_____________________
EXHIBIT 2.2
Merger agreement
DATED NOVEMBER 23, 1998 BETWEEN
FRONTIER NATIONAL CORPORATION
AND THE FRONTIER AGENCY, INC. AND
XXXXXX-XXXXXXXXXX, INC.,
XXXXXXXX XXXXX X. XXXXXX,
XXXXX X. XXXXXXXXXX, XXX X. XXXXXX
AND XXXXXX X. XXXXXXXXXX
_____________________
1
MERGER AGREEMENT
DATED NOVEMBER 23, 1998
BETWEEN
FRONTIER NATIONAL CORPORATION and
THE FRONTIER AGENCY, INC.
AND
XXXXXX-XXXXXXXXXX, INC.
XXXXXXXX XXXXX X. XXXXXX
XXXXX X. XXXXXXXXXX
XXX X. XXXXXX, AND
XXXXXX X. XXXXXXXXXX
2
TABLE OF CONTENTS
ARTICLE 1
The Merger.................................................................. 1
1.1 The Merger..................................................... 1
1.2 Effective Date................................................. 2
1.3 Effect of the Merger........................................... 2
1.4 Continuation of Business....................................... 2
1.5 Conversion of Shares........................................... 2
1.6 Consideration.................................................. 3
1.7 Exchange of Certificates....................................... 3
1.8 Closing of Transfer Books...................................... 3
1.9 Fractional Shares.............................................. 3
ARTICLE 2
Representations and Warranties of the Target and Target Shareholders........ 4
2.1 Organization................................................... 4
2.2 Capitalization................................................. 4
2.3 Corporate Authorization........................................ 5
2.4 Governmental Authorization..................................... 5
2.5 Non-Contravention.............................................. 5
2.6 Financial Statements........................................... 5
2.7 Absence of Certain Changes..................................... 6
2.8 Accounts Receivable............................................ 7
2.9 Absence of Undisclosed Liabilities............................. 7
2.10 Debt Instruments............................................... 7
2.11 Contracts...................................................... 7
2.12 Taxes.......................................................... 8
2.13 Labor.......................................................... 9
2.14 Employee Benefit Plans......................................... 9
2.15 Investment Representations..................................... 12
2.16 Intellectual Property and Intangible Property.................. 13
2.17 Permits and Licenses........................................... 13
2.18 Compliance with Law and Other Regulations...................... 13
2.19 Litigation..................................................... 14
2.20 Personal Property.............................................. 14
2.21 Real Property.................................................. 14
2.22 Insurance...................................................... 15
2.23 Environmental Matters.......................................... 16
2.24 Bank Accounts.................................................. 16
2.25 Transactions with Related Parties.............................. 16
2.26 Directors, Officers and Employees.............................. 16
2.27 Books and Records.............................................. 17
3
2.28 Adequacy of Disclosure......................................... 17
2.29 Finder's Fees.................................................. 17
2.30 Accounting Matters............................................. 17
2.31 Consents....................................................... 17
2.32 Sole Agreement to Merge or Sell................................ 17
ARTICLE 3
Representations and Warranties of the Purchaser and the Ag.................. 18
3.1 Organization and Power......................................... 18
3.2 Capitalization................................................. 18
3.3 Corporate Authorization........................................ 19
3.4 Governmental Authorization..................................... 19
3.5 Non-Contravention.............................................. 19
3.6 Reports and Financial Statements............................... 20
3.8 Litigation..................................................... 20
3.9 Compliance with Law and Other Regulations...................... 20
ARTICLE 4
Covenants of the Target and Target Shareholders............................. 21
4.1 Affirmative Covenants.......................................... 21
4.2 Access and Information......................................... 21
4.3 Conduct of Business Pending the Transaction.................... 21
4.4 Corporate Authorization........................................ 23
4.5 Pooling Accounting............................................. 24
4.6 Exclusivity.................................................... 24
4.7 Expenses....................................................... 24
4.8 Notification of Certain Matters................................ 24
ARTICLE 5
Covenants of the Purchaser and the Agency................................... 25
5.1 Affirmative Covenants.......................................... 25
5.2 Cooperation.................................................... 25
5.3 Confidential Information....................................... 26
5.4 Expenses....................................................... 26
ARTICLE 6
SECURITIES MATTERS.......................................................... 26
6.1 Securities Compliance.......................................... 26
6.3 Affiliates/Pooling of Interests and Tax Matters................ 27
ARTICLE 7
Conditions Precedent to the Merger.......................................... 28
7.1 Conditions Precedent to Each Party's Obligations............... 28
4
7.2 Conditions Precedent of Purchaser and the Agency................ 29
7.3 Conditions Precedent to Obligations of the Target............... 30
ARTICLE 8
Indemnification............................................................. 31
8.1 Indemnification by the Target and Target Shareholders........... 31
8.2 Indemnification by Purchaser.................................... 32
8.3 Procedure for Indemnification Claims............................ 32
ARTICLE 9
Miscellaneous............................................................... 33
9.1 Termination..................................................... 33
9.2 Amendment....................................................... 34
9.3 Assignment...................................................... 34
9.4 Descriptive Headings............................................ 34
9.5 Notices......................................................... 34
9.6 Governing Law................................................... 35
9.7 Public Announcements............................................ 35
9.8 Survival of Representations and Warranties...................... 36
9.9 Extensions and Waivers.......................................... 36
9.10 Counterparts.................................................... 36
9.11 Entire Agreement................................................ 36
5
MERGER AGREEMENT
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This MERGER AGREEMENT (the "Agreement") is made as of November 23, 1998,
(such date being sometimes referred to herein as "the date hereof"), among
Frontier National Corporation, an Alabama corporation (the "Purchaser"), The
Frontier Agency, an Alabama corporation (the "Agency"), Xxxxxxxx Xxxxx X.
Xxxxxx, Xxxxx X. Xxxxxxxxxx, Xxx X. Xxxxxx, and Xxxxxx X. Xxxxxxxxxx (the
"Target Shareholders") and Xxxxxx Xxxxxxxxxx, Inc., an Alabama corporation (the
"Target") (the Purchaser, the Agency, the Target Shareholders, and the Target
being sometimes collectively referred to herein as the "Parties").
WITNESSETH:
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WHEREAS, the Parties propose to effectuate a transaction by which the
Agency, a wholly-owned subsidiary of First National-America's Bank, which is a
wholly-owned subsidiary of the Purchaser, will merge with and into the Target,
as a result of which (a) the Target, as the surviving corporation, will become a
wholly-owned subsidiary of First National-America's Bank, and (b) the holders of
the outstanding capital stock of the Target will receive the consideration
hereinafter set forth (the "Merger"); and
WHEREAS, the respective Boards of Directors of the Purchaser, the Agency,
and the Target have approved or will approve this Agreement and have determined
that it is desirable and in each of their best interests that the business of
the Target be combined with that of the Purchaser by merger of the Agency with
and into the Target so that the Target will become a wholly-owned subsidiary of
First National-America's Bank as set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended; and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests."
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
Parties hereby agree as follows:
ARTICLE 1
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The Merger
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1.1 THE MERGER. On the Effective Date (as defined in Section 1.2
----------
herein), the Agency will merge with and into the Target, with the Target being
the surviving corporation (the "Surviving Corporation"), upon the terms and
provisions set forth in this Agreement, the Plan of Merger attached as Exhibit
1.1, and in accordance with the Alabama Business Corporation Act.
1.2 EFFECTIVE DATE. As soon as practicable after the satisfaction
--------------
or waiver of each condition to the Parties' obligations hereunder, the Parties
will take such action as is required by law to make the Merger effective,
including the execution of duly executed Articles of Merger in the form attached
as Exhibit 1.2 in accordance with the provisions the Alabama Business
-----------
Corporation Act, and a
6
closing will be held on such date (the "Closing Date"). The Merger shall become
effective on the date and as of the time Articles of Merger shall be filed with
the Secretary of State of Alabama, which filing shall occur no later than the
earlier of the second business day following the satisfaction of the conditions
set forth in Article 7 of this Agreement, or December 31, 1998, unless another
date and time is agreed to in writing by the Parties hereto. Such date and time
are herein referred to as the "Effective Date."
1.3 EFFECT OF THE MERGER. The Merger shall have the effect set forth
--------------------
in Section 10-2B-11.06 of the Alabama Business Corporation Act.
1.4 CONTINUATION OF BUSINESS. Immediately following the Effective
------------------------
Date, the business of the Surviving Corporation shall be governed and operated
as follows:
(a) The Articles of Incorporation and Bylaws of the Target in effect
on the Effective Date shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation, to remain unchanged until amended as provided by law.
(b) The officers of the Surviving Corporation immediately after the
Merger shall be those persons identified on Schedule 1.4(b) of this Agreement.
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(c) The directors of the Surviving Corporation immediately after the
Merger shall be those persons identified on Schedule 1.4(c) of this Agreement.
---------------
(d) The name of the Surviving Corporation shall be changed to The
Frontier Agency, Inc.
1.5 CONVERSION OF SHARES. As of the Effective Date, by virtue of the
--------------------
Merger and without any further action on the part of any holder of (i) shares of
Common Stock of the Target ("Target Shares") or (ii) shares of Common Stock of
the Purchaser ("Purchaser Shares"):
(a) Capital Stock of the Agency. Each issued and outstanding share
---------------------------
of capital stock of the Agency shall be converted into and become one (1) fully
paid and nonassessable share of Common Stock, par value $10.00 per share, of the
Surviving Corporation; and
(b) Cancellation of Target Treasury Stock. Each Target Share that is
-------------------------------------
owned by the Target shall automatically be canceled and retired and shall cease
to exist, and no Purchaser Shares or other consideration shall be delivered in
exchange therefor.
(c) Conversion of Target Shares. The Target Shares which are issued
---------------------------
and outstanding immediately prior to the Merger other than Target Shares to be
canceled in accordance with Section 1.5(b), considered in the aggregate, shall
be converted into the right to receive the Consideration (as defined below). As
of the Effective Date, each holder of any certificate representing any such
Target Shares shall cease to have any rights with respect thereto, except the
right to receive the Consideration (as defined below) upon the surrender of such
certificate in accordance with Section 1.7 of this Agreement, and the Purchaser
shall issue certificates representing the Consideration (as defined below).
(d) Shares of Purchaser Shall Remain Outstanding. Subsequent to the
--------------------------------------------
Effective Date, each share of stock of the Purchaser then issued and outstanding
shall remain as the issued and outstanding stock of the Purchaser.
7
1.6 CONSIDERATION. The Consideration for the Target Shares shall be
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an aggregate of 49,339 Purchaser Shares (the "Consideration"), which shall be
distributed to the Target Shareholder based upon 49.34 Purchaser Shares for each
Target Share owned.
1.7 EXCHANGE OF CERTIFICATES. On the Closing Date, the Target
------------------------
Shareholders shall deliver to the Purchaser the certificates that immediately
prior to the Effective Date represented all issued and outstanding Target Shares
(collectively, the "Target Certificates"). Upon surrender of each of the Target
Certificates, each such shareholder shall be entitled to receive in exchange
therefor a certificate representing his or her respective portion of the
Consideration, as set forth in Section 1.6 of this Agreement, and each of the
Target Certificates so surrendered shall forthwith be canceled.
1.8 CLOSING OF TRANSFER BOOKS. The Consideration issued upon the
-------------------------
surrender of the Target Certificates shall be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to the Target Shares
theretofore represented by such Target Certificates, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Target Shares.
1.9 FRACTIONAL SHARES. No fractional share certificate of Purchaser
-----------------
Shares shall be issued in connection with the conversion of the Target Shares
into Purchaser Shares nor will any outstanding fractional share interest entitle
the holder thereof to vote, to receive dividends, or to exercise any other
rights of a shareholder of the Surviving Corporation. In lieu of any such
fractional shares, any holder of Target Shares shall, upon surrender thereof, be
paid in cash the value of each such fraction, which for this purpose shall be
calculated by multiplying such fraction by $986.78.
ARTICLE 2
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Representations and Warranties of the Target and Target Shareholders
--------------------------------------------------------------------
The Target and the Target Shareholders, jointly and severally, represent
and warrant to the Purchaser and the Agency as follows:
2.1 ORGANIZATION. The Target is a corporation duly organized,
------------
validly existing, and in good standing under the laws of the State of Alabama
with all necessary corporate power and authority to carry on its business as now
being conducted and to own, operate, utilize and lease the assets, properties
and business now owned, operated, utilized or leased by the Target. The Target
is duly qualified to do business in all other jurisdictions where such
qualification is required, all of which are identified on Schedule 2.1(a)
---------------
hereto, except where the failure to be so qualified will not result in the
forfeiture of a material right or the incurrence of a material penalty or in any
other respect be materially adverse to the business and affairs of the Target.
The Target has delivered to Purchaser correct and complete copies of the
Certificate of Incorporation and the Bylaws of the Target, each as amended to
the date hereof.
The Target has no subsidiaries or interests in, nor has the Target
made advances or loans to, any other corporation, partnership, joint venture, or
other enterprise except as set forth in Schedule 2.1(b) hereto. Each such
---------------
entity is duly organized, validly existing, and in good standing under the laws
of the state set forth in such schedule with all requisite corporate power and
authority to own or lease its properties and to conduct its business as
presently being conducted and is duly qualified, licensed and
8
authorized to do business, and is in good standing in all jurisdictions in which
it is so require by virtue of ownership, operation or leasing of property or
assets or the conduct of its business. Unless the context hereof clearly
requires otherwise, all references in this Agreement, including this ARTICLE 2
regarding Representations and Warranties, to the Target shall be deemed to be
references to each and all of such entities as well as to the Target. Schedule
--------
2.1(b) sets forth (a) the authorized, issued, and outstanding capital stock of
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each direct and indirect subsidiary of the Target and the percentage of the
outstanding capital stock of each such subsidiary held by the Target and (b) the
nature and amount of any such equity investment, other interest, or advance.
2.2 CAPITALIZATION. The authorized capital stock of the Target
--------------
consists of 1,000 shares of voting common stock, of which 1,000 shares are
issued and outstanding and are owned, beneficially and of record, by the Target
Shareholders and no other persons or entities, with par value of $10.00 per
share. All of the issued and outstanding shares are duly authorized, validly
issued, fully paid, and non assessable. Except as disclosed on Schedule 2.2
------------
hereto, there are no outstanding options, rights, or warrants to purchase or
acquire, or securities convertible into or exchangeable for, any shares of
capital stock of the Target, and there are no contracts, commitments,
agreements, understandings, arrangements, or restrictions which require the
Target to issue, sell, or deliver any shares of capital stock of the Target.
2.3 CORPORATE AUTHORIZATION. The Target has the corporate power to
-----------------------
enter into this Agreement and, subject to any necessary shareholder approval,
shall have the authority to carry out the transactions contemplated hereby. The
Board of Directors of the Target has unanimously determined that this Agreement
and the transactions contemplated hereby, including the Merger, are fair to and
in the best interest of the shareholders of the Target and has authorized that
approval of the Merger be recommended to the shareholders of the Target. As
evidenced by their signatures hereto, each of the Target Shareholders shall vote
his respective shares in favor of the Merger. This Agreement, the execution and
delivery of which have been duly authorized by all necessary corporate action on
the part of the Board of Directors of the Target, constitutes a valid and
binding obligation of the Target.
2.4 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
--------------------------
performance by the Target of this Agreement, and the consummation of the Merger
and other transactions contemplated by this Agreement by the Target do not and
will not require any consent, approval or action by or in respect of, or any
declaration, filing, notice or registration with or to, any governmental or
regulatory body, court, agency, official or authority (each, a "Governmental
Authority"), other than routine filings with the Secretary of State of the State
of Alabama necessary to consummate the Merger, and the filings, consents, and
approvals set forth on Schedule 2.4 hereto.
2.5 NON-CONTRAVENTION. Assuming compliance with the matters referred
-----------------
to in Section 2.4, the execution, delivery and performance by the Target of this
Agreement, and the consummation of the Merger and other transactions
contemplated by this Agreement by the Target and the Target Shareholders does
not and will not (a) contravene or conflict with the Certificate of
Incorporation or Bylaws of the Target, (b) contravene or conflict with or
constitute a violation of any provision of any law, rule, regulation, judgment,
injunction, order or decree currently in effect and binding upon or applicable
to the Target and the Target Shareholders; (c) conflict with, result in a breach
of, constitute a default or an event which, with notice or lapse of time or
both, would constitute a default under, result in the acceleration of, or create
in any party a right to accelerate, terminate, modify, or cancel, any contract,
note, bond, mortgage, indenture, license, lease agreement or other instrument or
obligation to which the Target is a party or by which it or any of its assets or
properties may be bound or (d) result in the creation of any security interest
or lien upon any of the Target's assets.
9
2.6 FINANCIAL STATEMENTS. The Target has furnished the Purchaser
--------------------
with true and complete copies of its balance sheets as of June 30, 1998 and
1997, and statements of income, stockholder's equity and cash flows of the
Target for the fiscal years then ended, and the notes thereto (the "Target
Statements"). Such financial statements, including the notes thereto, present
fairly, in all material respects, the financial position and the results of
operations and cash flows of the Target at the dates and for the periods
indicated, in each case in conformity with generally accepted accounting
principles consistently applied through prior periods, are correct and complete
in all material respects, and are consistent with the books and records of the
Target.
2.7 ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule 2.7
--------------------------
delivered by the Target to the Purchaser, since the Target Interim Statements,
there has not been any material adverse change in the financial position,
working capital, assets, liabilities, reserves, business, or operations of the
Target, and the Target has not:
(a) Engaged in any material transaction outside the ordinary course
of business;
(b) Made any capital expenditures in excess of $2,500 individually or
$10,000 in the aggregate, or outside the ordinary course of business;
(c) Incurred any material indebtedness or leasehold expense;
(d) Entered into any material guaranties outside the ordinary course
of business;
(e) Increased salaries of any of their employees, other than in the
ordinary course of business, or entered into any employment contract, consulting
agreement, or the like;
(f) Adopted, implemented for the first time, or made any material
change in any Employee Benefit Plans (as hereinafter defined);
(g) Entered into a surety or other bond arrangement with respect to
the performance of any contract, lease, agreement or other obligation;
(h) Other than in the ordinary course of business, issued any capital
stock, bonds or other corporate securities, or granted any options, warrants or
other rights calling for the issuance thereof, or borrowed funds;
(i) Declared or made payment of, or set aside for payment, any
dividends or distributions of any assets, or purchased, redeemed or otherwise
acquired any of its capital stock, any securities convertible into capital
stock, or any other securities;
(j) Made any accrual or arrangement for or payment of bonuses or
special compensation of any kind to any director, officer or employee;
(k) Made any change in any method of accounting or accounting
practice;
(l) Waived any right or compromised any claim;
10
(m) Agreed, whether in writing or otherwise, to do any of the
foregoing; or
(n) Suffered any damage, destruction or loss, whether or not covered
by insurance, materially affecting the business or properties of the Target.
2.8 ACCOUNTS RECEIVABLE. All receivables reflected in the Financial
-------------------
Statements of the Target arose in the ordinary course of business, are legally
enforceable according to their terms, and are collectible to the extent of the
amount thereof net of any reserves for doubtful or uncollectible amounts. The
account records underlying the Financial Statements accurately and fairly
reflect, in reasonable detail, the transactions of the Target, and the Target's
books of account have been maintained in accordance with generally accepted
accounting practices consistently applied. None of the currently outstanding
accounts, notes and other receivables of the Target are subject to any valid
defense, set off, counterclaim or claim for returns or refunds, and no amounts
previously collected by the Target in respect of accounts, notes and other
receivables the Target are subject to any valid defense, set off, counterclaim
or claim for returns or refunds.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
----------------------------------
Schedule 2.9 delivered by the Target to the Purchaser, the Target has no
------------
material liabilities or obligations of any nature which are required to be
reflected or reserved against in a balance sheet in accordance with generally
accepted accounting principles consistently applied, other than those
liabilities and obligations which are fully reflected and reserved against in
the Target Interim Statement or which have been incurred in the ordinary course
of business and consistent with past practices since the date thereof.
2.10 DEBT INSTRUMENTS. Schedule 2.10 lists all mortgages,
---------------- -------------
indentures, notes, guarantees and other agreements for or relating to borrowed
money (including, without limitation, conditional sales agreements and capital
leases) to which the Target is a party or which have been assumed by the Target
or to which any assets of the Target are subject. The Target has performed all
the obligations required to be performed by any of such agreements to date, and
the Target is not in default in any respect under any of the foregoing.
2.11 CONTRACTS. Except as specified in Schedule 2.11 (and without
--------- -------------
limiting the foregoing), the Target is not a party to any oral or written:
(a) License agreement or distributor, dealer, manufacturer's
representative, franchise, sales agency, advertising, property management or
brokerage agreement;
(b) Agreement with any labor organization or other collective
bargaining unit;
(c) Agreement for the future purchase of materials, supplies,
services, merchandise or equipment involving payments of more than $1,000 over
its remaining term (including, without limitation, periods covered by any option
to renew by either party);
(d) Agreement for the purchase, sale or lease of any real estate;
(e) Agreement for the sale of any of its other assets or the grant of
any preferential rights to purchase any of its assets or rights, other than in
the ordinary course of business;
11
(f) Agreement which contains any provisions requiring the Target to
indemnify any other party thereto, other than as provided in the Target's
Articles of Incorporation or Bylaws;
(g) Joint venture agreement or other agreement involving the sharing
of profits;
(h) Outstanding loans to or other agreements with any person or
entity or entities controlling, controlled by or under common control with the
Target;
(i) Agreement which restricts the Target's ability to do business in
any particular geographic region, in any particular industry or with any
particular customer;
(j) Agreement providing the Target the right to use the patents,
trademarks, copyrights, know how or the like of others or provide others the
right to use such rights of the Target;
(k) Agreement for the sale of goods or services which requires
compliance with governmental procurement regulations;
(l) Any employment or consulting contract which is not by its terms
terminable at will without penalty;
(m) Any contract or arrangement for bonuses or incentive
compensation, deferred compensation, supplemental retirement payments, or the
like;
(n) Any material plan, contract or arrangement providing for
insurance for any officer or employee or member of his family (other than
conventional life, health, accident or similar plans available to the Target's
employees generally).
Each such agreement listed in Schedule 2.11 is a legal, valid and binding
-------------
obligation of, and is legally enforceable against, the respective Parties
thereto, and there has not occurred an event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a default thereunder.
2.12 TAXES. The Target has furnished to Purchaser true and complete
-----
copies of all the Target's foreign, federal, state and local tax returns and all
written communications relating to any such tax returns or to any deficiency or
claim proposed and/or asserted, irrespective of the outcome of such matter, but
only to the extent such items relate to tax years (i) which are subject to an
audit, investigation, examination or other proceeding, or (ii) with respect to
which the statute of limitations has not expired. Except as disclosed on
Schedule 2.12:
-------------
(a) Tax Returns. All tax returns required to be filed with respect
-----------
to the Target have been filed when due in accordance with all applicable laws,
and, as of the time of filing, such returns were accurate and complete in all
material respects; none of the Target's tax returns have been audited and/or
examined by any governmental agency within the past five years; and there is no
action, suit, proceeding, audit, investigation or claim pending or, to the
knowledge of any officer or director of the Target, threatened against or with
respect to the Target in respect of any tax return;
(b) Tax Liability. All taxes shown as due and payable by the Target
-------------
on the returns that have been filed have been duly paid; the Target does not
have, and on the Effective Date will not have,
12
any liability for taxes payable for or with respect to any periods prior to and
including the Effective Date in excess of the amounts actually paid prior to the
Effective Date or reserved for in financial statements furnished to Purchaser;
the Target is not and will not be as of the Effective Date under any contractual
obligation to pay the tax obligations of any other person, or to pay the tax
obligations with respect to transactions relating to any other period, or to
indemnify any other person with respect to any tax as of the Effective Date;
there are no liens for taxes (other than for current taxes not yet due and
payable) upon the assets the Target; and the Target has neither given, nor been
requested to give, any waivers extending the statutory period of limitation
applicable to any tax return for the Target for any period; and
(c) Tax Elections. No tax elections for purposes of federal,
-------------
foreign, state or local taxes are currently are in effect with respect to the
Target, and no election with respect to such taxes will be made without the
prior written consent of the Purchaser.
2.13 LABOR. Except as disclosed on Schedule 2.13, the Target is in
----- -------------
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice; the Target is
not a party to any collective bargaining or labor agreement or arrangement; no
application for certification as a collective bargaining unit with respect to
the Target is pending or anticipated; there is no unfair labor practice
complaint pending or, to the best knowledge of the Target, threatened against
the Target before the National Labor Relations Board; there are no strikes,
work stoppages, grievance proceedings or other controversies pending, or, to the
knowledge of the Target, threatened or reasonably anticipated between the
Target and any union or any current or former employees of the Target, or
involving any material suppliers.
2.14 EMPLOYEE BENEFIT PLANS. Except as disclosed in Schedule 2.14:
---------------------- -------------
(a) The Target does not maintain any bonus, deferred compensation,
pension, retirement, stock option, stock appreciation, restricted stock, profit
sharing, severance, medical or life insurance, employee stock ownership or stock
purchase plans or other "employee pension benefit plan", as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or other "employee welfare benefit plan", as defined in Section 3(1)
of ERISA (collectively the "Target Plans"). All of the Target Plans described
in Schedule 2.14 have been operated in all material respects in compliance with
-------------
all applicable laws, including without limitation, the applicable provisions of
ERISA and the Code, and regulations thereunder (collectively the "Employee
Benefit Laws").
(b) With respect to any Target plan which is either an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) or which is intended
to qualify under Section 401(a) of the Code (collectively, the "Target Pension
Plans"), a favorable determination letter as to the qualification of the plan
under Section 401(a) of the Code has been issued and the related trust has been
determined to be exempt from taxation under Section 501(a) of the Code and, to
the best of the Target's knowledge, no amendment made (or the failure to make
such amendment) to any Target Pension Plan subsequent to the date of such
determination letter has adversely affected the qualified status of any such
Target Pension Plan.
(c) The Target has performed all material obligations required to be
performed by it under, and is not in default under or in violation of, the terms
of any of the Target Plans in any material respect. To the best of the Target's
knowledge, no "disqualified person" (as defined in Section 4975 of the Code) or
"party in interest" (as defined in Section 3(14) of ERISA) has engaged in any
"prohibited
13
transaction" (as such term is defined in Section 4975 of the Code or Section 406
of ERISA), or breach of fiduciary duties (as described in Section 404 of ERISA)
and no "reportable event" within the meaning of Section 4043 of ERISA has
occurred with respect to any Target Plan. The Target has not incurred, and does
not reasonably expect to incur, any material liability to the Pension Benefit
Guaranty Corporation (except for required premium payments, which payments have
been made when due). No "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code (whether or not
waived), exists with respect to any of the Target Plans. No "unfunded current
liability" as determined under Section 412(1) of the Code exists with respect to
any Target Plan subject to the minimum funding requirements of Code Section 412,
and, if applicable, Title IV of ERISA. The Target has no liability for any
delinquent contributions within the meaning of Section 515 of ERISA (including,
without limitation, related attorneys' fees, costs, liquidated damages and
interest) or for any arrearages of wages.
(d) The Target is not required to contribute to, and during the five-
year period ending on the Effective Date will not have been required to
contribute to, any "multi-employer plan" as such term is defined in Section
4001(a)(3) of ERISA covering the Target employees, and the Target will not be
subject to any withdrawal liability (whether partial or complete) within the
contemplation of Section 4001 et seq. of ERISA as a result of the transactions
contemplated by this Agreement. The Target has never contributed to, withdrawn
from, or had any employee covered by a multi-employer plan.
(e) No provision of any Target Pension Plan nor any amendment to any
such plan would result in any limitation on Purchaser's right to receive
residual amounts from any such Plan under ERISA Section 4044, including ERISA
Section 4044(d)(2).
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
material payment becoming due to any Target employee or former employee from
Target under any Target Plan, materially increase any benefits otherwise
payable under any Target Plan, or result in the acceleration of the time of
payment or vesting of any such benefits under any Target Plan to any material
extent.
(g) The Target has no unpaid obligations and liabilities to provide
benefits or contributions with respect to any Target Plan (including, without
limitation, liabilities and obligations currently due and those not yet due that
are attributable to the current plan year or otherwise will become due at a
later date for benefits previously earned). With respect to each Target Plan
subject to Title IV of ERISA, as of the Effective Date, the assets of each such
Plan are at least equal in value to the present value of the accrued benefits
(determined as of the Effective Date) of the participants in such Plans, based
on actuarial methods, tables and assumptions satisfactory to the Purchaser,
which present value is not less than the projected benefit obligation for such
Plan under FAS 87.
(h) The Target has made all contributions and other payments required
by and due under the terms of each Target Plan and has taken no action relating
to any Target Plan that will increase Purchaser's obligation under any such
Plan.
(i) No asset of Target is subject to any lien under Code Section
401(a)(29), ERISA Section 302(f) or Code Section 412(n), ERISA Section 4068 or
arising out of any action filed under ERISA Section 4301(b).
14
(j) Neither the Target nor any affiliated company that is, or was at
any time after September 2, 1974, together with the Target, treated as a "single
employer" under section 414(b), 414(c), 414(m), or 414(o) of the Code, has
incurred any liability which could subject any of the Parties to this Agreement
to any liability under Section 4062, 4063, or 4064 of ERISA.
(k) There are no negotiations, demands or proposals which are pending
which materially affect matters now covered, or that would be covered, by the
types of plans or agreements listed in Schedule 2.14. There has been no material
-------------
failure to comply with any applicable reporting and disclosure requirements
under Title I or Title IV of ERISA that could subject the Target to any material
civil or any criminal sanction. There are no actions, suits or claims (other
than routine claims for benefits) pending or, to the best of the Target's
knowledge, threatened against the Target or the Target Plans, and to the best of
the Target's knowledge, no facts are known to exist which could reasonably be
expected to give rise to any actions, suits or claims (other than routine claims
for benefits) against the Target or against the Target Plans.
(l) The Target has complied in all material respects with the
requirements of the Consolidated Omnibus Budget Reconciliation Act, as it
relates to employee benefits provided to the Target's employees.
(m) Each welfare plan (including any such welfare plan covering
former employees of the Target) may be amended or terminated without restriction
by Purchaser on or at any time after the Effective Date.
2.15 INVESTMENT REPRESENTATIONS. The Target Shareholders hereby
--------------------------
represent and warrant that:
(a) They understand that the shares of Purchaser Shares they will
receive as part of the Purchase Price are not being registered under the
Securities Act on the ground that the issuance of such shares is exempt both as
not involving a public offering and as an intrastate offering;
(b) They are deemed residents of the State of Alabama, and that they
intend to hold such shares for investment purposes only and not with a view to
the resale or direct or indirect distribution of such shares nor notes or any
interest therein, and they recognize that various exemptions might not be
applicable if they were not bona fide Alabama residents or he they were to
acquire such shares for the purpose of redistribution;
(c) They understand that such shares shall be restricted in their
transferability until such time as counsel for the Purchaser is of the opinion
that the same may be sold or otherwise be disposed of by them in conformity with
the securities laws, which opinion shall not be unreasonably withheld;
15
(e) They understand that investment in the Purchaser is illiquid;
that they have adequate means of providing for their current needs and
contingencies; and that they have no need for liquidity in this investment; and
(f) They are not currently subject to any order, judgment, or decree
of any court of competent jurisdiction temporarily or preliminarily restraining
or enjoining, or subject to any order, judgment, or decree of any court of
competent jurisdiction entered within the last five (5) years permanently
restraining or enjoining them from engaging in or continuing any conduct or
practice in connection with the purchase or sale of any security or involving
the making of any false filing with any state.
2.16 INTELLECTUAL PROPERTY AND INTANGIBLE PROPERTY. Schedule 2.16
--------------------------------------------- -------------
lists all letters patent, patent applications, service marks, trade names,
trademarks, trademark registrations and applications, copyrights and copyright
applications and registrations both domestic and foreign, presently owned,
possessed or used by the Target in connection with its business (all of the
foregoing, together with all inventions, technology, processes, designs, know-
how, and formula material to the conduct of the Target's business are
hereinafter collectively referred to as the "Intellectual Property"). Except as
disclosed on Schedule 2.16, the Target owns the entire right, title and
interest in and to the Intellectual Property; a) all registrations, applications
for registration and assignments of registrations of any Intellectual Property
has been properly registered in the name of the Target; the Target is not
obligated or under any liability to make any payment, by way of royalties, fees,
or otherwise, to any owner or licensee of, or other claimant to, the
Intellectual Property; the Target has the right to bring action for the
infringement of such Intellectual Property; and no officer or director of the
Target has any knowledge, or has received any notice to the effect, that any
product the Target manufactures or sells or that any service the Target renders,
or that the marketing or use by the Target or another of any such product or
service, may or is claimed to infringe any Intellectual Property or legally
protectable right of another.
2.17 PERMITS AND LICENSES. The Target has all permits, licenses,
--------------------
orders, and approvals of all governmental bodies necessary for it to carry on
its business as presently conducted.
2.18 COMPLIANCE WITH LAW AND OTHER REGULATIONS. Except as disclosed
-----------------------------------------
in Schedule 2.18:
-------------
(a) The Target is not in violation of, and since June 30, 1997, has
not violated, any applicable provisions of law, statute, ordinance, regulation,
judgment, order, injunction, permit, license, certificate or other
authorization, or its governing instruments, which violation, individually or in
the aggregate, could have a material adverse effect on the Target;
(b) The Target is not currently subject to any fine, penalty,
liability or disability as the result of a failure to comply with any
requirement of federal, state, local or foreign law or regulation nor has the
Target received any notice of such noncompliance.
(c) Neither the Target nor any of its officers, directors, employees
or agents (or stockholders, distributors, representatives or other persons
acting on the express, implied or apparent authority of the Target) has paid,
given or received or has offered or promised to pay, give or receive, any bribe
or other unlawful, questionable or unusual payment of money or other thing of
value, any extraordinary discount, or any other unlawful or unusual inducement,
to or from any person, business association or governmental official or entity
in the United States or elsewhere in connection with or in
16
furtherance of the business of the Target (including, without limitation, any
offer, payment or promise to pay money or other thing of value to any foreign
official or political party (or official thereof) for the purpose of influencing
any act, decision or omission in order to assist the Target in obtaining
business for or with, or directing business to, any person, or to any person,
while knowing that all or a portion of such money or other thing of value with
be offered, given or promised to any such official or party for such purpose).
The business of the Target is not in any manner dependent upon the making or
receipt of such payments, discounts or other inducements.
2.19 LITIGATION. Except as disclosed in the Target Audited
----------
Statements, Target Interim Statements or on Schedule 2.19, there are no
-------------
injunctions, orders, or decrees of any court or administrative agency to which
the Target is subject, and material claims, actions, suits or other litigation
or proceedings or governmental investigations which could result in a judgment
in excess of $5,000 currently pending against the Target, nor is the Target
aware of any basis for any such claim, action, suit or other proceeding. The
Target Shareholders are not a party to, or subject to the provisions of any
judicial decree, judgment or order of any governmental agency the performance or
enforcement of which would materially adversely affect the Target's business or
financial condition or the ability of Target to consummate the transaction
described in this Agreement.
2.20 PERSONAL PROPERTY. Except as disclosed on Schedule 2.20, the
----------------- -------------
Target has good, valid and marketable title to all equipment, machinery and
personal property used in its business. Such personal property is in good
operating condition and repair and is suitable and adequate for the uses for
which it is intended or is being used.
2.21 REAL PROPERTY. Schedule 2.21(a) lists and sets forth the legal
------------- ----------------
description of all Real Property in which the Target possesses an ownership
interest, and Schedule 2.21(b) lists and sets forth a legal description of all
----------------
Real Property leased by the Target from others, and sets forth the owners of
such properties (collectively, the "Real Property"). Except as disclosed on
such Schedules:
(a) Owned Property. The Target has title in fee simple in each
--------------
property listed on Schedule 2.21(a) free and clear of any defect or encumbrance,
----------------
except (i) liens imposed by law and incurred in the ordinary course of business
which in the aggregate do not exceed and will not exceed $1,000; and (ii) minor
easements, defects and exceptions none of which individually, or in the
aggregate, materially interferes with the use of such properties for the
purposes for which they are held.
(b) Leased Property. The Target has valid and binding leases in each
---------------
property listed on Schedule 2.21(b), and the Target is current with respect to
----------------
all payments due under such leases; the Target has complied in all material
respect with its obligations under such leases; and there are no defaults under
any such leases that remain uncured and no condition exists which, with the
lapse of time or giving of notice, or both, would give rise to a default under
any such leases.
(c) Status of Real Property. The Target is entitled to use all of
-----------------------
the Real Property for the purposes for which it is now being used by the Target
without violation of any building code, zoning or other ordinance. The
buildings, structures, fixtures and improvements on each parcel of the Real
Property lie entirely within the boundaries of such parcel of the Real Property
as specified in the legal description set forth in Schedule 2.21(a) or Schedule
---------------- --------
2.21(b) and no structures of any kind encroach on the Real Property. The Target
-------
has not received any notice (oral or written) from any insurance carrier in
relation to the Real Property which could have an adverse effect on the
insurance coverage or premiums relating to the Real Property or improvements
thereon.
17
(d) Condemnation. No portion of the Real Property, or any building,
------------
structure, fixture or improvement thereon, is the subject of, or affected by,
any condemnation, taking, eminent domain or inverse condemnation proceeding
currently instituted or pending, and the Target has no knowledge that any of the
foregoing are, or will be, the subject of, or affected by, any such proceeding.
(e) Access to Utilities. The Target has not experienced any
-------------------
restriction in access to and from public roads and to all utilities, including
water, sewer, gas, electric, telephone, drainage and other utilities used by the
Target in the operation of the business as presently conducted and there is no
pending or, to the best of the Target's knowledge, threatened governmental
action which would prohibit or interfere with such access, and, to the best of
the Target's knowledge, no fact or condition exists which, with the mere running
of time, the giving of notice, or both, would result in the termination,
reduction or impairment of the furnishing of service to the real property of
water, sewer, gas, electric, telephone, drainage and other such utility
services.
2.22 INSURANCE. Schedule 2.22 lists all policies of title, fire,
--------- -------------
hazard, casualty, liability, life, worker's compensation and other forms of
insurance of any kind owned or held by the Target. Except as disclosed on
Schedule 2.22, there are no claims by the Target under any such policies as to
-------------
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds; all premiums payable under all such policies have been
paid, and the Target has otherwise complied with the terms and conditions of all
such policies; such policies have been in effect for the entire period of
operation of the Target and remain in full force and effect; such policies
cover all reasonably foreseeable risks associated with the business of the
Target, and are in such amounts, so as to be consistent with its claim history,
and consistent with insurance customarily carried by companies which, with
respect to the Target, are similarly situated and engaged in similar businesses
and own similar properties; such policies are sufficient for compliance by the
Target with all requirements of law and of all agreements to which the Target is
a party or by which the Target is bound; such policies provide they will remain
in full force and effect through December 31, 1998; and no officer or director
of the Target knows of any threatened termination of, or has received written
notice of any premium increase with respect to, any of such policies.
2.23 ENVIRONMENTAL MATTERS. Target is in compliance with all
---------------------
applicable Environmental Laws (as hereinafter defined), and there is no civil,
criminal or administrative judgment, action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter pending
or, to Target's knowledge, threatened against Target pursuant to Environmental
Laws which would reasonably be expected to result in a fine, penalty or other
obligation, cost or expense. Except as set forth in Schedule 2.23, there are no
-------------
past or present events, conditions, circumstances, activities, practices,
incidents, agreements, actions or plans which may prevent compliance with, or
which have given rise to or will give rise to liability under, any Environmental
Laws. As used herein, the term "Environmental Laws" shall mean federal, state,
local and foreign laws, principles of common law, regulations and codes, as well
as orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution, protection of the environment or
public health and safety.
2.24 BANK ACCOUNTS. Schedule 2.24 sets forth the name and location
------------- -------------
of each bank or other financial institution in which the Target has accounts of
any kind (including, without limitation, brokerage accounts) or safe deposit
boxes, all account numbers and the names of all persons authorized to draw
thereon or have access thereto.
18
2.25 TRANSACTIONS WITH RELATED PARTIES. Except as disclosed on
---------------------------------
Schedule 2.25:
-------------
(a) The Target does not own any note, bond, debenture or other
indebtedness, and is not otherwise a creditor, of any officer, director or
stockholder of the Target, or any affiliated entity or person of such officer,
director or stockholder.
(b) Other than such contracts or agreements that arise from being an
officer, director or stockholder of the Target, no officer, director or
stockholder of the Target, nor any affiliated entity or person of such officer,
director or stockholder, is currently a party to any written or verbal contract
or agreement with the Target, including, without limitation, any agreement
providing for the furnishing of services by, rental of assets from or to, or
otherwise requiring payments to, such officer, director, stockholder or
affiliated entity or person.
(c) No officer, director or stockholder of the Target, nor any
affiliated entity or person of such officer, director or stockholder, has any
direct or indirect interest in any property, asset or right which is used by the
Target in the conduct of its business.
2.26 DIRECTORS, OFFICERS AND EMPLOYEES. Schedule 2.26 lists all
--------------------------------- -------------
current directors, officers, and employees of the Target showing each such
person's name, position, and annual remuneration, bonuses and fringe benefits
for the current fiscal year and the most recently completed fiscal year.
2.27 BOOKS AND RECORDS. The books of account, stock records, minute
-----------------
books and other records of the Target are true and complete and have been
maintained in accordance with good business practices, and the matters contained
therein are appropriately and accurately reflected in the financial statements
of the Target furnished to Purchaser.
2.28 ADEQUACY OF DISCLOSURE. No representation or warranty contained
----------------------
in this Agreement and no statement contained in any certificate, schedule,
attachment, list or other writing furnished to the Purchaser pursuant to the
provisions hereof contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein not misleading. The copies of all such certificates, schedules,
attachments, lists and other writings which are being furnished to the Purchaser
are complete and correct.
2.29 FINDER'S FEES. Except as disclosed on Schedule 2.29, there is
------------- -------------
no investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of the Target which might be
entitled to any fee or commission from the Purchaser, the Target or any other
person upon consummation of the transactions contemplated by this Agreement.
2.30 ACCOUNTING MATTERS. To the best knowledge of the Target
------------------
Shareholders and the Target, after due inquiry and discussion with Horton, Lee,
Xxxxxxx et al, neither the Target nor any affiliate thereof has, through the
date of this Agreement, taken or agreed to take any action that (without giving
effect to this Agreement, the transactions contemplated hereby, or actions
relating thereto, or any action taken or agreed to be taken by the Purchaser)
would prevent the Purchaser from accounting for the business combination to be
effected by the Merger as a pooling of interests.
19
2.31 CONSENTS. Except as disclosed on Schedule 2.32 hereto, no
-------- -------------
consent or approval of or notice to any governmental agency or authority, or any
other person, is necessary in connection with or as a result of the execution
and delivery by Target of this Agreement, the performance by Target or its
obligations under this Agreement, or the continued operation of the Target's
business from and after the Effective Date.
2.32 SOLE AGREEMENT TO MERGE OR SELL. The Target and the Target
-------------------------------
Shareholders have not been or become a party to any merger or business
combination agreement, letter of intent, agreement of sale, or other agreement
obligating Target or any of its subsidiaries or Target Shareholders to sell or
authorize the sale or transfer of Target Shares or any of its subsidiaries, or
to allow Target or any of its subsidiaries to merge or consolidate with, or to
be acquired in any other manner by, any entity or person other than Purchaser.
ARTICLE 3
---------
Representations and Warranties of
---------------------------------
the Purchaser and the Agency
----------------------------
The Purchaser and the Agency, jointly and severally, represent and warrant
to the Target and the Target Shareholders as follows:
3.1 ORGANIZATION AND POWER.
----------------------
(a) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Alabama with all necessary
corporate power and authority to carry on its business as now being conducted
and to own, operate, utilize and lease the assets, properties and business now
owned, operated, utilized or leased by the Purchaser, and is duly qualified to
do business in all other jurisdictions where such qualification is required,
except where the failure to be so qualified will not result in the forfeiture of
a material right or the incurrence of a material penalty or in any other respect
would be materially adverse to the business and affairs of the Purchaser. The
Purchaser has delivered to the Target correct and complete copies of the
Certificate of Incorporation and the Bylaws of the Purchaser, each as amended to
the date hereof.
(b) The Agency is a corporation duly organized, validly existing and
in good standing under the laws of the State of Alabama. The Agency has
delivered to the Target correct and complete copies of the Certificate of
Incorporation and the Bylaws of the Agency, each as amended to the date hereof.
3.2 CAPITALIZATION.
--------------
(a) The authorized capital stock of the Purchaser consists of
10,000,000 shares of Class A Common Stock, with par value of $.001 per share
(the "Purchaser Shares"), of which 2,272,346 shares were validly issued and
outstanding, fully paid and non assessable, as of October 31, 1998. In
addition, as of October 31, 1998, 100,000 shares of the Purchaser Shares were
subject to issuance pursuant to presently outstanding options, 0 shares of the
Purchaser Shares were reserved for future options under presently existing stock
option plans, and 0 shares of the Purchaser Shares were reserved for issuance
under an employee stock purchase plan. There are also 10,000,000 shares of
Class B Common Stock, with a par value of $.001 per share, and 10,000,000 shares
of Preferred Stock, with a par value of $.001
20
per share, issued, none of which are outstanding. There are no other outstanding
options, rights or warrants to purchase or acquire, or securities convertible
into or exchangeable for, any shares of the Purchaser Shares; and there are no
contracts, commitments, agreements, understandings, arrangements or
restrictions, other than this Agreement, which require the Purchaser to issue,
sell or deliver any shares of Purchaser Shares. The shares of the Purchaser
Shares to be issued to the holders of the Target Shares pursuant to this
Agreement, when so issued, will be duly authorized, validly issued, fully paid,
and non assessable.
(b) The authorized capital stock of the Agency consists of 100 shares
of Common Stock, with par value of $10.00 per share, of which all shares are
validly issued, outstanding, and owned by First National-America's Bank, fully
paid and non assessable, as of the date hereof.
3.3 CORPORATE AUTHORIZATION. The Purchaser and the Agency have the
-----------------------
corporate power to enter into this Agreement and, subject to any necessary
shareholder approval, to carry out the transactions contemplated hereby. This
Agreement, the execution and delivery of which have been duly authorized by all
necessary corporate action (other than shareholder approval, if required) on the
part of the Purchaser and the Agency, and constitutes a valid and binding
obligation of the Purchaser and the Agency.
3.4 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
--------------------------
performance by the Purchaser and the Agency of this Agreement, and the
consummation of the Merger and other transactions contemplated thereby, do not
and will not require any consent, approval or action by or in respect of, or any
declaration, filing or registration with, any Governmental Authority, other than
routine filings with the Secretary of State of the State of Alabama necessary to
consummate the Merger and the applicable requirements of the Securities Act of
1933 (the "Securities Act"), the Securities Exchange Act of 1934 (the "Exchange
Act") and any applicable state securities and blue sky laws in connection with
the offer, sale and delivery of the Purchaser Shares to be issued in the Merger.
3.5 NON-CONTRAVENTION. Assuming compliance with the matters referred
-----------------
to in Section 3.4, the execution, delivery and performance by the Purchaser and
the Agency of this Agreement, and the consummation of the Merger and other
transactions contemplated by this Agreement by the Purchaser and the Agency does
not and will not (a) contravene or conflict with the Certificate of
Incorporation or Bylaws of the Purchaser or the Agency, (b) contravene or
conflict with or constitute a violation of any provision of any law, rule,
regulation, judgment, injunction, order or decree currently in effect and
binding upon or applicable to the Purchaser or the Agency; (c) conflict with,
result in a breach of, constitute a default or an event which, with notice or
lapse of time or both, would constitute a default under, result in the
acceleration of, or create in any party a right to accelerate, terminate,
modify, or cancel, any contract, note, bond, mortgage, indenture, license, lease
agreement or other instrument or obligation to which the Purchaser or the Agency
is a party or by which it or any of its assets or properties may be bound,
except where such conflicts, breaches, defaults, accelerations, modifications,
terminations, or cancellations are not material to the financial condition,
business and affairs of the Purchaser or the Agency; or (d) result in the
creation of any security interest or lien upon any of the Purchaser or the
Agency's assets, except where such security interests or liens are not material
to the financial condition, business and affairs of the Purchaser or the Agency.
3.6 REPORTS AND FINANCIAL STATEMENTS. The Purchaser has previously
--------------------------------
furnished to the Target true and correct copies of its (i) Registration
Statement on Form S-4, (ii) its prospectus dated July 31, 1998, and (iii) all
proxy statements and all other reports or registration statements filed by it
with
21
the SEC pursuant to the rules and regulations promulgated under the Exchange Act
since June 30, 1998, all in the form (including exhibits) so filed
(collectively, the "Reports"). As of their respective dates, the Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the audited financial statements and unaudited interim financial statements
included in the Reports present fairly, in all material respects, the financial
position and the results of operations and cash flows of the Purchaser at the
dates and for the periods indicated, in each case in conformity with generally
accepted accounting principles consistently applied through prior periods.
3.7 FINANCIAL STATEMENTS. The Purchaser has furnished the Target
--------------------
with true and complete copies of the unaudited consolidated balance sheet as of
September 30, 1998, and the unaudited statements of income, stockholder's equity
and changes in financial position for the nine months ended September 30, 1998
(the "Purchaser Interim Statements"). Such financial statements, including the
notes thereto, fairly present the consolidated financial condition and the
results of operations of the Purchaser at the dates and for the periods
indicated, in each case in conformity with generally accepted accounting
principles consistently applied.
3.8 LITIGATION. Except as disclosed in the Purchaser Interim
----------
Statements, there are no claims, actions, suits or other litigation or
proceedings or governmental investigations currently pending against the
Purchaser or the Agency which, if decided adversely to the Purchaser or the
Agency, could result in a material adverse effect on the Purchaser or the
Agency, nor is the Purchaser aware of any basis for any such claim, action, suit
or other proceeding.
3.9 COMPLIANCE WITH LAW AND OTHER REGULATIONS.
-----------------------------------------
(a) Neither the Purchaser nor the Agency is in violation of, and
since December 31, 1997, has not violated, any applicable provisions of law,
statute, ordinance, regulation, judgment, order, injunction, permit, license,
certificate or other authorization, or its governing instruments, which
violation, individually or in the aggregate, could have a material adverse
effect on the Purchaser or the Agency.
(b) Neither the Purchaser nor the Agency is currently subject to any
material fine, penalty, liability or disability as the result of a failure to
comply with any requirement of federal, state, local or foreign law or
regulation nor have the Purchaser or the Agency received any notice of such
noncompliance.
ARTICLE 4
---------
Covenants of the Target and Target Shareholders
-----------------------------------------------
The Target and Target Shareholders agree and covenant with the Purchaser
and the Agency as follows:
4.1 AFFIRMATIVE COVENANTS. From the date hereof through the
----------------------
Effective Date, the Target will take every action reasonably required of it to
satisfy the conditions to closing set forth in this Agreement and otherwise to
ensure the prompt and expedient consummation of the transaction contemplated
hereby, and will exert all reasonable efforts to cause the transaction to be
consummated,
22
provided in all instances that the representations and warranties of the
Purchaser in this Agreement are correct, that the covenants of the Purchaser and
the Agency in this Agreement are honored, and that the conditions to the
obligations of the Target set forth in this Agreement are not incapable of
satisfaction.
4.2 ACCESS AND INFORMATION. The Target shall afford to the Purchaser
----------------------
and to the Purchaser's accountants, counsel and other representatives reasonable
access during normal business hours and in a manner so as not to interfere with
the normal business operations of the Target throughout the period prior to the
Effective Date to all of its properties, books, contracts, commitments, records
(including, but not limited to, tax returns), and personnel, and, during such
period, the Target shall furnish promptly to the Purchaser (1) all written
communications to its directors or to its shareholders generally, (2) internal
monthly financial statements when and as available, and (3) all other
information concerning its business, properties, and personnel as the Purchaser
may reasonably request.
4.3 CONDUCT OF BUSINESS PENDING THE TRANSACTION. Prior to the
-------------------------------------------
consummation of the transaction or the termination of this Agreement pursuant to
its terms, the Target shall, and each of the officers and directors of the
Target shall cause the Target to, carry on its business only in the usual,
regular and ordinary course and in substantially the same manner as heretofore
conducted. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Date, unless the Purchaser
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed, and except as otherwise provided in or contemplated by this
Agreement:
(a) The Target shall use all reasonable efforts to preserve intact
its current business organizations and goodwill, keep available the services of
its current officers and employees, maintain good relationships with customers,
suppliers, distributors, employees, lenders, creditors, licensors, licensees and
others having business dealings or financial relationships with it, to the end
that its goodwill and ongoing businesses shall be unimpaired at the Effective
Date, and it shall immediately notify the Purchaser of any event or occurrence
or emergency material to, and not in the ordinary and usual course of, its
business;
(b) The Target shall continue properly and promptly to file when due
all federal, state, local, foreign, and other tax returns, reports, and
declarations required to be filed by it, and will pay, or make full and adequate
provision for the payment of, all taxes and governmental charges due from or
payable by it;
(c) The Target shall maintain in full force and effect insurance
coverage of a type and amount customary in its business, but not less than that
presently in effect;
(d) The Target shall not amend its Articles of Incorporation or
Bylaws;
(e) The Target shall not (i) declare, set aside, or pay any dividend
or other distribution on any of its capital stock, (ii) split, combine, or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire any shares of its
capital stock or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(f) The Target shall not issue, deliver, sell, pledge or otherwise
encumber any (i) shares of capital stock of the Target, (ii) other voting
securities of the Target, (iii) any other securities
23
convertible into such shares or voting securities, or (iv) any rights, warrants
or options to acquire any such shares, voting securities or convertible
securities;
(g) The Target shall not acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (ii) any assets that
individually or in the aggregate are material to the Target, except purchases of
inventory in the ordinary course of business consistent with past practice;
(h) The Target shall not make or agree to make any equipment leases
or any new capital expenditure or capital expenditures which individually is in
excess of $2,500 or in the aggregate are in excess of $10,000;
(i) The Target shall not sell, lease, mortgage, encumber, or
otherwise dispose of or grant any interest in any of its assets or properties
except sales, encumbrances, and other dispositions or grants in the ordinary
course of business and consistent with past practice, or liens for taxes not
yet due or liens or encumbrances that are not material in amount or effect and
do not impair the use of the property;
(j) The Target shall not incur any indebtedness, except for short
term borrowings incurred in the ordinary course of business consistent with past
practice;
(k) The Target shall not make any loans, advances or capital
contributions to, or investments in, any other person or entity;
(l) The Target shall not make any tax election that could reasonably
be expected to be binding on the Purchaser in the event the transactions
contemplated by this Agreement are consummated, or settle or compromise any tax
liability;
(m) The Target shall not pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
(i) liabilities reflected or reserved against in, or contemplated by, the most
recent financial statements (or the notes thereto) of the Target, or (ii)
liabilities incurred in the ordinary course of business consistent with past
practice since the date of such financial statements;
(n) The Target shall not modify, amend or terminate any material
contract or agreement to which it is a party, or waive, release or assign any
material rights or claims thereunder, except in the ordinary course of business;
(o) The Target shall not adopt, enter into, or amend any bonus,
profit-sharing, compensation, stock option, warrant, pension, retirement,
deferred compensation, employment, severance, termination, or other employee
benefit plan, agreement, trust fund, or arrangement for the benefit or welfare
of any officer, director or employee; or agree to any material (in relation to
historical compensation) increase in the compensation payable or to become
payable to, or any increase in the contractual term of employment of, any
officer, director, or employee except, with respect to employees who are not
officers or directors, in the ordinary course of business in accordance with
past practice;
(p) The Target shall not take any action that (without giving effect
to any action taken or agreed to be taken by the Purchaser under this Agreement)
would prevent the Purchaser from accounting
24
for the business combination to be effected by the Merger as a pooling of
interests or from treating the Merger as a "reorganization" under Section 368(a)
of the Code;
(q) The Target shall not knowingly violate any laws or regulations
applicable to it and its operations; and
(r) The Target shall not enter into any agreement, commitment, or
understanding, whether in writing or otherwise, with respect to any of the
matters referred to in subparagraphs (d) through (q) above.
4.4 CORPORATE AUTHORIZATION. The Target will use its best efforts to
-----------------------
obtain any necessary corporate authorization to consummate the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing;
(a) Board of Directors. The Board of Directors of the Target, having
------------------
previously determined that this Agreement and the transactions contemplated
hereby, including the Merger, are fair to and in the best interest of the
shareholders of the Target (as warranted in Section 2.3 of this Agreement), (i)
have unanimously approved this Agreement and the transactions contemplated
hereby, including the Merger, and (ii) will unanimously recommend approval and
adoption of this Agreement and the Merger by the shareholders of the Target.
(b) Stockholders' Meeting. The Board of Directors of the Target will
---------------------
call a special meeting of its stockholders (the "Special Meeting") as soon as
reasonably practicable in order that the stockholders may consider and vote upon
the adoption of this Agreement and the approval of the Merger, in accordance
with the Alabama Business Corporation Act.
4.5 POOLING ACCOUNTING. The Target and the Target Shareholders agree
------------------
(i) not to take or permit to be taken any action that would adversely affect the
ability of the Purchaser to treat the Merger as a pooling of interests, and (ii)
to take or cause to be taken such action as may be reasonably required to negate
the impact of any past actions which would adversely affect the ability of the
Purchaser to treat the Merger as a pooling of interests in accordance with
generally accepted accounting principles consistently applied and all published
rules, regulations and policies of the SEC.
4.6 EXCLUSIVITY. The Target shall not, directly or indirectly,
-----------
through any officer, director, employee, representative or agent thereof or any
of their respective affiliates, solicit or encourage (including by way of
furnishing non-public information) or take other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to an Acquisition Proposal (as defined below) from any person,
or engage in any discussions or negotiations relating thereto or in furtherance
thereof or accept any Acquisition Proposal. For the purposes of this Agreement,
"Acquisition Proposal" means inquiries or proposals regarding (i) any merger,
consolidation, share exchange or sale of substantial assets or similar
transactions involving the Target, (ii) sale of 10% or more of the outstanding
shares of capital stock of the Target, or (ii) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. The Target shall immediately cease and cause to
be terminated any existing discussions or negotiations with any Parties
conducted prior to the date of this Agreement with respect to any of the
foregoing.
25
4.7 EXPENSES. In the event of the consummation of the transaction
--------
contemplated hereby, the Target shall pay all costs and expenses associated with
such consummation, including attorney's fees, incurred by it.
4.8 NOTIFICATION OF CERTAIN MATTERS. The Target shall give prompt
-------------------------------
notice to the Purchaser of:
(a) Any notice of, or other communication relating to, a default or
event which, with notice or lapse of time or both, would become a default under
any agreement, instrument or indenture material to the business, assets,
prospects, condition (financial or otherwise) or results of operation of Target;
(b) Any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the Merger;
(c) Any notice or other communication from any regulating authority
or self-regulatory organization in connection with or pertaining to the Merger;
(d) Any material adverse change in the business, assets, prospects,
condition (financial or otherwise) or results of operation of the Target or the
occurrence of any event which, so far as reasonably can be foreseen, would
result in any such change;
(e) Any claims, actions, proceedings or investigations commenced or,
to the best of its knowledge, threatened, involving or affecting Target or, to
the best of its knowledge, any employee, consultant, director or officer in his
or her capacity as such, of Target, which, if pending on the date hereof, would
have required to be disclosed in the Schedules hereto or which relates to
consummation of the Merger; or
(f) Any other event which would cause the Representations and
Warranties contained in ARTICLE 2 of this Agreement to become incorrect or
misleading as of such date.
ARTICLE 5
---------
Covenants of the Purchaser and the Agency
-----------------------------------------
The Purchaser and the Agency agree and covenant with the Target and the
Target Shareholders as follows:
5.1 AFFIRMATIVE COVENANTS. From the date hereof through the
---------------------
Effective Date, the Purchaser will take every action reasonably required of it
to satisfy the conditions to closing set forth in this Agreement and otherwise
to ensure the prompt and expedient consummation of the transaction contemplated
hereby, and will exert all reasonable efforts to cause the transaction to be
consummated, provided in all instances that the representations and warranties
of the Target in this Agreement are honored and that the conditions to the
obligations of the Purchaser and the Agency set forth in this Agreement are not
incapable of satisfaction and subject, at all times, to the right and ability of
the directors of the Purchaser to satisfy their fiduciary obligations.
26
5.2 COOPERATION. The Purchaser will cooperate with the Target and
-----------
its counsel, accountants and agents in every way in carrying out the
transactions contemplated by this Agreement and in delivering all documents and
instruments deemed reasonably necessary or useful by the Target.
5.3 CONFIDENTIAL INFORMATION. In the event of the termination of
------------------------
this Agreement, the Purchaser will, and will cause its representatives to,
deliver to the Target or destroy all documents, work papers and other material,
and all copies thereof, obtained by it or on its behalf from the Target as a
result of this Agreement or in connection herewith, whether so obtained before
or after the execution hereof, and will hold in confidence all confidential
information that has been designated as such by the Target in writing or by
appropriate and obvious notation (except for such information that is readily
ascertainable from public or published information or trade sources), and will
not use any such confidential information except in connection with the
transaction contemplated by this Agreement; provided, however, that one set of
such materials may be retained for the legal files of Purchaser.
5.4 EXPENSES. In the event of the consummation of the transaction
--------
contemplated hereby, the Purchaser shall pay all costs and expenses associated
with such consummation, including attorney's fees, incurred by it and the
Agency.
ARTICLE 6
---------
SECURITIES MATTERS
------------------
6.1 SECURITIES COMPLIANCE. As soon as practicable following the date
---------------------
hereof, the Purchaser shall use its reasonable best efforts to comply, prior to
the Effective Date, with all applicable requirements of federal securities laws
and "Blue Sky" or state securities laws in connection with the Merger and the
issuance of the Purchaser Shares.
6.2 PERMITTED TRANSFERS OF UNREGISTERED SECURITIES.
----------------------------------------------
(a) The Target Shareholders understand and agree that the Purchaser
Shares may be transferred by any holder thereof only pursuant to (i) a public
offering thereof registered under the Securities Act, (ii) Rule 144 of the
Securities and Exchange Commission (the "SEC") (or any similar rule in force at
the time of such transfer) if such rule is available, or (iii) any other legally
available exemption from registration.
(b) In connection with the transfer of the Purchaser Shares, or any
part thereof, the holder thereof shall deliver written notice to the Purchaser
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel that it is knowledgeable in securities law matters and
reasonably acceptable to the Purchaser, to the effect that such transfer may be
effected without registration under the Securities Act and under applicable
state securities laws. In addition, if the holder of the securities to be
transferred delivers to the Purchaser an opinion of counsel that no subsequent
transfer of such Purchaser Shares will require registration under the Securities
Act or under applicable state securities laws, the Purchaser shall promptly
deliver new certificates for such Purchaser Shares that do not bear the
restrictive legend set forth in Section 6.1(d) hereof. If the Purchaser is not
required to deliver new certificates for such Purchaser Shares not bearing such
legend, the holder thereof shall not transfer such Purchaser Shares until the
prospective transferee has confirmed to the Purchaser in writing his or its
agreement to be bound by the conditions contained in this Section 6.1.
27
(c) Any sale of the Purchaser Shares by the Target Shareholders shall
be conducted by or through any member of the National Association of Securities
Dealers, Inc. registered as a NASDAQ market maker in the Common Stock of the
Purchaser (a "NASDAQ Market Maker"). For purposes of this Section 6.1(c), a
"sale" shall include any transfer for value received, but shall not include a
transfer under will or pursuant to applicable laws of descent and distribution.
In the event of any sale of the Purchaser Shares by the Target Shareholders
conducted by or through any NASDAQ Market Maker, the Purchaser shall promptly
upon such sale deliver new certificates for such Purchaser Shares that do not
bear the restrictive legend set forth in Section 6.1(d) hereof.
(d) Restrictive Legends. The Purchaser Shares and any shares of
-------------------
capital stock received in respect thereof, whether by reason of a stock split or
share reclassification thereof, a stock dividend thereon or otherwise, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS.
(e) Current Public Information. The Purchaser shall use its best
--------------------------
efforts to file all reports required to be filed by it under the Securities
Exchange Act and the rules and regulations promulgated thereunder and shall take
such further action as any holder of the Purchaser Shares may reasonably
request, all to the extent required to enable any such holder to sell the
Purchaser Shares pursuant to Rule 144 under the Securities Act (as such rule may
be amended from time to time) or any similar rule or regulation then in force.
Upon written request, the Purchaser shall deliver to any holder of any the
Purchaser Shares a written statement as to whether the Purchaser is in
compliance with such requirements.
6.3 AFFILIATES/POOLING OF INTERESTS AND TAX MATTERS. Prior to the
-----------------------------------------------
Effective Date, the Target Shareholders shall deliver to the Purchaser a written
agreement substantially in the form attached as Exhibit 6.3 hereto (the
"Affiliate Letter"). Such affiliates shall not be able to sell, transfer or
otherwise reduce his/her interest in the Purchaser Shares or reduce his/her risk
relating thereto until after such time as the financial results covering at
least thirty days of the combined operations of the Purchaser and the Target
have been published, within the meaning of Section 201-01 of the SEC's
Codification of Financial Reporting Policies, except to the extent permitted by,
and in accordance with, Accounting Series Release 135 and Staff Accounting
Bulletins 65 and 76.
ARTICLE 7
--------
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
7.1 Conditions Precedent to Each Party's Obligations. The respective
------------------------------------------------
obligation of each party to effect the Merger is subject to the satisfaction on
or prior to the Effective Date of the following conditions each of which shall
not be waivable:
28
(a) Real Estate. The Agreement to Purchase Real Estate between
-----------
Agency and W-S Properties dated as of this same date shall not have been
terminated or shall not have expired.
(b) No Injunctions or Restraints. No statute, rule, regulation,
----------------------------
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued by
any court of competent jurisdiction or other Governmental Authority or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect, and no suit or other legal proceeding shall have been instituted
seeking any of the foregoing.
(c) Pooling. The Purchaser shall have received from Schauer, Taylor,
-------
Xxx & Vise, P.C., as independent auditors of the Purchaser on the Closing Date
letters dated as of the Closing Date, addressed to the Purchaser and in form and
substance reasonably acceptable to the Purchaser, stating that the business
combination to be effected by the Merger may be accounted for as a pooling of
interests by the Purchaser for purposes of its consolidated financial statements
under generally accepted accounting principles and applicable SEC rules and
regulations. No action shall have been taken by any Governmental Authority or
any statute, rule, regulation or order enacted, promulgated or issued by any
Governmental Authority, or any proposal made for any such action by any
Governmental Authority which is reasonably likely to be put into effect, that
would prevent the Purchaser from accounting for the business combination to be
effected by the Merger as a pooling of interests.
(d) Required Consents. Any required consents or approvals of any
-----------------
person to the Merger shall have been obtained and be in full force and effect,
except for those the failure of which to obtain will not have a material adverse
effect on the business, assets, prospects, condition (financial or otherwise) or
results of operations of the Surviving Corporation.
(e) Employment Agreement. The employment agreements attached as
--------------------
Exhibit 7.1 (e) shall be executed.
(f) Board Nominations. Xxx X. Xxxxxx shall have been nominated to
-----------------
become a member of the Board of Directors of First National-America's Bank, and
Xxxxxx X. Xxxxxxxxxx shall have been nominated to become a member of the Board
of Directors of Purchaser.
7.2 CONDITIONS PRECEDENT OF PURCHASER AND THE AGENCY. The
------------------------------------------------
obligations of the Purchaser and the Agency to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the following
conditions, unless Purchaser or the Agency shall waive such fulfillment:
(a) Representations and Warranties. Except for changes contemplated
------------------------------
by this Agreement and changes occurring in the ordinary course of business, the
representations, warranties and agreements made by the Target and Target
Shareholders herein shall be true in all material respects on and as of the
Effective Date with the same effect as though such representations and
warranties had been made or given on and as of the Effective Date.
(b) Performance of Obligations by Target. The Target shall have
------------------------------------
performed in all material respects the obligations undertaken by it herein and
required to be performed at or prior to the Effective Date.
(c) Corporate Authorization. The Target's Board of Directors shall
-----------------------
have called a Special Meeting of the shareholders of the Target and recommended
to them the approval and adoption of this
29
Agreement and the Merger, the shareholders of the Target shall have approved the
consummation of the transactions contemplated by this Agreement with no
shareholders dissenting to the Merger, and the Target's Board of Directors shall
have directed the appropriate officers to execute any document or take any
action necessary to give effect to the Merger, all in accordance with the
provisions of the Alabama Business Corporation Act, and the Purchaser shall have
received copies of the resolutions duly adopted by the Board of Directors and
the minutes of the Special Meeting, certified by the Secretary of the Target in
the form attached as Exhibit 7.2(c), evidencing the taking of such actions.
--------------
(d) Incumbency. The signatories to this Agreement shall retain their
----------
respective positions and offices until the Effective Date, and they shall, at
the Effective Date, possess all necessary corporate authority to execute and
deliver any documents necessary to give effect to the transactions contemplated
by this Agreement under the provisions of the Alabama Business Corporation Act
or any other any applicable law.
(e) Opinions. The Purchaser shall have received an opinion dated the
--------
Effective Date of Xxxxxxx and Xxxxxx, counsel to the Target, confirming the
representations and warranties made by the Target at Sections 2.1 through 2.5,
2.19, 2.31 and 7.2(c) of this Agreement stating such counsel's opinion as to
such other matters as Purchaser may reasonably request, and in substantially the
same form as attached hereto as Exhibit 7.2(e), subject to customary limitations
--------------
reasonably acceptable to counsel for the Purchaser. In giving such opinion,
such counsel may rely as to factual matters upon certificates of officers of the
Target, certificates of public officials and any opinion of other attorneys for
the Target.
(f) No Material Adverse Change. There shall not have occurred after
--------------------------
the date hereof any material adverse change in the business, assets, prospects,
condition (financial or otherwise) or results of operations of the Target.
(g) Pre-Merger Review. Purchaser together with such other employees,
-----------------
agents, accountants, advisors and attorneys of Purchaser as Purchaser shall deem
necessary, shall have been allowed access to the books and records of Target and
its subsidiaries for the purpose of conducting a pre-merger review and due
diligence examination. Such pre-merger review shall be conducted within thirty
(30) days of the execution of this Agreement, and any adjustments to the
Consideration requested to be made by Purchaser shall be made within ten (10)
days after the thirty (30) day period has expired. If such adjustments
requested by Purchaser are not accepted by the Target within such period,
Purchaser shall then have ten (10) days to terminate this Agreement. If
Purchaser does not terminate the Agreement within this period, this condition
shall be deemed waived by Purchaser.
7.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET. The
-------------------------------------------------
obligation of the Target to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Date of the following conditions,
unless the Target shall waive such fulfillment:
(a) Representations and Warranties. Except for changes contemplated
------------------------------
by this Agreement and changes occurring in the ordinary course of business, the
representations, warranties and agreements made by the Purchaser and the Agency
herein shall be true in all material respects on and as of the Effective Date
with the same effect as though such representations and warranties had been made
or given on and as of the Effective Date.
30
(b) Performance of Obligations. The Purchaser and the Agency shall
--------------------------
have performed in all material respects the obligations undertaken by them
herein and required to be performed at or prior to the Effective Date.
(c) Corporate Authorization. The Board of Directors of the Purchaser
-----------------------
and the Agency shall have duly adopted resolutions approving the Merger and
directing the appropriate officers to execute any document necessary to give
effect thereto, all in accordance with the provisions of the Alabama Business
Corporation Act, and the Target shall have received copies of such resolutions
certified by the Secretary of the Purchaser in the form attached as Exhibit
-------
7.3(c).
------
(d) Incumbency. The signatories to this Agreement shall retain their
----------
respective positions and offices until the Effective Date, and they shall, at
the Effective Date, possess all necessary corporate authority to execute and
deliver any documents necessary to give effect to the transactions contemplated
by this Agreement under the provisions of the Alabama Business Corporation Act
or any other any applicable law.
(e) Opinion. The Target shall have received an opinion dated the
-------
Effective Date of Baker, Donelson, Bearman & Xxxxxxxx, a Professional
Corporation, counsel to the Purchaser, confirming the representations and
warranties made by the Purchaser and the Agency at Sections 3.1 through 3.5 of
this Agreement, and in substantially the same form as attached hereto as Exhibit
-------
7.3(e), subject to customary limitations reasonably acceptable to counsel for
------
the Purchaser. In giving such opinion, such counsel may rely as to factual
matters upon certificates of officers of the Purchaser, certificates of public
officials and any opinion of other attorneys for the Purchaser.
ARTICLE 8
--------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION BY THE TARGET AND TARGET SHAREHOLDERS.
-----------------------------------------------------
(a) Indemnity. From and after the Effective Date, the Target and the
---------
Target Shareholders shall jointly and severally defend, indemnify and hold
harmless the Purchaser, the Surviving Corporation and the Agency and their
directors, officers, employees and agents, and all persons acting on their
behalf, from, and reimburse the aforesaid Parties for, any and all Purchaser's
Damages (as defined in Section 8.1(b)), but only to the extent set forth in
Section 8.1(c).
(b) Purchaser's Damages. The term "Purchaser's Damages" shall
-------------------
include all losses, costs, expenses (including reasonable attorneys' fees and
experts' fees and expenses and other costs and expenses incident to any suit,
action, investigation, claim or proceeding), fees, liabilities and damages
sustained by the party entitled to indemnity prior to any reimbursement
therefor:
(i) arising from any breach of a representation or warranty of
the Target or Target Shareholders contained in this Agreement (except in each
case to the extent corrected or disclosed in writing to Purchaser prior to the
Effective Date);
(ii) resulting from a default in the performance of any of the
covenants or obligations that the Target or the Target Shareholders are required
to perform under this Agreement,
31
except to the extent corrected or performed by the Target or the Target
Shareholders prior to the Effective Date; or
(iii) resulting from any foreign, federal, state or local
income, franchise or other tax payable with respect to the Target's business for
the periods ending on or prior to the Effective Date; provided, however, that
the term "Purchaser's Damages" shall not include damages claimed for any
particular matter which does not exceed $10,000.
8.2 INDEMNIFICATION BY PURCHASER.
----------------------------
(a) Indemnity. From and after the Effective Date, Purchaser shall
---------
indemnify and hold harmless the Target and Target Shareholders and all persons
acting on their behalf from and reimburse the aforesaid Parties for any and all
the Target's Damages, as defined in Section 8.2(b).
(b) Target's Damages. The term "Targets' Damages" shall include all
----------------
losses, costs, expenses (including reasonable attorneys' and experts' fees and
expenses and other costs and expenses incident to any suit, action,
investigation, claim or proceeding), fees, liabilities and damages sustained by
the party entitled to indemnity prior to any reimbursement therefor:
(iv) arising from any breach of a representation or warranty of
the Purchaser or the Agency contained in or made pursuant to this Agreement
(except in each case to the extent corrected or disclosed in writing to the
Target prior to the Effective Date);
(v) resulting from a default in the performance of any of the
covenants or obligations that the Purchaser or the Agency is required to perform
under this Agreement (except to the extent corrected or performed by the
Purchaser or the Agency prior to the Effective Date);
(vi) resulting from or arising in connection with any liability
expressly assumed by the Purchaser or the Agency as contemplated by this
Agreement;
(vii) resulting from or arising in connection with the
Purchaser's or the Surviving Corporation's management, control, ownership or
operation of the assets or business of the Surviving Corporation after the
Effective Date;
(viii) personal injury or property damage resulting from or
arising in connection with any activities of the Purchaser or the Agency, or
their employee's or agents, on the Target's premises prior to the Effective Date
or on the Surviving Corporation's premises after the Effective Date.
8.3 PROCEDURE FOR INDEMNIFICATION Claims.
------------------------------------
(a) If the Target or Target Shareholders or the Purchaser wish to
assert a claim against the other party under this ARTICLE 8, such party shall
give written notice of such claim to the other party, specifying in reasonable
detail the nature of the Purchaser's Damages or the Target's Damages for which
indemnification is claimed, the Section or Sections of this Agreement upon which
such claim is based and the amount claimed in respect thereof ("Notice of
Claim"). Any such Notice of Claim must be submitted prior to the third
anniversary of the Effective Date.
32
(b) The Target and Target Shareholders and the Purchaser shall
consult and use their best efforts to cooperate in determining whether a Notice
of Claim is entitled to indemnity pursuant to this ARTICLE 8. When the Parties
determine that a Notice of Claim is entitled to indemnity, by agreement or
otherwise, the indemnifying party shall pay to the indemnified party the amount
of the claim by certified check or other means which is acceptable to the
indemnified party.
(c) If any legal proceeding by a third party shall be instituted, or
any claim or demand made, against any indemnified party in respect of which an
indemnifying party may be liable hereunder, the indemnified party shall give
prompt written notice thereof to the indemnifying party. The indemnifying
party, at its expense, and, with the consent of the indemnified party, may
participate in any such legal proceeding and the negotiations and settlement of
any such claim or demand. The indemnifying party shall have the absolute right,
in its sole discretion and without the consent of the indemnified party, to
settle any such legal proceeding, claim or demand so long as all obligations and
liabilities of the indemnified party are extinguished thereby and the interests
of the indemnified party are not otherwise prejudiced.
(d) If the amount of Purchaser's Damages or the Target's Damages paid
shall, at any time subsequent to such payment, be reduced by any recovery,
settlement or otherwise, the amount of such reduction, less any expense incurred
by the party receiving such recovery in connection therewith, shall be promptly
repaid to the indemnifying party.
ARTICLE 9
---------
Miscellaneous
-------------
9.1 TERMINATION. This Agreement may be terminated and the Merger
-----------
abandoned prior to the Effective Date:
(a) by mutual written consent of the Target and the Purchaser at any
time;
(b) by the Target at any time after December 31, 1998, provided that
the Target is not in any material breach of any covenant, agreement,
representation or warranty made by it in this Agreement;
(c) by the Purchaser at any time after December 31, 1998, provided
that the Purchaser is not in any material breach of any covenant, agreement,
representation or warranty made by it in this Agreement; or
(d) by either the Purchaser or Target if there are any material
inaccuracies, misrepresentations or breaches of the other's representations and
warranties hereunder, or if the other has breached or failed to perform any of
its material covenants or agreements contained herein.
In the event of termination, each of the Parties shall be responsible
for its own expenses and neither Purchaser nor Target shall have any further
liability to the other hereunder, except that (a) Section 5.4 shall survive such
termination; and (b) if such termination results from willful breach, the non-
breaching party may pursue such remedies as may be legally available to it.
33
9.2 AMENDMENT. The Parties may, by mutual agreement of the
---------
respective Boards of Directors of Target and Purchaser, amend, modify or
supplement this Agreement or any Schedule or Exhibit to the Agreement in such
manner as may be agreed upon by them in writing, at any time before or after
approval of the Merger and the transactions contemplated thereby by the
shareholders of Purchaser and Target, provided that no such amendment,
modification or supplement shall be made which reduces the Consideration or
changes the tax consequences without the further approval of the shareholders of
the Target. This Agreement may be amended at any time and, as amended, restated
by the President of the Purchaser and the Target, without the necessity for
approval by their respective Boards of Directors or shareholders, to correct
typographical errors or to change erroneous references or cross-references, or
to make such other changes which are immaterial to the substance of the
transactions contemplated hereby. This Agreement may not be otherwise amended
except by an instrument in writing signed on behalf of all the Parties hereto.
Otherwise, this Agreement may not be amended, modified or supplemented in whole
or in part except by an instrument in writing executed by each party to this
Agreement.
9.3 ASSIGNMENT. The Parties agree that neither this Agreement nor
----------
any rights created hereby shall be assignable by any party.
9.4 DESCRIPTIVE HEADINGS. The descriptive headings are for
--------------------
convenience of reference only and shall not control or affect the meaning or
construction of any provision of this Agreement.
9.5 NOTICES. All notices or other communications that are required
-------
or permitted hereunder shall be in writing and sufficient if delivered
personally, by facsimile or other electronic transmission or sent by registered
or certified mail, postage prepaid, addressed as follows:
If to the Target and/or Target Shareholders:
Xxxxxx-Xxxxxxxxxx, Inc.
Xxx X. Xxxxxx or
Xxxxxx X. Xxxxxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxxx, Esq.
Xxxxxxx and Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Internet: XXXXX@xxxxxxxxxx.xxx
If to Purchaser:
Frontier National Corporation
Xxxxx X. Xxxxx, Xx.
00 Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
34
With a copy to:
Xxxxxx X. Xxxxx
Baker, Donelson, Bearman & Xxxxxxxx
0000 Xxxxxxxxx Xxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
9.6 GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Alabama applicable to
contracts made and to be performed entirely within such State.
9.7 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
--------------------
each of the Purchaser and the Target shall not, and shall cause their respective
officers, directors, employees and agents not to, issue or cause the publication
of any press release or other announcement or statement with respect to this
Agreement or the Merger without the consent of the other, which shall not be
unreasonably withheld or delayed, except where such release, announcement or
statement is required by applicable law or any listing agreement with any
national securities exchange (including NASDAQ) on which its securities are
listed or traded, in which case Purchaser or Target, as the case may be, will
deliver simultaneously a copy of such release, announcement or statement to the
other.
9.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
------------------------------------------
and warranties made by any party to this Agreement shall be deemed made for the
purpose of inducing the other party to enter into this Agreement. The
representations and warranties contained in this Agreement shall be deemed to be
made on the date hereof and on the Effective Date and shall survive the Closing
Date for a period of three (3) years from the Closing Date, except as to tax
matters which shall survive for the period of time necessary for state and
federal statutes of limitations to run on the filing of the state and federal
tax returns of Target for the year ended June 30, 1998. All of the Target's
Schedules hereto will be updated as necessary to make them true and correct as
of the Effective Date.
9.9 EXTENSIONS AND WAIVERS. At any time prior to the Effective Date,
----------------------
the Parties hereto, by action taken by the Boards of Directors of the Purchaser
and the Target or their duly authorized officers, may: (i) extend the time for
the performance of any of the obligations or other acts of the other Parties
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other Parties contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the covenants or agreements of the other
Parties or with any of the conditions to the obligations of the waiving party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. No such waiver or extension shall imply any
further waiver or extension.
9.10 COUNTERPARTS. For the convenience of the Parties and to
------------
facilitate the filing of this Agreement with regulatory authorities, any number
of counterparts hereof may be executed, and each such counterpart shall be
deemed to be an original instrument, but all such counterparts together shall
constitute but one agreement.
35
9.11 ENTIRE AGREEMENT. This Agreement: (i) constitutes the entire
----------------
Agreement between the Parties hereto and supersedes all other prior agreements
and undertakings, both written and oral, of the Parties, or any of them, with
respect to the subject matter hereof; and (ii) is not intended to confer upon
any other person or entity any rights or remedies hereunder.
IN WITNESS WHEREOF, the undersigned officers of each of the Parties to this
Agreement, pursuant to authority duly given by their respective Boards of
Directors, have caused this Agreement to be duly executed.
FRONTIER NATIONAL CORPORATION
By: /s/ Xxxxx X. Xxxxx, Xx.
-------------------------------
Title: Chairman & CEO
----------------------------
THE FRONTIER AGENCY
By: /s/ Xxxxx X. Xxxxx, Xx.
-------------------------------
Title: President
----------------------------
XXXXXX-XXXXXXXXXX, INC.
By: /s/ Xxx X. Xxxxxx
-------------------------------
Title: President
----------------------------
/s/ Xxxxxxxx Xxxxx X. Xxxxxx
----------------------------------
XXXXXXXX XXXXX X. XXXXXX
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
XXXXX X. XXXXXXXXXX
/s/ Xxx X. Xxxxxx
----------------------------------
XXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
XXXXXX X. XXXXXXXXXX
36
