and shall be subject to and
have the benefits of, that certain Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated as of September 17, 1991, by and among Vista;
Concorde Finance & Investment, Inc., a Delaware corporation; InterRedec;
InterRedec, Inc., a Delaware corporation; and American Southern Insurance
Company ("ASICo") and the related Pledge and Security Agreement dated of even
date by and between Vista and InterRedec.
6. In addition to any other amounts due and payable under this
Note, Vista promises to pay to InterRedec One Million Dollars and no cents
($1,000,000.00) on October 11, 1996 if the Earnings Before Taxes (as defined
below) of ASICo and its subsidiaries, on a consolidated basis, equal or exceed
Five Million Dollars and no cents ($5,000,000.00) for its fiscal year ending
December 31, 1992. Any additional amount due to InterRedec under this
Paragraph 6 shall accrue interest under this Note in accordance with Paragraph
1 of this Note from January 1, 1993 through October 11, 1996. (The additional
amount, if any, payable under this Paragraph 6 shall be referred to in this
Note as the "First Additional Amount.")
7. In addition to any other amounts due under this Note, Vista
promises to pay to InterRedec One Million Dollars and no cents ($1,000,000.00)
on October 11, 1996 if the Earnings Before Taxes (as defined below) of ASICo
and its subsidiaries, on a consolidated basis, equal or exceed Fifteen Million
Dollars and no cents ($15,000,000.00) on an aggregate basis for its fiscal
years ending December 31, 1992, December 31, 1993, and December 31, 1994. Any
additional amount due to InterRedec under this Paragraph 7 shall accrue
interest under this Note in accordance with Paragraph 1 of this Note from
January 1, 1995 through October 11, 1996. (The additional amount, if any,
payable under this Paragraph 7 shall be referred to in this Note as the "Second
Additional Amount"; and the First Additional Amount and the Second Additional
Amount collectively shall be referred to in this Note as the "Additional
Amounts".)
8. "Earnings Before Taxes" shall mean the pre-tax earnings of
ASICo and its subsidiaries, on a consolidated basis, as determined in
accordance with generally accepted accounting principles, consistently applied,
as adjusted, where not otherwise duplicative, (a) to eliminate any adjustments
to the value of assets or liabilities or other accounting adjustments resulting
from the application of "purchase accounting principles"; (b) to include
reasonable finance charges related to injections of capital in any form
contributed by Vista or any third party; and (c) to eliminate any payments or
expense accruals charged by or on behalf of any corporation or other entity
affiliated with American Southern other than its subsidiaries (other than
payments made directly to third parties relating to ASICo or its
subsidiaries.). (Notwithstanding that management fees and certain other
expenses are disregarded in computing the amount of Earnings
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Before Taxes, nothing in this Paragraph 8 shall be construed as denying Vista
the right to assess any such charges.)
9. Vista shall have the right at any time and from time to time
to prepay the indebtedness represented by this Note in whole or in part without
premium or penalty, but with accrued interest to the date of such prepayment on
the principal amount prepaid.
10. Upon the occurrence of any of the following events, the
principal amount of this Note shall automatically be reduced by an amount
determined under Section 3.03 of the Stock Purchase Agreement (an "Offset
Amount") for which InterRedec is determined to be obligated to Vista (and any
such Offset Amount shall first reduce the amount of any Additional Amounts
before reducing the original principal amount of this Note):
(a) Vista and InterRedec shall agree in writing
(including an agreement as to the amount owed by InterRedec to Vista)
that InterRedec is obligated to Vista for indemnification under the
Stock Purchase Agreement and InterRedec shall not have paid Vista such
amount within seven (7) days of the date of such agreement;
(b) Vista and InterRedec shall agree to arbitration
procedures with respect to a dispute concerning the indemnification
provisions of the Stock Purchase Agreement, the arbitrator thereunder
shall enter an award in Vista's favor, and InterRedec shall not have
paid Vista the amount of such award within (7) days of the date such
award is entered; or
(c) A court of competent jurisdiction shall enter a
judgment concerning the indemnification provisions of the Stock
Purchase Agreement in Vista's favor and InterRedec shall not have paid
Vista the amount of such judgment within seven (7) days of the date
such judgment is entered.
11. Upon the final assessment of any amount of Taxes (as defined
in the Stock Purchase Agreement) against ASICo or any of the Subsidiaries for
any taxable period ending on or before the date of the Closing, which final
assessment is paid by Purchaser or ASICo and is not reimbursed by any of the
Sellers within five (5) business days after receipt by Sellers of notice from
Purchaser or ASICo that it has paid such Taxes, the principal amount of this
Note shall automatically be reduced by the Offset Amount with respect to such
final assessment (and any such reduction shall first reduce the amount of any
Additional Amounts before reducing the original principal amount of this Note).
12. Notwithstanding anything in Paragraph 10 or 11 of this Note,
if, after the date on which the principal amount of this Note has been reduced
by an Offset Amount, InterRedec pays Vista the Offset Amount, then the
principal amount of this Note immediately shall be increased for all purposes
by the amount which InterRedec pays Vista.
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13. Notwithstanding any provision to the contrary in this
Note, no party shall be required to pay, and no party shall be permitted to
collect, any amount of interest in excess of the maximum amount of interest
permitted by law ("Excess Interest"). If any Excess Interest is provided for
or determined by a court of competent jurisdiction to have been provided for in
this Note, then any Excess Interest shall be refunded to the payor thereof, and
the interest rate provided for and this Note shall automatically be reduced to
the maximum lawful rate allowed from time to time under applicable law.
14. Upon the occurrence of and during the continuance of
one or more Events of Default under and as defined in the Pledge and Security
Agreement:
(a) the full amount of this Note may, at the
option of InterRedec, be declared and immediately become due and payable, and
InterRedec, subject to the limitations set forth in the Pledge and Security
Agreement, may exercise any rights available to it at law and in equity, or
available under any agreement, relating to this Note; and
(b) interest accruing under this Note shall
accrue at the lower of (1) the Prime Rate plus two percentage points (2%), or
(2) eighteen percent (18%) per annum.
15. If the amount of this Note shall become due and
payable pursuant to Paragraph 14 of this Note, Vista shall immediately pay the
outstanding amount due under this Note into an escrow account (and shall
deposit the First Additional Amount and the Second Additional Amount, if any,
directly into the escrow account within five (5) business days of the dates
such amounts are finally determined to be due pursuant to Section 17 of this
Agreement,) with a bank that is reasonably acceptable to the parties and
pursuant to an escrow agreement in a form reasonably satisfactory to the
parties. The escrow agreement shall provide that (a) Vista shall have the
right to receive escrowed funds under the circumstances it would be entitled to
exercise its offset rights hereunder, and (b) any remaining escrowed funds
shall be released to InterRedec on the stated maturity date of this Note,
except that if on such date there are one or more outstanding claims for
Damages (as defined in the Stock Purchase Agreement), an amount of the escrowed
funds which would otherwise be released to InterRedec, equal to the maximum
amount of such claims for Damages, shall remain in escrow until the resolution
of such claims.
16. If, at the maturity of this Note, there are one or
more outstanding claims for Damages (as that term is defined in the Stock
Purchase Agreement), an amount of the proceeds due under this Note equal to
maximum amount of such claims for Damages shall be paid into escrow pursuant to
such terms and arrangements as the parities shall mutually and reasonably
agree.
17. Vista shall deliver to InterRedec a written
computation of the Earnings Before Taxes by March 31, 1993, with respect to the
First Additional Amount, and March 31, 1995, with respect to the Second
Additional
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Amount. InterRedec shall be deemed to have accepted each such computation
provided unless, within forty-five (45) days after receipt of such written
computation, InterRedec notifies Vista of its objection in writing and, in that
event, Vista shall provide InterRedec with information pertinent to its
computation of Earnings Before Taxes for such years, together with such access
to the pertinent accounting records of American Southern and its subsidiaries
as InterRedec may reasonably request. If the parties are unable to resolve any
disputes relating to the computation of Earnings Before Taxes within thirty
(30) days of InterRedec's notice of objection to Vista's computation, the
parties shall promptly refer the matter for arbitration to a mutually agreed
major accounting firm of a national standing which, at the time of such
submission, does not represent or has not represented any of the parties
hereto, and the decision of such major accounting firm shall be rendered within
not more than twenty (20) days of submission and shall be final and binding on
the parties. The expense of such arbitration shall be borne equally by the
parties.
18. If, during the term of this Note, Vista sells all of
the outstanding stock or substantially all of the assets of ASICo to a third
party (a "Subsequent Purchaser"), Vista may assign all of its rights and
obligations under this Note, together with all of its rights and obligations
under the Stock Pledge and Security Agreement, to such Subsequent Purchaser;
provided, however, that Vista (1) must first obtain the written consent of
InterRedec to such assignment which, based upon InterRedec's judgment of the
creditworthiness of the Subsequent Purchaser, shall not unreasonably be
withheld, or (2) delivers to InterRedec a bank letter of credit in a form and
from a bank reasonably acceptable to InterRedec and in an amount which at all
times shall be at least equal to the outstanding principal amount of this Note.
19. The failure or forbearance of InterRedec to exercise
any right hereunder, or otherwise granted to it by law or another agreement,
shall not affect or release the liability of Vista, and shall not constitute a
waiver of such right unless so stated by InterRedec in writing.
20. This Note shall be governed by and construed in
accordance with the substantive laws of the State of Georgia.
This Note is executed under the hand and seal of Vista on the
date first-above written.
VISTA RESOURCES, INC.
[CORPORATE SEAL]
By: /s/ Xxxxxx X. Xxxxxxx III
-------------------------------
Title: President and CEO
----------------------------
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Accepted by:
INTERREDEC, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxx
Vice President
INTERREDEC SOUTHERN COMPANY, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxx
Vice President
CONCORDE FINANCE & INVESTMENTS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxx
Vice President
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