1
EXHIBIT 2.3
DISTRIBUTION AGREEMENT
This Distribution Agreement (this "Agreement") is made and entered into
on October __, 1996, by and among AMERISAFE, Inc., a Texas corporation (the
"Company"), Auto One Acceptance Corp., a Texas corporation ("AOAC"), Xxxxxxx X.
Xxxxxx ("Xxxxxx") and Xxxx X. Xxxxxxxx ("Xxxxxxxx").
RECITALS
A. The Company is the owner of all issued and outstanding shares of
common stock (the "AOAC Stock") of AOAC.
B. Pursuant to the Plan of Reorganization adopted by the Board of
Directors of the Company on October __, 1996 (the "Plan of Reorganization"),
the Company desires to distribute 98.4% of the AOAC Stock to Xxxxxx and 1.6% of
the AOAC Stock to Xxxxxxxx, and Xxxxxx and Xxxxxxxx desire to accept such
distributions, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties agree as follows:
1. Distribution.
(a) Distribution of Shares. The Company hereby agrees to
distribute on the Distribution Date (as defined below in Section 2) (i) 984
shares of AOAC Stock to Xxxxxx and (ii) 16 shares of AOAC Stock to Xxxxxxxx.
The Company also hereby agrees to make, prior to such distribution, a capital
contribution to AOAC by delivering to AOAC a promissory note in the amount of
$50 million (the "Note"). Xxxxxx and Xxxxxxxx hereby agree to accept their
respective distributions of AOAC Stock.
(b) Delivery of Certificates. On the Distribution Date, the
Company will deliver to each of Xxxxxx and Xxxxxxxx properly endorsed stock
powers, with all applicable stock certificates attached, to evidence the
transfer of the shares contemplated in Section 1(a).
2. Distribution Date. For purposes of this Agreement, "Distribution
Date" means the date upon which the Company distributes the AOAC stock to
Xxxxxx and Xxxxxxxx, which date shall be two business days prior to the date
requested by the Company for the acceleration of the effectiveness of its
Registration Statement on Form S-1 (File No. 333-10099) with respect to the
Company's registered public offering of the Company's Class A Common Stock (the
"Offering") or such earlier date as may be
2
agreed upon by the parties; provided that if the Distribution Date has not
occurred prior to October 31, 1996, the obligations of each of the parties
hereto will terminate.
3. Representations of Xxxxxx, Xxxxxxxx and AOAC.
(a) Each of Xxxxxx and Xxxxxxxx hereby represents and warrants
that:
(i) He has all requisite power and authority to execute
and deliver this Agreement and to perform all of the transactions
contemplated by this Agreement to be performed by him.
(ii) Subject to Section 2, this Agreement will, when
executed and delivered by the parties, constitute his valid and binding
obligation, enforceable against him in accordance with its terms.
(iii) As of the Distribution Date, he has not
transferred, agreed to transfer, or negotiated with any person regarding
a transfer of, any of his shares of the Company or shares of AOAC.
(iv) He currently has no plans or intentions to transfer
any of his stock of the Company or AOAC on or after the Distribution
Date or to cause AOAC to make any distribution to stockholders other
than in the ordinary course of business.
(b) AOAC hereby represents and warrants that:
(i) AOAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and
has all requisite corporate authority to execute and deliver this
Agreement and to perform all of the transactions contemplated by this
Agreement to be performed by it; and
(ii) The execution and delivery by the AOAC of this
Agreement, and the consummation of the transactions contemplated by this
Agreement to be performed by AOAC, have been duly authorized by all
necessary corporate action on the part of AOAC, and this Agreement will,
when executed and delivered by the parties and subject to Section 2,
constitute a valid and binding obligation of AOAC, enforceable against
AOAC in accordance with its terms.
4. Representations of the Company. The Company hereby represents
and warrants to each of Xxxxxx, Temple and AOAC that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite corporate authority to execute and deliver this Agreement and to
perform all of the transactions contemplated by this Agreement to be performed
by it;
2
3
(b) The execution and delivery by the Company of this
Agreement, and the consummation of the transactions contemplated by this
Agreement to be performed by the Company, have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement will,
when executed and delivered by the parties and subject to Section 2, constitute
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms; and
(c) Upon the distribution by the Company to each of Xxxxxx and
Xxxxxxxx of the shares of AOAC Stock, each of Xxxxxx and Xxxxxxxx will have
beneficial and record ownership of such shares, free and clear of any and all
liens and encumbrances, other than the pledge of such shares to Banc One
Capital Partners II, Ltd. ("Banc One") as security for the loan agreement
between the Company and Banc One (the "Loan Agreement").
5. Tax Characterization. It is the express intention of the parties
that the transactions contemplated by this Agreement qualify for tax-free
treatment under section 355 of the Internal Revenue Code of 1986, as amended
(the "Code.") In this regard, the parties hereto covenant as follows:
(a) Each of Xxxxxx and Xxxxxxxx hereby covenants that:
(i) For the period commencing on the Distribution Date
and ending at the end of the second taxable year ending after the
Distribution Date (the "Post-Distribution Period"), he will not transfer
any of his Company or AOAC stock to any other person, other than a
transfer of Company stock solely in exchange for stock, pursuant to a
transaction qualifying as a tax-free reorganization described in section
368(a)(1) of the Code (a "Qualifying Transaction"). For all purposes of
this Agreement, a transaction shall be deemed to be a Qualifying
Transaction only if: (i) the IRS issues a ruling letter so holding, or
(ii) tax counsel to the Company renders an opinion reasonably
satisfactory in form and substance to the Company and to both Xxxxxx and
Xxxxxxxx that the transaction is a Qualifying Transaction. Any stock
received in such a transfer pursuant to a Qualifying Transaction shall
become subject to this covenant.
(ii) Following the Post-Distribution Period he will not
transfer stock of the Company or AOAC to any person pursuant to any
agreements, arrangements or negotiations entered into before the
Distribution Date.
(iii) During the Post-Distribution Period he will cause
the Company, through its operating subsidiary, and AOAC to continue the
active conduct of their respective businesses which they conduct on the
Distribution Date, and not to liquidate or to sell or otherwise dispose
of any material part of their assets (including stock of subsidiaries)
other than in the ordinary course of business or pursuant to a
Qualifying Transaction, if such sale or disposition would cause the
respective corporation not to continue to employ a substantial portion
3
4
of the assets held by it on the Distribution Date in the conduct of
businesses conducted by it on such date.
(iv) He will cause AOAC to use the Note, and the
proceeds from the repayment thereof, solely in the ordinary conduct of
its commercial and consumer finance business, in the enhancement and
expansion of such business and/or to retire existing indebtedness. In
no event will he cause AOAC to use such funds to invest in assets of any
business or activity other than AOAC's financing business.
(b) The Company and AOAC each covenants that during the
Post-Distribution Period it will not discontinue the active conduct of the
active business which it conducts on the Distribution Date, liquidate, or sell
or otherwise dispose of any material part of its assets (including stock of
subsidiaries) other than in the ordinary course of business or pursuant to a
Qualifying Transaction, if such sale or disposition would cause the respective
corporation not to continue to employ a substantial portion of the assets held
by it on the Distribution Date in the conduct of businesses conducted by it on
such date.
(c) AOAC covenants that it will use the Note, and proceeds
from the repayment thereof, solely in the ordinary conduct of its commercial
and consumer finance business, in the enhancement and expansion of such
business and/or to retire existing indebtedness. In no event will it use such
funds to invest in assets of any business or activity other than its existing
finance business.
(d) Each of Xxxxxx and Xxxxxxxx covenants that during the
Post-Distribution Period he will not cause AOAC to make, and AOAC covenants
that during such period it will not make, any distribution to shareholders not
constituting a dividend within the meaning of section 316 of the Code.
6. Pledge. AOAC hereby acknowledges that the Note received pursuant
to Section 1 will be payable only out of the net proceeds of the Offering and
will be subject to the prior repayment of all amounts owed to Banc One in
connection with the Loan Agreement. AOAC hereby agrees to pledge the Note and
the proceeds therefrom to Banc One as security for the Loan Agreement, and
further agrees to execute and deliver all such agreements, instruments and
documents, and to take any further action, as may be requested by Banc One to
evidence such pledge. Each of Xxxxxx and Xxxxxxxx acknowledges that the shares
of AOAC Stock to be received by him will remain pledged to Banc One as security
for the Loan Agreement and agrees to execute and deliver all such agreements,
instruments and documents, and to take any further action, as may be requested
by Banc One to evidence such pledge.
7. Further Assurances. Each of the parties agrees that he or it
will, at any time, upon the request of any other party hereto, take, or cause
to be taken, all actions and do, or cause to be done, all things (including
without limitation executing, acknowledging and delivering additional
agreements, instruments and documents) as may
4
5
be necessary, appropriate or advisable in order to consummate or make effective
the transactions contemplated by this Agreement in a manner consistent with the
intentions and purposes of the parties including, without limitation, the
delivery of such certificates or undertakings as may reasonably be required by
counsel to the Company in connection with the rendering by such counsel of
opinions with respect to the federal income tax treatment of the distributions
contemplated herein.
8. Indemnification.
(a) AOAC. If, as a result of any event within the control of
AOAC occurring in the 24-month period commencing on the Distribution Date and
involving either the stock or assets (or any combination thereof) of AOAC
(including, but not limited to, a merger, consolidation, liquidation, stock
issuance, or sale or other disposition of assets by or involving AOAC) any
taxes are imposed on the Company or any of its subsidiaries with respect to any
action taken pursuant to the Plan of Reorganization (or any amendment thereof),
then AOAC shall pay those taxes (and related interest and penalties, if any)
and shall indemnify and hold harmless the Company and its subsidiaries from and
against all such taxes, interest and penalties, including but not limited to
any such taxes paid at any time by Company or any subsidiary. AOAC shall make
such payment and indemnification no later than 15 days after written notice
from the Company or one of its subsidiaries of a final determination with
respect to such taxes, which notice shall be accompanied by a computation of
the amounts due.
(b) Xxxxxx. Xxxxxx agrees to indemnify the Company and its
subsidiaries and hold them harmless against and with respect to any damages,
claims, losses, taxes (including interest, penalties and additions thereto),
and costs and expenses arising from, in connection with or with respect to (i)
any misrepresentation or breach of warranty by Xxxxxx under this Agreement, or
(ii) any failure by Xxxxxx to fulfill any agreement or covenant under this
Agreement.
(c) Xxxxxxxx. Xxxxxxxx agrees to indemnify the Company and
its subsidiaries and hold them harmless against and with respect to any
damages, claims, losses, taxes (including interest, penalties and additions
thereto), and costs and expenses arising from, in connection with or with
respect to (i) any misrepresentation or breach of warranty by Xxxxxxxx under
this Agreement, or (ii) any failure by Xxxxxxxx to fulfill any agreement or
covenant under this Agreement.
9. Miscellaneous.
(a) Successors and Assigns. This Agreement will be binding
upon, and will inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(b) Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof.
5
6
(c) Amendment. This Agreement may not be amended except by an
instrument signed by the parties hereto.
(d) Headings. Section headings in this Agreement are included
herein for convenience of reference only and will not constitute a part of this
Agreement for any other purpose.
(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the substantive laws of the State of Texas,
without giving effect to the principles of conflict of laws of such State.
(f) Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
AMERISAFE, INC.
By:
--------------------------------
Xxxx X. Xxxxxxxx,
President
AUTO ONE ACCEPTANCE CORPORATION
By:
--------------------------------
Xxxxxxx X. Xxxxxx,
Chief Executive Officer
---------------------------------------
XXXXXXX X. XXXXXX
---------------------------------------
XXXX X. XXXXXXXX
6
