EXECUTION COPY
SHARE EXCHANGE AGREEMENT
DATED AS OF OCTOBER 31, 1996
BY AND AMONG
▇▇▇▇▇▇▇ INSURANCE GROUP, INC.
SHAREHOLDERS OF
▇▇▇▇▇▇▇ INSURANCE GROUP, INC.
AND
THE ▇▇▇▇▇▇▇ GROUP, INC.
TABLE OF CONTENTS
Page
ARTICLE I
EXCHANGE OF SHARES
1.01 Exchange of Shares..............................................1
1.02 Further Assurances..............................................2
ARTICLE II
METHOD OF EXCHANGE
2.01 Exchange Value..................................................2
2.02 Manner of Delivery..............................................2
ARTICLE III
CLOSING
..............................................................................2
ARTICLE IV
DOCUMENTS TO BE DELIVERED AT CLOSING
4.01 Deliveries by Shareholders......................................3
4.02 Deliveries by ▇▇▇▇▇▇▇...........................................3
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
5.01 Organization; Good Standing.....................................4
5.02 Corporate Documents; No Conflicts...............................4
5.03 Power; Authority................................................5
5.04 Capitalization; Title...........................................5
5.05 Financial Statements............................................6
5.06 Accounting Matters..............................................6
5.07 Taxes...........................................................7
5.08 Material Adverse Changes........................................8
5.09 Material Events.................................................9
5.10 Condition and Title to Assets................................. 10
5.11 Compliance with Law; Litigation............................... 11
5.12 Employee Plan................................................. 12
5.13 Licenses, Etc................................................. 12
5.14 Investments................................................... 12
5.15 Intellectual Property Rights.................................. 12
5.16 Material Contracts and Obligations............................ 12
5.17 Compliance With Other Instruments............................. 14
5.18 Insurance..................................................... 15
5.19 No Consents Required.......................................... 15
5.20 Customer Lists, Expirations and Renewals;
Validity of Policies.......................................... 15
5.21 Investment Representations and Warranties..................... 15
5.22 Disclosure.................................................... 16
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇
6.01 Organization; Good Standing................................... 16
6.02 Power; Authority.............................................. 17
6.03 Conflicting Agreements........................................ 17
6.04 ▇▇▇▇▇▇▇ Shares................................................ 17
6.05 Material Adverse Changes...................................... 17
6.06 Disclosure.................................................... 17
6.07 Investment Intent............................................. 18
ARTICLE VII
COVENANTS OF THE ACQUIRED COMPANY AND THE SHAREHOLDERS
7.01 Conduct of Business........................................... 18
7.02 No Dividends on Shares; No Share Transfers.................... 18
7.03 Governmental Filings.......................................... 19
7.04 Assistance.................................................... 19
7.05 Access........................................................ 19
7.06 Material Agreements........................................... 19
7.07 Employee Benefit Plans........................................ 19
7.08 Tax Matters................................................... 19
ARTICLE VIII
SHAREHOLDERS' CONDITIONS PRECEDENT
8.01 ▇▇▇▇▇▇▇'▇ Representations, Warranties and
Covenants..................................................... 20
8.02 No Actions.................................................... 20
8.03 Consents and Approvals........................................ 20
8.04 Inquiries; Investigations..................................... 20
8.05 Deliveries.................................................... 20
8.06 Material Adverse Change....................................... 20
8.07 Capitalization of ▇▇▇▇▇▇▇..................................... 20
ARTICLE IX
COVENANTS OF ▇▇▇▇▇▇▇
9.01 Governmental Filings.......................................... 21
9.02 Assistance.................................................... 21
ARTICLE X
▇▇▇▇▇▇▇'▇ CONDITIONS PRECEDENT
10.01 Shareholders' Representations, Warranties and
Covenants..................................................... 21
10.02 No Actions.................................................... 21
10.03 Consents and Approvals........................................ 21
10.04 Inquiries; Investigations..................................... 22
10.05 Material Adverse Change....................................... 22
10.06 Approval of Acquired Company's Board of
Directors and Shareholders.................................... 22
10.07 Deliveries.................................................... 22
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ARTICLE XI
TERMINATION
11.01 Methods of Termination........................................ 22
11.02 Effect of Termination......................................... 23
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.01 Survival...................................................... 23
12.02 Indemnification............................................... 24
12.03 Consent to Jurisdiction....................................... 24
ARTICLE XIII
GENERAL
13.01 Entire Agreement; Modifications............................... 25
13.02 Binding Effect................................................ 25
13.03 Public Announcements.......................................... 25
13.04 Counterparts.................................................. 25
13.05 Costs and Expenses............................................ 25
13.06 Notices....................................................... 26
13.07 Governing Law................................................. 26
13.08 Severability.................................................. 27
13.09 Knowledge..................................................... 27
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement") dated as of the 31st
day of October, 1996 is by and among ▇▇▇▇▇▇▇ INSURANCE GROUP, INC., a South
Carolina corporation (the "Acquired Company"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (each such person being individually referred
to herein as a "Shareholder" and collectively as the "Shareholders") and THE
▇▇▇▇▇▇▇ GROUP, INC., a South Carolina corporation ("▇▇▇▇▇▇▇").
WHEREAS, the Shareholders are the owners of 300 shares of issued and
outstanding common shares of the Acquired Company, par value $1.00 per share,
representing 100% of the issued and outstanding common shares of the Acquired
Company (the "Acquired Company Shares").
WHEREAS, the Shareholders are the owners of 408,332 shares of issued
and outstanding Series A preferred shares of the Acquired Company, no par value,
representing 100% of the issued and outstanding Series A preferred shares of the
Acquired Company (the "Series A Preferred Shares").
WHEREAS, the Acquired Company is engaged in the business of acting as
agent and broker in the sale of various types of insurance (collectively, the
"Business").
WHEREAS, ▇▇▇▇▇▇▇ desires to issue common shares of ▇▇▇▇▇▇▇ to the
Shareholders in exchange for their common shares of the Acquired Company and
Series A Preferred Shares, and the Shareholders desire to so exchange their
common shares of the Acquired Company for common shares of ▇▇▇▇▇▇▇ (the
"Transactions") in a transaction intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue Code, as amended,
such that following such exchange the Acquired Company shall be a wholly-owned
subsidiary of ▇▇▇▇▇▇▇.
NOW THEREFORE, for and in consideration of the premises and mutual
promises contained herein and intending to be legally bound, the Acquired
Company, the Shareholders and ▇▇▇▇▇▇▇ hereby agree as follows:
ARTICLE I
EXCHANGE OF SHARES
1.01 Exchange of Shares. Each of the Shareholders hereby agrees to
exchange all of his Acquired Company Shares and Series A Preferred Shares on the
terms and conditions herein set forth. ▇▇▇▇▇▇▇, in reliance upon the
representations and warranties of the Shareholders and the covenants of the
Shareholders and the Acquired Company contained herein and subject to the terms
and conditions of this Agreement, hereby agrees to exchange its common shares
for Acquired Company Shares and Series A Preferred Shares in the manner provided
in Article II hereof.
1.02 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Transactions.
ARTICLE II
METHOD OF EXCHANGE
2.01 Exchange Value. In exchange for the Acquired Company Shares and
the Series A Preferred Shares, ▇▇▇▇▇▇▇ shall issue to the Shareholders an
aggregate of Three Hundred Thousand (300,000) common shares of ▇▇▇▇▇▇▇, par
value $0.01 per share, (the "▇▇▇▇▇▇▇ Shares") and deliver such shares in the
manner provided in Section 2.02. Each of the Shareholders is exchanging 100
Acquired Company Shares and the number of Series A Preferred Shares referenced
on Exhibit A attached hereto, and shall, in accordance with this Article II, be
issued in exchange One Hundred Thousand (100,000) ▇▇▇▇▇▇▇ Shares.
2.02 Manner of Delivery.
(a) On the Closing Date (as hereinafter defined), ▇▇▇▇▇▇▇
shall cause to be issued to each of the Shareholders One Hundred
Thousand (100,000) properly issued, authorized, executed and
countersigned ▇▇▇▇▇▇▇ Shares.
(b) On the Closing Date, each Shareholder shall surrender to
▇▇▇▇▇▇▇ a certificate(s) representing the Acquired Company Shares (the
"Common Certificate(s)") representing all of such holder's Acquired
Company Shares and a certificate(s) representing the Series A
Preferred Shares (the "Preferred Certificate(s)"), together with an
appropriate letter(s) of transmittal duly executed.
(c) All exchanges of ▇▇▇▇▇▇▇ Shares in respect of Acquired
Company Shares and the Series A Preferred Shares that are made in
accordance with the terms of this Article II and Article XII hereof
shall be deemed to have been made in full satisfaction of all rights
pertaining to such Acquired Company Shares and the Series A Preferred
Shares except for such other rights as are specified in this
Agreement.
ARTICLE III
CLOSING
The closing (the "Closing") of the Transactions shall occur on October
31, 1996 (the "Closing Date") at the place specified by ▇▇▇▇▇▇▇; provided,
however, nothing contained herein shall obligate any party to close hereunder if
any of the conditions to such party's obligation to close (as set forth in
Article VIII or Article X hereof, as appropriate) is not satisfied.
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ARTICLE IV
DOCUMENTS TO BE DELIVERED AT CLOSING
4.01 Deliveries by Shareholders. At the Closing, the Shareholders and
the Acquired Company shall deliver, or cause to be delivered, to ▇▇▇▇▇▇▇ all of
the following documents and instruments:
(a) Original Common Certificate(s) representing all the
common stock of the Acquired Company.
(b) Original Preferred Certificate(s) representing all
the Series A Preferred Stock of the Acquired Company.
(c) Original notarized Power of Attorney appointing ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ as the attorney-in-fact of each Shareholder duly executed by
each Shareholder, in the form attached hereto as Exhibit B, evidencing
the irrevocable authority of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to act for and on behalf
of each Shareholder for all purposes of this Agreement and the
Transactions.
(d) A noncompetition agreement between the Shareholders and
▇▇▇▇▇▇▇ in the form of the agreement attached hereto as Exhibit C (the
"Noncompetition Agreement"), duly executed by the Shareholders.
4.02 Deliveries by ▇▇▇▇▇▇▇. At the Closing, ▇▇▇▇▇▇▇ shall deliver, or
cause to be delivered, to the Shareholders all of the following documents and
instruments:
(a) Three original share certificates each representing One
Hundred Thousand (100,000) shares of ▇▇▇▇▇▇▇ Shares. One of each such
certificates shall be in the name of each Shareholder (the "▇▇▇▇▇▇▇
Certificates").
(b) A certificate of existence issued by the Secretary of
State of South Carolina, issued as of the date within three (3)
business days of the Closing Date, evidencing that ▇▇▇▇▇▇▇ is a
corporation in good standing under the laws of the State of South
Carolina.
(c) A certificate executed by the Secretary of ▇▇▇▇▇▇▇ in the
form of Exhibit D hereto (i) attaching a copy of the corporate
resolutions adopted by the Board of Directors of ▇▇▇▇▇▇▇ authorizing
the execution, delivery and performance of this Agreement and
consummation of the Transactions by ▇▇▇▇▇▇▇, (ii) confirming the
incumbency of all officers executing this Agreement or other documents
and instruments executed by ▇▇▇▇▇▇▇ at Closing, and (iii) attaching
copies of the Articles of Incorporation and Bylaws of ▇▇▇▇▇▇▇ and
certifying as to the accuracy and completeness of such corporate
documents.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDERS
Each Shareholder represents and warrants to ▇▇▇▇▇▇▇ as follows, it
being understood and agreed, however, that (a) each Shareholder severally (and
not jointly) makes the representations and warranties hereinafter set forth in
Sections 5.03, 5.04, 5.06 and 5.23 hereof, and (b) each Shareholder, jointly and
severally, with all other Shareholders, makes those other representations and
warranties set forth in this Article V:
5.01 Organization; Good Standing. Except as disclosed in Schedule 5.01
hereto, the Acquired Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of South Carolina and has full
power and authority to own its properties and to carry on its business as now
conducted, the Acquired Company is in good standing and duly qualified to
conduct business as a foreign corporation in the State of North Carolina and the
Acquired Company is in good standing and duly qualified to do business as a
foreign corporation in each of the other jurisdictions in which the character of
the business conducted by it or the location of the properties owned by it makes
such qualification necessary and in which the failure to be so qualified,
individually or in the aggregate, could reasonably be expected to (a) have a
material adverse effect on the Acquired Company's consolidated financial
condition, results of operation, assets, liabilities, or net worth, or (b)
require the payment by the Acquired Company of a material amount of additional
taxes or associated penalties.
5.02 Corporate Documents; No Conflicts. True and correct copies of the
Acquired Company's by-laws and the Acquired Company's articles of incorporation,
all as currently in effect, have been made available to ▇▇▇▇▇▇▇. Copies of the
minute books and share records of the Acquired Company have been made available
to ▇▇▇▇▇▇▇ and such copies were complete and accurately reflect in all material
respects all proceedings of the shareholders and directors of the Acquired
Company and ownership of all outstanding shares, options, warrants and other
rights to acquire shares of the Acquired Company. Neither the execution of this
Agreement by the Shareholders and the Acquired Company nor the consummation of
the Transactions by the Shareholders and the Acquired Company will constitute or
cause a breach or violation of (i) the Acquired Company's articles of
incorporation or by-laws, (ii) subject to obtaining those consents and/or
approvals or the giving of any notice referred to in Schedule 5.19 herein, any
law, rule, or order having the force of law applicable to the Acquired Company,
(iii) subject to obtaining those consents and/or approvals or the giving of any
notice referred to in Schedule 5.19 herein, any agreement, contract, or
understanding to which the Acquired Company is a party or by which the Acquired
Company's properties may be bound, or (iv) subject to obtaining those consents
and/or approvals or the giving of any notice of making of any policy referred to
in Schedule 5.19 herein, any other material duties or obligations
4
binding upon the Acquired Company or affecting any of its properties, or cause a
lien or other encumbrance to attach to any of its properties.
5.03 Power; Authority.
(a) Each Shareholder has full power, authority and the legal
capacity to enter into this Agreement and the other agreements,
documents and instruments contemplated hereby to which such
Shareholder is a party and to consummate the Transactions, and this
Agreement and such other agreements, documents and instruments have
been (or will be) duly executed and delivered by such Shareholder and
are (or will be) the valid and legally binding obligations of such
Shareholder enforceable in accordance with their terms. Neither the
execution of this Agreement or such other documents by such
Shareholder nor the consummation of the Transactions will constitute
or cause a breach or violation of any agreements, covenants, or
obligations binding upon such Shareholder and affecting the Acquired
Company Shares or the Series A Preferred Shares owned by such
Shareholder. No consent of any other party is required for the
Transactions and the documents executed by such Shareholder in
connection herewith to be valid and legal binding obligations of such
Shareholder.
(b) The Acquired Company has full power, authority and legal
capacity to enter into this Agreement and the other agreements,
documents and instruments contemplated hereby to which the Acquired
Company is a party and to consummate the Transactions. This Agreement
and such other agreements, documents and instruments have been (or
will be) duly executed and delivered by the Acquired Company and are
(or will be) valid and legally binding obligations of the Acquired
Company enforceable in accordance with the their terms.
5.04 Capitalization; Title.
(a) The Acquired Company's authorized capitalization consists
of Four Hundred (400) common shares having no par value per share, of
which Three Hundred (300) shares are issued and outstanding.
(b) Each Shareholder is the true and lawful beneficial and
record owner of One Hundred (100) of the Acquired Company Shares and
such shares are owned by such shareholder free and clear of all liens,
security interests, charges, options, agreements, and encumbrances.
(c) Each Shareholder is the true and lawful beneficial and
record owner of that number of Series A Preferred Shares indicated on
Exhibit A attached hereto.
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(d) All of the Acquired Company Shares are validly issued,
fully paid, and nonassessable and there are, and shall be as of or on
the Closing Date, no options, calls, warrants, or any other
securities, rights or common share equivalents outstanding, which are
convertible into, exercisable for or relate to, any capital shares of
the Acquired Company. All Acquired Company Shares were issued in
compliance with all applicable federal and state securities laws,
rules, and regulations.
5.05 Financial Statements. True and correct copies of (i) the audited
consolidated balance sheets for the fiscal years of Acquired Company ended
December 31, 1993 and 1994; all of which include the notes and supplementary
information thereto and the reports prepared in connection therewith by ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇, the independent certified public accountant reporting thereon, (ii)
the audited consolidated balance sheet, the related audited consolidated
statement of income and retained earnings and audited consolidated statement of
cash flows for, the fiscal year of the Acquired Company ended December 31, 1995;
all of which include the notes and supplementary information thereto and the
reports prepared in connection therewith by KPMG Peat Marwick LLP ("Peat
Marwick"), the independent certified public accountants reporting thereon (the
December 31, 1995, 1994, and 1993 financial statements listed in (i) and (ii)
above are referred to herein as the "Annual Financial Statements"), and (iii)
the unaudited balance sheet and related statement of income and retained
earnings and cash flows, calculated on an accrual basis as of and for the last
day of each month since December 31, 1995 (the "Stub Financial Statements")
(collectively, the Annual Financial Statements, and the Stub Financial
Statements are referred to as the "Financial Statements") have been made
available to ▇▇▇▇▇▇▇. The Financial Statements present accurately and fairly the
Acquired Company's financial position, and, for fiscal 1995 and periods
thereafter, results of operations, and cash flows of the Acquired Company as of
the respective dates and for the respective periods stated therein. The
Financial Statements have been prepared pursuant to and in accordance with
generally accepted accounting principles ("GAAP"), in effect at their respective
dates of preparation, applied on a consistent basis. The Acquired Company does
not have any material liabilities, individually or in the aggregate, which have
not been disclosed in the Schedules attached to this Agreement.
5.06 Accounting Matters. Except as provided in this Agreement, no
Shareholder is a party to any agreement regarding the sale, assignment or
transfer of any Acquired Company Shares. No Shareholder has traded in ▇▇▇▇▇▇▇
Shares during the thirty (30) days period prior to the date hereof and, as of
the Closing, no Shareholder shall have traded in ▇▇▇▇▇▇▇ Shares during the
thirty (30) day period prior to Closing. The Acquired Company has not engaged in
any transactions with respect to treasury shares during the two (2) years prior
to the date hereof.
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5.07 Taxes.
(a) All federal, state, local and foreign tax and information
returns, declarations, reports, estimates, information statements, and
other documentation (including any additional or supporting material)
filed or maintained, or required to be filed or maintained by the
Acquired Company, in connection with the calculation, determination,
assessment or collection of Taxes as defined herein ("Returns") have
been and will be filed by the Acquired Company within the time and in
the manner prescribed by law and such Returns reflect, in all material
respects, the income tax liability, and other tax liability and all
other information required to be reported thereon.
(b) The Acquired Company, its employees, the Shareholders, its
outside accountants, and any tax advisors utilized by the Acquired
Company or Shareholders will fully cooperate with ▇▇▇▇▇▇▇, in the
complete, accurate, and timely preparation of any additional Returns
which are due after the Closing Date and which include taxable periods
through and including the Closing Date.
(c) For purposes of this Agreement, "Taxes" shall mean all
taxes, charges, levies or other assessments of whatever kind or
nature, including without limitation, all net income, gross income,
gross receipts, sales, use, service, ad valorem, value added,
transfer, franchise, profits, license, withholding, payroll,
employment, social security, workers' compensation, unemployment
compensation, excise, estimated, severance, stamp, occupancy or
property taxes, customs duties, fees, assessments or charges of any
kind whatsoever (together with any interest and any penalties,
additions to tax or additional amounts) imposed by any taxing
authority (domestic or foreign) upon the Acquired Company.
(d) No deficiency for any Taxes has been proposed, asserted or
assessed against the Acquired Company which has not been resolved and
paid in full. No Returns have been audited or, to the Shareholders'
knowledge, are the subject of any federal, state, local or foreign
audits or other administrative proceedings or court proceedings. The
Acquired Company has not (i) made requests for rulings, requests for
changes in accounting methods, subpoenas, or request for information
pending with respect to any taxing authority or (ii) granted any power
of attorney that is currently in force with respect to any matter
relating to Taxes. There are not in effect any waivers or comparable
consents by the Acquired Company regarding the application of statutes
of limitations or deadlines for assessments of any Taxes.
(e) There are no liens, security interests,
encumbrances, or other claims on any of the assets or
7
properties of the Acquired Company that arose in connection with any
failure (or alleged failure) to pay Taxes.
(f) The Acquired Company has withheld and paid to the proper
governmental authorities, within the time and manner prescribed by
law, all Taxes required to have been withheld under all applicable
laws and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other
third party.
(g) No Shareholder expects any authority to assess any
additional Taxes against the Acquired Company for any period for which
Returns have been filed.
(h) The Acquired Company is not a party to any tax allocation
or tax sharing agreement, and the Acquired Company does not owe any
amount under any tax-sharing or allocation agreement. The Acquired
Company (i) has not been a member of an affiliated group within the
meaning of Section 1504 of the Code filing a consolidated federal
income tax return, and (ii) does not have any liability for Taxes of
any person under Treasury Regulation 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor by contract or otherwise.
(i) The Acquired Company has not taken any action that would
have the effect of deferring any liability for Taxes for the Acquired
Company from any taxable period ending on or before the Closing Date
to any taxable period ending thereafter.
(k) None of the income recognized for federal, state, local,
foreign, or other income tax purposes by the Acquired Company during
the period ending on the Closing Date will (i) be derived other than
in the ordinary course of business, or (ii) arise from transactions of
a type not reflected in the relevant Returns for the last taxable
period.
(l) No stock or share transfer tax, real estate transfer tax,
sales tax or use tax shall become due to any taxing authorities in the
State of South Carolina as a result of the Transactions.
5.08 Material Adverse Changes. Since December 31, 1995, there have not
been any material adverse changes in the consolidated financial condition, the
results of operation, assets, liabilities or net worth of the Acquired Company.
Further, there has been no material adverse change in the Acquired Company's
assets or liabilities, in the relationships and agreements between the Acquired
Company, the Shareholders and any insurance carriers or under any contract, or
on or in the Acquired Company's business, financial prospects or condition,
financial or otherwise, since December 31, 1995. Since December 31, 1995, the
business affairs
8
of the Acquired Company have been conducted in the usual and
ordinary course.
5.09 Material Events. Except as set forth in Schedule 5.09,
since December 31, 1995, there have not been:
(a) Any destruction, damage to, or loss of or casualty with
respect to any of the assets or properties of the Acquired Company,
whether or not covered by insurance, which could reasonably be
expected to have a material adverse effect on the Acquired Company;
(b) any material change in the accounting policies,
methods or practices by the Acquired Company;
(c) any actions by the Acquired Company pursuant to which the
Acquired Company has issued, sold or otherwise disposed of or agreed
to issue, sell or otherwise dispose of any capital shares or any other
security of the Acquired Company, or issued, sold, or granted or
agreed to issue, sell, or grant any option, warrant or other right to
subscribe for or to purchase any capital shares or other security of
the Acquired Company;
(d) any declaration or payment of any dividends on or any
distribution (whether in cash or property) in respect of the Acquired
Company's capital shares, or any purchase, redemption, or other
acquisition by the Acquired Company of any of the Acquired Company's
capital shares or agreement or authorization to do any of the
foregoing;
(e) any sales or transfers of any assets or properties
of the Acquired Company, except in the ordinary course of
business;
(f) any execution of any new, or any amendments to or
terminations of any existing material contracts, agreements, or leases
or any permits or licenses to which the Acquired Company is a party or
of which the Acquired Company is the beneficiary;
(g) any loans by the Acquired Company to any person or
entity or any guaranty by the Acquired Company of any loan to
any person or entity;
(h) any issuance of evidence of indebtedness by the
Acquired Company, except in the ordinary course of business;
(i) any grant or creation of security interests, liens,
mortgages, pledges, or other encumbrances (other than the liens, if
any, for taxes and assessments not yet delinquent or being contested
in good faith by appropriate proceedings) on any assets or properties
of the Acquired Company;
9
(j) except in the ordinary course of business and consistent
with past practice, any changes in benefits provided to, or increase
in compensation payable to, the directors, officers, employees, or
agents of the Acquired Company (e.g. salary, bonuses, etc.);
(k) any written waivers or written releases of or
settlements of any material claims of or against the Acquired
Company;
(l) Any incurrence of any liabilities in excess of $10,000 in
the aggregate by the Acquired Company, other than liabilities incurred
in the ordinary course of the Acquired Company's business consistent
with past practice (none of which results from, arises out of, or was
caused by any breach of a material contract, breach of warranty, tort,
infringement, or violation of law); or
(m) Any agreements (written or oral) by the Acquired Company
to do any of the things described in the preceding clauses (a) through
(l).
5.10 Condition and Title to Assets.
(a) The Financial Statements reflect all of the assets and
properties owned or used by the Acquired Company in their respective
businesses, except for (i) property acquired or disposed of in the
ordinary course of business since the dates thereof, (ii) assets and
properties leased by the Acquired Company under and pursuant to
operating leases or similar arrangements, and (iii) items which have
been purchased and expensed or are not required to be reflected on the
Financial Statements pursuant to GAAP. The Acquired Company does not
own, and has never owned, any fee interest in any real property. The
Acquired Company has good and equitable title to all leasehold estates
(required to be capitalized under Statement of Financial Accounting
Standards No. 13) and good and marketable title to all personal
property in each case that is used in the conduct of the Acquired
Company's business or reflected on the Financial Statements, free and
clear from all mortgages, liens, encumbrances, pledges and security
interests, except for those mortgages, liens, encumbrances, pledges,
and security interests which have been made available for inspection
by ▇▇▇▇▇▇▇.
(b) (i) To the knowledge of the Shareholders, all buildings,
structures, fixtures, and improvements upon, and all utilities
serving, the real property used by the Acquired Company are in good
condition and repair in all material respects, ordinary wear and tear
excepted, and (ii) all equipment and other personal property owned or
used by the Acquired Company or any affiliate are in good operating
condition in all material respects, ordinary wear and tear excepted.
To the knowledge of the Shareholders, the real
10
property, buildings, structures, and fixtures used by the Acquired
Company are in compliance, in all material respects, with all
applicable zoning, land use, health and safety or other applicable
restrictions, and with all restrictions, covenants, and conditions to
which they are subject. To the knowledge of the Shareholders, there
are no zoning or land use restrictions presently in effect or proposed
by any governmental authority, which would materially impair the
Acquired Company's current and intended use of the real property
occupied or used by the Acquired Company on the date hereof.
(c) All of the inventory of the Acquired Company has been
reflected in the Financial Statements pursuant to and in accordance
with GAAP consistently applied.
(d) The notes receivable and accounts receivable of the
Acquired Company reflected on the Financial Statements were, when they
arose, and all notes receivable and accounts receivable thereafter
acquired by the Acquired Company prior to the Closing Date shall be,
the result of bona fide, routine transactions of the Acquired company
involving the sale of insurance in the ordinary and usual course of
the Business, bona fide notes receivable and accounts receivable of
the Acquired Company fully collectable except to the extent reserved
against in the financial books and records of the Acquired Company in
accordance with GAAP, consistently applied.
5.11 Compliance with Law; Litigation. The Acquired Company, with
regard to its business and its assets and business practices, has complied and
is in compliance, in all material respects, with all applicable laws,
regulations (including all South Carolina insurance statutes and regulations),
and other requirements of governmental authorities and (i) no investigation,
governmental or administrative proceeding or other litigation of any kind or
nature to which the Acquired Company is or may be a party is now pending or, to
the knowledge of the Shareholders, threatened, and (ii) no claim which has not
proceeded to litigation or other proceeding has been made or, to the knowledge
of the Shareholders, threatened against the Acquired Company. Specifically, but
without limitation, there are no pending or threatened (i) investigations,
charges, actions or proceedings by the South Carolina Department of Insurance
involving the Acquired Company, or any of their business transactions,
activities, practices or licenses, or (ii) claims, suits, complaints or
proceedings by any insurance customer of the Acquired Company involving any
alleged negligent or wrongful act or omission by or otherwise involving the
Acquired Company or any Shareholder, or any agent or employee of or person
associated with the Acquired Company. There are no judgments, orders,
stipulations, injunctions, decrees, stipulations or awards against the Acquired
Company or any of the above persons which affect the Acquired Company or the
effect of which is or will be to limit, restrict, regulate, enjoin or prohibit
any business practice or activity of the Acquired Company.
11
5.12 Employee Plan. The Acquired Company has no employee or
similar plan other than a 401(k) plan (the "Employee Plan").
5.13 Licenses, Etc.
(a) The Acquired Company has in effect those franchises, licenses,
permits, authorizations, and agreements (collectively, "Licenses") which are
necessary for the continued ownership and operation of its business and its
assets in the manner in which they have heretofore been owned and operated.
There are no outstanding or pending (or to the knowledge of the Shareholders
threatened) administrative or judicial proceedings involving the Acquired
Company or its assets related to or arising out of its failure to obtain or
comply with the terms and conditions of any license.
(b) The Acquired Company is duly licensed by the Commissioner of
Insurance of South Carolina, and the appropriate licensing authorities of any
other states where the nature of the Acquired Company's business activities
requires the issuance of a license to act as an insurance agent and broker; and,
the Acquired Company and each of its officers, employees and agents whose
activities result in the requirement that they be licensed, hold all such
licenses as are required by applicable law for it or them to make applications
for, procure, negotiate for or place for others, any policies for each of the
types of insurance dealt with by the Acquired Company. Each of those licenses
currently is in full force and effect and has not been revoked, and, to the
extent required to be licensed, the Acquired Company and each such individual is
in good standing as a licensed agent and/or broker under the insurance laws and
regulations of South Carolina.
5.14 Investments. Except as identified on Schedule 5.14 (which
reflects the Acquired Company's ownership percentages) and 138,890 ▇▇▇▇▇▇▇
Shares, the Acquired Company has no subsidiaries and does not, directly or
indirectly, possess any interest or have an investment in any corporation,
partnership, joint venture, trust or other business or have any investment in
cash or securities or other investment assets.
5.15 Intellectual Property Rights. All intellectual property rights
(including, without limitation, patents, trademarks, service marks, trade names,
designs, copyrights, proprietary know-how, trade secrets, and proprietary rights
and processes) used by the Acquired Company (collectively, the "Intellectual
Property Rights") are either owned by the Acquired Company or are used by the
Acquired Company pursuant to valid licenses or other rights granted to the
Acquired Company. No intellectual property rights, other than the Intellectual
Property Rights, are required for the Acquired Company to conduct the Business
as presently conducted.
5.16 Material Contracts and Obligations. All agreements,
contracts, indebtedness, liabilities, and other obligations to
which the Acquired Company is a party or by which it is bound and
which are material to the conduct and operations of the Acquired
12
Company's business shall be referenced herein collectively, as the "Material
Agreements" including, without limitation, the following:
(a) All contracts with any insurance company, carrier, broker,
underwriter, producer, insurance agency or agent or other such firms
or persons,
(b) All bank loan and line of credit agreements or other
agreements including, without limitation, compensating balance
agreements, with financial institutions, including any amendments,
renewal letters, notices and waivers in connection therewith,
(c) All other agreements evidencing outstanding loans
to or by the Acquired Company,
(d) All guarantees by or for the benefit of the
Acquired Company,
(e) All leases for or of real property and equipment,
(f) All contracts with suppliers or customers containing
exclusivity clauses, containing sole source or requirements
provisions, extending for a term of longer than twelve (12) months, or
containing extended warranty agreements,
(g) All sales representative agreements and agency
agreements,
(h) All insurance policies in force covering property
of the Acquired Company, director indemnification insurance
policies, and liability insurance policies,
(i) All partnership, joint venture and investment
agreements,
(j) All agreements or obligations with governments or
governmental agencies, including military procurement contracts,
research and development contracts and agreements relating to
financial assistance or grants in respect of the Business,
(k) All agreements with competitors and agreements
containing noncompetition clauses,
(l) All agreements pursuant to which the Acquired
Company provides consulting or other services to any person
or entity, and
(m) All agreements terminable in case of a change in control
of the Acquired Company or requiring third party consent to a change
of control of the Acquired Company and any other agreements not in the
ordinary course of business or particular to the Acquired Company's
business.
13
True and correct copies of the Material Agreements, as amended through the date
hereof, have been made available for inspection by ▇▇▇▇▇▇▇. Each Material
Agreement has been filed with and approved by the South Carolina Commissioner of
Insurance to the extent necessary under South Carolina law. All of the Material
Agreements are: (i) valid, legal and binding upon the Acquired Company, (ii) to
the knowledge of the Shareholders, legal and binding upon the other parties
thereto, and (iii) in full force and effect. No event has occurred and no state
of facts exists which is likely to result in the termination or limitation of
rights of the Acquired Company under any of the Material Agreements (including
any rights in or to or the unrestricted use and control of any customer lists,
all records concerning insurance accounts or policies obtained or compiled by
the Acquired Company during the course of its insurance business, all
expirations and records thereof (the "Expirations"), and all rights to and under
insurance policies sold by the Acquired Company and in effect on the Closing
Date and all renewals thereof). The Acquired Company has performed all
obligations required to be performed by it to date, is not in default (and would
not by the lapse of time and/or the giving of notice be in default) under the
Material Agreements or any other instrument to which it is a party, or by which
it may be bound. No other party has alleged any claim, dispute or controversy,
and the Acquired Company has not received written notice of nonrenewal,
termination, alleged nonperformance, deficient performance, defective products,
warranty claims, delay in delivery or other noncompliance by the Acquired
Company with respect to its obligations under any Material Agreement. The
Acquired Company is not a party to, or bound by, any agreement, contract or
instrument which: (i) the Acquired Company can reasonably foresee will result in
any material loss upon the performance thereof (including, without limitation,
any liability for penalties or damages, whether liquidated, direct, indirect,
incidental, or consequential, or downtime charges) which is not reflected or
adequately reserved against on the Financial Statements, or (ii) requires the
consent of, or may be terminated by, any third party in connection with or as a
result of the execution of this Agreement or the consummation of the
Transactions. To the Shareholders' and the Acquired Company's knowledge, no
other party with whom the Acquired Company has a contract or agreement, which is
of material importance to the condition (financial or otherwise), business, net
worth, assets, properties or operations of the Acquired Company, is in default
thereunder or has breached any terms thereof. Any party to a Material Agreement
that shall have the right to terminate such agreement as a result of the
Transactions shall have waived such right.
5.17 Compliance With Other Instruments. The Acquired Company is not in
violation, breach or default of any term of its articles of incorporation or
bylaws, or in any material respect of any term or provision of any Material
Agreement to which the Acquired Company is a party or of any provision of any
foreign or domestic judgment, decree, order, statute, rule, License, permit or
regulation applicable to or binding upon the Acquired Company. The execution,
delivery and performance of and compliance with this
14
Agreement by the Shareholders and the Acquired Company will not result in any
such violation or be in conflict with or constitute a default under any such
term, or result in the creation of any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Acquired Company pursuant to
any such term. No employee of the Acquired Company is in violation, nor is there
any allegation of such violation, of any term of any employment contract, patent
or other proprietary information disclosure agreement or any other contract or
agreement, including, without limitation, any contract or agreement relating to
the right of any such employee to be employed by the Acquired Company because of
the nature of the business conducted or proposed to be conducted by the Acquired
Company or for any other reason, and the continued employment by the Acquired
Company of its present employees will not result in any such violation.
5.18 Insurance. All policies of fire, liability and other types of
insurance held by the Acquired Company have been made available for inspection
by ▇▇▇▇▇▇▇, the premiums for the most recent period with respect to each such
policy and the dates through which the premiums have been paid. No insurance
carrier has threatened to terminate any of the insurance policies held by the
Acquired Company or to increase any premiums in respect thereof.
5.19 No Consents Required. Except as set forth on Schedule 5.19
hereto, none of the Shareholders or the Acquired Company is required to give any
notice to any third party or to obtain the consent, approval, license or permit
of any person or entity in connection with the execution, delivery and
performance of this Agreement by the Acquired Company and the Shareholders and
the consummation of the Transactions by the Shareholders and the Acquired
Company.
5.20 Customer Lists, Expirations and Renewals; Validity of Policies.
The Acquired Company is the true and lawful owner outright and absolutely of (i)
all customer lists, business records and other data obtained or compiled during
the course or conduct of its insurance agency and brokerage business, (ii) the
Expirations with respect to all insurance policies sold or placed by it, and
(iii) all records and renewals thereof, and the Acquired Company has the
unrestricted and unencumbered use and control of all the above pursuant to all
contracts and agreements between it and any insurance companies, underwriters,
brokers, producers, insurance agencies, agents or any other person or entity.
Neither this Agreement nor the consummation of the Transactions will affect, or
result in any reversion, incumbrance or loss of, any of the Expirations, the
Acquired company's books and records or any such rights of the Acquired Company
pursuant to any of such contracts or agreements or otherwise.
5.21 Investment Representations and Warranties.
(a) Each Shareholder has received prior to the date
hereof copies of the following items:
15
(i) The prospectus filed with the Securities and
Exchange Commission ("SEC") which pertains to the registration
of 1,400,000 shares of ▇▇▇▇▇▇▇'▇ common shares (the
"Registration Statement");
(ii) ▇▇▇▇▇▇▇'▇ 10-KSB report for the fiscal year
ended December 31, 1995 as filed with the SEC (the "10- KSB").
(iii) ▇▇▇▇▇▇▇'▇ 10-QSB reports for the fiscal quarters
ended March 31, 1996 and June 30, 1996 as filed with the SEC
(the "10-QSBs");
(iv) A statement by ▇▇▇▇▇▇▇ describing any material
changes in ▇▇▇▇▇▇▇'▇ affairs that are not disclosed in the
Registration Statement, the 10-KSB and the 10-QSBs;
(v) Information regarding the limitations on
resale of the ▇▇▇▇▇▇▇ Shares to be issued to the Share-
holders; and
(b) The ▇▇▇▇▇▇▇ Shares are being exchanged solely for each
Shareholder's own account for investment purposes only and not for the
account of any other person and not for distribution, assignment or
resale to others and no other person has a direct or indirect
beneficial interest in such ▇▇▇▇▇▇▇ Shares.
5.22 Disclosure. No representation or warranty by the Shareholders set
forth in this Article V or in any of the agreements comprising the Exhibits
hereto contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained in this Article V or in any such Exhibit not materially misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ represents and warrants to the Shareholders as follows:
6.01 Organization; Good Standing. ▇▇▇▇▇▇▇ is a corporation duly
organized, validly existing and in good standing under the laws of the State of
South Carolina. ▇▇▇▇▇▇▇ has full power and authority to own its properties and
carry on its business as now conducted and ▇▇▇▇▇▇▇ is in good standing and duly
qualified to conduct business as a foreign corporation in each jurisdiction in
which the character of the business conducted by it or the location of the
properties owned by it makes such qualification necessary and in which the
failure to be so qualified, individually or in the aggregate, could reasonably
be expected to (a) have a material adverse effect on ▇▇▇▇▇▇▇'▇ consolidated
financial condition, results of operation, assets, liabilities, or net worth, or
16
(b) require the payment by ▇▇▇▇▇▇▇ of a material amount of
additional taxes or associated penalties.
6.02 Power; Authority. ▇▇▇▇▇▇▇ possesses full power, authority, and
legal right to enter into and to perform under this Agreement and the other
documents contemplated hereby to which ▇▇▇▇▇▇▇ is a party and to consummate the
Transactions, and this Agreement and such other agreements, documents and
instruments have been (or will be) duly executed and delivered by ▇▇▇▇▇▇▇ and
are (or will be) the valid and legally binding obligations of ▇▇▇▇▇▇▇
enforceable in accordance with their terms. Neither the execution of this
Agreement or such other documents by ▇▇▇▇▇▇▇ nor the consummation of the
Transactions will constitute or cause a breach or violation of any agreements,
covenants, or obligations binding upon ▇▇▇▇▇▇▇. No consent of any other party
which has not been obtained is required for the Transactions and the documents
executed by ▇▇▇▇▇▇▇ in connection herewith to be valid and legal binding
obligations of ▇▇▇▇▇▇▇.
6.03 Conflicting Agreements. The execution and delivery of this
Agreement by ▇▇▇▇▇▇▇, the consummation of the Transactions, and the performance
by ▇▇▇▇▇▇▇ of its obligations hereunder will not be in conflict with, or result
in, or constitute a breach or default of the terms, conditions or provisions of
▇▇▇▇▇▇▇'▇ articles of incorporation or by-laws or any instrument, agreement,
mortgage, judgment, order, award, decree or other restriction to which ▇▇▇▇▇▇▇
is a party or by which ▇▇▇▇▇▇▇ is bound, or any regulatory provision affecting
▇▇▇▇▇▇▇, subject to obtaining those consents and/or approvals referred to in
Section 9.01 hereof. ▇▇▇▇▇▇▇ has, on the date hereof, full power and authority
to enter into this Agreement and to do and perform all other acts and things
required to be done by it under this Agreement.
6.04 ▇▇▇▇▇▇▇ Shares. The ▇▇▇▇▇▇▇ Shares for which the Acquired Company
Shares and the Series A Preferred Shares shall be exchanged, shall be duly
authorized by all necessary corporate action of ▇▇▇▇▇▇▇, validly issued, fully
paid and nonassessable, free and clear of all liens, encumbrances and other
claims by third parties.
6.05 Material Adverse Changes. Since December 31, 1995, there has not
been any material adverse change in the consolidated financial condition,
results of operation, assets, liabilities or net worth of ▇▇▇▇▇▇▇.
6.06 Disclosure. No representation or warranty by ▇▇▇▇▇▇▇ set forth in
this Article VI or in any of the agreements comprising the Exhibits hereto or
the materials provided to the Shareholders by ▇▇▇▇▇▇▇ pursuant to Section 5.23
hereof (other than the statements made in such materials with respect to
transferability of ▇▇▇▇▇▇▇ Shares) contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained in this Article VI or in any such Exhibit or the
materials provided to the Shareholders by ▇▇▇▇▇▇▇ pursuant to Section 5.23
hereof (other than the statements
17
made in the transmittal letter accompanying such materials with respect to
transferability of ▇▇▇▇▇▇▇ Shares) not materially misleading.
6.07 Investment Intent. ▇▇▇▇▇▇▇ is acquiring the Acquired Company
Shares and Series A Preferred Shares to be transferred to it under this
Agreement for investment only and not with a view to the sale or distribution
thereof, and ▇▇▇▇▇▇▇ has no commitment or present intention to liquidate the
Acquired Company or to sell or otherwise dispose of the Acquired Company Shares
or Series A Preferred Shares.
ARTICLE VII
COVENANTS OF THE ACQUIRED COMPANY AND THE SHAREHOLDERS
From the date hereof until the Closing (the "Executory Period")
(except that the covenants set forth in Sections 7.07, 7.08 and 7.09 shall
survive and continue after the expiration of the Executory Period), the Acquired
Company and the Shareholders, jointly and severally, agree as follows:
7.01 Conduct of Business. The Acquired Company shall and the
Shareholders shall cause the Acquired Company to, (a) carry on its business in
the usual and ordinary course, (b) use reasonable efforts to preserve its
business organization intact and conserve the good will and relationships of its
customers, and others having business relations with it, (c) conduct its
business in a manner which will cause the representations and warranties
contained in Article V to be true and correct on the Closing Date in each case,
as if made on and as of such date, (d) not grant any increases in wages,
bonuses, benefits or other compensation to any director, officer, employee or
agent, other than increases in the normal course of business consistent with
past practices, (e) not enter into any agreement which would be a "Material
Contract" without ▇▇▇▇▇▇▇'▇ consent, (f) not waive any right or benefit or (g)
not incur any liability or obligation outside the ordinary course of business or
which involves the receipt or expenditure of more than $10,000 without ▇▇▇▇▇▇▇'▇
consent.
7.02 No Dividends on Shares; No Share Transfers. Other than with
respect to the Series B Preferred Stock of the Acquired Company, the Acquired
Company shall not, and the Shareholders shall cause the Acquired Company not to,
declare, set aside, or pay any dividend or other distribution of any nature on
or in respect of any of the capital shares of the Acquired Company, and the
Acquired Company shall not, and the Shareholders shall cause the Acquired
Company not to, directly or indirectly issue, redeem, retire, purchase or
otherwise acquire any of its capital shares, or agree to do any of the foregoing
or grant any rights which could result in any of the foregoing. No Shareholder
shall sell, assign, or transfer, or agree to or allow to be created any rights
or obligations for the sale, assignment or transfer of, any of the Acquired
Company Shares of such Shareholder, or any rights or interests therein.
18
7.03 Governmental Filings. The Acquired Company shall, and the
Shareholders shall and shall cause the Acquired Company to, take all steps
reasonably necessary in connection with, and diligently pursue any filings or
submissions determined by counsel to ▇▇▇▇▇▇▇ to be appropriate or required to be
made by or for the Shareholders or the Acquired Company in order for the
Transactions to be consummated.
7.04 Assistance. The Acquired Company shall, and the Shareholders
shall cause the Acquired Company to, provide, at the cost and expense of the
Acquired Company, such reasonable assistance and cooperation as may be necessary
in connection with the filings of ▇▇▇▇▇▇▇ pursuant to Section 9.01 hereof.
7.05 Access. The Acquired Company shall, and the Shareholders shall
cause the Acquired Company to, give to ▇▇▇▇▇▇▇ and its authorized agents and
representatives (including, but not limited to, accountants, lawyers,
environmental consultants, lenders and appraisers) full and complete access to
the properties, premises, assets, employees, representatives, advisors and
agents of the Acquired Company any and all of the Acquired Company's books,
records and documents. The Acquired Company shall, and the Shareholders shall
cause the Acquired Company to, furnish to ▇▇▇▇▇▇▇ such information and copies of
such documents and records as ▇▇▇▇▇▇▇ shall reasonably request in connection
with its examination under and pursuant to this Section 7.05.
7.06 Material Agreements. The Acquired Company shall not, and the
Shareholders shall cause the Acquired Company not to, amend, terminate or give
any notice with respect to amending, termination or non-renewal of any Material
Agreement without the prior written consent of ▇▇▇▇▇▇▇. The Acquired Company
shall not, and the Shareholders shall cause the Acquired Company not to, enter
into or renew the term of any agreement which constitutes or would constitute a
Material Agreement, without the prior written consent of ▇▇▇▇▇▇▇.
7.07 Employee Benefit Plans. Prior to the Closing, the Acquired
Company shall not adopt or become obligated under any new employee benefit plan
and shall not materially change the terms of the Employee Plan.
7.08 Tax Matters. The Acquired Company shall close its books for tax
purposes as of the Closing Date and ▇▇▇▇▇▇▇ shall cause such closing of the
Acquired Company's books to occur. The Shareholders shall be solely liable for
Taxes for the period through the Closing Date and arising from the Closing of
the Transactions.
19
ARTICLE VIII
SHAREHOLDERS' CONDITIONS PRECEDENT
All of the following shall be conditions precedent to Shareholders'
obligations to close the Transactions:
8.01 ▇▇▇▇▇▇▇'▇ Representations, Warranties and Covenants. The
representations and warranties made by ▇▇▇▇▇▇▇ herein shall be accurate and
correct on and as of the date of Closing as if made on and as of that date and
▇▇▇▇▇▇▇ shall have performed and complied, in all material respects, with all of
the terms, provisions and conditions of this Agreement to be performed and
complied with by ▇▇▇▇▇▇▇ at or before the Closing.
8.02 No Actions. There shall not be, on the date of Closing, any
action or proceeding, judicial or administrative, federal, state or local,
pending or threatened against any Shareholder or the Acquired Company which, if
adversely determined, would materially impair the ability of any such party to
carry out its obligations under this Agreement or in connection with the
Transactions or which relates to the Transactions and, if successful, would
expose such party to a material amount of damages.
8.03 Consents and Approvals. All filings and submissions under Section
7.03 hereof shall have been made and the approval or consent of the regulatory
authorities with respect to the filings described in Section 7.03 hereof shall
have been obtained, and evidence thereof shall have been provided to the
Shareholders.
8.04 Inquiries; Investigations. The Shareholders shall have the right,
in addition to any other right or election provided for herein, at any time
after the date hereof, to terminate this Agreement and all obligations hereunder
in the event any inquiry, investigation, suit or proceeding challenging the
Transactions is threatened or commenced prior to the date of Closing by any
governmental agency.
8.05 Deliveries. ▇▇▇▇▇▇▇ shall have made all of the deliveries
required to be made by ▇▇▇▇▇▇▇, or for which ▇▇▇▇▇▇▇ has responsibility, under
Article IV hereof.
8.06 Material Adverse Change. Since December 31, 1995, there shall not
have been any material adverse change in the financial condition, or the results
of operation, assets, liabilities or net worth of ▇▇▇▇▇▇▇.
8.07 Capitalization of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ shall not have declared any
stock dividends or any stock splits with respect to its common shares.
20
ARTICLE IX
COVENANTS OF ▇▇▇▇▇▇▇
During the Executory Period, ▇▇▇▇▇▇▇ covenants and agrees as follows:
9.01 Governmental Filings. ▇▇▇▇▇▇▇ shall take all steps reasonably
necessary in connection with, and shall diligently pursue, any filings or
submissions required by ▇▇▇▇▇▇▇ for the Transactions under (a) Federal and
applicable state securities laws in order to obtain exemption for the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended, and similar state laws, and (b) such other filings and submissions
that ▇▇▇▇▇▇▇'▇ counsel deems necessary or prudent in connection with this
Agreement or the consummation of the Transactions.
9.02 Assistance. ▇▇▇▇▇▇▇ covenants and agrees to provide such
reasonable assistance and cooperation as may be necessary in connection with the
filings of the Shareholders and/or the Acquired Company pursuant to Section 7.03
hereof.
ARTICLE X
▇▇▇▇▇▇▇'▇ CONDITIONS PRECEDENT
All of the following shall be conditions precedent to ▇▇▇▇▇▇▇'▇
obligations to close the Transactions:
10.01 Shareholders' Representations, Warranties and Covenants. The
representations and warranties made by the Shareholders herein shall be accurate
and correct on and as of the date of Closing as if made on and as of that date,
and the Shareholders and the Acquired Company shall have performed and complied,
in all material respects, with all the terms, provisions and conditions of this
Agreement to be performed and complied with by the Shareholders or the Acquired
Company at or before the Closing.
10.02 No Actions. There shall not be, on the date of Closing, any
action or proceeding, judicial or administrative, federal, state or local,
pending or threatened against ▇▇▇▇▇▇▇, any Shareholder, or the Acquired Company
which, if adversely determined, would materially impair the ability of any such
party to carry out such party's obligations under this Agreement or in
connection with the Transactions or which relates to the Transactions and, if
successful, would expose such party to a material amount of damages.
10.03 Consents and Approvals. All filings and submissions under
Section 9.01 hereof shall have been made and the approval or consent of the
regulatory authorities with respect to the filings described in Sections 7.03
and 9.01 hereof shall have been obtained or the relevant waiting periods with
respect to such filings shall have expired, and evidence thereof shall have been
provided to ▇▇▇▇▇▇▇.
21
10.04 Inquiries; Investigations. ▇▇▇▇▇▇▇ shall have the right, in
addition to any other right or election provided for in this Agreement, at any
time after the date hereof, to terminate this Agreement and all obligations
hereunder in the event any inquiry, investigation, suit or proceeding
challenging the Transactions is threatened or commenced prior to the date of the
Closing by any governmental agency.
10.05 Material Adverse Change. Since December 31, 1995, there shall
not have been any material adverse change in the financial condition, results of
operation, assets, liabilities or net worth of the Acquired Company.
10.06 Approval of Acquired Company's Board of Directors and
Shareholders. This Agreement shall have been approved in the manner required by
the South Carolina Business Corporation Act, the Articles of Incorporation of
the Acquired Company and the Bylaws of the Acquired Company by the Board of
Directors of the Acquired Company and the shareholders of the Acquired Company.
10.07 Deliveries. The Shareholders and the Acquired Company shall have
made or cause to have been made all of the deliveries required to be made by the
Shareholders of the Acquired Company, or for which the Shareholders or the
Acquired Company have responsibility, under Article IV hereof.
ARTICLE XI
TERMINATION
11.01 Methods of Termination. This Agreement may be
terminated and the Transactions herein contemplated may be
abandoned at any time prior to Closing:
(a) By mutual consent of ▇▇▇▇▇▇▇ and the Shareholders
or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as attorney-in fact for each of the
Shareholders;
(b) by ▇▇▇▇▇▇▇ if all of the conditions specified in
Article X hereof have not been satisfied on or before
November 15, 1996;
(c) by the Shareholders or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
attorney-in fact for each of the Shareholders if all of the
conditions specified in Article VIII hereof have not been
satisfied on or before November 15, 1996;
(d) by ▇▇▇▇▇▇▇ if the Shareholders or any Shareholder are in
default in any material respect under this Agreement and such default
is not cured within five (5) days after written notice thereby by
▇▇▇▇▇▇▇ to the Shareholders or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as attorney-in fact
for each of the Shareholders;
22
(e) by the Shareholders or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as attorney-in
fact for each of the Shareholders if ▇▇▇▇▇▇▇ is in default in any
material respect under this Agreement and such default is not cured
within five (5) days after written notice thereof by the Shareholders
or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as attorney-in fact for each of the Shareholders
to ▇▇▇▇▇▇▇;
(f) by ▇▇▇▇▇▇▇ pursuant to Section 10.05 hereof; or
(g) by the Shareholders or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
attorney-in fact for each of the Shareholders pursuant to
Section 8.06 hereof.
▇▇▇▇▇▇▇ may exercise its right to terminate this Agreement by giving written
notice thereof to the Shareholders or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as attorney-in fact for
each of the Shareholders. The Shareholders or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as attorney-in
fact for each of the Shareholders may exercise its right to terminate this
Agreement by giving written notice thereof to ▇▇▇▇▇▇▇.
11.02 Effect of Termination. If this Agreement is terminated pursuant
to Section 11.01 hereof, this Agreement shall forthwith become void (other than
Sections 7.08 and 9.03, which shall remain in full force and effect), and there
shall be no further liability on the part of ▇▇▇▇▇▇▇ (on the one hand) or the
Shareholders and the Acquired Company (on the other hand) to the other, except
for any liability of ▇▇▇▇▇▇▇ or the Shareholders under Sections 7.08 and 9.03 or
any liability arising out of any uncured willful breach of any covenant or other
agreement contained in this Agreement or any fraudulent breach of a
representation or warranty contained in this Agreement.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.01 Survival.
(a) Representations and Warranties. The representations and warranties
of the Shareholders (or any Shareholder) and ▇▇▇▇▇▇▇ contained in this Agreement
or in any Schedule or Exhibit hereto shall survive the Closing until the date of
the first audit of financial statements containing the combined operations of
the Acquired Company and ▇▇▇▇▇▇▇ for those items that would be expected to be
encountered in the audit process and until the first anniversary of the Closing
for all other items.
(b) Covenants. The covenants (including, without limitation, Section
13.05 thereof) of the Shareholders (or any Shareholder), the Acquired Company
and ▇▇▇▇▇▇▇ made in this Agreement or in any Exhibit hereto shall survive the
Closing until one (1) year following the expiration of such covenant in
accordance with its terms.
23
(c) Indemnity Claim. Notwithstanding the foregoing, any claim arising
out of any representation, warranty or covenant that would otherwise terminate
in accordance with subsections (a) or (b) above will continue to survive, if
notice for indemnity (as detailed below) based in whole or in part thereon shall
have been timely given under this Article XII on or prior to such termination
date, until such claim for indemnification has been satisfied or otherwise
finally resolved.
12.02 Indemnification. The Shareholders each hereby agree, jointly and
severally, to indemnity and hold harmless ▇▇▇▇▇▇▇ and its officers, directors,
employees and agents from, against and in respect of any and all claims, suits,
actions, proceedings (formal or informal), investigations, arbitrations,
judgments, deficiencies, damages, settlements, losses, obligations, liabilities,
and legal and other expenses (including reasonable legal fees and expenses of
counsel chosen by an indemnified person) as and when incurred (hereinafter
referred individually and in the aggregate as "Damages") arising out of,
resulting from or based upon:
(i) any breach by the Acquired Company or the
Shareholders of a representation or warranty contained herein,
or any misrepresentation or warranty contained herein, or any
misrepresentation or inaccuracy in, or any material omission
from, any certificate, schedule, statement, document or
instrument furnished to ▇▇▇▇▇▇▇ by the Acquired Company or the
Shareholders pursuant hereto;
(ii) the failure by the Acquired Company or the
Shareholders to fully perform any of their obligations
or agreements contained herein;
(iii) any and all obligations or liabilities of the
Acquired Company or the Shareholders of any nature whatsoever,
whether accrued or contingent, and whether or not in existence
at the date hereof, which are not expressly assumed by
▇▇▇▇▇▇▇;
(iv) the operation or conduct of the business of the
Acquired Company prior to the date hereof, or any action or
inaction by the Acquired Company or the Shareholders or any
officer, director, employee, agent or representative of the
Acquired Company prior to the Effective Date; and
12.03 Consent to Jurisdiction. Each Shareholder and ▇▇▇▇▇▇▇ hereby
consents to the nonexclusive jurisdiction of any local, state or federal court
located in or having authority over Lancaster County in the State of South
Carolina. Each Shareholder further hereby consents to venue in Lancaster County,
South Carolina. Each Shareholder hereby consents and agrees that all service of
process may be made on the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (as the
24
attorney-in-fact of such Shareholder) by personal delivery or by registered or
certified mail addressed to the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ at the address therefor set
forth in Section 13.07 hereof. Each Shareholder hereby consents and agrees that
service of process made on ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the foregoing manner shall be
deemed to be made on such Shareholder for all purposes. ▇▇▇▇▇▇▇ hereby consents
and agrees that all service of process may be made on ▇▇▇▇▇▇▇ by personal
delivery or by registered or certified mail addressed to ▇▇▇▇▇▇▇ set forth in
Section 13.07 hereof.
ARTICLE XIII
GENERAL
13.01 Entire Agreement; Modifications. This Agreement (including the
Exhibits and Schedules referred to herein) constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements relating thereto, whether oral or written. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
implied or be binding (including, without limitation, any alleged waiver based
on a party's knowledge of any inaccuracy in any representation or warranty
contained herein) unless in writing and signed by the party against which such
amendment, supplement, modification, waiver or termination is asserted. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
therein provided.
13.02 Binding Effect. All of the terms and provisions of this
Agreement by or for the benefit of the parties shall be binding upon and inure
to the benefit of their successors, permitted assigns, heirs and personal
representatives. Except as expressly provided herein, nothing herein is intended
to confer upon any person other than the parties, their successors, permitted
assigns, heirs and personal representatives, any rights or remedies under or by
reason of this Agreement.
13.03 Public Announcements. Except as may be required by law (so long
as advance written notice thereof is given by the party making the required
release or announcement), any and all public announcements or releases related
to the Transactions shall be approved by ▇▇▇▇▇▇▇ and the Shareholders in advance
of dissemination.
13.04 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement. The parties hereto may
execute this Agreement on separate signature pages, and there is no requirement
that all parties sign the same signature pages.
13.05 Costs and Expenses. Each party hereto assumes the
payment of its own costs and expenses (including any legal and/or
25
accounting fees) in connection with the negotiation and execution of this
Agreement and the consummation of the Transactions.
13.06 Notices. All notices, requests, instructions, documents and
other communications provided for herein or given hereunder shall be in writing
and shall be deemed to have been given if sent to the parties at the following
addresses in the manner set forth below:
(a) If to ▇▇▇▇▇▇▇ to:
The ▇▇▇▇▇▇▇ Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇, PLLC
NationsBank Corporate Center
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III
(b) If to Shareholders or any Shareholder:
To the Shareholders' attorney-in-fact
at the address set forth below
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or
In the event any successor attorney-in-fact is
appointed, at the address provided by such successor
attorney-in-fact, in the manner provided herein, at
the time of such appointment
All such notices, requests, instructions, documents and other communications
shall be sent either by registered or certified mail, postage prepaid, or by a
nationally recognized overnight courier service providing receipt of delivery
and shall be deemed to have been given three (3) days after being deposited in
the mails or one (1) day after being delivered to such a courier service. Any
party from time to time may change its address, or other information for the
purpose of notices to that party, by giving notice specifying such change to the
other parties hereto in the manner provided hereby.
13.07 Governing Law. This Agreement shall be construed and
governed under the domestic, internal law (but not the conflicts of
law principles) of the State of South Carolina.
26
13.08 Severability. Should any clause, section or part of this
Agreement be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this Agreement which can be effective without such
void or illegal clause section or part shall, nevertheless, remain in full force
and effect.
13.09 Knowledge. As used in this Agreement, the phrase "to the
knowledge" and any substantially similar words and phrases shall mean the actual
knowledge of a person (or, in the case of a person that is a corporation or
other entity, the actual knowledge of the officers of the corporation or persons
holding similar positions in an unincorporated entity) and the knowledge such
person could be expected to have after making due inquiry with respect to the
matter involved.
27
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date and year first above written.
▇▇▇▇▇▇▇:
The ▇▇▇▇▇▇▇ Group, Inc.
ATTEST:
--------------------- By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Secretary ---------------------------------
------------ Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice-President
[Corporate Seal]
ACQUIRED COMPANY:
▇▇▇▇▇▇▇ Insurance Group, Inc.
ATTEST:
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- ------------------------------------
Secretary Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------ Title: President
[Corporate Seal]
[SHAREHOLDER SIGNATURE PAGES ATTACHED]
28
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (SEAL)
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
SS#:
or Tax. I.D. #
Phone no:
WITNESS:
-----------------------
[signature]
-----------------------
[print name]
29
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (SEAL)
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
SS#:
or Tax. I.D. #
Phone no:
WITNESS:
-----------------------
[signature]
-----------------------
[print name]
30
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (SEAL)
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Address:
SS#:
or Tax. I.D. #
Phone no:
WITNESS:
-----------------------
[signature]
-----------------------
[print name]
31
Schedules
5.01 Good Standing
5.09 Material Events
5.14 Investments
5.19 Required Consents
32
Exhibits
A Series A Preferred Shareholder Interests
B Form of Power of Attorney
C Form of Employee Noncompete Agreement
▇ ▇▇▇▇▇▇▇ Secretary's Certificate
33
