UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File number 1-9487
ATLANTIS PLASTICS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 06-1088270
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including Area Code) (305) 858-2200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
[CAPTION]
<TABLE>
<S> <C>
Class Shares Outstanding at June 30, 1995
A, $.10 par value 4,192,823
B, $.10 par value 2,899,977
</TABLE>
ATLANTIS PLASTICS, INC.
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Consolidated Income Statements
(Unaudited) for the three and six
months ended June 30, 1995 and
1994 . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets
(Unaudited) as of June 30, 1995 and
December 31, 1994. . . . . . . . . . . . .
Consolidated Statements of Cash Flows
(Unaudited) for the six months ended
June 30, 1995 and 1994 . . . . . . . . . .
Notes to Unaudited Consolidated
Financial Statements . . . . . . . . . . .
Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . .
Part II. Other Information. . . . . . . . . . . . .
Item 1 - Legal Proceedings . . . . . . . .
Item 4 - Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . .
Item 6 - Exhibits and Reports on Form 8-K
Signatures . . . . . . . . . . . . . . . . . . . . .
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Net sales $68,344,053 $63,542,759 $146,201,406 $117,670,726
Cost of sales 60,552,442 50,954,544 124,239,760 94,349,194
Gross profit 7,791,611 12,588,215 21,961,646 23,321,532
Selling, general
and administrative
expenses 6,456,596 6,800,822 15,154,449 12,968,780
Operating income 1,335,015 5,787,393 6,807,197 10,352,752
Interest expense (3,835,609) (3,315,081) (7,500,396) (6,372,000)
Interest income 38,640 27,438 98,863 58,038
Income (loss) from
continuing
operations
before income
taxes (2,461,954) 2,499,750 (594,336) 4,038,790
Income tax
(provision) benefit 735,971 (1,143,488) (188,822) (1,885,901)
Income (loss)
from continuing
operations (1,725,983) 1,356,262 (783,158) 2,152,889
Income (loss) from
discontinued
operations, less
applicable taxes (614,928) 133,316 (606,842) 121,438
Net income
(loss) (2,340,911) 1,489,578 (1,390,000) 2,274,327
Preferred stock
dividends (36,250) (36,250) (72,500) (72,500)
Income (loss)
applicable to common
shares and
equivalents $ (2,377,161) $ 1,453,328 $ (1,462,500) $ 2,201,827
INCOME (LOSS)
PER COMMON SHARE:
Continuing
operations ($0.23) $0.18 ($0.11) $0.28
Discontinued
operations (0.08) 0.01 (0.08) 0.01
Net income (loss) ($0.31) $0.19 ($0.19) $0.29
Weighted average
shares
outstanding 7,622,504 7,509,898 7,621,192 7,526,038
DIVIDENDS DECLARED
PER COMMON SHARE $0.025 $0.025 $0.05 $0.05
See accompanying notes to consolidated financial statements (unaudited).
</TABLE>
[CAPTION]
<TABLE>
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<S> <C> <C>
June 30, December 31,
1995 1994
ASSETS
Cash and equivalents $2,236,036 $1,432,567
Accounts receivable,net 32,943,269 36,584,996
Inventories 19,878,591 22,854,778
Other current assets 5,198,651 6,353,248
Current assets 60,256,547 67,225,589
Property and
equipment, net 64,140,867 61,255,540
Investment in WinsLoew
Furniture, Inc. stock 4,570,253 5,096,722
Net assets of
discontinued
operations 9,060,679 9,378,506
Goodwill, net of
amortization 62,531,289 63,466,653
Other assets 4,855,382 5,098,953
$205,415,017 $211,521,963
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable
and accrued expenses $22,518,614 $32,398,197
Current portion of
long-term debt 3,295,863 1,859,821
Current liabilities 25,814,477 34,258,018
Long-term debt, net
of current portion 131,840,097 127,374,389
Deferred income taxes 7,158,564 7,841,678
Other liabilities 1,505,390 1,625,530
Total liabilities 166,318,528 171,099,615
Commitments and contingencies
Shareholders' equity:
Series A convertible
preferred stock, $1.00
par value, 20,000 shares
authorized, issued and
outstanding in
1995 and 1994 2,000,000 2,000,000
Class A common stock,
$.10 par value,
20,000,000 shares
authorized
4,192,823 and
4,082,437 shares
issued and
outstanding in
1995 and 1994 419,282 408,244
Class B common stock,
$.10 par value,
7,000,000 shares
authorized 2,899,977
and 3,002,363 shares
issued and outstanding
in 1995 and 1994 289,998 300,236
Additional paid-in
capital 6,827,531 6,781,206
Unrealized holding
gains (losses),
net of tax 161,973 (284,219)
Retained earnings 29,397,705 31,216,881
Total shareholders'
equity 39,096,489 40,422,348
205,415,017 $211,521,963
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
Six Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($1,390,000) $2,274,327
Adjustments to reconcile net income to --
net cash provided by (used in)
operating activities:
Depreciation 4,504,135 3,748,137
Amortization of goodwill. 935,364 845,977
Loan fee and other amortization. 263,802 250,422
Changes in assets and liabilities,
net of acquisition of assets of
business in 1994:
Accounts receivable. 3,641,727 (5,005,992)
Inventories 2,976,187 (1,819,394)
Other current assets 1,154,597 52,193
Accounts payable and
accrued expenses. (9,879,583) (2,965,075)
Deferred income taxes (683,114) 136,943
Other liabilities (120,140) (113,619)
Other, net 158,768 70,771
Effects of discontinued operations. 1,111,489 113,668
Total adjustments. 4,063,232 (4,685,969)
Net cash provided by (used in)
operating activities 2,673,232 (2,411,642)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,389,462) (7,908,640)
Payments for acquisitions of
businesses 0 (12,411,835)
Net cash used in investing
activities (7,389,462) (20,320,475)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving
credit agreements 17,757,521 27,754,441
Repayments under revolving
credit agreements (26,733,545) (7,496,294)
Payments on long-term debt. (540,423) (100,518)
Proceeds from issuance of
long-term debt. 15,418,197 2,300,000
Dividends on preferred
and common stock. (429,176) (429,176)
Purchases of treasury stock 0 (728,728)
Proceeds from exercise of stock options 47,125 242,066
Net cash provided by
financing activities 5,519,699 21,541,791
Net increase (decrease) in cash
and equivalents 803,469 (1,190,326)
Cash and equivalents at beginning
of period 1,432,567 2,170,060
Cash and equivalents at end of period $2,236,036 $979,734
See accompanying notes to consolidated financial statements (unaudited).
(continued)
<S> <C>
Supplemental disclosures of cash flow information -
continuing operations:
Six Months Ended
June 30,
1995 1994
Cash paid during the period for:
Interest $7,109,647 $6,110,430
Income taxes. $1,276,645 $2,384,970
During 1994 the Company purchased certain assets and assumed certain
liabilities of Advanced Plastics, Inc. for $12,411,835. Assets acquired,
liabilities assumed and consideration paid for this acquisition
was as follows:
Fair value of assets acquired $13,095,629
Liabilities assumed. (683,794)
$12,411,83
See accompanying notes to consolidated financial statements (unaudited).
</TABLE>
<PAGE>
ATLANTIS PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements
of Atlantis Plastics, Inc. ("Atlantis" or the "Company"),
which are for interim periods, do not include all disclosures
provided in the annual consolidated financial statements.
These unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements
and the footnotes thereto contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 as
filed with the Securities and Exchange Commission. The
December 31, 1994 balance sheet, included herein, was derived
from audited financial statements, but does not include all
disclosures required by generally accepted accounting
principles.
Atlantis Plastic Films currently accounts for approximately
two-thirds of the Company's net sales and consists of: (i)
stretch films (multi-layer plastic films that are used
principally to stretchwrap pallets of materials for shipping
or storage), and (ii) custom film products (high-grade
laminating films, embossed films and specialty film products
targeted primarily to industrial and agricultural markets).
Atlantis Molded Plastics currently accounts for approximately
one-third of the Company's net sales and consists of three
principal technologies, serving a wide variety of specific
market segments: (i) injection molded thermoplastic parts that
are sold primarily to original equipment manufacturers and
used in major household appliances, agricultural and
automotive products, (ii) a variety of standard and custom
extruded parts (profile extrusion) that are incorporated into
a broad range of consumer and commercial products, including
plastic moldings, trims, channels, seals and gaskets that are
used in recreational vehicles, doors, residential windows,
office furniture and retail store fixtures, and (iii) blow
molded milk, juice, water and industrial containers in a
variety of shapes and sizes.
The accounts of wholly owned Western Pioneer Insurance Company
("Western Pioneer") have been presented as a discontinued
operation in the accompanying financial statements (see Note
6).
All material intercompany balances and transactions have been
eliminated. Certain amounts included in prior period
financial statements have been reclassified to conform with
the current year presentation.
2. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(which are of a normal recurring nature) necessary for a fair
presentation of the financial statements. The results of
operations for the three and six months ended June 30, 1995
are not necessarily indicative of the results to be expected
for the full year.
3. Net income (loss) per common share was computed by dividing
net income (loss), after deducting dividends applicable to
preferred stock, by the weighted average number of shares and
share equivalents outstanding during the period. Fully diluted
net income (loss) per common share is substantially equivalent
to primary net income per common share.
4. During May 1994, the Company purchased substantially all of
the assets (excluding cash) and assumed all of the liabilities
(excluding interest bearing indebtedness and amounts due to
the seller) of Advanced Plastics, Inc. ("Advanced"). The
acquisition was accounted for using the purchase method, and
accordingly, the results of operations of Advanced have been
included in the consolidated income statements since the date
of the acquisition. If the acquisition of Advanced had
occurred on January 1, 1994, the Company's pro forma income
from continuing operations for the first six months of 1994
would have been $2.3 million, or $.30 per share.
5. The following table summarizes the cost and approximate fair
value of the Company's investments, which are classified as
available-for-sale, at June 30, 1995:
[CAPTION]
<TABLE>
<S> <C> <C>
Unrealized
Cost Gains Losses
WinsLoew Stock . . . . . $ 4,506,557 $ 63,696 $ --
Western Pioneer
Investment
Portfolio:
State, municipal and
political subdivision
bonds . . . . . . . . 20,992,181 177,031 --
Preferred stock . . . 1,964,063 4,687 --
$27,462,801 $245,414 $ --
(continued)
<S> <C>
Fair Value
WinsLoew Stock . . . . . $ 4,570,253
Western Pioneer
Investment Portfolio:
State, municipal and
political subdivision
bonds . . . . . . . . 21,169,212
Preferred stock . . . 1,968,750
$27,708,215
</TABLE>
6. The operations of Western Pioneer, the Company's California
property-casualty insurance subsidiary, have been presented as
a discontinued operation in the accompanying financial
statements.
During May 1995, the Company announced that it had signed a
definitive agreement for the sale of Western Pioneer to a
Massachusetts-based property and casualty insurance holding
company. The transaction is expected to close by September 30,
1995. The Company believes that the ultimate sale proceeds
will equal or exceed Western Pioneer's net assets.
The following table summarizes Western Pioneer's operating
results for the three and six month periods ended June 30,
1995 and 1994:
[CAPTION]
<TABLE>
<S> <C>
Three Months
Ended June 30,
1995 1994
REVENUES:
Insurance premiums
earned . . . . . . . . $6,425,000 $5,348,000
Interest, dividends
and other revenues . . 348,000 318,000
6,773,000 5,666,000
EXPENSES:
Losses and loss
adjustments. . . . . . 5,901,000 3,952,000
Selling, general and
administrative . . . . 1,956,000 1,548,000
Operating income
(loss) . . . . . . . (1,084,000) 166,000
Gain on sales of
marketable securities 19,000 0
Loss on demolition of
building . . . . . . . 0 (151,000)
Interest expense . . . . (1,000) (3,000)
Income tax (provision)
benefit. . . . . . . . 451,000 121,000
Net income (loss). . . . $ (615,000) $ 133,000
(continued)
<S> <C>
Six Months
Ended June 30,
1995 1994
REVENUES:
Insurance premiums
earned . . . . . . . . $12,303,000 $10,350,000
Interest, dividends
and other revenues . . 689,000 616,000
12,992,000 10,966,000
EXPENSES:
Losses and loss
adjustments. . . . . . 10,504,000 7,582,000
Selling, general and
administrative . . . . 3,677,000 3,180,000
Operating income
(loss). . . . . . . . (1,189,000) 204,000
Gain on sales of
marketable securities. 19,000 0
Loss on demolition of
building . . . . . . . 0 (151,000)
Interest expense . . . . (2,000) (7,000)
Income tax (provision)
benefit. . . . . . . . 565,000 75,000
Net income (loss). . . $(607,000) $121,000
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's continuing operations consist of two major
business segments producing a wide variety of polyethylene stretch
and custom films ("Atlantis Plastic Films") and molded plastic
products ("Atlantis Molded Plastics").
The operations of Western Pioneer, the Company's California
property-casualty insurance subsidiary, have been presented as a
discontinued operation in the accompanying financial statements.
See Note 6 for certain information regarding Western Pioneer.
CONTINUING OPERATIONS
Sales, gross profit and operating income for the second
quarter and year-to-date periods ended June 30, 1995 and 1994 were
as follows (in thousands):
[CAPTION]
<TABLE>
<S> <C>
Three Months Ended
June 30,
1995 1994
% of % of
SALES: Amount Total Amount Total
Atlantis Plastic
Films $45,739 67% $41,815 66%
Atlantis Molded
Plastics 22,605 33% 21,728 34%
TOTAL $68,344 100% $63,543 100%
GROSS PROFIT:
% of % of
Sales Sales
Atlantis Plastic
Films $6,165 13% $ 8,706 21%
Atlantis Molded
Plastics 1,627 7% 3,882 18%
TOTAL $ 7,792 11% $12,588 20%
OPERATING INCOME:
Atlantis Plastic
Films $1,060 2% $3,358 8%
Atlantis Molded
Plastics 275 1% 2,429 11%
TOTAL $1,335 2% $5,787 9%
(continued)
<S> <C>
Six Months Ended
June 30,
1995 1994
% of % of
SALES: Amount Total Amount Total
Atlantis Plastic
Films $100,815 69% $77,801 66%
Atlantis Molded
Plastics 45,386 31% 39,870 34%
TOTAL $146,201 100% $117,671 100%
GROSS PROFIT:
% of % of
Sales Sales
Atlantis Plastic
Films $17,028 17% $16,237 21%
Atlantis Molded
Plastics 4,934 11% 7,085 18%
TOTAL $21,962 15% $23,322 20%
OPERATING INCOME:
Atlantis Plastic
Films $5,515 5% $6,055 8%
Atlantis Molded
Plastics 1,292 3% 4,298 11%
TOTAL $6,807 5% $10,353 9%
</TABLE>
Sales
First quarter 1995 sales of $77.9 million were 44% above first
quarter 1994 sales, primarily due to higher film selling prices
during 1995 resulting from passing through to customers increases
in plastic resin prices (the major raw material component of the
Company's products) during 1994 and early 1995, and increased
sales volume within the film operating units. During the second
quarter of 1995, demand for film softened considerably, resulting
in second quarter sales of $68.3 million, 8% ahead of last year's
second quarter, but 12% below the first quarter of 1995.
During the last nine months of 1994, plastic resin prices
increased by approximately 75%, causing product demand to rise
beyond normal levels as customers increased inventories in order to
avoid purchases at anticipated higher selling prices. During the
second quarter of 1995, the film market, anticipating resin price
declines, experienced a significant weakening in demand as
customers postponed purchases in order to reduce abnormally high
inventories created during the preceding period and to maximize
product purchases at expected future lower prices. Resin prices
declined in early June 1995, and have fallen approximately 12% (or
$.06 per pound) from early June through early August, 1995. Looking
ahead, the Company expects film demand to continue to remain weak
in the near term, until inventory levels have normalized in the
market.
First half 1995 sales of $146.2 million increased by 24% due
to the resin price increases described above, and also due to
incremental sales volume resulting from added capacity created by
the Company's recent capital expansion programs and the
contribution from the May 1994 acquisition of Advanced, an
injection molder located in Warren, Ohio (see Note 4).
Gross Profits
The significant decline in demand during the second quarter
adversely impacted 1995 gross profits compared to last year, with
second quarter gross profit of $7.8 million (11% of sales),
compared to last year's second quarter gross profit of $12.6
million (20% of sales). First half 1995 gross profit equaled $22
million (15% of sales), compared to $23.3 million (20% of sales) in
1994. The second quarter and first half 1995 declines in gross
profits were also attributable to poor injection molding and blow
molding profitability during 1995, as described below.
Atlantis Plastic Films recorded a second quarter 1995 gross
profit percentage of 13%, declining from the first quarter 1995
percentage of 20% and the second quarter 1994 percentage of 21%.
The decline in gross profits was experienced within both the custom
and stretch film units, and was primarily due to margin compression
caused by the reduced demand which forced the Company to lower
selling prices prior to actual resin price reductions from
suppliers. Looking ahead, it is generally expected that resin
prices will continue to moderate in the near term.
The Atlantis Molded Plastics second quarter 1995 gross profit
percentage of 7% also decreased compared to this year's first
quarter gross profit percentage of 15% and last year's second
quarter gross profit percentage of 18%. The year-to-date 1995 gross
profit percentage for Atlantis Molded Plastics equaled 11% compared
to 18% for the same period last year. The lower 1995 percentages
reflect poor injection molding profitability resulting from a
variety of factors, including: (i) a decline in sales of appliance-
related parts due to weaker demand for appliances during the first
half of 1995 compared to the first half of 1994, (ii) higher
subcontracted and overtime labor costs due to the shortage of
qualified labor resulting from current low levels of unemployment
within the midwest region, and (iii) unfavorable product mix. The
1995 decline in gross profit percentages was also caused by lower
blow molding profitability due to continued competitive pricing
pressures within the dairy plastic container markets, partially
offset by stronger profitability in the profile extrusion unit
resulting from increased sales.
Selling, General and Administrative Expenses (SG&A)
Second quarter 1995 SG&A equaled $6.5 million (9% of sales),
compared to last year's second quarter SG&A of $6.8 million (11%
of sales). Year-to-date 1995 SG&A totaled $15.2 million (10% of
sales), compared to last year's first half SG&A of $13 million
(11% of sales).
The dollar decrease in SG&A for the 1995 second quarter period
resulted primarily from reduced sales commission payments within
the film unit resulting from the downturn in sales described above,
lower incentive compensation accruals, and also due to a reduction
in salaried headcount. The year-to-date 1995 dollar increase in
SG&A was primarily due to: (i) first quarter 1995 sales commission
payments associated with increased film sales volume during that
quarter, and (ii) the inclusion of Advanced since May 1994.
Income
As a result of the factors described above, second quarter
1995 operating income equaled $1.3 million, compared to $5.8
million for the same period last year. Year-to-date 1995 operating
income equaled $6.8 million, compared to $10.4 million in the
first half of 1994.
The second quarter 1995 loss from continuing operations
equaled $1.7 million, or $.23 per share compared to income from
continuing operations of $1.4 million, or $.18 per share for the
second quarter of 1994. The year-to-date 1995 loss from continuing
operations equaled $783,000, compared to first half 1994 income
from continuing operations of $2.2 million.
Interest Expense & Taxes
Second quarter 1995 interest expense of $3.8 million was 16%
higher than the $3.3 million posted for the same period last year.
Year-to-date 1995 interest expense of $7.5 million also increased
compared to last year's first half interest expense of $6.4
million. The increases can be attributed to increased borrowing
levels during the first half of 1995 in connection with: (i) higher
inventory and accounts receivable average balances during the first
half of the fiscal year associated with higher sales levels
compared to the first half of 1994, (ii) the May 1994 acquisition
of Advanced, and (iii) borrowings in connection with equipment
financing programs established during 1994 and 1995.
As discussed below in "Liquidity and Capital Resources",
during the second quarter of 1995 the Company's management focused
on streamlining inventories, improving collections on accounts
receivable and reducing outstanding indebtedness. As a result,
reductions have been achieved in each of these categories from the
respective March 31, 1995 balances, with further reductions posted
during July 1995. Based upon the reduction in outstanding
indebtedness, assuming market interest rates remain constant,
management anticipates a corresponding decrease in interest expense
during the remainder of 1995 when compared to the first half of
1995.
The Company's effective tax rates during the second quarter
and first half periods of 1995 and 1994 were affected by
nondeductible goodwill amortization.
DISCONTINUED OPERATIONS
Western Pioneer's second quarter 1995 insurance premiums
earned of $6.4 million were 20% higher than for the same period
last year, while year-to-date 1995 premiums earned of $12.3 million
were 19% ahead of the same period last year, primarily due to an
increase in new policies written.
Losses and loss adjustment expenses during the second quarter
of 1995 equaled 92% of premiums earned, compared to 74% of premiums
earned for the same period a year ago. The year-to-date percentage
of 85% was also higher than last year's first half loss and loss
adjustment expense percentage of 73%. The 1995 loss and loss
adjustment expense percentages were higher than normal, and can be
attributed to: (i) the significant increase in new policies during
1995, with new business historically less profitable than
continuing business, and (ii) poorer than normal weather conditions
during the winter of 1994-1995, which caused an increase in
accidents and claims during 1995.
SG&A expenses were 30% as a percentage of premiums
earned during the second quarter of 1995, compared to the 29%
expense percentage for the same period last year. The year-to-date
percentage of 30% was slightly below last year's first half SG&A
percentage of 31%. (See Note 6 for information regarding the
Company's plans to dispose of Western Pioneer during 1995.)
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at June 30, 1995 totaled
approximately $34.4 million, compared to $39.5 million at March 31,
1995 and $33.0 million at December 31, 1994. Cash totaled $2.2
million at June 30, 1995, compared to $1.4 million at December 31,
1994. The table below presents selected balance sheet and
quarterly cash flow data (in thousands):
[CAPTION]
<TABLE>
<S> <C> <C> <C>
June 30, March 31, Dec. 31,
1995 1995 1994
SELECTED BALANCE
SHEET DATA:
Working Capital $34,442 $39,453 $32,968
Inventory 19,879 26,711 22,855
Accounts Receivable 32,943 37,268 36,585
Total Debt 135,136 137,118 129,234
<S> <C> <C> <C>
Six
Months
Ended Second First
June 30, Quarter Quarter
1995 1995 1995
SELECTED CASH FLOW
DATA:
Cash Provided by
(Used In) Operating
Activities $2,673 $6,097 $(3,424)
Cash Used In
Investing Activities (7,389) (3,078) (4,311)
Cash Provided By
(Used In) Financing
Activities 5,520 (2,149) 7,669
</TABLE>
During the second quarter of 1995, as film demand began to
soften and resin price decreases appeared imminent, the Company
focused on the reduction of inventories, accounts receivable and
outstanding indebtedness. The second quarter 1995 reduction
program resulted in significant declines in these amounts, with
further reductions accomplished during July 1995. At June 30, 1995,
the Company had approximately $15.6 million of unrestricted
availability under its revolving credit facility based on eligible
collateral. In addition, the Company had approximately $11 million
of availability for utilization in connection with equipment
financing programs. Accounts payable and accrued expenses were also
significantly reduced during the first half of 1995. Looking ahead,
the Company's management expects to continue its focus on
streamlining inventories, improving collections of accounts
receivables and reducing indebtedness.
Management believes that funds generated from operations and
funds available under the revolving credit facility will be
sufficient to satisfy the Company's debt service obligations and
working capital requirements for the remainder of 1995. In
addition, management expects to utilize an equipment financing
program established during the first quarter of 1995 to finance the
majority of capital expenditures during 1995. To the extent
available, excess funds will be used to reduce outstanding
borrowings under the revolving credit facility.
Cash Flows from Operating Activities
In the first half of 1995, net cash provided by operating
activities was approximately $2.7 million, compared to $2.4 million
of net cash used in operating activities for the same period last
year. During the second quarter of 1995, net cash provided by
operating activities equaled $6.1 million. Accounts receivable and
inventories decreased by $3.6 million and $3.0 million,
respectively, during the first six months of 1995, and by $4.3
million and $6.8 million, respectively, during the second quarter
of 1995, due to: (i) the accounts receivable and inventory
reduction programs initiated by the Company during the second
quarter, as described above, and (ii) the downturn in film demand
and sales levels compared with the yearend 1994 period.
Accounts payable and accrued expenses at June 30, 1995
decreased compared with the 1994 year-end balance due to first
quarter 1995 payments of 1994-related incentive compensation and
capital expenditures accrued at year-end 1994, and due to a
decrease in resin related accounts payable balances at June 30,
1995 related to the resin inventory reductions described above.
Cash Flows from Investing Activities
Net cash used in investing activities, consisting of capital
expenditures, was $7.4 million during the first half of 1995,
compared to $7.9 million for the same period last year. (See Note
4 for information regarding the Company's purchase of Advanced in
May 1994.)
Cash Flows from Financing Activities
Net cash provided by financing activities was $5.5 million
during the first half of 1995, compared to $21.5 million provided
by financing activities in the first half of 1994. During the
second quarter of 1995, outstanding indebtedness was reduced by
approximately $2 million. During the first half, total borrowings
equaled $5.9 million, net of principal repayments. These
borrowings were primarily utilized to fund the capital expenditures
described above, and to finance certain equipment acquired during
1994. The Company paid dividends on common and preferred stock of
approximately $429,000.
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is, from time to time, involved in routine
litigation. None of such routine litigation in which the
Company is presently involved is material to its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) The Registrant held its Annual meeting of
Shareholders on May 19, 1995.
(b) Not Required.
(c) The matter voted on at the Annual Meeting of
Shareholders, and the tabulation of votes on such
matter are as follows:
Election Of Directors
[CAPTION]
<TABLE>
<S> <C> <C>
Name For Withheld
CLASS A
Charles D. Murphy, III 2,147,353 690
Chester B. Vanatta 2,147,353 220
CLASS B
Anthony F. Bova 24,511,840 -0-
Phillip T. George, M.D. 24,511,840 -0-
Larry D. Horner 24,511,840 -0-
Earl W. Powell 24,511,840 -0-
</TABLE>
(d) Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(3) Exhibits
10.16 Credit Agreement between Atlantis Plastics Injection
Molding, Inc. and the Registrant and National City Bank,
Northeast, dated as of May 19, 1995.
10.17 Stock Purchase Agreement for the acquisition of Western
Pioneer Insurance Company by and between the Commerce
Insurance Company, a Massachusetts corporation and the
Registrant, dated as of May 18, 1995.
10.18 Demand Promissory Note from Atlantis Plastic Films, Inc.
to General Electric Capital Corporation in the amount of
$1,280,579.70, dated as of May 8, 1995.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter for which this Quarterly Report on Form
10-Q is filed, the Registrant did not file any Current Reports on
Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ATLANTIS PLASTICS, INC.
Date: August 10, 1995 /s/ Anthony F. Bova
ANTHONY F. BOVA
President and Chief Executive
Officer
Date: August 10, 1995 /s/ Paul Rudovsky
PAUL RUDOVSKY
Executive Vice President and
Chief Financial Officer
CREDIT AGREEMENT
Agreement made as of May 19, 1995 by and between ATLANTIS PLASTICS
INJECTION MOLDING, INC. and ATLANTIS PLASTICS, INC. (collectively,
the BORROWER) and NATIONAL CITY BANK, NORTHEAST (BANK):
1A. CROSS-REFERENCE -- Certain terms are defined in section 9.
1B. SUMMARY -- This Agreement sets forth the terms and conditions
upon which the Borrower may obtain Subject Loans on a revolving
basis until the Expiration Date. This Agreement also sets forth
covenants and warranties made by the parties to induce each other
to enter into this Agreement and contains other Material
provisions.
2A. SUBJECT COMMITMENT -- The basic terms of the Subject
Commitment and the compensation therefor are as follows:
2A.01 AMOUNT -- The amount of the Subject Commitment is One
Million Three Hundred Thousand and No/100ths Dollars
($1,300,000.00), but that amount may be reduced from time to time
pursuant to subsection 2A.03 and the Subject Commitment may be
terminated pursuant to section 5B.
2A.02 TERM -- The Subject Commitment shall commence as of the date
of this Agreement and shall remain in effect on a revolving basis
until May 19, 1998 (the EXPIRATION DATE) EXCEPT that a later
Expiration Date may be established from time to time pursuant to
subsection 2A.05 and EXCEPT that the Subject Commitment shall end
in any event upon any earlier reduction thereof to zero pursuant to
subsection 2A.03 or any earlier termination pursuant to section 5B.
2A.03 OPTIONAL REDUCTIONS -- Borrower shall have the right, at all
times and without the payment of any premium, to permanently reduce
the amount of the Subject Commitment by giving Bank one Banking
Day's prior written notice of the amount of each such reduction and
the effective date thereof subject, however, to the following:
(a) No such reduction shall reduce the Subject Commitment to a
lesser aggregate amount than the sum of the aggregate unpaid
principal balance of the LIBOR Loans then outstanding plus the
aggregate unpaid principal balance of any LIBOR Loans to be
obtained pursuant to any unfulfilled Credit Request under
subsection 2B.02 plus the aggregate unpaid principal balance of the
prior loans, if any, then outstanding.
(b) Concurrently with each reduction Borrower shall prepay such
part, if any, of the principal of the Subject Loans then
outstanding as may be in excess of the amount of the Subject
Commitment as so reduced. Subsection 2B.13 and section 6C shall
apply to each such prepayment.
2A.04 COMMITMENT FEE -- Borrower agrees to pay Bank a commitment
fee
(a) based on the average daily difference between the amount of
the Subject Commitment from time to time in effect and the
aggregate unpaid principal balance of the Subject Loans then
outstanding,
(b) computed at the rate of three-eighths of one percent (3/8%)
per annum so long as the Subject Commitment remains in effect and
(c) payable in arrears on June 30, 1995 and quarter-annually
thereafter and at the end of the Subject Commitment.
2A.05 EXTENSION OF SUBJECT COMMITMENT -- Whenever Borrower
furnishes its audited financial statements to Bank pursuant to
clause (b) of subsection 3A.01, commencing with the year ending
December 31, 1995, Borrower may request that the Subject Commitment
be extended to May 19, 1999 and annually extendible thereafter in
Bank's discretion. Bank agrees to give consideration to each such
request; but in no event shall Bank be committed to extend the
Subject Commitment, nor shall the Subject Commitment be so
extended, unless and until both Borrower and Bank shall have
executed and delivered an extension agreement substantially in the
form of Exhibit C with the blanks appropriately filled.
2B. SUBJECT LOANS -- Bank agrees that so long as the Subject
Commitment remains in effect Bank will, subject to the conditions
of this Agreement, grant Borrower such Subject Loans as Borrower
may from time to time request.
2B.01 SUBJECT NOTE -- The Subject Loans shall be evidenced at all
times by a Subject Note executed and delivered by Borrower, payable
to the order of Bank in a principal amount equal to the dollar
amount of the Subject Commitment as in effect at the execution and
delivery of the Subject Note and being in the form and substance of
Exhibit B with the blanks appropriately filled.
(a) Whenever Borrower shall obtain a Subject Loan, Bank shall
endorse an appropriate entry on the Subject Note or make an
appropriate entry in a loan account in Bank's books and records, or
both. Each entry shall be prima facie evidence of the data
entered; but such entries shall not be a condition to Borrower's
obligation to pay.
(b) No holder of any Subject Note shall transfer a Subject Note,
or seek a judgment or file a proof of claim based on a Subject
Note, without in each case first endorsing the Subject Note to
reflect the true amount owing thereon.
2B.02 CREDIT REQUESTS -- Whenever Borrower desires to borrow
pursuant to this Agreement, Borrower shall give Bank an appropriate
notice (a CREDIT REQUEST) with such information as Bank may
reasonably request. The Credit Request shall be irrevocable and
shall (EXCEPT in the case of any obtained at the execution and
delivery of this Agreement) be given to Bank not later than 12:00
noon Youngstown time
(a) on the Banking Day the proceeds of any requested PR Loan is to
be disbursed to Borrower and
(b) on the first (1st) Banking Day prior to the Banking Day on
which the proceeds of any requested LIBOR Loan are to be disbursed
to Borrower.
Each Credit Request shall be made either in writing or by
telephone, PROVIDED that any telephone request shall be promptly
confirmed in writing and Borrower shall assume the risk of
misunderstanding.
2B.03 CONDITION: NO DEFAULT -- Borrower shall not be entitled to
obtain any Subject Loan if
(a) any Default Under This Agreement shall then exist or would
thereupon begin to exist or
(b) any representation or warranty made in subsections 4B.01
through 4B.08 (both inclusive) shall have ceased to be true and
complete in any Material respect or
(c) there shall have occurred any Material adverse change in
Borrower's financial condition, properties or business since the
date of Borrower's Most Recent 3A.01 Financial Statements.
Each Credit Request, both when made and when honored, shall of
itself constitute a continuing representation and warranty by
Borrower that Borrower is entitled to obtain, and Bank is obligated
to make, the requested Subject Loan.
2B.04 CONDITION: PURPOSE -- Borrower shall not use the proceeds
of any Subject Loan in any manner that would violate or be
inconsistent with Regulation U or X of the Board of Governors of
the Federal Reserve System; nor will it use any such proceeds for
the purpose of financing the acquisition of any corporation or
other business entity if the acquisition is publicly opposed by the
latter's management and if Bank deems that its participation in the
financing would involve it in a conflict of interest.
2B.05 LOAN MIX -- The Subject Loans at any one time outstanding
may consist of PR Loans or LIBOR Loans or any combination thereof
as Borrower may from time to time duly elect.
2B.06 AMOUNT -- No Subject Loan shall be made if, after giving
effect thereto, the aggregate unpaid principal balance of the
Subject Loans would exceed the amount of the Subject Commitment
then in effect. Each LIBOR Loan shall be in the principal sum of
One Hundred Thousand and No/100ths Dollars ($100,000.00) or any
greater amount (subject to the aforesaid limitations) that is a
multiple of Twenty-five Thousand and No/100ths Dollars
($25,000.00).
2B.07 CONTRACT PERIODS -- Each LIBOR Loan shall have applicable
thereto a Contract Period to be duly elected by Borrower in the
Credit Request therefor. Each Contract Period shall begin on the
date the loan proceeds are to be disbursed and shall end on such
date, not later than the Expiration Date, as Borrower may select
subject, however, to the following:
The Contract Period for each LIBOR Loan shall end one month or two
or three or six months after the date of borrowing; PROVIDED, that
(1) if any such Contract Period otherwise would end on a day that
is not a Banking Day, it shall end instead on the next following
Banking Day unless that day falls in another calendar month, in
which latter case the Contract Period shall end instead on the last
Banking Day of the next preceding calendar month, and
(2) if the Contract Period commences on a day for which there is
no numerical equivalent in the calendar month in which the Contract
Period is to end, it shall end on the last Banking Day of that
calendar month.
2B.08 BORROWING BASE The BORROWING BASE at any given time shall be
the aggregate of
(a) an amount equal to eighty-five percent (85%) of the net book
value (after deducting any discount or other incentive for early
payment but without deducting any valuation reserve) of the
Eligible Receivables, plus
(b) an amount equal to fifty-five percent (55%) of the Eligible
Inventory,
all as reasonably determined by Bank either on the basis of the
then most recent Borrowing Base Report furnished by Borrower to
Bank pursuant to subsection 3A.01 or on the basis of the then most
recent field audit (if any) made or other information received by
Bank.
2B.09 BORROWING BASE MAINTENANCE Whenever Borrower shall furnish
to Bank a Borrowing Base Report showing that the sum of the
aggregate unpaid principal balance of the subject loans then
outstanding exceeds the amount of Borrower's Borrowing Base as
shown in that report, Borrower shall make a payment to Bank in an
amount equal to that excess for application to the principal of the
Subject Loans.
2B.10 MATURITIES -- The stated maturity of each PR Loan shall be
the Expiration Date. The stated maturity of each LIBOR Loan shall
be the last day of the Contract Period applicable thereto. In no
event, however, shall the stated maturity of any Subject Loan be
later than the Expiration Date.
2B.11 ROLLOVER -- If
(a) prior to the Expiration Date any LIBOR Loan shall not be paid
in full at the stated maturity thereof and
(b) Borrower shall have failed to duly give Bank a timely Credit
Request in respect thereof, Borrower shall be deemed to have duly
given Bank a timely Credit Request to obtain (and Bank shall
accordingly make) a PR Loan in a principal amount equal to the
unpaid principal of the LIBOR Loan then due, the proceeds of which
PR Loan shall be applied to the payment in full of the LIBOR Loan
then due; PROVIDED that no such PR Loan shall of itself constitute
a waiver of any then-existing Default Under This Agreement.
2B.12 INTEREST: PR LOANS -- The principal of and overdue interest
on the PR Loans shall bear interest payable in arrears on the
nineteenth day of each month and at maturity and computed (in
accordance with subsection 8.10)
(a) prior to maturity, at a fluctuating rate equal to one half of
one percent (1/2%) in excess of the Prime Rate from time to time in
effect and
(b) after maturity (whether occurring by lapse of time or by
acceleration), at a fluctuating rate equal to three percent (3%) in
excess of the Prime Rate from time to time in effect,
with each change in the Prime Rate automatically and immediately
changing the rate thereafter applicable to the PR Loans; PROVIDED,
that in no event shall the rate applicable to the PR Loans after
the maturity thereof be less than the rate applicable thereto
immediately after maturity.
2B.13 INTEREST: LIBOR LOANS -- The principal of and overdue
interest on each LIBOR Loan shall bear interest computed (in
accordance with subsection 8.10) and payable as follows:
(a) Prior to maturity each LIBOR Loan shall bear interest at a
rate equal to
the LIBOR Pre-Margin Rate in effect at the start of the applicable
Contract Period plus
the applicable LIBOR MARGIN, namely, two and one half percent (2-
1/2%) per annum prior to the Expiration Date and three percent (3%)
per annum on and after the Expiration Date.
(b) After maturity (whether occurring by lapse of time or by
acceleration), shall bear interest computed and payable in the same
manner as in the case of PR Loans EXCEPT that in no event shall any
LIBOR Loan bear interest after maturity at a lesser rate than that
applicable thereto immediately after maturity.
(c) Interest on each LIBOR Loan shall be payable in arrears on the
last day of the Contract Period applicable thereto and at maturity
and, in the case of any Contract Period having a longer term than
ninety (90) days, shall also be payable every three (3) months
after the first day of the Contract Period.
2B.14 DISBURSEMENT -- Bank shall disburse the proceeds of each
Subject Loan to Borrower's general checking account with Bank in
the absence of written instructions from Borrower to the contrary.
2B.15 PREPAYMENTS -- Borrower may from time to time prepay the
principal of the PR Loans in whole or in part and may from time to
time prepay the principal of any given series of LIBOR Loans in
whole or in part, subject to the following:
(a) Each prepayment of LIBOR Loans shall be applied solely to a
single LIBOR Loan, shall aggregate One Hundred Thousand and
No/100ths Dollars ($100,000.00) or any multiple of Twenty-five
Thousand and No/100ths Dollars ($25,000.00) or an amount equal to
the then aggregate unpaid principal balance thereof.
(b) Each prepayment of the PR Loans may be made without penalty or
premium. Any prepayment of any LIBOR Loans (regardless of the
reason for the prepayment) shall be subject to the payment of any
indemnity required by section 6B.
(c) No prepayment shall of itself reduce the Subject Commitment.
(d) Concurrently with each prepayment, Borrower shall prepay the
interest accrued on the prepaid principal.
2B.16 LIBOR LOANS: UNAVAILABILITY -- If at any time
(a) Bank shall determine that dollar deposits of the relevant
amount for the relevant Contract Period are not available in the
London interbank eurodollar market, or
(b) Bank shall determine that circumstances affecting that market
make it impracticable for Bank to ascertain the rate or rates
applicable to such LIBOR Loans,
then and in each such case Bank shall, by written notice to
Borrower, suspend Borrower's right thereafter to obtain LIBOR Loans
of the kind in question, which suspension shall remain in effect
until such time, if any, as Bank may give written notice to
Borrower that the condition giving rise to the suspension no longer
prevails.
2B.17 LIBOR LOANS: ILLEGALITY -- If any governmental authority
shall assert that it is unlawful for Bank to fund, make or maintain
any LIBOR Loans,
(a) Bank shall give Borrower prompt written notice thereof and
(b) Borrower shall promptly pay in full the principal of and
interest on the LIBOR Loan in question and make the reimbursement,
if any, required by section 6B.
3A. INFORMATION -- Borrower agrees that so long as the Subject
Commitment remains in effect and thereafter until the Subject
Indebtedness shall have been paid in full, Borrower will perform
and observe each of the following:
3A.01 FINANCIAL STATEMENTS -- Atlantis Plastics, Inc. shall
furnish to Bank
(a) within forty-five (45) days after the end of each of the first
three quarter-annual periods of each of Atlantis Plastics, Inc.'s
fiscal years, its balance sheet as at the end of the period and its
statements of cash flow, income and its statement of shareholders
equity for Atlantis Plastics, Inc.'s current fiscal year to date,
all prepared (but unaudited) on a consolidated basis, on a
comparative basis with the prior year, in accordance with GAAP
(EXCEPT as disclosed therein) and in form and detail satisfactory
to Bank,
(b) as soon as available (and in any event within ninety (90) days
after the end of each of Borrower's fiscal years), a complete copy
of an annual audit report of Atlantis Plastics, Inc. and all
Subsidiaries on a consolidated and consolidating basis, (including,
without limitation, all financial statements therein and notes
thereto) of Borrower for that year which shall be
(1) prepared on a comparative basis with the prior year, in
accordance with GAAP (EXCEPT as disclosed therein) and in form and
detail satisfactory to Bank,
(2) certified (without qualification as to GAAP) by independent
public accountants selected by Borrower and satisfactory to Bank,
(c) concurrently with the delivery of any financial statement to
Bank pursuant to clause (a) or (b), a certificate by Atlantis
Plastics, Inc.'s chief financial officer
(1) certifying that to the best of the officer's knowledge and
belief, (A) those financial statements fairly present in all
Material respects the financial condition of Atlantis Plastics,
Inc. and Atlantis Plastics Injection Molding, Inc. and the results
of their operations in accordance with GAAP subject, in the case of
interim financial statements, to routine year-end audit adjustments
and (B) no Default Under This Agreement then exists or if any
does, a brief description of the default and Borrower's intentions
in respect thereof, and
(2) setting forth calculations indicating whether or not Borrower
is in compliance with the general financial standards of section
3B,
(d) promptly when filed (in final form) or sent, a copy of
(1) each registration statement, Form 10-K annual report, Form
10-Q quarterly report, Form 8-K current report or similar document
filed by Atlantis Plastics, Inc. with the Securities and Exchange
Commission (or any similar federal agency having regulatory
jurisdiction over Atlantis Plastics, Inc.'s securities) and
(2) each proxy statement, annual report, certificate, notice or
other document sent by Atlantis Plastics, Inc. to the holders of
any of its securities (or any trustee under any indenture which
secures any of its securities or pursuant to which such securities
are issued),
(e) within forty-five (45) days after the end of each of the first
three quarter-annual periods of each of Atlantis Plastics, Inc.'s
fiscal years, internally prepared interim financial statements of
Atlantis Plastics Injection Molding, Inc., for the year to date
results as of the end of the period, prepared (but unaudited) on a
comparative basis with the prior year, in accordance with GAAP
(EXCEPT as disclosed therein) and in form and detail satisfactory
to Bank, and
(f) concurrently with the delivery of any financial statement to
Bank pursuant to clause (a) or (b), a certificate by Borrower's
chief financial officer
(1) certifying that to the best of the officer's knowledge and
belief, (A) those financial statements fairly present in all
Material respects Borrower's financial condition and the results of
its operations in accordance with GAAP subject, in the case of
interim financial statements, to routine year-end audit adjustments
and (B) no Default Under This Agreement then exists or if any does,
a brief description of the default and Borrower's intentions in
respect thereof; and
(2) setting forth calculations indicating whether or not Borrower
is in compliance with the general financial standards of section
3B,
(g) within twenty (20) days after the end of each month (and at
such other times as Borrower may deem advisable), a Borrowing Base
Report being in form and detail satisfactory to Bank, setting forth
Borrower's Borrowing Base as at the end of that month and certified
by an appropriate officer of Borrower to be true and complete to
the best of the officer's knowledge and belief, it being agreed
that Borrower at its option may furnish other such reports at other
times,
(h) forthwith upon Bank's written request, such other information
in writing about Borrower's financial condition, properties and
operations and about Borrower's employee benefit plans, if any, as
Bank may from time to time reasonably request.
3A.02 NOTICE -- Borrower will cause its chief financial officer,
or in his absence another officer designated by Borrower, to give
Bank fifteen (15) days written notice whenever any officer of
Borrower
(a) reasonably believes (or receives notice from any governmental
agency alleging) that any Reportable Event has occurred in respect
of any Pension Plan or that Borrower has become in Material
non-compliance with any law or governmental order referred to in
subsection 3C.06 if non-compliance therewith would Materially and
adversely affect Borrower's financial condition or its properties,
(b) receives from the Internal Revenue Service or any other
federal, state or local taxing authority any allegation of any
default by Borrower in the payment of any tax that is Material in
amount or notice of any assessment in respect thereof,
(c) learns there has been brought against Borrower before any
court, administrative agency or arbitrator any litigation or
proceeding which, if successful, might have a Material, adverse
effect on Borrower,
(d) reasonably believes that any representation or warranty made
in subsections 4B.01 through 4B.08 (both inclusive) shall have
ceased in any Material respect to be true and complete or that any
Default Under This Agreement shall have occurred or
(e) reasonably believes that there has occurred or begun to exist
any other event, condition or thing that likely may have a
Material, adverse effect on Borrower's financial condition,
operations or properties.
3B. GENERAL FINANCIAL STANDARDS -- Borrower agrees that so long as
the Subject Commitment remains in effect and thereafter until the
Subject Indebtedness shall have been paid in full, Borrower will
observe each of the following:
3B.01 CAPITAL EXPENDITURE LIMITS -- The aggregate amount of all
Capital Expenditures of Atlantis Plastics, Inc. and the Subsidiary
Guarantors (excluding expenditures funded by insurance proceeds)
will not exceed the sum of $12,000,000 (the "Capital Expenditure
Allowance") plus sixty-five percent (65%) of the unused Capital
Expenditure Allowance from the prior Fiscal Year in any Fiscal
Year. In the event that Atlantis Plastics, Inc. or any Subsidiary
Guarantor enters into a Capital Lease or other contract with
respect to fixed assets, for purposes of calculating Capital
Expenditures under this subsection, the aggregate amount of all
payments due for the entire term of such contract shall be
considered expended in full on the date that Atlantis Plastics,
Inc. or such Subsidiary enters into such contract or Capital Lease.
3B.02 FIXED CHARGE COVERAGE -- Fixed Charge Coverage, on a
trailing twelve (12) Fiscal Month basis, shall not be less than
1.05 at the end of any fiscal quarter.
3B.03 INTEREST EXPENSE COVERAGE -- Interest Expense
Coverage, on a trailing twelve (12) Fiscal Month basis, shall not
be less than 1.8 at the end of any fiscal quarter.
3B.04 INDEBTEDNESS TO EBIDAT -- Indebtedness to EBIDAT, on a
trailing twelve (12) Fiscal Month basis, shall not be greater than
4.75 at the end of any fiscal quarter.
3B.05 EBIDAT -- EBIDAT, on a trailing twelve (12) Fiscal Month
basis, shall not be less than the following for the following
respective fiscal quarters:
[CAPTION]
<TABLE>
<S> <C>
TRAILING TWELVE-FISCAL MONTH PERIOD
ENDING ON THE LAST DAY OF EACH
FISCAL QUARTER ENDING ON THE FOLLOWING DATES: EBIDAT
March 31, 1995 $21,400,000
June 30, 1995 $21,600,000
September 30, 1995 $21,750,000
December 31, 1995 $21,910,000
March 31, 1996 $22,250,000
June 30, 1996 $22,600,000
September 30, 1996 $22,900,000
December 31, 1996 $23,248,000
March 31, 1995 $23,500,000
June 30, 1997 $23,750,000
September 30, 1997 $24,000,000
December 31, 1997 $24,202,000
</TABLE>
3C. AFFIRMATIVE COVENANTS -- Borrower agrees that so long as the
Subject Commitment remains in effect and thereafter until the
Subject Indebtedness shall have been paid in full, Borrower will
perform and observe each of the following:
3C.01 TAXES -- Borrower will pay in full
(a) prior in each case to the date when penalties for the
nonpayment thereof would attach, all taxes, assessments and
governmental charges and levies for which it may be or become
subject and
(b) prior in each case to the date the claim would become
delinquent for non-payment, all other lawful claims (whatever their
kind or nature) which, if unpaid, might become a lien or charge
upon its property;
PROVIDED, that no item need be paid so long as and to the extent
that it is contested in good faith and by timely and appropriate
proceedings which are effective to stay enforcement thereof.
3C.02 FINANCIAL RECORDS -- Borrower will at all times keep true
and complete financial records in accordance with GAAP and, without
limiting the generality of the foregoing, make appropriate accruals
to reserves for estimated and contingent losses and liabilities.
3C.03 VISITATION -- Borrower will permit Bank at all reasonable
times with notice
(a) to visit and inspect Borrower's properties and examine its
records at Bank's expense and to make copies of and extracts from
such records and
(b) to consult with Borrower's officers, employees, accountants,
actuaries, trustees and plan administrators in respect of its
financial condition, properties and operations and the financial
condition of its employee benefit plans, each of which parties is
hereby authorized to make such information available to Bank to the
same extent that it would be to Borrower.
3C.04 INSURANCE -- Borrower will
(a) keep itself and all of its insurable properties insured at all
times to such extent, with such deductibles, by such insurers and
against such hazards and liabilities as is generally and prudently
done by like businesses, EXCEPT that if a more specific standard is
provided in any Related Writing, the more specific standard shall
prevail and
(b) forthwith upon Bank's written request, furnish to Bank such
information about Borrower's insurance as Bank may from time to
time reasonably request, which information shall be prepared in
form and detail reasonably satisfactory to Bank and certified by an
officer of Borrower.
3C.05 CORPORATE EXISTENCE -- Borrower will at all times maintain
its corporate existence, rights and franchises.
3C.06 COMPLIANCE WITH LAW -- Borrower will comply with all laws
(whether federal, state or local and whether statutory,
administrative or judicial or other) and with every lawful
governmental order (whether administrative or judicial) and will,
without limiting the generality of the foregoing,
(a) use and operate all of its facilities and properties in
Material compliance with all applicable Environmental Laws and
handle all regulated hazardous materials in Material compliance
therewith; keep in full effect each permit, approval,
certification, license or other authorization required by any
environmental law for the conduct of any Material portion of its
business; and comply in all other Material respects with all
Environmental Laws;
(b) make a full and timely payment of premiums required by ERISA
and perform and observe all such further and other requirements of
ERISA such that no Default under ERISA shall occur or begin to
exist and
(c) comply with all Material requirements of all applicable
occupational health and safety laws;
PROVIDED, that this subsection shall not apply to any of the
foregoing
(i) if and to the extent that the same shall be contested in good
faith by timely and appropriate proceedings which are effective to
stay enforcement thereof and against which appropriate reserves
shall have been established or
(ii) in any other case so long as no Default Under This Agreement
would occur or begin to exist if the maximum liability of all such
items (including, without limitation, those referred to in clause
(i)) were reflected in Borrower's balance sheet as a current
liability.
3C.07 PROPERTIES -- Borrower will maintain all fixed assets
necessary to its continuing operations in good working order and
condition, ordinary wear and tear excepted.
3D. NEGATIVE COVENANTS -- Borrower agrees that so long as the
Subject Commitments remain in effect and thereafter until the
Subject Indebtedness shall have been paid in full, Borrower will
observe, such of the following provisions, namely:
3D.01 EQUITY TRANSACTIONS -- Atlantis Plastics Injection Molding,
Inc. will not
(a) be a party to any merger or consolidation,
(b) purchase or otherwise acquire all or substantially all of the
assets and business of any corporation or other business
enterprise,
(c) create, acquire or become a party to any joint venture or
partnership, or make or keep any investment in any stocks or other
equity securities of any kind other than any investment fully
disclosed in Borrower's Most Recent 3A.01 Financial Statements or
in the Supplemental Schedule or
(d) lease as lessor, sell, sell-leaseback or otherwise transfer
(whether in one transaction or a series of transactions) all or any
substantial part of its fixed assets EXCEPT chattels that shall
have become obsolete or no longer useful in its present business;
PROVIDED, that if no Default Under This Agreement shall then exist
and if none would thereupon begin to exist, this subsection shall
not apply to any transaction referred to in clause (a) or (b) if
(1) after giving effect thereto, the nature of Borrower's business
shall not be materially different from that at the date of this
Agreement and (2) there shall have been executed and delivered to
Bank an assumption agreement (to be in form and substance
satisfactory to Bank) by the surviving corporation (if not Atlantis
Plastics Injection Molding, Inc.) in the case of any merger, by the
resulting corporation in the case of any consolidation and by the
transferee (if not Atlantis Plastics Injection Molding, Inc.) in
any transfer of any kind of assets.
3D.02 CREDIT EXTENSIONS -- Atlantis Plastics Injection Molding,
Inc. will not
(a) make or keep any investment in any notes, bonds or other
obligations of any kind for the payment of money or make or have
outstanding at any time any advance or loan to anyone or
(b) be or become a Guarantor of any kind;
PROVIDED, that this subsection shall not apply to
(i) any existing or future advance made to an officer or employee
of Atlantis Plastics Injection Molding, Inc. solely for the purpose
of paying ordinary and necessary business expenses of Atlantis
Plastics Injection Molding, Inc.,
(ii) any existing or future investment in direct obligations of
the United States of America or any agency thereof, or in
certificates of deposit issued by Bank, or in any other
money-market investment if it carries the highest quality rating of
any nationally-recognized rating agency, PROVIDED, that no such
investment shall mature more than ninety (90) days after the date
when made,
(iii) any existing investment, advance, loan or Guaranty fully
disclosed in Borrower's Most Recent 3A.01 Financial Statements or
in the Supplemental Schedule,
(iv) any existing or future Guaranty of any direct or contingent
obligation owing to Bank or
(v) any endorsement of a check or other medium of payment for
deposit or collection, or any similar transaction in the normal
course of business.
3D.03 BORROWINGS -- Atlantis Plastics Injection Molding, Inc. will
not create, assume or have outstanding at any time any indebtedness
for borrowed money or any Funded Indebtedness of any kind;
PROVIDED, that this subsection shall not apply to
(i) the Subject Indebtedness or any other Debt owing to Bank,
(ii) any Subordinated indebtedness,
(iii) any existing or future indebtedness secured by a purchase
money security interest permitted by subsection 3D.04 or incurred
under a lease permitted by subsection 3D.04
(iv) any existing indebtedness fully disclosed in Borrower's Most
Recent 3A.01 Financial Statements or in the Supplemental Schedule
or any renewal or extension thereof in whole or in part or
(v) borrowings provided for in the Indenture between Atlantis
Group, Inc., and American Stock Transfer & Trust Company dated
February 22, 1993 (the "Indenture"),
(vi) Intercompany debt of Borrower.
3D.04 LIENS, LEASES -- Atlantis Plastics Injection Molding, Inc.
will not
(a) lease any property as lessee or acquire or hold any property
subject to any land contract, inventory consignment or other title
retention contract,
(b) sell or otherwise transfer any Receivables, whether with or
without recourse, or
(c) suffer or permit any property now owned or hereafter acquired
by it to be or become encumbered by any mortgage, security
interest, lien or financing statement.
PROVIDED, that this subsection shall not apply to
(i) any tax lien, or any lien securing workers' compensation or
unemployment insurance obligations, or any mechanic's, carrier's or
landlord's lien, or any lien arising under ERISA, or any security
interest arising under article four (bank deposits and collections)
or five (letters of credit) of the Uniform Commercial Code, or any
similar security interest or other lien, EXCEPT that this clause
(i) shall apply only to security interests and other liens arising
by operation of law (whether statutory or common law) and in the
ordinary course of business and shall not apply to any security
interest or other lien that secures any indebtedness for borrowed
money or any Guaranty thereof or any obligation that is in Material
default in any manner (other than any default contested in good
faith by timely and appropriate proceedings effective to stay
enforcement of the security interest or other lien in question),
(ii) zoning or deed restrictions, public utility easements, minor
title irregularities and similar matters having no adverse effect
as a practical matter on the ownership or use of any of the
property in question,
(iii) any lien securing or given in lieu of surety, stay, appeal
or performance bonds, or securing performance of contracts or bids
(other than contracts for the payment of money borrowed), or
deposits required by law or governmental regulations or by any
court order, decree, judgment or rule or as a condition to the
transaction of business or the exercise of any right, privilege or
license, EXCEPT that this clause (iii) shall not apply to any lien
or deposit securing an obligation that is in Material default in
any manner (other than any default contested in good faith by
timely and appropriate proceedings effective to stay enforcement of
the security interest or other lien in question),
(iv) any mortgage, security interest or other lien securing only
Atlantis Plastics Injection Molding, Inc.'s Debt to Bank,
(v) any mortgage, security interest or other lien (each, a
"purchase money security interest") which is created or assumed in
purchasing, constructing or improving any real property or
equipment or to which any such property is subject when purchased,
PROVIDED, that (A) the purchase money security interest shall be
confined to the aforesaid property, (B) the indebtedness secured
thereby does not exceed the total cost of the purchase,
construction or improvement and (C) any such indebtedness, if
repaid in whole or in part, cannot be reborrowed,
(vi) any mortgage, security interest or other lien which (together
with the indebtedness secured thereby) is fully disclosed in
Borrower's Most Recent 3A.01 Financial Statements or in the
Supplemental Schedule
(vii) any financing statement perfecting a security interest that
would be permissible under this subsection or
(viii) liens provided for in the Indenture.
3D.05 FIXED ASSETS -- Atlantis Plastics Injection Molding, Inc.
will not invest (net after trade-ins, if any) in fixed assets and
leasehold improvements during any fiscal year (commencing with the
present year) more than seven million five hundred thousand
dollars($7,500,000.00) plus its allowable obsolescence,
amortization and depreciation charges for that year.
3D.06 OPERATING INCOME -- Atlantis Plastics Injection Molding,
Inc. shall maintain a minimum controllable operating income of
$4,000,000.00, defined as EBIDAT minus depreciation plus corporate
services allocation which shall be tested at each fiscal year end.
4A. CLOSING -- Prior to or at the execution and delivery of this
Agreement Borrower shall have complied or caused compliance with
each of the following:
4A.01 SUBJECT NOTE -- Borrower shall have executed and delivered
a Subject Note to Bank in accordance with subsection 2B.01.
4A.02 RESOLUTIONS/INCUMBENCY -- Borrower's secretary or assistant
secretary shall have certified to Bank (a) a copy of resolutions
duly adopted by Borrower's board of directors in respect of this
Agreement and (b) the names and true signatures of officers
authorized to execute and deliver this Agreement and Related
Writings on behalf of Borrower.
4A.03 LEGAL OPINION -- Borrower's counsel shall have rendered to
Bank their written opinion in respect of the matters referred to in
subsections 4B.01, 4B.02, 4B.03 and 4B.04 and in respect of the
perfection of each mortgage, security interest or other lien
referred to in this section 4A, which opinion shall be in such form
and substance (and may be subject only to such qualifications and
exceptions, if any) as shall be satisfactory to Bank.
4A.04 SECURITY AGREEMENTS -- Atlantis Plastics, Injection Molding,
Inc., shall have executed and delivered to Bank security agreements
being in form and substance satisfactory to Bank and granting Bank
security interests in and to all of Borrower's existing and the
equipment listed in the Security Agreement of even date herewith
and any replacements or proceeds thereof, and in all of Borrower's
inventory and Receivables as security for Borrower's Debt to Bank.
Borrower shall have joined with Bank in executing and filing such
financing statements and other documents and in making and doing
such further and other acts and things as Bank may deem necessary
for the evidence, perfection or other protection of Bank's security
interests. So long as there remains outstanding amounts do under
this agreement or any other obligations of Borrower to Bank,
Atlantis Plastics Injection Molding, Inc. shall keep all collateral
(which Bank shall have a perfected security interest in) securing
the obligations at the Warren, Ohio facilities
4A.05 MORTGAGES -- Atlantis Plastics Injection Molding, Inc. shall
have executed and delivered to Bank as security for Borrower's Debt
to Bank a mortgage or mortgages being in form and substance
satisfactory to Bank and constituting the first mortgage lien on
real properties having a post office address of 1512 Phoenix Road,
NE, Warren, Ohio 44483. Atlantis Plastics Injection Molding, Inc.
shall have furnished to Bank in respect of those properties, at its
expense, (a) a mortgagee's policy of title insurance issued in
such amount as Bank may reasonably require by an insurer
satisfactory to Bank, (b) a professional environmental assessment,
(c) a survey by a registered surveyor and (d) an appraisal by an
appraiser satisfactory to Bank.
4A.06 DOCUMENTATION FEE -- Borrower shall pay Bank a documentation
fee of Three Thousand Dollars ($3,000.00).
4B. WARRANTIES -- Subject only to such additions and exceptions,
if any, as may be set forth in the Supplemental Schedule or in
Borrower's Most Recent 3A.01 Financial Statements, Borrower
represents and warrants as follows:
4B.01 EXISTENCE -- Atlantis Plastics Injection Molding, Inc. is a
duly organized and validly existing Kentucky corporation in good
standing. Atlantis Plastics Injection Molding, Inc. has no
subsidiaries. Atlantis Plastics, Inc. is a duly organized and
validly existing Florida corporation in good standing. Exhibit D
sets forth the name of each of the Subsidiaries of Atlantis
Plastics, Inc., the address of its chief executive office and the
jurisdiction in which it is incorporated. Each Subsidiary is a
duly organized and validly existing corporation in good standing
where incorporated, and all of its outstanding stock is fully paid
and non-assessable and owned by Atlantis Plastics, Inc. free from
any security interest, option, equity or other right of any kind
EXCEPT to the extent, if any, set forth in Exhibit D. Each
Borrower and Subsidiary is duly qualified to transact business in
each state or other jurisdiction in which it owns or leases any
real property or in which the nature of the business conducted
makes such qualification necessary or, if not so qualified, such
failure to qualify will have no Material adverse effect upon the
financial condition of Borrower and the Subsidiaries and their
ability to transact business, all on a consolidated basis.
4B.02 GOVERNMENTAL RESTRICTIONS -- To the best of Borrower's
knowledge, after reasonable inquiry, no registration with or
approval of any governmental agency of any kind is required on the
part of either Borrower for the due execution and delivery or for
the enforceability of this Agreement or any Related Writing other
than the filing or recording of documents with public officials,
the noting of title certificates and similar acts and things
related to the perfection of the mortgages, security interests and
other liens referred to in section 4A.
4B.03 CORPORATE AUTHORITY -- Each Borrower has requisite corporate
power and authority to enter into this Agreement and to obtain and
secure the Subject Loan in accordance with this Agreement. The
officer executing and delivering this Agreement on behalf of each
Borrower has been duly authorized to do so and to execute and
deliver a Subject Note and other Related Writings in accordance
with section 4A. Neither the execution and delivery of this
Agreement or any Related Writing by either Borrower nor its
performance and observance of the respective provisions thereof
will violate any existing provision in its articles of
incorporation, regulations or by-laws or any applicable law or
violate or otherwise constitute a default under any contract or
other obligation now existing and binding upon it. Upon the
execution and delivery thereof, this Agreement and the aforesaid
Related Writings will each become a valid and binding obligation
enforceable against Borrower according to their respective tenors
subject, however, to any applicable insolvency or bankruptcy law of
general applicability and general principles of equity.
4B.04 LITIGATION -- No litigation or proceeding is pending against
Borrower before any court, administrative agency or arbitrator
which might, if successful, have a Material adverse effect on
Borrower.
4B.05 TAXES -- Borrower has filed all federal, state and local tax
returns which are required to be filed by it and paid all taxes due
as shown thereon (EXCEPT to the extent, if any, permitted by
subsection 3C.01).
4B.06 TITLE -- Atlantis Plastics Injection Molding, Inc. has good
and marketable title to all assets reflected in its Most Recent
3A.01 Financial Statements EXCEPT for changes resulting from
transactions in the ordinary course of business. All such assets
are clear of any mortgage, security interest or other lien of any
kind other than any permitted by subsection 3D.04.
4B.07 LAWFUL OPERATIONS -- Borrower's operations, as of the date
of closing, are and shall continue to be in Material compliance
with all applicable requirements imposed by law, whether federal,
state or local, whether statutory, regulatory or other, including
(without limitation) ERISA, all Environmental Laws, and
occupational safety and health laws and all zoning ordinances.
Without limiting the generality of the foregoing,
(a) no environmental condition exists at, on or under any facility
or other property now or previously owned by Borrower, and Borrower
has not received any notice from any governmental agency or court
that it is in violation of any Environmental Law that would have a
Material effect on Borrower or its operations;
(b) No Material Accumulated Funding Deficiency exists in respect
of any of Borrower's Pension Plans; and no Reportable Event has
occurred in respect of any such plan which is continuing and which
constitutes grounds either for termination of the plan or for court
appointment of a trustee for the administration thereof; and
(c) Borrower has provided Bank with a Phase I environmental site
assessment on the Mortgaged Property.
4B.08 INSURANCE -- Borrower's insurance coverage complies with the
standards set forth in subsection 3C.04 and those set forth in the
Related Writings referred to in subsections 4A.04 and 4A.05.
4B.09 FINANCIAL STATEMENTS -- Each of the financial statements
referred to in subsection 3A.01 has been prepared in accordance
with generally accepted accounting principles applied on a basis
consistent with those used by Borrower during its then next
preceding full fiscal year EXCEPT to the extent, if any,
specifically noted therein and fairly presents in all Material
respects (subject to routine year-end audit adjustments in the case
of the unaudited financial statements) its financial condition as
of the date thereof (including a full disclosure of Material
contingent liabilities, if any) and the results of its operations,
if any, for the fiscal period then ending. There has been no
Material adverse change in Borrower's financial condition,
properties or business since the date of Borrower's Most Recent
3A.01 Financial Statements nor any change in its accounting
procedures since the end of Borrower's latest full fiscal year
covered by those statements.
4B.10 DEFAULTS -- No Default Under This Agreement exists, nor will
any exist immediately after the execution and delivery of this
Agreement.
5A. EVENTS OF DEFAULT -- Each of the following shall constitute an
Event of Default hereunder:
5A.01 PAYMENTS -- If any principal included in the Subject
Indebtedness shall not be paid in full promptly when the same
becomes payable; or if any Subject Indebtedness (EXCEPT principal)
or any of Borrower's other Debt to Bank (EXCEPT any payable on
demand) shall not be paid in full promptly when the same becomes
payable and shall remain unpaid for ten (10) consecutive days
thereafter; or if such of Borrower's Debt, if any, to Bank, as may
be payable on demand shall not be paid in full within ten (10) days
after any actual demand for payment.
5A.02 OTHER INDEBTEDNESS (a) If there occurs a default or "Event
of Default" as defined in the promissory note given by Borrower to
Bank dated May 17, 1995, in the amount of $578,000.00; or (b) If
there occurs a default or "Event of Default" as defined in the
promissory note given by Borrower to Bank of even date herewith in
the amount of $1,739,000.00 or (c) If there occurs a default or
"Event of Default" as defined in the open end mortgage and security
agreement executed by Borrower of even date herewith; (d) if there
occurs a payment default, or any default which has a Material
adverse effect on Borrower's operations, by Borrower with any
creditor.
5A.03 WARRANTIES -- If any representation, warranty or statement
made in this Agreement or in any Related Writing referred to in
section 4A shall be false or erroneous in any respect; or if any
representation, warranty or statement hereafter made by or on
behalf of Borrower in any Related Writing not referred to in
section 4A shall be false or erroneous in any Material respect.
5A.04 COVENANTS WITHOUT GRACE -- If Borrower shall fail or omit to
perform or observe any provisions in subsections 3A.02 or 3B.
5A.05 COVENANTS WITH GRACE -- If anyone (other than Bank and its
agents) shall fail or omit to perform and observe any agreement
(other than those referred to in subsections 5A.01, 5A.02 or 5A.04)
contained in this Agreement or any Related Writing that is on its
part to be complied with, and that failure or omission shall not
have been fully corrected within forty-five (45) days after the
giving of written notice to Borrower by Bank that it is to be
remedied.
5A.06 CROSS-DEFAULT -- If any of Atlantis Plastics Injection
Molding, Inc.'s indebtedness for borrowed money (regardless of
maturity) or any of its Funded Indebtedness shall be or become "in
default" (as defined below). In this subsection, in default means
that (a) there shall have occurred (or shall exist) in respect of
the indebtedness in question (either as in effect at the date of
this Agreement or as in effect at the time in question) any event,
condition or other thing which constitutes, or which with the
giving of notice or the lapse of any applicable grace period or
both would constitute, a default which accelerates (or permits any
creditor or creditors or representative or creditors to accelerate)
the maturity of any such indebtedness; or (b) any such
indebtedness (other than any payable on demand) shall not have been
paid in full at its stated maturity; or (c) any such indebtedness
payable on demand shall not have been paid in full within ten (10)
Banking Days after any actual demand for payment.
5A.07 BORROWER'S SOLVENCY -- If (a) either Borrower shall
discontinue operations, or (b) either Borrower shall commence any
Insolvency Action of any kind or admit (by answer, default or
otherwise) the Material allegations of, or consent to any relief
requested in, any Insolvency Action of any kind commenced against
that Borrower by its creditors or any thereof, or (c) any creditor
or creditors shall commence against either Borrower any Insolvency
Action of any kind which shall remain in effect (neither dismissed
nor stayed) for thirty (30) consecutive days.
5B. EFFECTS OF DEFAULT -- Notwithstanding any contrary provision
or inference in this Agreement or in any Related Writing:
5B.01 OPTIONAL DEFAULTS -- If any Event of Default referred to in
subsection 5A.01 through 5A.06, both inclusive, shall occur and be
continuing, Bank shall have the right in its discretion, by giving
written notice to Borrower, subject to applicable grace periods, if
any.
(a) to terminate the Subject Commitment (if not already expired or
reduced to zero pursuant to section 2A or terminated pursuant to
this section) and Bank shall have no obligation thereafter to grant
any Subject Loan to Borrower, and
(b) to accelerate the maturity of all of Borrower's Debt to Bank
(other than Debt, if any, already due and payable), and all such
Debt shall thereupon become and thereafter be immediately due and
payable in full without any presentment or demand and without any
further or other notice of any kind, all of which are hereby waived
by Borrower.
5B.02 AUTOMATIC DEFAULTS -- If any Event of Default referred to in
subsection 5A.07 shall occur,
(a) the Subject Commitment shall automatically and immediately
terminate (if not already expired or reduced to zero pursuant to
section 2A or terminated pursuant to this section) and Bank shall
have no obligation thereafter to grant any Subject Loan to
Borrower, and
(b) all of Borrower's Debt to Bank (other than Debt, if any,
already due and payable) shall thereupon become and thereafter be
immediately due and payable in full, all without any presentment,
demand or notice of any kind, which are hereby waived by Borrower.
5B.03 OFFSETS -- If there shall occur or exist any Default Under
This Agreement referred to in subsection 5A.07, then, so long as
that Default Under This Agreement exists, Bank shall have the right
at any time to set off against and to appropriate and apply toward
the payment of the Subject Indebtedness then owing to it, whether
or not the same shall then have matured, any and all deposit
balances then owing by Bank to or for the credit or account of
Borrower, all without notice to or demand upon Borrower, all such
notices and demands being hereby expressly waived.
6A. INDEMNITY: GOVERNMENTAL COSTS/LIBOR LOANS -- If
(a) there shall be introduced or changed any treaty, statute,
regulation or other law, or there shall be made any change in the
interpretation or administration thereof, or there shall be made
any request from any central bank or other lawful governmental
authority, the effect of any of which events shall be to (1)
impose, modify or deem applicable any reserve or special deposit
requirements against assets held by or deposits in or loans by any
national banking association (whether or not applicable to Bank) or
by Bank or (2) subject Bank to any tax, duty, fee, deduction or
withholding or (3) change the basis of taxation of payments due to
Bank from Borrower (otherwise than by a change in taxation of
Bank's overall net income) or (4) impose on Bank any penalty in
respect of any LIBOR Loans and
(b) in Bank's reasonable opinion any such event (1) increases
(or, if the event were applicable to Bank, would increase) the cost
of making, funding or maintaining any LIBOR Loan or (2) reduces
the amount of any payment to be made to Bank in respect of the
principal or interest on any LIBOR Loan or other payment under this
Agreement,
then, upon Bank's demand, Borrower shall from time to time pay Bank
an amount equal to each such cost increase or reduced payment, as
the case may be.
6B. INDEMNITY: FUNDING COSTS -- Borrower agrees to indemnify Bank
against any loss relating in any way to its funding of any LIBOR
Loan paid before its stated maturity (whether a prepayment or a
payment following any acceleration of maturity) and to pay Bank, as
liquidated damages for any such loss, an amount (discounted to the
present value in accordance with standard financial practice at a
rate equal to the treasury yield) equal to interest computed on the
principal payment from the payment date to the respective stated
maturities thereof at a rate equal to the difference of the
contract rate less the treasury yield, all as determined by Bank in
its reasonable discretion. TREASURY YIELD means the annual yield
on direct obligations of the United States having a principal
amount and maturity similar to that of the principal being paid.
6C. CREDIT REQUESTS -- Whenever Borrower shall revoke any Credit
Request for a LIBOR Loan, or shall for any other reason fail to
borrow pursuant thereto or otherwise comply therewith, or shall
fail to honor any prepayment notice, then, in each case on Bank's
reasonable demand, Borrower shall pay Bank such amount as will
compensate it for any loss, cost or expense incurred by it by
reason of its liquidation or reemployment of deposits or other
funds.
6D. INDEMNITY: UNFRIENDLY TAKEOVERS -- Borrower agrees to
indemnify Bank and hold Bank harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind
(including, without limitation, the reasonable fees and
disbursements of counsel in connection with any investigative,
administrative or judicial proceeding, whether or not Bank shall be
designated a party thereto) which may be incurred by Bank relating
to or arising out of any actual or proposed use of proceeds of the
Subject Loans in connection with the financing of an acquisition of
any corporation or other business entity, PROVIDED that Bank shall
have no right to be indemnified hereunder for its own gross
negligence or willful misconduct as determined by a court of
competent jurisdiction.
6E. INDEMNITY: CAPITAL REQUIREMENTS -- If
(a) at any time any governmental authority shall require National
City Corporation or Bank, whether or not the requirement has the
force of law, to maintain, as support for the Subject Commitment,
capital in a specified minimum amount that either is not required
or is greater than that required at the date of this Agreement,
whether the requirement is implemented pursuant to the "risk-based
capital guidelines" (published at 12 CFR 3 in respect of "national
banking associations", 12 CFR 208 in respect of "state member
banks" and 12 CFR 225 in respect of "bank holding companies") or
otherwise, and
(b) as a result thereof the rate of return on capital of National
City Corporation or Bank or both (taking into account their then
policies as to capital adequacy and assuming full utilization of
their capital) shall be directly or indirectly reduced by reason of
any new or added capital thereby allocable to the Subject
Commitment,
then and in each such case Borrower shall, on Bank's demand, pay
Bank as an additional fee such amounts as will in Bank's reasonable
opinion reimburse National City Corporation and Bank for any such
reduced rate of return.
6F. INDEMNITY: COLLECTION COSTS -- If any Event of Default shall
occur and shall be continuing, Borrower will pay Bank such further
amounts, to the extent permitted by law, as shall cover Bank's
costs and expenses (including, without limitation, the reasonable
fees, interdepartmental charges and disbursements of its counsel)
incurred in collecting the Subject Indebtedness or in otherwise
enforcing its rights and remedies in respect thereof.
6G. CERTIFICATE FOR INDEMNIFICATION -- Each demand by Bank for
payment pursuant to section 6A, 6B, 6C, 6D, 6E or 6F shall be
accompanied by a certificate setting forth the reason for the
payment, the amount to be paid, and the computations and
assumptions in determining the amount, which certificate shall be
presumed to be correct in the absence of manifest error. In
determining the amount of any such payment, Bank may use reasonable
averaging and attribution methods.
7. BANK'S PURPOSE -- Bank represents and warrants to Borrower that
Bank is familiar with the Securities Act of 1933 as amended and the
rules and regulations thereunder and is not entering into this
Agreement with any intention of violating that Act or any rule or
regulation thereunder, it being understood, however, that Bank
shall at all times retain full control of the disposition of its
assets.
8. INTERPRETATION -- This Agreement and the Related Writings shall
be governed by the following provisions:
8.01 WAIVERS -- Bank may from time to time in its discretion grant
Borrower waivers and consents in respect of this Agreement or any
Related Writing or assent to amendments thereof, but no such waiver
or consent shall be binding upon Bank unless specifically granted
by Bank in writing, which writing shall be strictly construed.
Without limiting the generality of the foregoing, Borrower agrees
that no course of dealing in respect of, nor any omission or delay
in the exercise of, any right, power or privilege by Bank shall
operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any further or other exercise thereof or
of any other, as each such right, power or privilege may be
exercised either independently or concurrently with others and as
often and in such order as Bank may deem expedient.
8.02 CUMULATIVE PROVISIONS -- Each right, power or privilege
specified or referred to in this Agreement or any Related Writing
is in addition to and not in limitation of any other rights, powers
and privileges that Bank may otherwise have or acquire by operation
of law, by other contract or otherwise.
8.03 BINDING EFFECT -- The provisions of this Agreement and the
Related Writings shall bind and benefit Borrower and Bank and their
respective successors and assigns, including each subsequent
holder, if any, of the Subject Notes or any thereof; PROVIDED, that
no person or entity other than Borrower may obtain Subject Loans;
and PROVIDED, further, that neither any holder of any Subject Note
or assignee of any Subject Loan, whether in whole or in part, shall
thereby become obligated thereafter to grant Borrower any Subject
Loan.
8.04 SURVIVAL OF PROVISIONS -- All representations and warranties
made in or pursuant to this Agreement or any Related Writing shall
survive the execution and delivery of this Agreement and the
Subject Notes. The provisions of sections 6A, 6B, and 6C shall
survive the payment of the Subject Indebtedness, by six (6) months
thereafter and sections 6D and 6F shall survive the payment of the
indebtedness indefinitely.
8.05 IMMEDIATE U.S. FUNDS -- Any reference to money is a reference
to lawful money of the United States of America which, if in the
form of credits, shall be in immediately available funds.
8.06 CAPTIONS -- The several captions to different sections and
subsections of this Agreement are inserted for convenience only and
shall be ignored in interpreting the provisions thereof.
8.07 SUBSECTIONS -- Each reference to a section includes a
reference to all subsections thereof (i.e., those having the same
character or characters to the left of the decimal point) EXCEPT
where the context clearly does not so permit.
8.08 ILLEGALITY -- If any provision in this Agreement or any
Related Writing shall for any reason be or become illegal, void or
unenforceable, that illegality, voidness or unenforceability shall
not affect any other provision.
8.09 OHIO LAW -- This Agreement and the Related Writings and the
respective rights and obligations of the parties hereto shall be
construed in accordance with and governed by internal Ohio law.
8.10 INTEREST/FEE COMPUTATIONS -- All interest and all fees for
any given period shall accrue on the first day thereof but not on
the last day thereof and in each case shall be computed on the
basis of a 360-day year and the actual number of days elapsed. In
no event shall interest accrue at a higher rate than the maximum
rate, if any, permitted by law.
8.11 NOTICE -- A notice to or request of Borrower shall be deemed
to have been given or made under this Agreement or any Related
Writing either upon the delivery of a writing to that effect
(either in person or by transmission of a telecopy) to an officer
of Borrower or five (5) days after a writing to that effect shall
have been deposited in the United States mail and sent, with
postage prepaid, by registered or certified mail, properly
addressed to Borrower (Attention: chief financial officer). No
other method of actually giving actual notice to or making a
request of Borrower is hereby precluded. Every notice required to
be given to Bank pursuant to this Agreement or any Related Writing
shall be delivered (either in person or by transmission of a
telecopy) to an Account Officer of Bank. A notice or request by
mail is properly addressed to a party when addressed to it at the
address set forth opposite its signature below or at such other
address as that party may furnish to each of the others in writing
for that purpose. A telecopy is transmitted to a party when
transmitted to the telecopy number set forth opposite that party's
signature below (or at such other telecopy number as that party may
furnish to the other in writing for that purpose).
8.12 ACCOUNTING TERMS -- Any accounting term used in this
Agreement shall have the meaning ascribed thereto by GAAP subject,
however, to such modification, if any, as may be provided by
section 9 or elsewhere in this Agreement.
8.13 ENTIRE AGREEMENT -- This Agreement and the Related Writings
referred to in or otherwise contemplated by this Agreement set
forth the entire agreement of the parties as to the transactions
contemplated by this Agreement.
8.14 WAIVER OF JURY TRIAL -- The parties acknowledge and agree
that any controversy that may arise under this Agreement and the
Related Writings would involve difficult and complex issues and
therefore agree that any law suit growing out of or incidental to
any such controversy will be tried in a court of competent
jurisdiction by a judge sitting without a jury.
8.15 LATE CHARGE; APPLICATION OF PAYMENTS -- If Borrower fails to
pay any amount due hereunder, or any fee in connection herewith, in
full within ten (l0) days after its due date, Borrower will, in
each case, incur and shall pay a late charge equal to the greater
of twenty dollars ($20.00) or five percent (5%) of the unpaid
amount. The payment of a late charge will not cure or constitute
a waiver of any Event of Default under this Agreement. Except as
otherwise agreed in writing, payments will be applied first to
accrued but unpaid interest and fees, in that order, on an invoice
by invoice basis in the order of their respective due dates, until
paid in full, then to late charges and then to principal.
9. DEFINITIONS -- As used in this Agreement and in the Related
Writings, EXCEPT where the context clearly requires otherwise,
ACCOUNT OFFICER means that officer who at the time in question is
designated by Bank as the officer having primary responsibility for
giving consideration to Borrower's requests for credit or, in that
officer's absence, that officer's immediate superior or any other
officer who reports directly to that superior officer;
ACCUMULATED FUNDING DEFICIENCY shall have the meaning ascribed
thereto in section 302(a)(2) of ERISA;
AGREEMENT means this Agreement and includes each amendment, if any,
to this Agreement;
BANK means National City Bank, Northeast, a national banking
association headquartered in Akron, Ohio;
BANKING DAY means (a) in the case of a LIBOR Loan, a day on which
banks in the London Interbank Market deal in United States dollar
deposits and on which banking institutions are generally open for
domestic and international business in Youngstown, Ohio and in New
York City and (b) in any other case, any day other than a Saturday
or a Sunday or a public holiday or other day on which banking
institutions in Youngstown, Ohio, are generally closed and do not
conduct a general banking business;
BORROWER means Atlantis Plastics Injection Molding, Inc., a
Kentucky corporation and Atlantis Plastics, Inc., a Florida
corporation;
BORROWING BASE is defined in Subsection 2B.08;
BORROWING BASE REPORT means a report furnished by Borrower pursuant
to Clause (h) of Subsection 3A.01;
CONTRACT PERIOD is defined in subsection 2B.07;
CREDIT REQUEST means a request made pursuant to subsection 2B.02;
CURRENT ASSETS means the net book value of all such assets (after
deducting applicable reserves, if any, and without consideration to
any reappraisal or write-up of assets) as determined in accordance
with GAAP;
CURRENT LIABILITIES means all such liabilities as determined in
accordance with GAAP and includes (without limitation) all accrued
taxes and all principal of any Funded Indebtedness maturing within
twelve months of the date of determination;
DEBT means, collectively, all liabilities of the party or parties
in question to Bank, whether owing by one such party alone or with
one or more others in a joint, several, or joint and several
capacity, whether now owing or hereafter arising, whether owing
absolutely or contingently, whether created by loan, overdraft,
Guaranty of payment or other contract or by quasi-contract or tort,
statute or other operation of law or other, and whether
participated to or from Bank in whole or in part; and in the case
of Borrower includes, without limitation, the Subject Indebtedness;
DEFAULT UNDER ERISA means (a) the occurrence or existence of a
Material Accumulated Funding Deficiency in respect of Borrower's
Pension Plans, (b) any failure by Borrower to make a full and
timely payment of premiums required by ERISA for insurance against
any employer's liability in respect of any such plan, (c) any
Material breach of a fiduciary duty by Borrower or trustee in
respect of any such plan or (d) the existence of any action for
the forceable termination of any such plan;
DEFAULT UNDER THIS AGREEMENT means an event, condition or thing
which constitutes (or which with the lapse of any applicable grace
period or the giving of notice or both would constitute) an Event
of Default referred to in section 5A and which has not been
appropriately waived in writing in accordance with this Agreement
or corrected to Bank's full satisfaction;
DISTRIBUTION means a payment made, liability incurred or other
consideration (other than any stock dividend or stock split payable
solely in capital stock of Borrower) given by Borrower for the
purchase, acquisition, redemption or retirement of any capital
stock of Borrower or as a dividend, return of capital or other
distribution in respect of Borrower's capital stock; and Distribute
means to make a Distribution;
ELIGIBLE INVENTORY means, collectively, all of Borrower's Inventory
EXCEPT the following:
(a) any finished goods which have been returned to Borrower after
sale or lease thereof or which are defective, unmerchantable, or
obsolete in Bank's good faith and commercially reasonable judgment,
(b) any Inventory not located in the United States of America or
in Canada, unless the Inventory is in undelayed transit to the
United States of America,
(c) any work-in-process,
(d) any Inventory covered by a negotiable warehouse receipt or
other negotiable document of title issued by a bailee,
warehouseman, or similar party,
(e) any Inventory subject to any consignment, lease or other title
retention contract and
(f) any Inventory subject to any security interest or financing
statement securing any indebtedness other than Borrower's Debt to
Bank or subject to any non-consensual lien securing any delinquent
obligation;
ELIGIBLE RECEIVABLE means a Receivable owing to Borrower EXCEPT the
following:
(a) any Receivable (other than an installment Receivable) which
remains unpaid for more than ninety (90) days after its due date or
for more than ninety (90) days after the date first invoiced to the
account debtor, whichever first elapses,
(b) any installment Receivable if any installment thereof shall
not have been paid in full within sixty (60) days after its due
date,
(c) any Receivable if the account debtor then owes other
Receivables to Borrower and if more than ten percent (10%), by
amount, of the Receivables then owing by that debtor are excepted
under clauses (a) and (b) above,
(d) any Receivable the payment of which by the account debtor is
not, or does not remain, unconditional,
(e) any Receivable if and to the extent that the account debtor
has asserted a defense or offset of any kind against the payment
thereof,
(f) any Receivable which according to its terms may be paid by the
account debtor by an offset of any claim of the latter against the
account creditor,
(g) any Receivable which arises other than from a sale or lease of
Inventory in the ordinary course of business or other than from the
rendering of services in the ordinary course of business,
(h) any Receivable the account debtor of which is an Affiliate or
a director, officer, employee or agent of Borrower or of any
Affiliate,
(i) any Receivable the account debtor of which is insolvent or is
the debtor in an Insolvency Action or who at the time in question
is in default in any way on an existing obligation to Borrower,
(j) any Receivable the account debtor of which is not a resident
or citizen of the United States of America or Canada or is not
subject to service of legal process in the United States of America
or Canada,
(k) any Receivable subject to any security interest or financing
statement securing any indebtedness other than Borrower's Debt to
Bank or subject to any non-consensual lien securing any delinquent
obligation, or
(l) any Receivable the collection of which Bank, in the exercise
of its reasonable judgment, for any other reason determines to have
become impaired;
ENVIRONMENTAL LAW means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 USC 9601 et seq.), the
Hazardous Material Transportation Act (49 USC 1801 et seq.), the
Resource Conservation and Recovery Act (42 USC 6901 et seq.), the
Federal Water Pollution Control Act (33 USC 1251 et seq.), the
Toxic Substances Control Act (15 USC 2601 et seq.) and the
Occupational Safety and Health Act (29 USC 651 et seq.), as such
laws have been or hereafter may be amended, and any and all
analogous future federal, or present or future state or local,
statutes and the regulations promulgated pursuant thereto;
ERISA means the Employee Retirement Income Security Act of 1974
(P.L. 93-406) as amended from time to time and in the event of any
amendment affecting any section thereof referred to in this
Agreement, that reference shall be a reference to that section as
amended, supplemented, replaced or otherwise modified;
ERISA REGULATOR means any governmental agency (such as the
Department of Labor, the Internal Revenue Service and the Pension
Benefit Guaranty Corporation) having any regulatory authority over
any of the Companies' Pension Plans;
EVENT OF DEFAULT is defined in section 5A;
Expiration Date means the date referred to as such in subsection
2A.02, EXCEPT that in the event of any extension pursuant to
subsection 2A.05, EXPIRATION DATE shall mean the latest date to
which the Subject Commitments shall have been so extended;
FUNDED INDEBTEDNESS means indebtedness of Atlantis Plastics
Injection Molding, Inc. which matures or which (including each
renewal or extension, if any, in whole or in part) remains unpaid
for more than twelve months after the date originally incurred and
includes, without limitation (a) any indebtedness (regardless of
its maturity) if it is renewable or refundable in whole or in part
solely at the option of that person or entity (in the absence of
default) to a date more than one year after the date of
determination, (b) any capitalized lease, (c) any Guaranty of
Funded Indebtedness owing by another person or entity and (d) any
Funded Indebtedness secured by a security interest, mortgage or
other lien encumbering any property owned or being acquired by the
person or entity in question even if the full faith and credit of
that person or entity is not pledged to the payment thereof;
PROVIDED, that in the case of any indebtedness payable in
installments or evidenced by serial notes or calling for sinking
fund payments, those payments maturing within twelve months after
the date of determination shall be considered current indebtedness
rather than Funded Indebtedness for the purposes of section 3B but
shall be considered Funded Indebtedness for all other purposes;
GAAP means generally accepted accounting principles applied in a
manner consistent with those used in Borrower's latest fiscal
year-end financial statements referred to in subsection 3A.01;
INSIDER, as applied to Subordinated indebtedness, refers to
Subordinated indebtedness which at the time in question is owing to
any person who is a director or officer of Borrower or who is the
record and beneficial owner of ten percent (10%) or more of
Borrower's capital stock or who is a member of the immediate family
of any such director, officer or stockholder;
INSOLVENCY ACTION means either (a) a pleading of any kind filed by
the person, corporation or entity (an "insolvent") in question to
seek relief from the insolvent's creditors, or filed by the
insolvent's creditors or any thereof to seek relief of any kind
against that insolvent, in any court or other tribunal pursuant to
any law (whether federal, state or other) relating generally to the
rights of creditors or the relief of debtors or both, or (b) any
other action of any kind commenced by an insolvent or the
insolvent's creditors or any thereof for the purpose of marshalling
the insolvent's assets and liabilities for the benefit of the
insolvent's creditors; and INSOLVENCY ACTION includes (without
limitation) a petition commencing a case pursuant to any chapter of
the federal bankruptcy code, any application for the appointment of
a receiver, trustee, liquidator or custodian for the insolvent or
any substantial part of the insolvent's assets, and any assignment
by an insolvent for the general benefit of the insolvent's
creditors;
LIBOR PRE-MARGIN RATE means the rate per annum (rounded upwards, if
necessary, to the next higher 1/16 of 1%), as determined by Bank
which equals the average rate per annum at which deposits in United
States dollars are offered for deposits of the maturity and amount
in question, at 11:00 A.M. London time (or as soon thereafter as
practicable) two Banking Days prior to the first day of the
Contract Period in question, to Bank by prime banking institutions
in any Eurodollar market reasonably selected by Bank;
LIBOR LOAN means a Subject Loan having a Contract Period described
in clause (b) of subsection 2B.07 and bearing interest in
accordance with clause (b) of subsection 2B.11;
MATERIAL means a Material adverse effect on financial conditions,
operations or business of Borrower;
MOST RECENT 3A.01 FINANCIAL STATEMENTS means Borrower's most recent
financial statements that are referred to in subsection 3A.01;
NET INCOME means Net Income as determined in accordance with GAAP,
after taxes and after extraordinary items, but without giving
effect to any gain resulting from any reappraisal or write-up of
any asset;
NET WORTH means the excess (as determined on a consolidated basis
and in accordance with GAAP) of the net book value (after deducting
all applicable valuation reserves and without consideration to any
reappraisal or write-up of assets) of the tangible assets (i.e.,
all assets other than intangibles such as patents, costs of
businesses over net assets acquired, good will and treasury stock)
of the corporation or corporations in question over their Total
Liabilities;
PENSION PLAN means a defined benefit plan (as defined in section
3(35) of ERISA) of the Companies or any thereof and includes,
without limitation, any such plan that is a multi-employer plan (as
defined in section 3(37) of ERISA) applicable to any of the
Companies' employees;
PRIME RATE means the fluctuating rate of interest which is publicly
announced from time to time by Bank at its principal place of
business as being its "prime rate" or "base rate" thereafter in
effect, with each change in the Prime Rate automatically,
immediately and without notice changing the fluctuating interest
rate thereafter applicable hereunder, it being agreed that the
Prime Rate is not necessarily the lowest rate of interest then
available from Bank on fluctuating rate loans;
RECEIVABLE means a claim for money due or to become due, whether
classified as an account, instrument, chattel paper, general
intangible, incorporeal hereditament or otherwise, and any proceeds
of the foregoing;
RELATED WRITING means any note, mortgage, security agreement, other
lien instrument, financial statement, audit report, notice, legal
opinion, Credit Request, officer's certificate or other writing of
any kind which is delivered to the Bank and which is relevant in
any manner to this Agreement or any Related Writing delivered to
Bank and includes, without limitation, the Subject Notes and the
other writings referred to in sections 3A and 4A;
REPORTABLE EVENT has the meaning ascribed thereto by ERISA;
PR LOAN means a Subject Loan maturing in the manner described in
the first sentence of subsection 2B.08 and bearing interest in
accordance with subsection 2B.11;
SUBJECT COMMITMENT means Bank's commitment to extend credit to
Borrower pursuant to sections 2A and 2B of this Agreement and upon
the terms, subject to the conditions of this Agreement and in
accordance with the other provisions of this Agreement;
SUBJECT INDEBTEDNESS means, collectively, the principal of and
interest on the Subject Loans and all fees and other liabilities,
if any, incurred by Borrower to Bank pursuant to this Agreement or
any Related Writing;
SUBJECT LOAN means a loan obtained by Borrower pursuant to this
Agreement;
SUBJECT NOTE means a note executed and delivered by Borrower and
being in the form and substance of Exhibit B with the blanks
appropriately filled;
SUBORDINATED, as applied to any liability of Borrower, means a
liability which at the time in question is subordinated (by written
instrument in form and substance satisfactory to Bank) in favor of
the prior payment in full of Borrower's Debt to Bank;
SUBSIDIARY means a corporation or other business entity if shares
constituting a majority of its outstanding capital stock (or other
form of ownership) or constituting a majority of the voting power
in any election of directors (or shares constituting both
majorities) are (or upon the exercise of any outstanding warrants,
options or other rights would be) owned directly or indirectly at
the time in question by the corporation in question or another
Subsidiary of that corporation or any combination of the foregoing;
SUPPLEMENTAL SCHEDULE means the schedule incorporated into this
Agreement as Exhibit A;
TOTAL LIABILITIES means the aggregate (without duplication) of all
liabilities of the corporation or corporations in question and
includes, without limitation, (a) any indebtedness which is
secured by any mortgage, security interest or other lien on any of
their property even if the full faith and credit of none of them is
pledged to the payment thereof, (b) any indebtedness for borrowed
money or Funded Indebtedness of any kind if any such corporation or
corporations is a Guarantor thereof and (c) any Subordinated
indebtedness; PROVIDED, that there shall be excluded any liability
under a reimbursement agreement relating to a letter of credit
issued to finance the importation or exportation of goods;
the foregoing definitions shall be applicable to the respective
plurals of the foregoing defined terms.
10. ADDITIONAL DEFINITIONS -- The following terms are defined in
the Credit Agreement dated as of February 22, 1993, as amended,
between Atlantis Plastics, Inc. and Heller Financial, Inc., which
definitions are hereby incorporated by reference: Capital
Expenditures, EBIDAT, EBIT, Fiscal Month, Fixed Charge Coverage,
Fixed Charges, Indebtedness, Interest Expense Coverage, Interest
Expense, Joint Venture and Subsidiary Guarantors, which such
definitions are attached hereto as Exhibit E.
STATE OF )
) SS.
COUNTY OF )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared as
of the above-named Corporation,
ATLANTIS PLASTICS INJECTION MOLDING, INC., who acknowledged that
he/she did sign the foregoing instrument for and on behalf of the
Corporation, by authority of its Board of Directors, and that the
same is the free act and deed of the Corporation and the free act
and deed of him/her personally and as such officer.
IN TESTIMONY, I set my hand and official seal, this day of
, 1995.
Notary Public
STATE OF )
) SS.
COUNTY OF )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared as
of the above-named
Corporation, ATLANTIS PLASTICS, INC., who acknowledged that he/she
did sign the foregoing instrument for and on behalf of the
Corporation, by authority of its Board of Directors, and that the
same is the free act and deed of the Corporation and the free act
and deed of him/her personally and as such officer.
IN TESTIMONY, I set my hand and official seal, this day of
, 1995.
Notary Public
SUPPLEMENTAL SCHEDULE
There is no item which Borrower must disclose in this Supplemental
Schedule in order to be in full compliance with subsections 3D.01,
3D.02, 3D.03 and 3D.04, nor is there any addition or exception to
the representations and warranties in section 4B.
ATLANTIS PLASTICS INJECTION MOLDING, INC.
LONG TERM DEBT 3/31/95
[CAPTION]
<TABLE>
<S> <C>
DIGITAL FINANCE COMPUTER LEASE 250,703
GE CAPITAL FINANCE 2,648,453
ARKANSAS DEVELOP FINANCE AUTHORITY 1,359,716
BALANCE SHEET $4,258,872
CURRENT PORTION L-T DEBT 449,848
LONG TERM DEBT 3,809,024
$4,258,872
</TABLE>
EXHIBIT A
NOTE
$1,300,000.00 Youngstown, Ohio, May , 1995
FOR VALUE RECEIVED, the undersigned, ATLANTIS PLASTICS INJECTION
MOLDING, INC. (BORROWER), a Kentucky corporation, and ATLANTIS
PLASTICS, INC., a Florida corporation, jointly and severally
promise to pay to the order of NATIONAL CITY BANK, NORTHEAST, at
the payee's main office in Youngstown, Ohio, the principal sum of
ONE MILLION THREE HUNDRED THOUSAND AND 00/100THS DOLLARS
(or, if less, the aggregate unpaid principal balance from time to
time shown on the reverse side), together with interest computed
thereon in accordance with the Credit Agreement referred to below,
which principal and interest is payable in accordance with the
provisions in the Credit Agreement.
This note is issued pursuant to a certain Agreement (the "Credit
Agreement") made as of , 1995 by and between the
payee and Borrower. The Credit Agreement contains definitions
applicable to this note, provisions governing the making of loans,
the acceleration of the maturity thereof, rights of prepayment and
other provisions applicable to this note. Each endorsement, if
any, on the reverse side of this note (or any allonge thereto)
shall be prima facie evidence of the data so endorsed.
Borrower hereby authorizes any attorney at law at any time or times
to appear in any state or federal court of record in the United
States of America after the indebtedness represented by this note
shall have become due, whether by lapse of time or by acceleration
of maturity, to waive the issuance and service of process, to
present this note (together with any endorsement or endorsements
thereon) to the court, to admit the maturity thereof and the
nonpayment thereof when due, to confess judgment against Borrower
in favor of the holder of this note for the full amount then
appearing due, together with interest and costs of suit, and
thereupon to release all errors and waive all rights of appeal and
stay of execution. The foregoing warrant of attorney shall survive
any judgment, it being understood that should any judgment against
Borrower be vacated for any reason, the holder of this note may
nevertheless utilize the foregoing warrant of attorney in
thereafter obtaining additional judgment or judgments against
Borrower.
Address: ATLANTIS PLASTICS INJECTION
Highway 60, West MOLDING, INC.
P.O. Box 3
Henderson, Kentucky 42420 By:
Telecopy (502) 827-9841
Title:
Address: ATLANTIS PLASTICS, INC.
1870 The Exchange
Suite 200 By:
Atlanta, Georgia 30339
( ) - Title:
WARNING BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE
TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A
COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU
MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
EXHIBIT B
EXTENSION AGREEMENT
This extension agreement made as of , 19 by and
between ATLANTIS PLASTICS INJECTION MOLDING, INC. and ATLANTIS
PLASTICS, INC. (collectively, BORROWER) and NATIONAL CITY BANK,
NORTHEAST (BANK):
The parties have executed and delivered a certain credit agreement
dated , 1995 which provides for, among other things, a
Subject Commitment aggregating $ and available to
Borrower, upon certain terms and conditions until
, 1996 (the EXPIRATION DATE now in effect) subject to any
earlier reduction or termination pursuant to the credit agreement.
In consideration of our mutual agreements and for other valuable
considerations, the parties agree that subsection 2A.02 of the
credit agreement (captioned "TERM") is hereby amended by deleting
the date , 19 and by substituting therefor the
date " , 19 ", which latter date shall be the
EXPIRATION DATE hereafter in effect.
In all other respects the credit agreement shall remain in full
force and effect.
Address: ATLANTIS PLASTICS INJECTION
Highway 60, West MOLDING, INC.
P.O. Box 3
Henderson, Kentucky 42420 By:
Telecopy (502) 827-9841
Title:
Address: ATLANTIS PLASTICS, INC.
1870 The Exchange
Suite 200
Atlanta, Georgia 30339 By:
( ) -
Title:
Address: NATIONAL CITY BANK, NORTHEAST
20 Federal Plaza
Youngstown, Ohio 44503 By:
Telecopy: (216) 742-4308
Title:
EXHIBIT C
LIST OF SUBSIDIARIES OF ATLANTIS PLASTICS, INC.
(S. 4B.01)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
Address of its Jurisdiction
Name of Chief Executive Where Equity
Subsidiary Office Incorporated Ownership
Atlantis Plastics,
Inc.
Linear Films
National Poly
Pierce Plastics
Plastic Containers
Western Pioneer
Stretch Films
Institutional Films
Custom Films
Rigal Plastics
</TABLE>
EXHIBIT D
C R E D I T A G R E E M E N T
between
ATLANTIS PLASTICS INJECTION MOLDING, INC.
and
ATLANTIS PLASTICS, INC.,
and
NATIONAL CITY BANK, NORTHEAST
, 1995
TABLE OF CONTENTS
1A. CROSS-REFERENCE . . . . . . . . . . . . . .
1B. SUMMARY . . . . . . . . . . . . . . . . . .
2A. SUBJECT COMMITMENT. . . . . . . . . . . . .
2A.01 AMOUNT. . . . . . . . . . . . . . . . . . .
2A.02 TERM. . . . . . . . . . . . . . . . . . . .
2A.03 OPTIONAL REDUCTIONS . . . . . . . . . . . .
2A.04 COMMITMENT FEE. . . . . . . . . . . . . . .
2A.05 EXTENSION OF SUBJECT COMMITMENT . . . . . .
2B. SUBJECT LOANS . . . . . . . . . . . . . . .
2B.01 SUBJECT NOTE. . . . . . . . . . . . . . . .
2B.02 CREDIT REQUESTS . . . . . . . . . . . . . .
2B.03 CONDITION: NO DEFAULT. . . . . . . . . . .
2B.04 CONDITION: PURPOSE . . . . . . . . . . . .
2B.05 LOAN MIX. . . . . . . . . . . . . . . . . .
2B.06 AMOUNT. . . . . . . . . . . . . . . . . . .
2B.07 CONTRACT PERIODS. . . . . . . . . . . . . .
2B.08 BORROWING BASE. . . . . . . . . . . . . . .
2B.09 BORROWING BASE MAINTENANCE. . . . . . . . .
2B.10 MATURITIES. . . . . . . . . . . . . . . . .
2B.11 ROLLOVER. . . . . . . . . . . . . . . . . .
2B.12 INTEREST PR LOANS. . . . . . . . . . . . .
2B.13 INTEREST: LIBOR LOANS . . . . . . . . . . .
2B.14 DISBURSEMENT. . . . . . . . . . . . . . . .
2B.15 PREPAYMENTS . . . . . . . . . . . . . . . .
2B.16 LIBOR LOANS: UNAVAILABILITY. . . . . . . .
2B.17 LIBOR LOANS: ILLEGALITY. . . . . . . . . .
3A. INFORMATION . . . . . . . . . . . . . . . .
3A.01 FINANCIAL STATEMENTS. . . . . . . . . . . .
3A.02 NOTICE. . . . . . . . . . . . . . . . . . .
3B. GENERAL FINANCIAL STANDARDS . . . . . . . .
3B.01 CAPITAL EXPENDITURE LIMITS. . . . . . . . .
3B.02 FIXED CHARGE COVERAGE . . . . . . . . . . .
3B.03 INTEREST EXPENSE COVERAGE . . . . . . . . .
3B.03 INDEBTEDNESS TO EBIDAT. . . . . . . . . . .
3B.05 EBIDAT. . . . . . . . . . . . . . . . . . .
3C. AFFIRMATIVE COVENANTS . . . . . . . . . . .
3C.01 TAXES . . . . . . . . . . . . . . . . . . .
3C.02 FINANCIAL RECORDS . . . . . . . . . . . . .
3C.03 VISITATION. . . . . . . . . . . . . . . . .
3C.04 INSURANCE . . . . . . . . . . . . . . . . .
3C.05 CORPORATE EXISTENCE . . . . . . . . . . . .
3C.06 COMPLIANCE WITH LAW . . . . . . . . . . . .
3C.07 PROPERTIES. . . . . . . . . . . . . . . . .
3D. NEGATIVE COVENANTS. . . . . . . . . . . . .
3D.01 EQUITY TRANSACTIONS . . . . . . . . . . . .
3D.02 CREDIT EXTENSIONS . . . . . . . . . . . . .
3D.03 BORROWINGS. . . . . . . . . . . . . . . . .
3D.04 LIENS, LEASES . . . . . . . . . . . . . . .
3D.05 FIXED ASSETS. . . . . . . . . . . . . . . .
3D.06 OPERATING INCOME. . . . . . . . . . . . . .
4A. CLOSING . . . . . . . . . . . . . . . . . .
4A.01 SUBJECT NOTE. . . . . . . . . . . . . . . .
4A.03 LEGAL OPINION . . . . . . . . . . . . . . .
4A.04 SECURITY AGREEMENTS . . . . . . . . . . . .
4A.05 MORTGAGES . . . . . . . . . . . . . . . . .
4A.07 DOCUMENTATION FEE . . . . . . . . . . . . .
4B. WARRANTIES. . . . . . . . . . . . . . . . .
4B.01 EXISTENCE . . . . . . . . . . . . . . . . .
4B.02 GOVERNMENTAL RESTRICTIONS . . . . . . . . .
4B.03 CORPORATE AUTHORITY . . . . . . . . . . . .
4B.04 LITIGATION. . . . . . . . . . . . . . . . .
4B.05 TAXES . . . . . . . . . . . . . . . . . . .
4B.06 TITLE . . . . . . . . . . . . . . . . . . .
4B.07 LAWFUL OPERATIONS . . . . . . . . . . . . .
4B.08 INSURANCE . . . . . . . . . . . . . . . . .
4B.09 FINANCIAL STATEMENTS. . . . . . . . . . . .
4B.10 DEFAULTS. . . . . . . . . . . . . . . . . .
5A. EVENTS OF DEFAULT . . . . . . . . . . . . .
5A.01 PAYMENTS. . . . . . . . . . . . . . . . . .
5A.02 OTHER INDEBTEDNESS. . . . . . . . . . . . .
5A.03 WARRANTIES. . . . . . . . . . . . . . . . .
5A.04 COVENANTS WITHOUT GRACE . . . . . . . . . .
5A.05 COVENANTS WITH GRACE. . . . . . . . . . . .
5A.06 CROSS-DEFAULT . . . . . . . . . . . . . . .
5A.07 BORROWER'S SOLVENCY . . . . . . . . . . . .
5B. EFFECTS OF DEFAULT. . . . . . . . . . . . .
5B.01 OPTIONAL DEFAULTS . . . . . . . . . . . . .
5B.02 AUTOMATIC DEFAULTS. . . . . . . . . . . . .
5B.03 OFFSETS . . . . . . . . . . . . . . . . . .
6A. INDEMNITY: GOVERNMENTAL COSTS/LIBOR LOANS .
6B. INDEMNITY: FUNDING COSTS. . . . . . . . . .
6C. CREDIT REQUESTS . . . . . . . . . . . . . .
6D. INDEMNITY: UNFRIENDLY TAKEOVERS . . . . . .
6E. INDEMNITY: CAPITAL REQUIREMENTS . . . . . .
6F. INDEMNITY: COLLECTION COSTS . . . . . . . .
6G. CERTIFICATE FOR INDEMNIFICATION . . . . . .
7. BANK'S PURPOSE. . . . . . . . . . . . . . .
8. INTERPRETATION. . . . . . . . . . . . . . .
8.01 WAIVERS . . . . . . . . . . . . . . . . . .
8.02 CUMULATIVE PROVISIONS . . . . . . . . . . .
8.03 BINDING EFFECT. . . . . . . . . . . . . . .
8.04 SURVIVAL OF PROVISIONS. . . . . . . . . . .
8.05 IMMEDIATE U.S. FUNDS. . . . . . . . . . . .
8.06 CAPTIONS. . . . . . . . . . . . . . . . . .
8.07 SUBSECTIONS . . . . . . . . . . . . . . . .
8.08 ILLEGALITY. . . . . . . . . . . . . . . . .
8.09 OHIO LAW. . . . . . . . . . . . . . . . . .
8.10 INTEREST/FEE COMPUTATIONS . . . . . . . . .
8.11 NOTICE. . . . . . . . . . . . . . . . . . .
8.12 ACCOUNTING TERMS. . . . . . . . . . . . . .
8.13 ENTIRE AGREEMENT. . . . . . . . . . . . . .
8.14 WAIVER OF JURY TRIAL. . . . . . . . . . . .
8.15 LATE CHARGE, APPLICATION OF PAYMENTS. . . .
9. DEFINITIONS . . . . . . . . . . . . . . . .
Account Officer . . . . . . . . . . . . . .
Accumulated Funding Deficiency. . . . . . .
Agreement . . . . . . . . . . . . . . . . .
Bank. . . . . . . . . . . . . . . . . . . .
Banking Day . . . . . . . . . . . . . . . .
Borrower. . . . . . . . . . . . . . . . . .
Borrowing Base. . . . . . . . . . . . . . .
Borrowing Base Report . . . . . . . . . . .
Contract Period . . . . . . . . . . . . . .
Credit Request. . . . . . . . . . . . . . .
Current Assets. . . . . . . . . . . . . . .
Current Liabilities . . . . . . . . . . . .
Debt. . . . . . . . . . . . . . . . . . . .
Default under ERISA . . . . . . . . . . . .
Default Under This Agreement. . . . . . . .
Distribution. . . . . . . . . . . . . . . .
Eligible Inventory. . . . . . . . . . . . .
Eligible Receivable . . . . . . . . . . . .
Environmental Law . . . . . . . . . . . . .
ERISA . . . . . . . . . . . . . . . . . . .
ERISA Regulator . . . . . . . . . . . . . .
Event of Default. . . . . . . . . . . . . .
Expiration Date . . . . . . . . . . . . . .
Funded Indebtedness . . . . . . . . . . . .
GAAP. . . . . . . . . . . . . . . . . . . .
Insider . . . . . . . . . . . . . . . . . .
Insolvency Action . . . . . . . . . . . . .
LIBOR Pre-Margin Rate . . . . . . . . . . .
LIBOR Loan. . . . . . . . . . . . . . . . .
Material. . . . . . . . . . . . . . . . . .
Most Recent 3A.01 Financial Statements. . .
Net Income. . . . . . . . . . . . . . . . .
Net Worth . . . . . . . . . . . . . . . . .
Pension Plan. . . . . . . . . . . . . . . .
Prime Rate. . . . . . . . . . . . . . . . .
Receivable. . . . . . . . . . . . . . . . .
Related Writing . . . . . . . . . . . . . .
Reportable Event. . . . . . . . . . . . . .
PR Loan . . . . . . . . . . . . . . . . . .
Subject Commitment. . . . . . . . . . . . .
Subject Indebtedness. . . . . . . . . . . .
Subject Loan. . . . . . . . . . . . . . . .
Subject Note. . . . . . . . . . . . . . . .
Subordinated. . . . . . . . . . . . . . . .
Subsidiary. . . . . . . . . . . . . . . . .
Supplemental Schedule . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . .
plurals . . . . . . . . . . . . . . . . . .
EXHIBIT A: Supplemental Schedule (4B)
EXHIBIT B: Subject Note (2B.01; 4A.01)
EXHIBIT C: Extension Agreement (2A.05)
EXHIBIT D: Subsidiaries
EXHIBIT E: Heller Definitions
EXECUTION COPY
STOCK PURCHASE AGREEMENT
FOR THE ACQUISITION
OF
WESTERN PIONEER INSURANCE COMPANY
Dated as of May 18, 1995
TABLE OF CONTENTS
ARTICLE 1 Definitions. . . . . . . . . . . . . . . . . . . . . .
1.1 Defined Terms . . . . . . . . . . . . . . . . .
1.2 Other Definitional Provisions . . . . . . . . .
ARTICLE 2 Purchase Price; Closing. . . . . . . . . . . . . . . .
2.1 Sale and Purchase of Capital Stock. . . . . . .
2.2 Purchase Price. . . . . . . . . . . . . . . . .
2.3 Deposit with the Escrow Agent . . . . . . . . .
2.4 Payment of Purchase Price . . . . . . . . . . .
2.5 Closing . . . . . . . . . . . . . . . . . . . .
ARTICLE 3 Representations and Warranties of the Purchaser. . . .
3.1 Organization and Standing . . . . . . . . . . .
3.2 Authorization of Agreement. . . . . . . . . . .
3.3 No Violation or Conflict. . . . . . . . . . . .
3.4 Consent or Approval of Authorities. . . . . . .
3.5 Litigation. . . . . . . . . . . . . . . . . . .
3.6 Brokers . . . . . . . . . . . . . . . . . . . .
3.7 Investment. . . . . . . . . . . . . . . . . . .
3.8 No Reliance on Projections. . . . . . . . . . .
3.9 Financial Capacity. . . . . . . . . . . . . . .
3.10 No Other Representations or Warranties. . . . .
ARTICLE 4 Representations and Warranties of the Seller
With Respect to the Company. . . . . . . . . . . . . .
4.1 Organization and Standing . . . . . . . . . . .
4.2 Authority to do Business. . . . . . . . . . . .
4.3 Articles of Incorporation and Bylaws;
Corporate Records . . . . . . . . . . . . . . .
4.4 No Subsidiaries . . . . . . . . . . . . . . . .
4.5 Capitalization. . . . . . . . . . . . . . . . .
4.6 Rights; Warrants or Options; Dividends. . . . .
4.7 Financial Statements. . . . . . . . . . . . . .
4.8 Undisclosed Liabilities . . . . . . . . . . . .
4.9 Personal Property . . . . . . . . . . . . . . .
4.10 Real Property . . . . . . . . . . . . . . . . .
4.11 Insurance . . . . . . . . . . . . . . . . . . .
4.12 Operating Permits/Compliance with Law . . . . .
4.13 Litigation. . . . . . . . . . . . . . . . . . .
4.14 List of Accounts. . . . . . . . . . . . . . . .
4.15 List of Personnel . . . . . . . . . . . . . . .
4.16 Labor Relations . . . . . . . . . . . . . . . .
4.17 Benefit Plans and Agreements. . . . . . . . . .
4.18 Absence of Changes. . . . . . . . . . . . . . .
4.19 Tax Matters . . . . . . . . . . . . . . . . . .
4.20 Environmental Matters . . . . . . . . . . . . .
4.21 Intellectual Property . . . . . . . . . . . . .
4.22 Material Contracts. . . . . . . . . . . . . . .
4.23 Transactions With Affiliates. . . . . . . . . .
4.24 Insurance Coverage Reserves . . . . . . . . . .
4.25 Insurance Issued by the Company . . . . . . . .
4.26 Threats of Cancellation . . . . . . . . . . . .
4.27 Reinsurance Contracts . . . . . . . . . . . . .
4.28 Best Rating . . . . . . . . . . . . . . . . . .
4.29 Absence of Improper Payments. . . . . . . . . .
4.30 Disclosure of all Material Matters. . . . . . .
4.31 No Other Representations or Warranties. . . . .
ARTICLE 5 Representations and Warranties of the Seller
Regarding Shares and Other Matters. . . . . . .
5.1 Organization and Standing of the Seller . . . .
5.2 Ownership of Shares . . . . . . . . . . . . . .
5.3 Authorization of Agreement. . . . . . . . . . .
5.4 No Violation or Conflict. . . . . . . . . . . .
5.5 Consent or Approval of Authorities. . . . . . .
5.6 Agreements with Authorities . . . . . . . . . .
5.7 Litigation. . . . . . . . . . . . . . . . . . .
5.8 Financial Statements. . . . . . . . . . . . . .
5.9 Brokers . . . . . . . . . . . . . . . . . . . .
ARTICLE 6 Pre-Closing Covenants. . . . . . . . . . . . . . . . .
6.1 Conduct of Business . . . . . . . . . . . . . .
6.2 Pre-Closing Activities. . . . . . . . . . . . .
6.3 Best Efforts; Further Assurances. . . . . . . .
6.4 Access to Information . . . . . . . . . . . . .
6.5 Confidentiality . . . . . . . . . . . . . . . .
6.6 HSR Act; Consents and Approvals . . . . . . . .
6.7 Additional Convention Statements. . . . . . . .
6.8 Termination of Management Agreement and
Tax Allocation Agreement. . . . . . . . . . . .
6.9 No Solicitation . . . . . . . . . . . . . . . .
6.10 Notification of Certain Matters . . . . . . . .
ARTICLE 7 Conditions to Closing. . . . . . . . . . . . . . . . .
7.1 Conditions to Each Party's Obligations. . . . .
7.1.1 . . . . . . . . . . . .Approvals. . . . .
7.1.2No Injunction or Restraint; Illegality . .
7.2 Conditions to the Purchaser's Obligations . . .
7.3 Conditions to the Seller's Obligations. . . . .
ARTICLE 8 Additional Agreements. . . . . . . . . . . . . . . . .
8.1 Further Assurances. . . . . . . . . . . . . . .
8.2 Publicity . . . . . . . . . . . . . . . . . . .
8.3 Certain Tax Matters . . . . . . . . . . . . . .
8.4 Further Assurances. . . . . . . . . . . . . . .
8.5 Noncompetition. . . . . . . . . . . . . . . . .
8.6 Non-Solicitation of Employees . . . . . . . . .
8.7 Access. . . . . . . . . . . . . . . . . . . . .
ARTICLE 9 Survival of Representations, Warranties and
Covenants; Indemnification; Certain Adjustments
9.1 Survival of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . .
9.2 Indemnification . . . . . . . . . . . . . . . .
9.3. Post-Closing Loss Reserve Redundancy
(Deficiency) Repayment. . . . . . . . . . . . .
9.4 Limited Remedies. . . . . . . . . . . . . . . .
ARTICLE 10 Modification, Waivers and Termination . . . . . . . .
10.1 Modification. . . . . . . . . . . . . . . . . .
10.2 Waivers . . . . . . . . . . . . . . . . . . . .
10.3 Termination . . . . . . . . . . . . . . . . . .
10.4 Effect of Termination . . . . . . . . . . . . .
ARTICLE 11 Miscellaneous. . . . . . . . . . . . . . . . . . .
11.1 Notices . . . . . . . . . . . . . . . . . . . . . .
11.2 Entire Agreement. . . . . . . . . . . . . . . . . .
11.3 Benefits; Binding Effect; Assignment. . . . . . . .
11.4 Waiver. . . . . . . . . . . . . . . . . . . . . . .
11.5 No Third Party Beneficiary. . . . . . . . . . . . .
11.6 Severability. . . . . . . . . . . . . . . . . . . .
11.7 Expenses. . . . . . . . . . . . . . . . . . . . . .
11.8 Section Headings. . . . . . . . . . . . . . . . . .
11.9 Counterparts. . . . . . . . . . . . . . . . . . . .
11.10 Remedies Cumulative . . . . . . . . . . . . . . . .
11.11 Applicable Law/Consent to Jurisdiction. . . . . . .
11.12 Waiver of Jury Trial. . . . . . . . . . . . . . . .
11.13 Construction. . . . . . . . . . . . . . . . . . . .
EXHIBITS AND SCHEDULES
EXHIBIT A - Form of Escrow Agreement
EXHIBIT B - Form of Opinion of the Purchaser's Counsel
EXHIBIT C - Form of Opinion of the Seller's Counsel
SCHEDULE 4.7.1 - Financial Statements
SCHEDULE 4.8 - Undisclosed Liabilities
SCHEDULE 4.9 - Personal Property Liens
SCHEDULE 4.10 - Real Property
SCHEDULE 4.11 - Insurance
SCHEDULE 4.12.1 - Operating Permits; Compliance With
Law
SCHEDULE 4.13 - Litigation
SCHEDULE 4.14 - List of Accounts
SCHEDULE 4.15 - List of Personnel
SCHEDULE 4.16 - Labor Relations
SCHEDULE 4.17 - Benefit Plans and Agreements
SCHEDULE 4.18 - Absence of Changes
SCHEDULE 4.19 - Tax Matters
SCHEDULE 4.20 - Environmental Matters
SCHEDULE 4.21 - Intellectual Property
SCHEDULE 4.22 - Material Contracts
SCHEDULE 4.23 - Transactions With Affiliates
SCHEDULE 4.24 - Insurance Coverage Reserves
SCHEDULE 4.25.5 - Violations by Certain Agents and
Brokers
SCHEDULE 6.2 - Certain Actions Permitted
STOCK PURCHASE AGREEMENT
This Agreement is made and entered into as of May 18, 1995, by
and between The Commerce Insurance Company, a Massachusetts
corporation (the "Purchaser"), and Atlantis Plastics, Inc., a
Florida corporation (the "Seller").
PRELIMINARY STATEMENTS:
A. Western Pioneer Insurance Company, a California
corporation (the "Company"), is a property and casualty insurer
with operations and its principal place of business in Pleasanton,
California.
B. All of the issued and outstanding shares of capital
stock of the Company are owned by the Seller.
C. The Purchaser desires to purchase and the Seller
desires to sell all of the outstanding shares of capital stock of
the Company on the terms and subject to the conditions set forth in
this Agreement.
AGREEMENT:
In consideration of the respective mutual agreements,
covenants, representations and warranties herein contained, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. In addition to terms defined elsewhere
in this Agreement, the following terms, when utilized in this
Agreement and unless the context otherwise requires, shall have the
meanings indicated, which meanings shall be equally applicable to
both the singular and plural forms of such terms:
"Adverse Consequences" means liabilities, losses, damages,
claims, costs or expenses of every nature, kind and description
whatsoever (including, without limitation, court costs and
reasonable attorneys' fees and expenses).
"Affiliate" with respect to any Person means any Person (a
"Controlling Person") which, directly or indirectly, through one or
more intermediaries, controls the subject Person or any Person
which is controlled by or is under common control with a
Controlling Person. For the purposes of this definition, "control"
(including the correlative terms "controlling", "controlled by" and
"under common control with"), with respect to any Person, means
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract
or otherwise.
"Affiliated Group" means any affiliated group within the
meaning of Section 1504 of the Code.
"Agreement" means this Stock Purchase Agreement, together with
all exhibits and schedules attached hereto.
"Authority" means any federal, state or local governmental
regulatory agency, commission, bureau or authority.
"Benefit Plan" means each "employee benefit plan" as set forth
in Section 3(3) of the ERISA, and includes, without limitation,
Multiemployer Plans, and each employment, compensation, deferred
compensation, stock purchase, stock option, consulting, severance,
change-in-control, fringe benefit, welfare, insurance, bonus,
incentive and other employee or independent contractor benefit
plan, agreement, contract, program, policy or arrangement, whether
or not subject to ERISA (including any funding mechanism therefor
now in effect or required in the future), whether formal or
informal, oral or written, legally binding or not, under which any
employee or former employee of, or other provider or former
provider of services to, the Company or any other organization
which is a member of the Controlled Group has any present or future
right to benefits or under which the Company or any such member has
any liability to fund a present or future benefit.
"California Department" means the Department of Insurance of
the State of California or any entity succeeding to any or all of
its functions or authority.
"Change of Control Application" means the application of the
Purchaser with the California Department on Form A (or other
appropriate form) seeking approval of the transactions contemplated
hereby.
"Closing" has the meaning set forth in Section 2.5 of this
Agreement.
"Closing Date" means the third business day following the day
on which the last to be received of all authorizations, approvals,
and consents that are conditions to the consummation of the
transactions contemplated hereby have been obtained, or such other
date as the Purchaser and the Seller shall agree in writing.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Common Stock of the Company" means the Common Stock of the
Company, par value $15.00 per share.
"Company" is defined in the Preliminary Statements to this
Agreement.
"Company Financial Statements" means the GAAP Financial
Statements and the Statutory Financial Statements.
"Confidential Information" means any data or other information
pertaining to the financial condition, results of operations,
business or products of the Company, including, without limitation,
customer lists, policies, techniques and know-how, and other facts
relating to sales, advertising, promotions, financial matters,
customers and prospective customers, suppliers and agents
(including, without limitation, the Company's independent insurance
agents); provided, however, that Confidential Information does not
include information (a) ascertainable or obtained from public or
published information, (b) received from a third Person not known
to the Purchaser to be under an obligation to the Seller, the
Company or any of their Representatives to keep such information
confidential, (iii) that is or becomes known to the public (other
than through a breach of this Agreement), (iv) that was in the
Purchaser's possession before disclosure thereof to it in
connection with this Agreement, or (v) that was independently
developed by the Purchaser or any of its Affiliates.
"Contributed Amount" is defined in Section 2.3 of this
Agreement.
"Controlled Group" means the Company's controlled group of
organizations as determined under Section 414(b), (c), (m) or (o)
of the Code, or Section 4001(b) of ERISA.
"Employees" means all of the Company's officers and employees.
"Environmental Claim" means any civil, criminal or
investigative action, suit, litigation, hearing, communication
(written or oral), demand, claim, citation, notice or notice of
violation, warning, consent decree, judgment or order by any person
or entity alleging, claiming, concerning or finding liability or
potential liability (including, without limitation, liability or
potential liability for investigatory costs, clean-up costs,
governmental response or oversight costs, natural resources
damages, property damages, penalties, personal injuries, death or
any other damages or costs, including, without limitation,
litigation and settlement costs and consultants' and attorneys'
fees) arising out of, based on or resulting from, in whole or in
part, (1) the actual or alleged presence, threatened release,
release, emission, disposal, storage, treatment, transportation,
generation, manufacture or use of any Hazardous Substance at or
from any location or (2) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Laws or (3)
under any Environmental Law.
"Environmental Law" means the Federal Water Pollution Control
Act, the Federal Resource Conservation and Recovery Act of 1976,
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, each as amended, and any other Law
concerning pollution or protection of the environment, natural
resources or human health, including any Law relating to emissions,
discharges, releases or threatened releases of any Hazardous
Substance into ambient air, surface water, ground water or lands or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any
Hazardous Substance. "Laws" for purposes of the foregoing
definition should be deemed to include, without limitation,
nuisance, trespass or "toxic tort," so called.
"Environmental Permit" means any authorization, approval,
registration or license or permit relating to the Environmental
Laws.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder.
"Escrow Agent" is defined in Section 2.3 of this Agreement.
"Escrow Agreement" is defined in Section 2.3 of the Agreement
and is in the form attached hereto as EXHIBIT A.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Financial Statements" means the Company Financial Statements
and the Seller's Consolidated Financial Statements.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"GAAP Financial Statements" is defined in Section 4.7.1 of
this Agreement.
"Hazardous Substance" means any chemical, pollutant,
contaminant, waste (including, without limitation, toxic,
hazardous, infectious, sanitary, solid, radioactive and petroleum
waste), toxic substance, hazardous substance, extremely hazardous
substance, hazardous material, radioactive material, oil and
petroleum product, as such terms, or any similar terms, are or
shall be used under any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended and the rules and regulations promulgated
thereunder.
"Income Tax" means any federal, state, local or foreign tax
based on, measured by or with respect to income, net worth or
capital, including any interest, penalty or addition thereto.
"Indemnified Party" is defined in Section 9.2.3 of this
Agreement.
"Indemnifying Party" is defined in Section 9.2.3 of this
Agreement.
"Initial Loss Reserve Claim Quotient" shall be the quotient of
the dollar amount of the claims (a) that (i) are outstanding as of
the Most Recent Balance Sheet Date and (ii) become outstanding
after the Most Recent Balance Sheet Date under policies that are
effective as of the Most Recent Balance Sheet Date, which in either
case are settled and closed as of the Initial Loss Reserve
Indemnification Date, divided by (b) the Loss Reserves as of the
Most Recent Balance Sheet Date.
"Initial Loss Reserve Indemnification Date" shall be the last
day of that fiscal quarter which is closest to the second
anniversary of the Closing Date.
"Interim GAAP Financial Statements" is defined in Section
4.7.1 of this Agreement.
"Intellectual Property" is defined in Section 4.21 of this
Agreement.
"Knowledge" means, (a) when applied to the Seller, the actual
knowledge, or knowledge which should have been obtained after
reasonable inquiry, of the Seller's executive officers who are
familiar with the Company and all of the Company's officers, and,
(b) when applied to the Purchaser, the actual knowledge, or
knowledge which should have been obtained after reasonable inquiry,
of the Purchaser's executive officers.
"Law" means any law, statute, rule or regulation, and any
judgment or order of any court or Authority.
"Lien" means any lien, charge, claim, restriction,
encumbrance, security interest or pledge of any kind whatsoever.
"Loss Reserve Indemnification Date" is defined in Section
9.3.3 of this Agreement.
"Loss Reserve Sum" shall be the sum of (a) the aggregate
amount of claim payments and the expenses of settling claims as of
the Loss Reserve Indemnification Date with respect to coverages in
effect as of the Most Recent Balance Sheet Date and (b) the Loss
Reserves as of the Loss Reserve Indemnification Date, and in either
case exclusive of any special reinsurance which has been or may be
purchased by the Purchaser or the Company with respect to the
insurance coverages written by the Company as of the Most Recent
Balance Sheet Date.
"Loss Reserves" shall mean the liabilities established by the
Company to reflect the estimated cost of claims payments and the
related expenses that the Company ultimately will be required to
pay in respect of insurance coverages it has written as of the Most
Recent Balance Sheet Date, which include amounts established for
losses and for the expenses of settling claims, such as legal and
other fees and the portion of general expenses allocated to claim
settlement costs.
"Management Agreement" means the Management Agreement, dated
as of October 1, 1985, between the Company and the Seller.
"Material Adverse Effect" means an event, occurrence or
circumstance (other than a macroeconomic change in the U.S.
economy) which (a) has had, or is reasonably likely to have, a
material adverse effect on the assets, condition, results of
operations or business of the Company as represented herein, or (b)
would materially impair the Company's ability to perform its
obligations under this Agreement. Without limiting the generality
of the immediately preceding sentence, solely for purposes of
determining whether the condition set forth in Section 7.2.1 of
this Agreement has been, or likely will be, satisfied, an event,
occurrence or circumstance will be deemed to have a Material
Adverse Effect if, had such event, occurrence or circumstance taken
place as of January 1, 1994, the effect, individually or in the
aggregate, on the 1994 GAAP Financial Statements would have been to
decrease the Company's net income by more than five percent. The
Purchaser and the Seller further agree that for purposes of
assessing the impact of the failure of any financial statement
referenced in Section 4.7 of this Agreement to be true and correct,
all failures with respect to any line item of a financial statement
referred to therein shall be aggregated and considered one
individual item.
"Material Contract" means any agreement, contract or
commitment, whether written or oral, which involves or may involve
payments or receipts of more than $10,000 in any single year or
$50,000 in the aggregate or which cannot be terminated without
liability to the Company upon less than 30 days' written notice.
"Most Recent Balance Sheet" is defined in Section 4.7.1 of
this Agreement.
"Most Recent Balance Sheet Date" is March 31, 1995.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37) or Section 4001(a)(3).
"Net Intercompany Amount" means the aggregate net payable to,
or receivable from, the Seller (including its Affiliates) by the
Company, whether arising under the Management Agreement or Tax
Allocation Agreement as currently in effect.
"Net Purchase Price" is defined in Section 2.2 of this
Agreement.
"1994 GAAP Financial Statements" is defined in Section 4.7.1
of this Agreement.
"Oakland Site Purchase Price" shall be (a) $639,000 if the
Oakland Site is transferred to the Seller pursuant to Section 6.2.3
of the Agreement, or (b) $639,000 less the amount received by the
Company from a third party if the Oakland Site is transferred to a
third party pursuant to Section 6.2.3 of this Agreement.
"Operating Permits" means all licenses, permits, orders,
approvals, registrations, authorizations, qualification filings
with all Authorities and all industry or non-governmental self-
regulatory organizations required in connection with the operation
of the business of the Company as presently conducted, and
includes, without limitation, those licenses of the Company to
transact insurance and reinsurance in the State of California.
"Opinion of the Purchaser's Counsel" means the opinion of
Nutter, McClennen & Fish, counsel to the Purchaser, dated as of the
Closing Date, addressed to the Seller and in the form of EXHIBIT B
hereto.
"Opinion of the Seller's Counsel" means the opinion of
Greenberg Trauig Hoffman Lipoff Rosen & Quentel, P.A., counsel to
the Seller, dated as of the Closing Date, addressed to the
Purchaser and in the form of Exhibit C hereto.
"Other Taxes" means all Taxes other than Income Taxes.
"Person" means any natural person, corporation, limited
liability company, unincorporated organization, partnership,
limited partnership, limited liability partnership, association,
joint-stock company, joint venture, trust or government, or any
agency or political subdivision of any government.
"Pre-Closing Tax Period" means any tax period (including
partial periods) that ends on or prior to the Closing Date,
including, without limitation, any short taxable year required
under Treasury Regulations Section 1.1502-76.
"Purchase Price" is defined in Section 2.2 of this Agreement.
"Purchaser" is defined in the preamble of this Agreement.
"Representative" means, with respect to any Person, such
Person's officers, directors, partners, employees, agents,
attorneys, accountants, lenders or prospective lenders, Affiliates
and other representatives.
"Requisite Regulatory Approvals" is defined in Section 7.1.1
of this Agreement.
"Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto.
"Scheduled Contracts" means all agreements and instruments
listed on SCHEDULE 4.22 of this Agreement.
"SEC" means the Securities and Exchange Commission or any
entity succeeding to any or all of its functions or authority.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Securities Restrictions" means restrictions imposed upon the
transfer of securities by applicable federal and state securities
Laws.
"Seller" is defined in the preamble of this Agreement.
"Seller's Consolidated Financial Statements" is defined in
Section 5.8 of this Agreement.
"Shares" means all of the issued and outstanding shares of
Common Stock of the Company.
"Statutory Financial Statements" is defined in Section 4.7.2
of this Agreement.
"Tax" and "Taxes" means one of and all, respectively, federal,
state, local and foreign taxes (including, without limitation,
income or profits taxes, premium taxes, excise taxes, sales taxes,
use taxes, gross receipts taxes, franchise taxes, ad valorem taxes,
severance taxes, capital levy taxes, transfer taxes, employment and
payroll-related taxes, property taxes, business license taxes,
occupation taxes, import duties and other governmental charges and
assessments), of any kind whatsoever, including interest, additions
to tax and penalties with respect thereto.
"Tax Allocation Agreement" means the Tax Allocation Agreement
dated as of March 1, 1984, between the Company and the Seller.
"Tax Assessment" is defined in Section 8.3.3 of this
Agreement.
"Tax Notice" is defined in Section 8.3.3 of this Agreement.
"Third Party Claim" is defined in Section 9.2.3 of this
Agreement.
1.2 OTHER DEFINITIONAL PROVISIONS
1.2.1 Unless otherwise defined herein, all terms
defined in this Agreement shall have the defined meanings when used
in any certificate, report or other documents made or delivered
pursuant hereto.
1.2.2 The words "hereof", "herein", "hereunder" and
"hereto" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
ARTICLE 2
PURCHASE PRICE; CLOSING
2.1 SALE AND PURCHASE OF CAPITAL STOCK. On the Closing
Date, the Seller shall sell, transfer, convey and deliver to the
Purchaser, and the Purchaser shall purchase and accept delivery of,
all of the Shares of Common Stock of the Company for the Purchase
Price specified in Section 2.2 hereof. In order to effectuate the
purchase and sale of all Shares, the Seller shall deliver to the
Purchaser upon such purchase and sale all of the certificates
evidencing such Shares, registered in the Seller's name, endorsed
to the Purchaser or with appropriate stock powers separate from the
certificates and endorsed to the Purchaser, in each case in a
manner satisfactory to the Purchaser's counsel.
2.2 PURCHASE PRICE. The aggregate purchase price (the
"Purchase Price") to be paid by the Purchaser in exchange for the
Shares shall be $12,000,000. At the Closing, the Purchase Price
shall be adjusted (as adjusted, the "Net Purchase Price") by (a)
deducting from it the Oakland Site Purchase Price and (b) either
(i) deducting from it the Net Intercompany Amount as of the Closing
Date if such amount represents an aggregate net receivable from the
Seller or (ii) adding to it the Net Intercompany Amount as of the
Closing Date if such amount represents an aggregate net payable to
the Seller.
2.3 DEPOSIT WITH THE ESCROW AGENT. As of the execution
and delivery of this Agreement, the Purchaser has deposited with
Nutter, McClennen & Fish in its capacity as escrow agent (the
"Escrow Agent") pursuant to the terms of the Escrow Agreement of
even date herewith (the "Escrow Agreement") $1,000,000 (the
"Contributed Amount").
2.4 PAYMENT OF PURCHASE PRICE. The Net Purchase Price
shall be payable to the Seller at the Closing by wire transfer of
immediately available funds to an account or accounts designated by
the Seller in writing. The Net Purchase Price shall be composed of
(a) the Contributed Amount from the Escrow Agent and (b) an amount
from the Purchaser equal to the Net Purchase Price less the
Contributed Amount.
2.5 CLOSING. Subject to the fulfillment or waiver of the
conditions precedent set forth in Article 7 hereof, the closing of
the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Nutter, McClennen & Fish in
Boston, Massachusetts, at 10:00 a.m. (local time) on the Closing
Date. Except as otherwise provided herein, all proceedings to be
taken and all documents to be executed at the Closing shall be
deemed to have been taken, delivered and executed simultaneously,
and no proceeding shall be deemed taken nor documents deemed
executed or delivered until all have been taken, delivered and
executed.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
In order to induce the Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, the Purchaser
hereby represents and warrants to the Seller as follows:
3.1 ORGANIZATION AND STANDING. The Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of The Commonwealth of Massachusetts. The Purchaser
has all requisite corporate right, power and authority to enter
into this Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby and thereby. Copies of the
Articles of Organization and Bylaws of the Purchaser and all
amendments thereto as of the date of this Agreement have been
delivered to the Seller and are complete and correct.
3.2 AUTHORIZATION OF AGREEMENT. The execution, delivery
and performance of each of this Agreement and the Escrow Agreement
by the Purchaser and the consummation by it of the transactions
contemplated hereby or thereby have been duly and validly
authorized by all requisite corporate action. Each of the
Agreement and the Escrow Agreement has been duly and validly
executed and delivered and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, moratorium, fraudulent conveyance and other
similar laws affecting creditors' rights generally and by general
principles of equity.
3.3 NO VIOLATION OR CONFLICT. Neither the execution and
delivery of this Agreement or the Escrow Agreement by the Purchaser
nor the consummation by it of the transactions contemplated hereby
or thereby, nor compliance by the Purchaser with the provisions
hereof or thereof, will (a) violate any term or provision of the
Purchaser's Articles of Organization or Bylaws, or (b) assuming
that the Requisite Regulatory Approvals are duly obtained, (i)
violate any Law or any writ, order or decree of any court or
Authority which is applicable to the Purchaser or any of its
respective properties or assets, or (ii) violate, conflict with,
result in a breach of any provision of or the loss of any benefit
under, constitute a default, breach or violation (or an event
which, with notice or lapse of time or both, would constitute a
default, breach or violation) under, result in the termination of
or right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any Lien upon
any of the respective properties or assets of the Purchaser under,
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, agreement or other
instrument or obligation to which the Purchaser is a party, or by
which it or any of its respective properties or assets may be bound
or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches or defaults which, either
individually or in the aggregate, will not have or be reasonably
likely to have a material adverse effect on the Purchaser.
3.4 CONSENT OR APPROVAL OF AUTHORITIES. Except for (a)
the approval of the California Department and related filing
requirements, (b) any required notification to or consent by the
California Board of Equalization, and (c) the requisite notice and
filing by the Purchaser or an affiliate of the Purchaser under the
HSR Act, no consent, approval or authorization of, or registration,
qualification, designation, declaration or filing with, any
Authority is required in connection with the execution, delivery of
performance by the Purchaser of this Agreement or any other
agreement, instrument or document contemplated hereby or thereby or
the consummation by the Purchaser of the transactions contemplated
hereby or thereby. To the knowledge of the Purchaser, there is no
reasonable basis to believe that all Requisite Regulatory Approvals
will not be obtained by September 30, 1995 without the imposition
of any condition or requirement of the type referred to in Section
7.1.1.
3.5 LITIGATION. There are no actions, suits, claims or
proceedings pending or, to the knowledge of the Purchaser,
threatened against or involving the Purchaser, or any of its assets
or properties, or any of its officers and directors (in their
capacities as such), before any court or arbitration tribunal or by
or before any Authority that question the validity of this
Agreement or seek to prohibit, enjoin or otherwise challenge the
consummation of the transactions contemplated hereby. There are no
outstanding orders, judgments, injunctions, stipulations, awards or
decrees of any Authority, court or arbitration tribunal against the
Purchaser, or any of its assets or properties, officers or
directors (in their capacities as such), which reasonably could be
expected to prohibit or enjoin the consummation of the transactions
contemplated hereby.
3.6 BROKERS. The Purchaser has not employed any broker or
finder and has not incurred and will not incur any broker's,
finder's or similar fees, commissions or expenses payable by the
Purchaser in connection with the transactions contemplated by this
Agreement.
3.7 INVESTMENT. The Purchaser acknowledges that the
Shares have not been registered under the Securities Act or under
the securities laws of any state or other jurisdiction. The
Purchaser is acquiring the Shares solely for the Purchaser's own
account and not with a view to, or for resale in connection with,
any distribution prohibited by the Securities Act or the securities
laws of any applicable state or other jurisdiction. The Purchaser
agrees not to resell or offer to resell the Shares except in
compliance with the Securities Act and other applicable securities
laws. The Purchaser acknowledges that it has been afforded the
opportunity to ask questions of, and to receive answers from, the
Seller and persons acting on behalf of the Seller concerning the
Shares, the Company and the matters contemplated by this Agreement.
Nothing in this Section 3.7, however, shall vitiate the
representations and warranties set forth in Articles 4 and 5 of
this Agreement.
3.8 NO RELIANCE ON PROJECTIONS. The Purchaser
acknowledges that it is not relying upon any representations
regarding financial projections of the business of the Company
provided by the Seller, its Representatives or their respective
Affiliates.
3.9 FINANCIAL CAPACITY. The Purchaser has cash or cash
equivalent investments on hand sufficient to satisfy all of its
obligations under this Agreement, and the Purchaser will not
finance the Purchase Price.
3.10 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for
the representations and warranties contained in this Article 3,
neither the Purchaser nor any other Person makes any other express
or implied representation or warranty on behalf of the Purchaser,
and the Purchaser hereby disclaims any such representation or
warranty, whether by the Purchaser or any of its directors,
employees, agents or Representatives or any other Person, with
respect to the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby,
notwithstanding the delivery or disclosure to the Seller or any of
its officers, directors, employees, agents or Representatives or
any other Person of any documentation or other information by the
Purchaser or any of its directors, Employees, agents or
Representatives or any other Person with respect to any one or more
of the foregoing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
WITH RESPECT TO THE COMPANY
In order to induce the Purchaser to enter into this Agreement,
and to consummate the transactions contemplated hereby, the Seller
represents and warrants to the Purchaser as follows:
4.1 ORGANIZATION AND STANDING. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of California. The Company is not in
default under any provision of its Articles of Incorporation or
bylaws.
4.2 AUTHORITY TO DO BUSINESS. The Company has full
corporate power and authority to own or lease its properties and
assets and to conduct its business in the manner conducted as of
the date of this Agreement, and is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its properties and assets or
the conduct of its business requires it to be so licensed or
qualified, except where the failure to be in good standing or to be
duly licensed or qualified to do business would not have a Material
Adverse Effect. Without limiting the scope of the immediately
preceding sentence, the Company is duly licensed to transact the
following classes of insurance business in the State of California:
fire, liability, common carrier, automobile and miscellaneous. The
Company is not qualified to transact business, including, without
limitation, insurance business, in any state other than the State
of California.
4.3 ARTICLES OF INCORPORATION AND BYLAWS; CORPORATE
RECORDS. Copies of the Articles of Incorporation and Bylaws of the
Company and all amendments thereto as in effect as of the date of
this Agreement have been delivered to the Purchaser and are
complete and correct. The corporate minutes and stock records of
the Company have been made available to the Purchaser and are
complete and correct as of the date of this Agreement, with all
necessary signatures, and set forth all meetings and actions taken
by the stockholders and Directors, and, to the Seller's Knowledge,
all votes of the stockholders or Directors set forth in
certificates furnished to anyone at any time since February 29,
1984 and on or before the date of this Agreement.
4.4 NO SUBSIDIARIES. Except for portfolio investments
made in the ordinary course of business, the Company does not own
and, since February 29, 1984, has not owned any share of capital
stock or other security of, or any other interest in, nor does it
control or has it controlled, directly or indirectly, any other
Person.
4.5 CAPITALIZATION. The Company's authorized capital
stock consists solely of 100,000 shares of Common Stock of the
Company, of which 66,667 shares are issued and outstanding and no
shares are treasury shares. All of the issued and outstanding
Shares of Common Stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, with no
personal liability attaching to the ownership thereof. None of
such Shares was issued in violation of the preemptive rights of any
Person or any agreement or Law by which the Company, at the time of
issuance, was bound, including, without limitation, any applicable
federal and state securities law.
4.6 RIGHTS; WARRANTS OR OPTIONS; DIVIDENDS. There are no
outstanding subscriptions, warrants, calls, options,
understandings, commitments or, except for this Agreement, other
agreements or rights of any kind to purchase or otherwise receive
or be issued, or securities or obligations of any kind convertible
into, any shares of capital stock or any other security of the
Company. There is no outstanding contract or other agreement of
the Seller, the Company or any other person to purchase, redeem or
otherwise acquire any outstanding shares of the capital stock of
the Company, or securities or obligations of any kind convertible
into any shares of the Common Stock of the Company. There are no
dividends which have accrued or been declared but are unpaid on the
Common Stock of the Company. Neither the Seller nor the Company
has any contractual obligation to register under the Securities
Act, any shares of the Common Stock of the Company.
4.7 FINANCIAL STATEMENTS
4.7.1 The Seller has delivered to the Purchaser
copies of the Company's unaudited balance sheet at March 31, 1995
(the "Most Recent Balance Sheet") and the related statements of
income, stockholders' equity and cash flow for the three months
ended March 31, 1995 (the "Interim GAAP Financial Statements"), and
for the year ended December 31, 1994 (the "1994 GAAP Financial
Statements"). The foregoing unaudited financial statements
(collectively, the "GAAP Financial Statements") (a) are complete
and correct in all material respects and have been prepared from
the books and records of the Company, (b) present fairly the
financial condition of the Company and its results of operations as
at and for the respective periods then ended, (c) have been
prepared in accordance with GAAP applied on a consistent basis and
(d) except as disclosed in SCHEDULE 4.7.1, comply in all material
respects with the published rules and regulations of the SEC;
provided, however, that the Interim GAAP Financial Statements are
subject to normal year-end adjustments and lack footnotes and other
presentation items. The books and records of the Company have
been, and are being, maintained in all material respects in
accordance with GAAP and reflect only actual transactions.
4.7.2 The Seller has delivered to the Purchaser
copies of (a) the Company's Annual Convention Statement for the
year ended December 31, 1994, as filed with the California
Department, and (b) the audited statement of admitted assets,
liabilities, capital and surplus (statutory basis) of the Company
as of December 31, 1994 and 1993 and the related statements of
income, changes in capital and surplus and cash flows for the years
then ended (collectively, the "Statutory Financial Statements").
The Statutory Financial Statements (x) are complete and correct in
all material respects and have been prepared in accordance with
statutory accounting principles prescribed or permitted by the
regulations of the California Department, which have been applied
on a consistent basis and in accordance with such regulations, and
(y) present fairly in all material respects the admitted assets,
liabilities, capital and surplus (statutory basis) of the Company
and changes in its financial position and its results of operations
as at and for the periods then ended.
4.8 UNDISCLOSED LIABILITIES. Except as and to the extent
reflected in the Most Recent Balance Sheet or in SCHEDULE 4.8
hereto, the Company does not have any liabilities, commitments or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, and whether due or to become due, including, without
limitation, liabilities that may become known or arise after the
date hereof and which relate to the transactions entered into or
any state of facts existing on or before the date of the Most
Recent Balance Sheet and which would be required under GAAP to be
shown in such balance sheet or referenced in the notes thereto,
other than (a) those reflected, reserved against or disclosed in
the Company Financial Statements and not heretofore paid or
discharged, (b) obligations for borrowed money and guarantees of
obligations of third parties not required by GAAP to be reflected,
reserved against or disclosed in the Interim GAAP Financial
Statements, all of which are set forth on SCHEDULE 4.8 hereto and
none of which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, and (c) those
incurred in the ordinary course of business consistent with past
practice since the date of the Most Recent Balance Sheet.
4.9 PERSONAL PROPERTY.
4.9.1 Except for assets disposed of in the ordinary
course of business consistent with past practice since the date of
the Most Recent Balance Sheet, the Company has good and valid title
to all of the (a) tangible personal property and assets which are
used in the operation of its business and which it owns or purports
to own, and (b) leasehold interests in all leases of tangible
personal property which it leases or purports to lease, free and
clear of any Liens, other than such Liens or imperfections of title
as (i) are reflected, reserved against or otherwise disclosed in
the Company Financial Statements, (ii) arise out of Taxes not yet
due or payable or being contested in good faith by appropriate
proceedings, (iii) are imposed by Law (including, without
limitation, mechanics', materialmen's, landlords' warehousemen's
and carriers' liens) and are securing obligations incurred in the
ordinary course of business which are not past due or are being
contested in good faith by appropriate proceedings, (iv) relate to
immaterial properties or assets or otherwise could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, or (v) are set forth on SCHEDULE 4.9
hereto. All fixtures and equipment that are owned or used by the
Company and material to its business have been properly maintained
and, to the Seller's Knowledge, are in good operating order and
repair.
4.9.2 The Company enjoys peaceful and undisturbed
possession under all of such leases of personal property under
which it is operating. All of such leases are valid, subsisting
and in full force and effect and there are no existing defaults or
events which, with the passage of time or the giving of notice, or
both, would constitute defaults by the Company or, to the Knowledge
of the Seller, by any other party thereto, except for such
defaults, if any, which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
4.10 REAL PROPERTY.
4.10.1 The Company does not own, and has not owned at
any time since February 29, 1984, beneficially or of record, any
real property other than the property described on SCHEDULE 4.10
hereto (the "Oakland Site"). SCHEDULE 4.10 hereto sets forth a
list of all real property leased, subleased or otherwise occupied
by the Company, indicating the nature of its interest therein. The
Company has valid leasehold interests in all leases of real
property which it leases or purports to lease, free and clear of
any Liens, other than such Liens as (a) are reflected, reserved
against or otherwise disclosed in the GAAP Financial Statements,
(b) arise out of Taxes not yet subject to penalties for non-payment
or being contested in good faith by appropriate proceedings, (c)
are imposed by Law (including, without limitation, mechanics',
materialmen's, landlords' warehousemen's and carriers' liens) and
are securing obligations incurred in the ordinary course of
business which are not past due or are being contested in good
faith by appropriate proceedings, (d) relate to immaterial
properties or assets or otherwise which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect, or (e) are set forth on SCHEDULE 4.10 hereto. To the
Knowledge of the Seller, there are no pending lawsuits or
condemnation, expropriation, eminent domain or similar proceedings
affecting all or any portion of any property listed on SCHEDULE
4.10 or the value thereof, and no such lawsuits or proceedings are
contemplated.
4.10.2 The Company enjoys peaceful and undisturbed
possession under all of such property leases under which it is
operating. Except as set forth on Schedule 4.10, to the Knowledge
of the Seller, all of such leases are valid, subsisting and in full
force and effect. There are no existing defaults, or events which
with the passage of time or the giving of notice, or both, would
constitute defaults under any such property lease by the Company
or, to the Knowledge of the Seller, by any other party thereto,
except for such defaults, if any, which would not have,
individually or in the aggregate a Material Adverse Effect. The
portions of the buildings that are used by the Company and material
to its business have been properly maintained and, to the Seller's
Knowledge, are in good operating order and repair.
4.11 INSURANCE. SCHEDULE 4.11 hereto sets forth a complete
and correct list of all insurance policies providing insurance
coverage of any nature to the Company. All such policies are in
full force and effect, and all premiums due and payable in respect
thereof have been paid. The Company has complied in all material
respects with the provisions of such policies, and such policies
are sufficient for compliance with all requirements of Law and
agreements to which the Company is a party, except where the
failure to so comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Since
the respective dates of such policies, no notice of cancellation or
non-renewal with respect to any such policy has been received by
the Company.
4.12 OPERATING PERMITS/COMPLIANCE WITH LAW.
4.12.1 The Company possesses all Operating Permits
necessary or required under any Law to own or lease and operate its
properties and to conduct its business as now conducted, except for
incidental Operating Permits that would be readily obtainable
without undue burden or expense in the event of any lapse,
termination, cancellation or forfeiture or that if not obtained
would not have, individually or in the aggregate, a Material
Adverse Effect. All such material Operating Permits are in full
force and effect and, to the Knowledge of the Seller, except as set
forth on SCHEDULE 4.12.1 hereto, no modification, suspension or
cancellation of any of them is threatened, and no material
Operating Permits will be adversely affected by the consummation of
the transactions contemplated by this Agreement. Neither the
Seller nor the Company has failed nor is it failing to comply with
any applicable Operating Permit, Law or order, where such failure
would have a Material Adverse Effect on the Company's business, and
there are no proceedings pending or, to the Seller's Knowledge,
threatened or contemplated, nor has the Seller or the Company
received any notice regarding any such failure. A true and correct
list of all Operating Permits is set forth on SCHEDULE 4.12.1.
4.12.2 The Company is not in violation of any Law,
Operating Permit, writ, judgment, decree, injunction or similar
order applicable to the Company or any of its assets or properties,
except for possible violations which, individually or in the
aggregate, reasonably cannot be expected to have a Material Adverse
Effect on the Company or the beneficial owner of the Shares.
Without limiting the generality of the foregoing and with respect
to the Company, its assets, properties, Employees, directors,
agents and representatives: (i) each of the Seller and the Company
has filed or caused to be filed in a timely manner all reports,
statements, documents, registrations, filings or submissions which
were required by Law to be filed by it and have paid all fees and
assessments due and payable in connection therewith; all such
filings complied in all material respects with applicable Laws when
filed, and no deficiencies have been asserted with respect to any
such filings; (ii) the Seller has delivered or made available to
the Purchaser true and correct copies of all reports reflecting the
results of financial and market conduct examinations of the affairs
of the Company issued by insurance regulatory authorities for each
year commencing on or after January 1, 1989 and all deficiencies
or violations in such reports for any prior period have been
resolved; (iii) the Seller has delivered or made available to the
Purchaser the preliminary results or findings of financial
examinations of the affairs of the Company that are on-going in
nature on or as of the date hereof; and (iv) all outstanding
insurance contracts issued or assumed by the Company are, to the
extent required under applicable laws, on forms approved by the
insurance regulatory authority of the jurisdiction where issued or
have been filed with and not objected to by such authority within
the period provided for objection. Since January 1, 1992, no
Authority has initiated, or to the Knowledge of the Seller, has
contemplated the initiation of any proceeding regarding, or
investigation into, the business or operation of the Company.
4.13 LITIGATION. Except as set forth on SCHEDULE 4.13
hereto, there are no actions, suits, claims or proceedings pending
(including, without limitation, administrative actions, proceedings
or investigations by the California Department) or, to the
Knowledge of the Seller, threatened against or involving the
Company, or any of its assets or properties, or any of its officers
and directors (in their capacities as such), before any court or
arbitration tribunal or by or before any Authority. There are no
outstanding orders, judgments, injunctions, stipulations, awards or
decrees of any Authority, court or arbitration tribunal against the
Company, or any of its assets or properties, officers or directors
(in their capacities as such), which reasonably could be expected
to prohibit or enjoin the consummation of the transactions
contemplated hereby. There are no disciplinary proceedings pending
before or, to the Knowledge of the Seller, being contemplated by,
the California Department and, except as set forth on SCHEDULE
4.13, no orders or directives have been entered against the Company
by the California Department.
4.14 LIST OF ACCOUNTS. SCHEDULE 4.14 hereto contains a
list of all bank and securities accounts, and all safe deposit
boxes, maintained by the Company and a listing of the persons
authorized to draw thereon or make withdrawals therefrom or, in the
case of safe deposit boxes, with access thereto.
4.15 LIST OF PERSONNEL. SCHEDULE 4.15 hereto sets forth
(a) the name and respective salaries, wages, other compensation,
dates of employment, dates and amounts of last salary increase and
positions of each officer and director of each of the Company and
each other Employee whose total compensation during the year ended
December 31, 1994 exceeded $25,000, (b) all wage or salary
increases or bonuses received by such persons since December 31,
1994, and any accrual for such increases or bonuses, and (c) all
commitments or agreements by the Company to increase the wages or
modify the conditions or terms of employment of any of the
Employees.
4.16 LABOR RELATIONS. Except as disclosed on SCHEDULE
4.16, there are no material disputes, employee grievances, or
disciplinary actions pending or, to the Knowledge of the Seller,
threatened by or between the Seller or the Company and any of the
Employees. With respect to the Employees, the Company has complied
in all respects with all provisions of all Laws relating to the
employment of labor and has no liability for any arrears of wages
or taxes or penalties for failure to comply with any such Law or
for any severance or termination payments of any type except where
such failure would not have a Material Adverse Effect or impose
personal liability on any of the Company's officers or directors or
the holder of the Shares. No election or proceedings relating to
the Company's labor relations with the Employees is pending or, to
the Seller's Knowledge, contemplated. With respect to the
Employees, the Company has had no union activity or any material
labor trouble of any kind, nature or description at any time since
February 29, 1984. All true and correct copies of all personnel
policies and manuals of the Seller and the Company as they relate
to the Employees have been provided to the Purchaser. No Employee
or any consultant of the Seller or the Company shall have the right
to receive from the Company or the Purchaser a severance payment or
other payment in the nature thereof in the event his or her
employment is terminated by the Company or the Purchaser after the
Closing Date, whether such right arises as a matter of contract,
past policy or understanding, by operation of law, or otherwise.
4.17 BENEFIT PLANS AND AGREEMENTS. A true and complete
list of all Benefit Plans in effect as of the date hereof that
either the Seller or the Company maintains or to which it
contributes or since February 29, 1984 has contributed for the
benefit of the Employees is included in SCHEDULE 4.17 hereto. The
Seller has delivered to the Purchaser an accurate and complete copy
of each Benefit Plan listed on SCHEDULE 4.17 (or, to the extent any
Benefit Plan has not been reduced to writing, an accurate
description thereof).
4.18 ABSENCE OF CHANGES. Since the Most Recent Balance
Sheet Date, the business of the Company has been conducted in the
ordinary course and substantially consistent with past practices.
Except as set forth on SCHEDULE 4.18, and except for such events
which, individually or in the aggregate, have not had, or
reasonably could not be expected to have, a Material Adverse
Effect, since the date of the Most Recent Balance Sheet, there has
not been (a) any adverse change in the business, affairs or
prospects of the Company or, to the Seller's Knowledge, are any
such changes threatened, anticipated or contemplated; (b) any
actual or, to the Seller's Knowledge, threatened, anticipated or
contemplated damage, destruction, loss, conversion, termination,
cancellation, default or taking by eminent domain or other action
by Authority which has adversely affected or reasonably could be
expected to have an adverse effect on the properties, assets,
business, affairs or prospects of the Company; (c) any adverse
pending or, to the Seller's Knowledge, threatened, anticipated or
contemplated dispute of any kind with any customer, supplier,
Employee, landlord, subtenant or licensee of the Company, or any
pending or, to the Seller's Knowledge, threatened, anticipated or
contemplated occurrence or situation of any kind, nature or
description which reasonably could be expected to result in any
reduction in the amount, or any change in the terms or conditions,
of business with any customer, supplier or source of financing; or
(d) any pending, or to the Seller's Knowledge, threatened,
anticipated or contemplated occurrence or situation of any kind,
nature or description adversely affecting the properties, assets,
business, affairs or prospects of the Company. Since the Most
Recent Balance Sheet Date, there has not occurred any of the
actions specified in Sections 6.2.1 through 6.2.16 of this
Agreement.
4.19 TAX MATTERS.
4.19.1 All Income Tax Returns and all material Other
Tax Returns required to be filed with respect to the business and
assets of the Company have been duly and timely (within any
applicable extension periods) filed with the appropriate
Authorities in all jurisdictions in which such Returns are required
to be filed and all such Returns are complete and correct in all
respects. All Taxes (including estimated Taxes) shown to be due
and payable on such Returns have been paid.
4.19.2 The unpaid Taxes of the Company (a) did not as
of the date of the Most Recent Balance Sheet, exceed the reserve
for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and tax
income) disclosed on the face of the Most Recent Balance Sheet, and
(B) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the custom of the
Company.
4.19.3 Except as set forth on SCHEDULE 4.19 hereto,
there is no claim or assessment pending or, to the Knowledge of the
Seller, threatened against the Company for any alleged deficiency
in Income Taxes or any material alleged deficiency in Other Taxes.
4.19.4 Except as set forth on SCHEDULE 4.19 the
Company has not (a) filed any consent to the application of Section
341(f) of the Code, (b) executed a waiver or consent extending any
statute of limitations for the assessment or collection of any
Income Taxes or Other Taxes which remain outstanding, (c) applied
for a ruling relative to Income Taxes or Other Taxes, (d) entered
into a closing agreement with any Tax Authority, or (e) filed an
election under Section 338(g) or 338(h)(10) of the Code or caused
or permitted a deemed election under Section 338(e) of the Code.
4.19.5 Except as set forth on SCHEDULE 4.19 no Income
Tax Return or material Other Tax Return of the Company has been
audited by any Tax Authority at any time since January 1, 1989.
4.19.6 Except for the Tax Allocation Agreement, the
Company is not a party to any written agreement providing for the
allocation or sharing of Taxes.
4.19.7 The Company has no liability for the Income
Taxes of any other Person other than the Seller and its
subsidiaries under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, foreign or local Law).
4.19.8 The Company has not been a member of an
Affiliated Group filing a consolidated federal Income Tax Return
other than an Affiliated Group of which the common parent is the
Seller.
4.20 ENVIRONMENTAL MATTERS.
4.20.1 Except as disclosed on SCHEDULE 4.20 hereto,
the Company is not subject to any liability (and has not handled or
disposed of any substance, arranged for the disposal of any
substance, or owned or operated any property or facility in any
manner that could reasonably be expected to form the basis for any
future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against the Company giving rise to any
liability) for damage to the atmosphere or any site, location or
body of water (surface or subsurface) or for any other reason under
any Environmental Law or with respect to any Environmental Law.
4.20.2 Except as disclosed on SCHEDULE 4.20, no
notice, citation, summons or order has been received by the Company
and no complaint has been filed and no penalty has been assessed
or, to the Knowledge of the Seller, threatened by any Authority or
third party with respect to (a) any alleged violation by the
Company of any Environmental Law, (b) any alleged failure by the
Company to have any Environmental Permit required under any
Environmental Law in connection with its business or (c) any other
Environmental Claim to which the Company or any of its assets is,
or reasonably could be expected to be, subject.
4.20.3 Except as disclosed on SCHEDULE 4.20, to the
Knowledge of the Seller the Company has not transported any
substance or arranged for the transportation of any substance to
any location which is listed on the National Priorities List under
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or on any comparable list
maintained by any state environmental authority.
4.20.4 The Seller has delivered all environmental
inspection reports ("Environmental Reports") in its possession or
in the possession of its counsel or consultants prepared by any
person or entity concerning compliance with, or actual or potential
liability under, applicable Environmental Law with respect to the
Company's business, operations, assets or properties or any
property contiguous thereto, including without limitation the
Oakland Site.
4.21 INTELLECTUAL PROPERTY. SCHEDULE 4.21 hereto sets
forth a list of all domestic and foreign patents, trademarks, trade
names, service marks and copyrights (or pending registrations and
applications therefor) owned or used under license by the Company
and of each material invention, formula, method and process used
under license by it (the "Intellectual Property"), and no
royalties, honorariums or fees are payable by the Company to any
person by reason of the ownership or use of the Intellectual
Property. SCHEDULE 4.21 indicates each item of Intellectual
Property which the Company licenses or sublicenses to others.
Except as set forth on SCHEDULE 4.21, (a) no claims have been
asserted by any Person in connection with the use by the Company of
any Intellectual Property, (b) to the Knowledge of the Seller, no
Person is infringing upon any of the rights of the Company with
respect to the Intellectual Property, and (c) to the Knowledge of
the Seller, the Company's use of the Intellectual Property does not
infringe upon the rights of any Person.
4.22 MATERIAL CONTRACTS.
4.22.1 SCHEDULE 4.22 hereto sets forth a list of all
Material Contracts to which the Company is a party. The Seller has
delivered to the Purchaser true and correct copies of each document
and a written description, accurate in all material respects, of
each oral arrangement so listed. Without limiting the generality
of the foregoing, SCHEDULE 4.22 includes all agreements and
instruments of the following types to which the Company is a party
or an intended beneficiary irrespective of whether such agreements
and instruments otherwise would be within the scope of the
definition of Material Contracts:
i. Pension, retirement, deferred compensation,
death benefit, profit sharing, bonus or other
employee incentive, fringe benefit, stock
purchase, stock option, hospitalization and
insurance plans and arrangements (and grant
certificates and other documents issued
thereunder) including, without limitation,
stock appreciation, phantom stock or similar
rights, and vacation pay, severance pay and
other similar benefit arrangements for
officers, employees or agents, together with a
list of all pensioned Employees or obligations
to provide any pensions hereafter other than
pursuant to the plans hereinbefore in this
item described;
ii. Employment contracts and agreements,
management agreements, consulting agreements,
agreements providing for termination or
severance benefits, non-competition
agreements, non-disclosure agreements,
contracts for professional or personal
services (other than those contracts
terminable at will and subject to the
imposition of liability), contracts with
other persons engaged in sales or distributing
activities, agency and brokerage contracts and
brokerage agreements, and advertising
contracts;
iii. To the extent not included in Schedules 4.15,
4.17 and 4.23, agreements, understandings and
arrangements of any kind with any officer,
director, employee, stockholder or agent of
the Company relating to present or future
compensation or other benefits available to
such person or otherwise;
iv. Indentures, loan agreements, notes, security
agreements, guarantees, mortgages, conditional
sales contracts, leases of real or personal
property, contracts for the purchase or sale
of real or personal property, and agreements
for financing;
v. All technical assistance, know how or
engineering consulting agreements and employee
agreements regarding inventions and copyrights
to which the Company is a party or
beneficiary;
vi. All effective Powers of Attorney granted by
the Company to any Person;
vii. All agreements, contracts or other
arrangements to which the Company is a
guarantor, surety or endorser;
viii. Any contract, agreement, commitment,
arrangement or understanding limiting the
freedom of the Company from competing in any
line of business or with any person or entity
or from soliciting any person to become an
Employee;
ix. Any partnership, joint venture or profit-
sharing contract with any person that cannot
be terminated, as of right and without
penalty, on 180-days' notice or less;
x. Any lease or sublease of real property used in
the conduct of the Company's business,
operations or affairs, and any other lease,
sublease or rental or use contract providing
for annual rental payments in excess of
$25,000;
xi. Contracts relating to the future disposition
or acquisition of any investment in any Person
or of any interest in any business enterprise,
and any contract requiring the Company to
purchase any security other than notes or
other debt securities having a maturity date
less than 90 days from the date of purchase;
xii. Contracts and arrangements that cannot be
terminated, as of right and without penalty,
on less than 90-days' notice between (i) the
Company and (ii) any Company Related Person
(for the purposes hereof "Company Related
Person" shall mean (A) the Seller or any
director or executive officer of the Company,
(B) any spouse or immediate family member of
any such director or officer, and (C) any
corporation or other entity (other than the
Seller and its subsidiaries) of which any of
the aforementioned persons is an officer,
director or partner or is, directly or
indirectly, the beneficial owner of at least
5% of the ownership interest of such entity);
xiii. Reinsurance or other similar contracts,
whether ceded or assumed; and
xiv. All contracts, agreements, instruments,
arrangements or understandings, other than
insurance contracts, or which have not been
included in items i through xiii above,
involving payment by or to the Company of more
than $50,000 or not terminable immediately
without penalty or otherwise materially
affecting the assets, financial condition,
properties or business of the Company.
4.22.2 Except as set forth in SCHEDULE 4.22, all
Scheduled Contracts are valid and binding and in full force and
effect, and there are no defaults thereunder or events which with
notice or the passage of time would constitute a default by the
Company or, to the Knowledge of the Seller, by any other party
thereto, except for such defaults and events as to which requisite
waivers or consents have been obtained or other defaults or
failures to be valid and binding which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
4.23 TRANSACTIONS WITH AFFILIATES. All transactions
heretofore between the Company and the Affiliates of the Seller
have been conducted on terms no different than would be obtained if
the transaction had been between the Company and an unrelated
party. As of the Most Recent Balance Sheet Date, the Net
Intercompany Amount, which represented to the Company an aggregate
net receivable from the Seller, was $847,231 and was composed of
(a) alternative minimum tax carry-forwards in the aggregate amount
of $422,724 and (b) intercompany receivables in the aggregate
amount of $424,507. Except as set forth on SCHEDULE 4.23, since
the date of the Most Recent Balance Sheet, (w) the Company has not
entered into any Material Contract or engaged in any other
transaction with the Seller or any Affiliate of the Seller, (x) no
Affiliate of the Seller has any interest in any property, real or
personal, tangible or intangible, used in or pertaining to the
business of the Company, (y) neither the Seller nor any of its
Affiliates nor any Employee or director of the Company is indebted
to the Company, and (z) the Company is not indebted to the Seller
or any of its Affiliates.
4.24 INSURANCE COVERAGE RESERVES.
4.24.1 The aggregate reserves and other amounts of
liabilities or obligations of the Company (including, without
limitation, reserves established as an allowance for uncollectible
amounts under any reinsurance, coinsurance or similar contract) as
established or reflected on the books and records of the Company as
of the Most Recent Balance Sheet Date (a)(i) were determined in
accordance with generally accepted actuarial standards consistently
applied, except as set forth in SCHEDULE 4.24, (ii) are fairly
stated in accordance with sound actuarial principles, and (iii) are
based on actuarial assumptions that are in accordance with those
specified in the related insurance contracts, (b) meet the
requirements of the insurance laws of the applicable jurisdiction
and (c) are adequate to cover the total amount of all matured and
unmatured liabilities and obligations of the Company under all
outstanding insurance contracts pursuant to which the Company has
any liability (whether absolute, accrued, contingent or otherwise)
or obligation, including without limitation any incurred but not
reported claim and any liability or obligation arising as a result
of any reinsurance, coinsurance or other similar contract.
4.24.2 The Company owns assets that qualify as reserve
assets to the extent required by applicable insurance laws.
4.24.3 Except as set forth in SCHEDULE 4.24, the
Company has made no material change in its insurance reserving
practices since December 31, 1993.
4.25 INSURANCE ISSUED BY THE COMPANY.
4.25.1 Since March 31, 1990 and except as set forth in
the Company's rate filings with the California Department, true and
complete copies of which have been made available to the Purchaser,
no insurance product or program of the Company has been amended in
any material respect or made available to the public for the first
time.
4.25.2 All insurance contract obligations incurred by
the Company have been paid (or provision for payment has been made
therefor) in accordance with the terms of the contracts under which
they arose, except for such obligations for which the Company, in
accordance with industry custom and practice, reasonably believes
there is a reasonable basis to contest payment.
4.25.3 No outstanding insurance contract which would
entitle the holder thereof or any other person to receive
dividends, distributions or other benefits based on the revenues or
earnings of the Company has been issued or assumed by the Company.
4.25.4 The underwriting standards utilized and ratings
applied by the Company with respect to insurance contracts
outstanding as of the date hereof conform to industry accepted
practices (or otherwise are reasonable where no such industry
accepted practices exist) and, with respect to any such contract
reinsured in whole or in part, conform to the standards and ratings
required pursuant to the terms of the related reinsurance,
coinsurance or other similar contracts.
4.25.5 Since March 31, 1990, to the Knowledge of the
Seller, each insurance agent or broker appointed by the Company, at
the time such agent or broker wrote, sold or produced business for
the Company, was duly appointed and, to the Seller's Knowledge,
duly licensed, as an insurance agent or broker (for the type of
business written, sold or produced by such insurance agent or
broker) in the particular jurisdiction in which such agent or
broker wrote, sold or produced such business for the Company; and
except as set forth in SCHEDULE 4.25.5, to the Seller's Knowledge,
no such insurance agent or broker violated (or with or without
notice or lapse of time or both would have violated) any term or
provision of any Law or any writ, judgment, decree, injunction or
similar order applicable to the writing, sale or production of
business for the Company. SCHEDULE 4.25.5 also sets forth a list
of the agents and brokers of the Company who wrote, sold or
produced business for the Company as of the Most Recent Balance
Sheet Date, and corresponding to the name of each such agent or
broker is the aggregate amount of premium written by such agent or
broker on behalf of the Company from June 1, 1994 through the Most
Recent Balance Sheet Date and the commission rate applicable to the
premiums written by such agents and brokers.
4.25.6 The Company has entered into, and complied with
all the terms of, a consent agreement with the California
Department pursuant to California Insurance Code Article 10,
Sections 1861.01 through 1861.16 (Proposition 103), including
payment of all refunds due and making all required rate and form
filings. No further payments are required under such consent
agreement with the California Department.
4.25.7 All of the Company's rates, rate filings,
class, class or rating plans, and forms that have been or currently
are filed, charged or used by the Company have been finally
approved by the California Department.
4.26 THREATS OF CANCELLATION. Since December 31, 1992, no
policyholder, group of policyholder affiliates, or persons writing,
selling or producing insurance business, which individually or in
the aggregate, accounted for 10% or more of the premium income of
the Company for the year ended December 31, 1994, has terminated
or, to the Knowledge of the Seller, contemplated the termination of
its relationship with the Company.
4.27 REINSURANCE CONTRACTS. All amounts (including without
limitation amounts based on paid and unpaid losses) recoverable
under reinsurance, coinsurance or other similar contracts to which
the Company is a party are fully collectible in the ordinary
course, net of established reserves therefor. All reinsurance
treaties and arrangements to which the Company is a party are in
full force and effect and no party thereto is in violation of or in
default in the performance, observance or fulfillment of any
obligation, agreement, covenant or condition contained therein;
neither the Seller nor the Company has received any notice from any
of the other parties to such treaties, contracts or agreements that
such other party intends not to perform such treaty, contract or
agreement and, to the Knowledge of the Seller, neither the Seller
nor the Company has a reason to believe that any of the other
parties to such treaties, contracts or arrangements will be unable
to perform such treaty, contract or arrangement except to the
extent adequately and properly reserved for in the financial
statements of the Company.
4.28 BEST RATING. The Company was rated "A" by A.M. Best
Company, Inc. as of December 31, 1993, and it has not been given
notice from such rating agency of any threatened or prospective
downgrading in such rating.
4.29 ABSENCE OF IMPROPER PAYMENTS. Since February 29,
1984, neither the Company nor the Seller or any of its Affiliates
on behalf of the Company: (a) has made any contribution, payment
or gift of its property to or for the private use of any
governmental official, employee or agent where either the payment
or the purpose of such contribution, payment or gift is illegal
under the laws of the United States, any state thereof or any other
jurisdiction (foreign or domestic); (b) has established or
maintained any unrecorded fund or asset for any purpose, or has
made any false or artificial entries on its books or records for
any reason; (c) has made any payment to any person with the
intention or understanding that any part of such payment was to be
used for any other purpose other than that described in the
documents supporting the payment; or (d) has made any contribution,
or has reimbursed any political gift or contribution made by any
other person, to candidates for public office, whether federal,
state or local, where such contribution would be in violation of
Law.
4.30 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of
fact set forth in this Agreement (including without limitation all
information in the Financial Statements and the other schedules,
exhibits, and attachments hereto, taken as a whole) is false or
misleading in any material respect, nor does this Agreement
(including without limitation all information in the Financial
Statements and the other schedules, exhibits, and attachments
hereto, taken as a whole) omit to state a material fact necessary
in order to make the statements made or information disclosed, in
the light of the circumstances under which they were made or
disclosed, not misleading.
4.31 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for
the representations and warranties contained in this Article 4 and
in Article 5 hereof, neither the Seller nor the Company nor any
other Person makes any other express or implied representation or
warranty on behalf of the Seller or the Company, and the Seller and
the Company hereby disclaim any such representation or warranty,
whether by the Seller or the Company or any of their respective
officers, directors, employees, agents or Representatives or any
other Person, with respect to the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby, notwithstanding the delivery or disclosure to the Purchaser
or any of its officers, directors, employees, agents or
Representatives or any other Person of any documentation or other
information by the Seller or the Company or any of their respective
officers, directors, employees, agents or representatives or any
other person with respect to any one or more of the foregoing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING
SHARES AND OTHER MATTERS
In order to induce the Purchaser to enter into this Agreement,
and to consummate the transactions contemplated hereby, the Seller
represents and warrants to the Purchaser as follows:
5.1 ORGANIZATION AND STANDING OF THE SELLER. The Seller
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida. The Seller has
all requisite corporate right, power and authority to enter into
this Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby and thereby. Copies of the
Articles of Incorporation and By-Laws of the Seller, as applicable,
and all amendments thereto as of the date of this Agreement have
been delivered to the Purchaser and are complete and correct.
5.2 OWNERSHIP OF SHARES. The Seller owns, beneficially
and of record, and has the right to transfer to the Purchaser, all
of the issued and outstanding shares of Common Stock of the Company
as set forth opposite the Seller's name on EXHIBIT A, free and
clear of any Liens (except Securities Restrictions). At the
Closing, the Seller will transfer and convey, and the Purchaser
will acquire, good, valid and marketable title to the Shares, free
and clear of all Liens (except Securities Restrictions).
5.3 AUTHORIZATION OF AGREEMENT. The execution, delivery
and performance by the Seller of each of this Agreement and the
Escrow Agreement and the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly and
validly authorized by all requisite corporate action. Each of this
Agreement and the Escrow Agreement has been duly and validly
executed and delivered by the Seller and constitutes the legal,
valid and binding obligations of the Seller, enforceable against
the Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, moratorium, fraudulent
conveyance and other similar laws affecting creditors' rights
generally and by general principles of equity.
5.4 NO VIOLATION OR CONFLICT. Neither the execution and
delivery of this Agreement or the Escrow Agreement by the Seller
nor the consummation by it of the transactions contemplated hereby
or thereby, nor compliance by the Seller with the provisions hereof
or thereof, will (a) violate any term or provision of the Seller's
Articles of Incorporation or By-Laws, or (b) assuming that the
Requisite Regulatory Approvals are duly obtained, (i) violate any
Law or any writ, order or decree of any court or Authority which is
applicable to the Seller or any of its respective properties or
assets, or (ii) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a
default, breach or violation (or an event which, with notice or
lapse of time or both, would constitute a default, breach or
violation) under, result in the termination of or right of
termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the
respective properties or assets of the Seller under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, agreement or other
instrument or obligation to which the Seller is a party, or by
which it or any of its respective properties or assets may be bound
or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches or defaults which, either
individually or in the aggregate, will not have or be reasonably
likely to have a material adverse effect on the Seller.
5.5 CONSENT OR APPROVAL OF AUTHORITIES. Except for (a)
the approval of the California Department and related filing
requirements, (b) any required notification to or consent by the
California Board of Equalization, and (c) the requisite notice and
filing by the Seller under the HSR Act, no consent, approval or
authorization of, or registration, qualification, designation,
declaration or filing with, any Authority is required in connection
with the execution, delivery of performance by the Seller of this
Agreement, or any other agreement, instrument or document
contemplated hereby or the consummation by the Seller of the
transactions contemplated hereby or thereby. To the knowledge of
the Seller, there is no reasonable basis to believe that all
Requisite Regulatory Approvals will not be obtained by September
30, 1995 without the imposition of any condition of the type
referred to in Section 7.1.1.
5.6 AGREEMENTS WITH AUTHORITIES. Neither the Seller nor
any of its Affiliates is subject to or the recipient of any of the
following (each a "Regulatory Agreement"): a cease-and-desist or
other order issued by, a written agreement, consent agreement or
memorandum of understanding with, a commitment letter or similar
undertaking to, an order or directive by, or an extraordinary
supervisory letter from, or a board of director resolution adopted
at the request of any Authority that restricts the conduct of the
business of the Company or of any direct or indirect beneficial
owner of the Shares or that, in any other manner, relates to the
Company's capital adequacy, its underwriting or investment
policies, its management, or its business. To the Knowledge of the
Seller, no Authority is considering issuing or requesting any
Regulatory Agreement.
5.7 LITIGATION. There are no actions, suits, claims or
proceedings pending or, to the Knowledge of the Seller, threatened
against or involving the Seller, or any of the Seller's assets or
properties, officers and directors, before any court or arbitration
tribunal or by or before any Authority that question the validity
of this Agreement or seek to prohibit, enjoin or otherwise
challenge the consummation of the transactions contemplated hereby.
There are no outstanding orders, judgments, injunctions,
stipulations, awards or decrees of any Authority, court or
arbitration tribunal against the Seller or any of the Seller's
assets or properties, officers or directors, which reasonably could
be expected to prohibit or enjoin the consummation of the
transactions contemplated hereby.
5.8 FINANCIAL STATEMENTS. The Seller has delivered to the
Purchaser copies of the Seller's audited consolidated balance sheet
and the related statements of income, stockholders' equity and cash
flow (with unaudited consolidating information) for the year ended
December 31, 1994 (the "Seller's Consolidated Financial
Statements"). The Seller's Consolidated Financial Statements (a)
are complete and correct in all material respects and have been
prepared in accordance with the books and records of the Seller and
its subsidiaries, (b) present fairly the financial condition of the
Seller and its subsidiaries and their results of operations and
cash flows as at and for the periods ended on the dates thereof,
and (c) have been prepared in accordance with GAAP applied on a
consistent basis.
5.9 BROKERS. Neither the Seller nor the Company has
employed any broker or finder other than Philo Smith & Co., Inc. or
has incurred or will incur any broker's, finder's or similar fees,
commissions or expenses payable by the Seller or the Company in
connection with the transactions contemplated by this Agreement
except for fees, if any, payable to Philo Smith & Co., Inc. Any
fee payable to Philo Smith & Co., Inc. shall be paid by the Seller.
ARTICLE 6
PRE-CLOSING COVENANTS
6.1 CONDUCT OF BUSINESS. During the period from the date
hereof to the Closing Date, the Seller shall, unless the Purchaser
shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed), cause the Company to continue to
conduct its business affairs in the usual and ordinary course of
business and in substantially the same manner as previously
conducted (except as required by applicable Law) and to maintain or
cause to be maintained in full force and effect, all of the
Company's Operating Permits.
6.2 PRE-CLOSING ACTIVITIES. Except as otherwise permitted
or required by this Agreement or as set forth on SCHEDULE 6.2
hereto, prior to the Closing Date, the Seller shall not unless the
Purchaser shall otherwise consent in writing (which consent shall
not be unreasonably withheld or delayed), take any action to cause
the Company, and shall not permit the Company, to:
6.2.1 Create, incur or assume any indebtedness for
borrowed money, except for trade credit incurred in the ordinary
course of business, or incur, assume or become subject to, whether
directly or indirectly, by way of guaranty or otherwise, any
obligation or liability (whether absolute, accrued, contingent or
otherwise and whether due or to become due) other than obligations
or liabilities incurred in the ordinary course of business; or
6.2.2 Fail to discharge or satisfy any Lien or pay or
satisfy any obligation or liability (whether absolute, accrued,
contingent or otherwise) arising from its operations when the same
shall become due and payable; or
6.2.3 Sell, lease, assign, transfer or otherwise
dispose of any material property or asset, except for (a)
investment portfolio transactions in the ordinary course of
business, and (b) sales of assets having a gross book value not in
excess of $10,000 individually or $50,000 in the aggregate;
provided, however, that notwithstanding this Section 6.2.3, title
in fee simple to the Oakland Site shall be transferred either (x)
by quit-claim deed immediately prior to the Closing from the
Company to the Seller for a purchase price in the amount of the
Oakland Site Purchase Price, which shall be settled in accordance
with Section 2.2 of this Agreement, and such transfer shall be on
an "AS IS WHERE IS" basis, with no representations or
indemnifications of any kind or nature to be made by the Company in
connection with such transfer, and in addition, all leases and
other agreements relating to the Oakland Site shall be assigned to
and assumed by the Seller in connection with such transfer,
pursuant to assignment and assumption agreements in form and
substance reasonably acceptable to the Purchaser or (y) to any
third party unrelated to the Company or the Seller upon such terms
and conditions as are reasonably acceptable to the Purchaser, if
notwithstanding the foregoing, in the event of any such transfer to
any third party, the Seller shall indemnify the Purchaser in
accordance with the terms of Section 9.2.1(c); and in any situation
involving the transfer of the Oakland Site, all expenses and taxes
incurred and paid by the Company in connection with such transfer
shall be reimbursed by the Seller.
6.2.4 Permit or allow any material property or asset
to be subjected to any Lien except those Liens permitted under
Sections 4.9 and 4.10, or enter into any conditional sale or other
title retention agreement with respect to any material property or
asset; or
6.2.5 Declare or pay any dividend or other
distribution on or with respect to any shares of its capital stock
or make any direct or indirect redemption, retirement, purchase or
other acquisition of any shares of its capital stock; or
6.2.6 Make any change in its accounting methods or
practices;
6.2.7 Amend its Articles of Incorporation or Bylaws,
merge with or into or consolidate with any other Person, subdivide
or in any way reclassify any shares of its capital stock or change
in any manner the rights of its outstanding capital stock; or
6.2.8 Create, authorize, issue, sell or deliver any
of its capital stock, bonds or other of its securities (whether
authorized and unissued or held in treasury) or any instrument
convertible into any of them, or grant or otherwise issue any
options, warrants or other rights with respect thereto, or split
up, combine or reclassify any of its outstanding stock; or
6.2.9 Merge or consolidate with, or acquire
substantially all of the assets of, any other Person; or
6.2.10 Make any loan or advance (whether in cash or
other property), or make any investment in or capital contribution
to, or extend any credit to, any Person, except (a) portfolio
investments in the ordinary course of business, (b) short-term
investments pursuant to customary cash management policies, and (c)
advances made in the ordinary course of business to Employees; or
6.2.11 Make any payment to the Seller or any affiliate
of the Seller (other than payments pursuant to the Management
Agreement and Tax Allocation Agreement and reimbursements for
expenditures made on behalf of the Company by the Seller or its
Affiliates in the ordinary course of business) or forgive any
indebtedness due or owing from the Seller or any affiliate of the
Seller to the Company; or
6.2.12 Enter into any agreement with any labor union
or association representing any Employee, or make any wage or
salary increase or bonus, or increase in any other direct or
indirect compensation, for or to any of its officers, directors or
Employees; or
6.2.13 Enter into, amend, terminate or fail to renew
any Material Contract except in the ordinary course of business; or
6.2.14 Make any capital expenditures, capital
additions or capital improvements in excess of $50,000 in the
aggregate; or
6.2.15 Restructure or materially change its investment
securities portfolio through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported;
6.2.16 Enter into any agreement or commitment to do
any of the foregoing.
6.3 BEST EFFORTS; FURTHER ASSURANCES.
6.3.1 The parties shall use their respective best
efforts to cause the consummation of the transactions contemplated
by this Agreement. The Seller shall cause the Company to use its
best efforts to preserve intact its customer relationships and
goodwill and to maintain good relations with its agents.
6.3.2 The Seller shall cause the proper officers and
directors of the Seller and the Company, as applicable, to execute
whatever minutes of meetings or other instruments and take whatever
action as may be necessary or desirable to effect, perfect or
confirm of record or otherwise, in the Purchaser, full right, title
and interest in and to (i) the Shares and (ii) the business,
properties and assets now conducted or owned by the Company, free
and clear of all liens, or to collect, realize upon, gain
possession of, or otherwise acquire full right, title and interest
in and to such business, properties and assets, or to carry out the
intent and purposes of the transactions contemplated hereby.
6.4 ACCESS TO INFORMATION. From the date of this
Agreement, the Seller will give the Purchaser and its authorized
Representatives and sources of financing full access to the offices
and other facilities and to the books and records of the Company,
will permit the Purchaser and its authorized Representatives and
sources of financing to make such inspections as it and they may
require, will permit the Purchaser to interview any independent
insurance agent or broker with whom the Company has an agreement,
contract, instrument or understanding, and will cause its officers
and Representatives (including, without limitation, its firm of
independent certified public accountants) to furnish the Purchaser
and its authorized Representatives and sources of financing with
such financial and operating data and other information with
respect to the business, operations, assets and liabilities of the
Company and the market potential for their businesses as the
Purchaser and its authorized Representatives and sources of
financing may from time to time request.
6.5 CONFIDENTIALITY.
6.5.1 Unless and until the transactions contemplated
hereby have been consummated, the Purchaser shall, and shall ensure
that its Representatives shall, hold in strict confidence and not
use in any way except in connection with the consummation of the
transactions contemplated hereby, all Confidential Information
obtained in connection with the transactions contemplated hereby
from the Seller or the Company or from any of their respective
Representatives, except any such Confidential Information which is
required to be disclosed by the Purchaser or its Representatives
(a) in connection with any court action or any proceeding before
any Authority, (b) in connection with the enforcement of any of the
rights of the Purchaser hereunder, or (c) in connection with
securing any consent or approval hereunder; provided, however, that
in the case of a disclosure contemplated by clause (b) or (c),
above (other than in connection with notices and filings with the
California Department), no disclosure shall be made until the
Purchaser shall have given notice to the Seller of the intention so
to disclose such Confidential Information and shall have given the
Seller a reasonable opportunity to contest the need for such
disclosure, and the Purchaser shall cooperate with the Seller in
connection with any such proceeding. The Purchaser shall cause its
Representatives to agree, for the benefit of the Seller, to keep
such Confidential Information confidential, and to hold or dispose
of such Confidential Information in the manner and to the extent
provided herein. The Purchaser shall not use any Confidential
Information in competition with the Company in California.
6.5.2 In the event this Agreement is terminated, the
Purchaser and its Representatives shall promptly destroy or, upon
the request of the Seller, return to the Seller all Confidential
Information furnished by the Seller or the Company or any of their
respective Representatives, and any copies or extracts thereof.
6.6 HSR ACT; CONSENTS AND APPROVALS.
6.6.1 The Purchaser and the Seller shall each (a) use
all reasonable efforts to file within 14 days after the date of
this Agreement with the Antitrust Division of the United States
Department of Justice and the Federal Trade Commission the pre-
merger notifications required by the HSR Act from such party,
requesting early termination of the waiting period thereunder, (b)
respond promptly to inquiries to such party from such Authorities
in connection with such filings, and (c) cooperate fully with one
another in the preparation of such filings and responses.
6.6.2 The Purchaser and the Seller shall take all
reasonable steps necessary or appropriate to obtain the approval of
the California Department in connection with the transactions
contemplated hereby, shall use all reasonable efforts to file
within 14 days after the date of this Agreement a Change of Control
Application with the California Department and shall provide the
Seller with a true and correct copy of the Change of Control
Application promptly after filing it with the California
Department.
6.6.3 The Purchaser and the Seller shall each (and
the Seller shall cause the Company to) give any notices to, make
any filings with, and use their respective best efforts to obtain
any other authorizations, consents and approvals of any Authorities
required to be obtained by any of them to consummate the
transactions contemplated hereby.
6.6.4 The Seller shall cause the Company to give any
notices to third parties, and shall cause the Company to use its
best efforts to obtain, any third party consents that the Purchaser
may reasonably request in connection with the consummation of the
transactions contemplated hereby; provided that neither the Company
nor the Seller shall be required to make any payment to any such
third party in order to obtain such consent unless the Purchaser
agrees to reimburse the Company or the Seller, as the case may be,
for any such payment. Nothing in this Agreement shall be construed
as an attempt or an agreement by the Company to assign or cause the
assignment of any contract or agreement which is by law
nonassignable without the consent of the other party or parties
thereto, unless such consent shall have been given.
6.7 ADDITIONAL CONVENTION STATEMENTS. As soon as
reasonably practicable after they become available, the Seller
shall furnish to the Purchaser copies of the Quarterly Convention
Statements of the Company for all interim quarterly periods ending
subsequent to December 31, 1994 and prior to the Closing Date. The
financial statements included in the Quarterly Convention
Statements referred to above will be complete and correct in all
material respects, prepared in conformity with statutory accounting
principles prescribed or permitted by the California Department
applied on a consistent basis and will present the financial
position and results of operations of the Company as at such dates
and for such periods (subject to normal year-end adjustments), in
accordance with such statutory accounting principles applied on a
consistent basis, and the schedules thereto, when considered in
relation to the basic statutory financial statements, will be
complete and correct and present fairly in all material respects
the information shown therein.
6.8 TERMINATION OF MANAGEMENT AGREEMENT AND TAX ALLOCATION
AGREEMENT. The Seller and the Company shall, effective for all
periods beginning on or after the Closing Date, terminate the
Management Agreement and the Tax Allocation Agreement and any
related policies between or among the Seller, Affiliates of the
Seller and the Company. Except for any amounts receivable from or
payable to the Seller under the Management Agreement or the Tax
Allocation Agreement as of the Closing Date, no further payments
shall be due thereunder. The Net Intercompany Amount as of the
Closing Date shall be settled as provided in Section 2.2 of this
Agreement.
6.9 NO SOLICITATION. The Seller shall not, nor shall it
permit any of its or the Company's officers, directors, employees
or Representatives directly or indirectly to (a) initiate contact
with, solicit or encourage any inquiries or proposals by, or (b)
enter into any discussion or negotiation with, or disclose directly
or indirectly any information concerning the Company's business and
properties to, or afford any access to the Company's properties,
books and records to, any corporation, partnership, person or other
entity or group in connection with any possible proposal regarding
a sale of the Common Stock of the Company or a merger,
consolidation or sale of all or a substantial portion of the
assets, of the Company or any similar transaction.
6.10 NOTIFICATION OF CERTAIN MATTERS. Each of the parties
(the "Notifying Party") shall give prompt notice to the other party
of (a) the occurrence or non-occurrence of any event that would be
likely to cause any representation or warranty of the Notifying
Party contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (b) any
material failure of the Notifying Party to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of
any notice pursuant to this Section 6.10 shall not limit or
otherwise affect the remedies available hereunder to the party
receiving such notice.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The
respective obligations of the Purchaser and the Seller under this
Agreement to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the
Closing of the following conditions, none of which may be waived:
7.1.1 APPROVALS. All regulatory approvals required
to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired
(all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals")
and none of the Requisite Regulatory Approvals shall have imposed
any condition or requirement which, in the reasonable opinion of
the Purchaser, could reasonably be expected to have such a material
adverse effect on the economic or business benefits to the
Purchaser of the purchase of Shares considering such benefits as a
whole, so as to render inadvisable, in the reasonable opinion of
the Purchaser, the consummation of such transaction.
7.1.2 NO INJUNCTION OR RESTRAINT; ILLEGALITY.
Neither the Purchaser, the Seller nor the Company shall be subject
to any order, decree or injunction of any Authority which enjoins
or prohibits the consummation of the transactions contemplated by
this Agreement nor shall any proceeding by any Authority seeking
any such order, decree or injunction be pending. No statute, rule,
regulation, order or decree shall have been enacted, entered or
promulgated by any Authority which prohibits, restricts or makes
illegal the consummation of the transactions contemplated by this
Agreement.
7.2 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. All of the
obligations of the Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction at
or prior to the Closing of each and every one of the following
conditions precedent, any one or more of which may be waived by the
Purchaser:
7.2.1 Each of the representations and warranties of
the Company and the Seller set forth in this Agreement shall be
true and correct in all material respects as of the Closing Date as
though made on and as of the Closing Date, except for
representations and warranties which speak as of an earlier
specified date, which need only be true and correct in all material
respects as of such date, and except to the extent any
representation and warranty is qualified by materiality, such
representation and warranty shall be true and correct as of the
Closing Date or, if such representation and warranty speaks of an
earlier specified date, as of such date.
7.2.2 The Company and the Seller shall have performed
and complied in all material respects with all of the agreements,
covenants and obligations required under this Agreement to be
performed or complied with by the Company or the Seller prior to or
at the Closing.
7.2.3 The Seller shall have delivered to the
Purchaser a certificate, executed by a duly authorized officer of
the Seller in his capacity as such, certifying in such detail as
the Purchaser may reasonably request, that the conditions specified
in Sections 7.1.1 and 7.1.2 (insofar as they are to be performed by
the Seller) have been fulfilled.
7.2.4 No proceeding in which the Seller or the
Company shall be a debtor, defendant or party seeking an order for
its own relief or reorganization shall have been brought or be
pending by or against such Person under any United States or state
bankruptcy or insolvency Law.
7.2.5 From the date of this Agreement there shall
have occurred no change in any Law or any proposal to adopt a law
that reasonably could be expected to be adopted and if adopted,
could reasonably be expected to have, individually or in the
aggregate with all such changes, a Material Adverse Effect.
7.2.6 The Purchaser shall have received:
i. A certificate issued by the Secretary of State
of the State of California, as of a date
reasonably acceptable to the Purchaser, as to
the legal existence and good standing of the
Company in such state;
ii. A certificate issued by the California
Department, as of a date reasonably acceptable
to the Purchaser, that the Company is duly
licensed for the classes of business described
in Section 4.2 of this Agreement;
iii. A certificate issued by the Secretary of State
of the State of Florida as of a date
reasonably acceptable to the Purchaser, as to
the legal existence and good standing of the
Seller in such state.
iv. A certificate of the Secretary or an Assistant
Secretary of the Company certifying as to (i)
the completeness and accuracy of its Articles
of Incorporation and Bylaws;
v. A certificate of the Secretary or an Assistant
Secretary of the Seller certifying as to (i)
the completeness and accuracy of its Articles
of Incorporation and By-Laws, (ii) requisite
corporate or other action authorizing the
transactions contemplated by this Agreement
and (iii) the incumbency and signatures of the
officers of the Seller executing this
Agreement;
7.2.7 The Seller shall have delivered to the
Purchaser such resignations of the officers and directors of the
Company as the Purchaser may request.
7.2.8 The Purchaser shall have received the Opinion
of the Seller's Counsel.
7.2.9 The Oakland Site shall have been conveyed in
accordance with Section 6.2.3 of this Agreement.
7.2.10 All proceedings taken by the Seller and all
instruments executed and delivered by the Seller and the Company
prior to the Closing Date in connection with the transactions
contemplated herein shall be satisfactory in form and substance in
the reasonable opinion of counsel to the Purchaser.
7.3 CONDITIONS TO THE SELLER'S OBLIGATIONS. All of the
obligations of the Seller to consummate the transactions
contemplated by this Agreement are subject to the satisfaction at
or prior to the Closing of each and every one of the following
conditions precedent, any one or more of which may be waived by the
Seller:
7.3.1 Each of the representations and warranties of
the Purchaser contained herein shall be true and correct in all
material respects as of the Closing Date as though made on and as
of the Closing Date, except for representations and warranties
which speak as of an earlier specified date, which need only be
true and correct in all material respects as of such date, and
except to the extent any representation and warranty is qualified
by materiality, such representation and warranty shall be true and
correct as of the Closing Date or, if such representation and
warranty speaks of an earlier specified date, as of such date.
7.3.2 The Purchaser shall have performed and complied
in all material respects with all of the agreements, covenants and
obligations required under this Agreement to be performed or
complied with by it prior to or at the Closing.
7.3.3 The Purchaser shall have delivered to the
Seller a certificate, executed by a duly authorized officer of the
Purchaser in his capacity as such, certifying in such detail as the
Seller may reasonably request that the conditions specified in
Sections 7.2.1 and 7.2.2 (insofar as they are to be performed by
the Purchaser) have been fulfilled.
7.3.4 No proceeding in which the Purchaser shall be
a debtor, defendant or party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against
the Purchaser under any United States or state bankruptcy or
insolvency Law.
7.3.5 The Seller shall have received:
i. A certificate issued by the Secretary of State
of the Commonwealth of Massachusetts, as of a
date reasonably acceptable to the Purchaser,
as to the legal existence and good standing of
the Purchaser in such state; and
ii. A certificate of the Clerk or an Assistant
Clerk of the Purchaser certifying as to (i)
the completeness and accuracy of its Articles
of Incorporation and By-Laws, (ii) requisite
corporate or other action authorizing the
transactions contemplated by this Agreement
and (iii) the incumbency and signatures of the
officers of the Purchaser executing this
Agreement;
7.3.6 The Seller shall have received the Opinion of
the Purchaser's Counsel.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 FURTHER ASSURANCES. The parties hereto shall deliver
any and all other instruments or documents required to be delivered
pursuant to, or necessary or proper in order to give effect to, all
of the terms and provisions of this Agreement including, without
limitation, all necessary stock powers and such other instruments
of transfer as may be necessary or desirable to transfer ownership
of the Shares.
8.2 PUBLICITY. No publicity release or announcement
concerning this Agreement or the transactions contemplated hereby
shall be made without advance approval thereof by the Purchaser and
the Seller. The parties hereto agree to cooperate in issuing any
press release or other public announcement concerning this
Agreement or the transactions contemplated hereby. Whenever
practicable, each party shall furnish to the other party drafts of
all such press releases or announcements prior to their release.
Nothing contained herein shall prevent any party from at any time
furnishing any information to any Authority or from making any
disclosures required under the Exchange Act or under the rules and
regulations of any national securities exchange on which such
party's shares of capital stock are listed.
8.3 CERTAIN TAX MATTERS.
8.3.1 Upon the condition that the Closing be
effected, the Seller shall indemnify and hold harmless the
Purchaser and the Company, and their respective successors and
assigns, from, against and in respect of any Adverse Consequences
the Purchaser or the Company may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any liability of
the Company for Income Taxes of any other Person under Treasury
Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law).
8.3.2 The Seller will include the income of the
Company (including any deferred income included in income pursuant
to Treasury Regulation Sections 1.1502-13 and 1.1502-14 and any
excess loss accounts taken into income under Treasury Regulation
Section 1.1502-19) on the Seller's consolidated federal Income Tax
Returns for all Pre-Closing Tax Periods and will pay all federal
Income Taxes attributable to such income. The Purchaser will cause
the Company to provide, or cause to be provided, to the Seller,
without charge, such information as may reasonably be requested by
the Seller in connection with the preparation of any such Tax
Returns relating to Pre-Closing Tax Periods. The income of the
Company will be apportioned to the period up to and including the
Closing Date and the period after the Closing Date by closing the
books of the Company as of the end of the Closing Date.
8.3.3 If a notice shall be given by any Tax Authority
with respect to a potential Tax liability of the Company which, if
sustained, would result in a payment by the Seller to the Purchaser
pursuant to Section 9.2.1 of this Agreement (a "Tax Assessment"),
the Purchaser shall, after receipt of such notice, promptly notify
the Seller in writing (a "Tax Notice"). The Seller may, by written
notice to the Purchaser given within 30 days after the receipt by
the Seller of a Tax Notice, at the Seller's sole cost and expense
(except as hereinafter provided), participate fully in the defense
of all Tax Assessments with respect to which the Seller may become
liable pursuant to the Seller's indemnification obligations
hereunder. The Purchaser shall diligently prosecute such defense
in cooperation and consultation with the Seller and shall provide
written notice to the Seller of all conferences, meetings,
proceedings and appearances before all Authorities with respect to
the defense of any such Tax Assessment. If the Seller elects to
participate in the defense of a Tax Assessment, the Purchaser shall
provide, or shall cause the Company to provide, to the Seller (at
no cost to the Seller) such information as may be required in
connection with such defense as reasonably requested by the Seller.
If the Seller elects to participate in the defense of a Tax
Assessment, the Purchaser shall give the Seller written notice of
any proposed resolution or settlement of such Tax Assessment not
less than 15 business days before the Purchaser accepts or intends
to accept such proposed resolution or settlement. The Purchaser
shall have the right to settle or otherwise to resolve any Tax
Assessment for which the Seller would become liable pursuant to its
indemnification obligations hereunder upon the written consent of
the Seller, which consent shall not be unreasonably withheld.
8.3.4 The Seller shall have no liability with respect
to any Taxes resulting by reason of any election made or deemed to
be made by the Purchaser or the Company subsequent to the Closing,
whether express or implied, under Section 338 of the Code.
8.3.5 The Seller shall be entitled to any and all
refunds of Taxes attributable to any Pre-Closing Tax Period. If
the Purchaser or the Company voluntarily amends any Return (other
than as required by any Tax Authority) for a taxable period which
includes any Pre-Closing Tax Period, or, without the Seller's
consent, enters into any agreement or settlement with any Tax
Authority relating to a taxable period ending after the Closing
Date, and such agreement or settlement affects any item of
deduction, loss, credit, income or gain with respect to any Pre-
Closing Tax Period, then notwithstanding any provision of this
Agreement which may be to the contrary, the Seller shall have no
liability for any Adverse Consequences with respect to any Taxes
attributable to any change in tax liability effected by such
amended Return, agreement or settlement.
8.3.6 Notwithstanding any provision of this Agreement
which may be to the contrary, the Purchaser and the Company shall
preserve all Returns, books and records in their control relating
to any liabilities for Taxes due with respect to any Pre-Closing
Tax Period until the expiration of all applicable statutes of
limitation and extensions thereof with respect to Taxes for any
such period.
8.4 FURTHER ASSURANCES. In case at any time after the
Closing any further action is necessary to carry out the purposes
of this Agreement, each of the parties hereto will take such
further action (including the execution and delivery of such
further instruments and documents) as any other party reasonably
may request, all at the sole cost and expense of the requesting
party (except to the extent the requesting party is entitled to
indemnification therefor under this Agreement).
8.5 NONCOMPETITION. For a period commencing on the
Closing Date and terminating on the fifth anniversary thereof, the
Seller will not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation or
business of any other Person or entity (whether as a partner,
agent, security holder, creditor, consultant or otherwise) that
directly or indirectly is engaged in the property and casualty
insurance business in any county in the State of California so long
as the Company or its successor carries on such business in such
places during such period; provided, however, that nothing herein
shall be deemed to prevent the Seller from acquiring through market
purchases and owning, solely as an investment, less than 1% of the
equity securities of any class of any issuer whose shares are
registered under Section 12(b) or 12(g) of the Exchange Act and are
listed or admitted for trading on any United States national
securities exchange or are quoted on the National Association of
Securities Dealers, Inc. Automated Quotations System, or any
similar system of automated dissemination of quotations of
securities prices in common use, so long as the Seller is not a
member of any "control group" (within the meaning of the rules and
regulations of the SEC) of any such issuer. The Seller agrees that
the covenant provided for in this Section 8.5 is reasonable and
necessary in terms of time, activity and territory to protect the
Purchaser's interest as a buyer of the Shares. To the extent that
the covenant provided for in this Section 8.5 may later be deemed
by a court to be too broad to be enforced with respect to its
duration or with respect to any particular activity or geographic
area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete
specific words or phrases to or from the provision. The provision
as modified shall then be enforced.
8.6 NON-SOLICITATION OF EMPLOYEES. For a period of three
years following the Closing Date, the Seller will not, directly or
indirectly, for itself or for any other Person, firm, corporation,
partnership, association or other entity, employ, attempt to employ
or enter into any contractual arrangement with any employee or
former employee of the Company, or entice, induce or encourage any
such employee to terminate his or her employment with the Company,
unless such employee or former employee has not been employed by
the Company (or its predecessors) for a period in excess of six
months.
8.7 ACCESS.
8.7.1 Until the date which is five years after the
Closing Date, the Purchaser will give, and will cause the Company
to give, to the Seller access to (and the right to make copies at
the expense of the Seller of) the books, files, records and
Returns of the Company to the extent that such relate to the
business and operations of the Company on or prior to the Closing
Date and are in the Purchaser's or Company's possession on the
Closing Date or subsequently come into the Purchaser's or Company's
possession. Any access pursuant to this Section 8.7.1 will be
conducted by the Seller in good faith, with a legitimate purpose
that is not related to prospective competition by the Seller and
which shall not interfere unreasonably with the operations of the
Purchaser or the Company following the Closing. Neither the
Purchaser nor the Company will destroy or dispose of any such
books, files, records or Returns prior to the expiration of such
five-year period. After the expiration of this five-year period,
the Purchaser will give, or will cause the Company to give, prior
to destroying or disposing of any such books, files, records or
Returns, at least 60-days' advance notice to the Seller of the
intended destruction or disposition, and during such 60-day period
the Seller will have the right to make copies of the same, all at
the Seller's expense.
8.7.2 The Seller acknowledges that the books, files,
records and Returns of the Company shall be the property of the
Purchaser and the Company immediately after the Closing, whether in
the possession of the Purchaser, the Company, the Seller or any of
Seller's other Affiliates. To the extent such books, files,
records and Returns are in the possession of the Seller or any of
its Affiliates, until the date which is five years after the
Closing Date, the Seller will give to the Purchaser and the Company
access to (and the right to take possession or make copies at the
expense of the Purchaser or the Company of) the books, files,
records and Returns of the Company. Any access pursuant to this
Section 8.9.2 will be conducted by the Purchaser in good faith,
with a legitimate purpose that is not related to prospective
competition by the Seller and in such manner which shall not
interfere unreasonably with the operations of the Seller following
the Closing. The Seller will not destroy or dispose of any such
books, files, records or tax returns prior to the expiration of
such five-year period. After the expiration of this five-year
period, the Seller will give, prior to destroying or disposing of
any such books, files, records or Returns, at least 60-days'
advance notice to the Purchaser of the intended destruction or
disposition, and during such 60-day period the Purchaser or the
Company will have the right to take possession of the same or to
make copies of the same, all at the expense of the Seller.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INDEMNIFICATION; CERTAIN ADJUSTMENTS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
9.1.1 Except as otherwise provided in this Section
9.1.1, the representations, warranties, covenants and agreements of
the Seller contained in this Agreement shall survive the date of
this Agreement, the Closing Date and the consummation of the
transactions contemplated by this Agreement and until the earlier
of (a) the date the Company files its audited statement of admitted
assets, liabilities, capital and surplus (statutory basis) as of
December 31, 1995 and the related statements of income, changes in
capital and surplus and cash flows for the years then ended or (b)
the date the Purchaser files with the SEC its Annual Report on Form
10-K for the year ending December 31, 1995. The representations
and warranties contained in Sections 4.17, 4.19 and 4.20 shall
survive until the expiration of the applicable statutes of
limitations, the representation and warranty contained in Section
4.24 shall survive until the second anniversary of the Closing
Date, and the representations and warranties in Sections 5.2 and
5.3 shall survive forever, subject to any applicable statutes of
limitations.
9.1.2 Except as otherwise provided in this Section
9.1.2, the representations, warranties, covenants and agreements of
the Purchaser contained in this Agreement shall survive the date of
this Agreement, the Closing Date and the consummation of the
transactions contemplated by this Agreement and until the earlier
of (a) the date the Company files its audited statement of admitted
assets, liabilities, capital and surplus (statutory basis) as of
December 31, 1995 and the related statements of income, changes in
capital and surplus and cash flows for the years then ended or (b)
the date the Purchaser files with the SEC its Annual Report on Form
10-K for the year ending December 31, 1995. The representations
and warranties contained in Section 3.2, which shall survive
forever, subject to any applicable statutes of limitations.
9.1.3 To preserve any claim for breach of any such
warranty, representation, covenant or agreement, the party claiming
a breach shall be obligated to notify the party claimed to be in
breach in writing of any such breach, or facts that may give rise
to such breach, before termination of such warranty,
representation, covenant or agreement; otherwise, such party's
claim for breach shall be forever barred.
9.2 INDEMNIFICATION.
9.2.1 Upon the condition that the Closing be
effected, the Seller shall indemnify and hold harmless the
Purchaser and the Company, and their respective successors and
assigns, from, against and in respect of any Adverse Consequences
the Purchaser or the Company shall suffer through and after the
date of the claim for indemnification (including any Adverse
Consequences the Purchaser may suffer after the end of any
applicable survival period):
(a) Resulting from, arising out of, relating to or caused
by (i) any breach or violation of any of the
representations or warranties of the Seller contained
in this Agreement (except the representation and
warranty in Section 5.2 of this Agreement) or (ii) the
failure by the Seller to comply with any of the
covenants or agreements of the Seller contained in
this Agreement; provided, however, that the Seller
shall not have any obligation to indemnify the
Purchaser or the Company from, against or in respect
of any Adverse Consequences resulting from, arising
out of, relating to or caused by the breach or
violation of any of the representations or warranties
contained in Sections 4.3 through 4.18 and 4.21
through 4.32 hereof (x) until the Purchaser has
suffered Adverse Consequences by reason of all such
breaches or violations in excess of $200,000 (and then
only to the extent that such Adverse Consequences, in
the aggregate, exceed $200,000) or (y) to the extent
the Adverse Consequences suffered by the Purchaser by
reason of all such breaches or violations exceed
$4,000,000. For purposes of this Section 9.2, no
single claim for damages by the Purchaser against the
Seller hereunder shall be deemed to apply against such
$200,000 aggregate deductible (and the Seller shall
have no liability to the Purchaser in connection
therewith) unless the amount of such damages exceeds
$5,000; provided, however, that in the event that the
aggregate amount of any such individual claims of
$5,000 or less asserted by the Purchaser against the
Seller shall exceed $75,000, then the total amount of
such claims shall be deemed to apply against such
$200,000 aggregate deductible;
(b) Resulting from, arising out of, related to or caused
by (i) any breach or violation of the representation
or warranty in Section 5.2 or (ii) any Environmental
Claim with respect to the Company arising out of facts
or circumstances existing at the time of the Closing;
or
(c) Resulting from, arising out of, related to or caused
by (i) the ownership of the Oakland Site by the
Company or (ii) any transfer of the Oakland Site in
accordance with the terms of Section 6.2.3, including,
without limitation, any breach, omission or
misrepresentation under any agreement made by the
Company in connection with any such transfer.
9.2.2 Upon the condition that the Closing be
effected, the Purchaser and the Company shall indemnify and hold
harmless the Seller, its successors and assigns from, against and
in respect of, any Adverse Consequences the Seller shall suffer
through and after the date of the claim for indemnification
resulting from, arising out of, relating to or caused by (a) any
breach or violation of any of the representations or warranties of
the Purchaser contained in this Agreement, or (b) the failure by
the Purchaser to comply with any of the covenants or agreements of
the Purchaser contained in this Agreement.
9.2.3 A party (which, if the Purchaser is to be
indemnified, shall be deemed to include the Company) seeking
indemnification pursuant to this Section 9.2 (the "Indemnified
Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") in the event
that any person not a party to this Agreement shall make any demand
or claim, or file or threaten to file any lawsuit (a "Third Party
Claim"), which Third Party Claim may cause liability to the
Indemnifying Party pursuant to the indemnification provisions of
this Agreement. In any such event, the Indemnifying Party shall
have the right, exercisable by notice to the Indemnified Party
within 10 business days after notice by the Indemnified Party to
the Indemnifying Party of the commencement or assertion of such
Third Party Claim, to retain counsel (which counsel shall be
reasonably acceptable to the Indemnified Party) for the Indemnified
Party, at the cost and expense of the Indemnifying Party, to defend
any such Third Party Claim if the Indemnifying Party acknowledges
that it is required to indemnify the Indemnified Party for any and
all liability ensuing from such Third Party Claim; provided,
however, the Indemnifying Party may not assume the defense of any
Third Party Claim as provided in this Section 9.2.3 if the
potential Adverse Consequences of such Third Party Claim either (a)
would have or reasonably could be expected to have a material
adverse effect on the Company's financial condition or future
operating results, and the Purchaser and the Company would not be
entitled to indemnification hereunder for substantially all of such
Adverse Consequences or (b) would exceed $4,000,000. The
Indemnified Party shall be permitted to participate in the defense
of such Third Party Claim at its own expense. Failure of the
Indemnified Party to give promptly the notice required by this
Section 9.2.3 shall not relieve the Indemnifying Party of its
obligations to indemnify under this Section 9.2, but as a result of
such failure the Indemnified Party shall be liable to the
Indemnifying Party for the amount of actual damages caused by such
failure.
9.2.4 Unless and until the Indemnifying Party assumes
the defense of a Third Party Claim as provided in Section 9.2.3,
the Indemnified Party may defend against the Third Party Claim in
any manner it may reasonably deem appropriate at the cost and
expense of the Indemnifying Party.
9.2.5 The Indemnifying Party, if it shall have
assumed the defense of any Third Party Claim, shall not have the
right to consent to the entry of judgment with respect to, or
otherwise settle such Third Party Claim without the prior written
consent of the Indemnified Party (which consent shall not be
unreasonably withheld).
9.2.6 The parties hereto shall cooperate in the
defense of any Third Party Claim, the out-of-pocket expense of
which shall be borne by Indemnifying Party, and shall furnish such
records, information and testimony, and cause their respective
employees and other representatives to attend such conferences,
discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith.
9.2.7 Any payment made by the Seller pursuant to the
Seller's indemnification obligations under this Section 9.2 shall
constitute a reduction in the Purchase Price hereunder. Any
payment made by the Purchaser pursuant to the Purchaser's
indemnification obligations under this Section 9.2 shall constitute
an addition to the Purchase Price hereunder.
9.2.8 If the event causing the Adverse Consequences
for the purposes of this Section 9.2 gives rise to a current
deduction against taxable income of the Indemnified Party, the
Adverse Consequences shall be reduced by the tax benefit
attributable thereto. If such event will give rise to a future tax
deduction to the Indemnified Party, the Adverse Consequences shall
be reduced by the tax benefit attributable thereto discounted at
the prime rate of interest reported in the WALL STREET JOURNAL at
the time of payment.
9.2.9 The amount of any indemnification claim under
this Section 9.2 shall be reduced by any insurance received by the
Indemnified Party on account of the Adverse Consequences that give
rise to such indemnification claim; provided, however, that this
Section 9.2.9 shall not obligate the Purchaser, the Company or the
Seller to obtain any insurance coverage or, if already obtained, to
maintain the effectiveness of such insurance or to make any claim
thereunder.
9.3. POST-CLOSING LOSS RESERVE REDUNDANCY (DEFICIENCY)
REPAYMENT.
9.3.1 The Post-Closing Loss Reserve Calculation shall
be the difference between (a) the Loss Reserves as of the Most
Recent Balance Sheet Date and (b) the Loss Reserve Sum.
9.3.2 Within fifty (50) days from the end of each
calendar quarter commencing with the first calendar quarter after
the Closing Date and continuing until the Loss Reserve
Indemnification Date, the Purchaser shall send to the Seller the
Company's quarterly statement for that quarter just ended, as filed
with the California Department.
9.3.3 Within fifty (50) days after the Initial Loss
Reserve Indemnification Date, the Purchaser shall calculate the
Post-Closing Loss Reserve Calculation and the Initial Loss Reserve
Claim Quotient and deliver such calculations to the Seller,
together with all material supporting documentation. If the
Initial Loss Reserve Claim Quotient is less than .92, within ten
(10) days from the date of delivery of such calculation to the
Seller, either party may elect to extend the calculation of the
Post-Closing Loss Reserve Calculation for one or more fiscal
quarters up to any date that is no more than one year after the
Initial Loss Reserve Indemnification Date (the "Secondary Loss
Reserve Indemnification Date;" the "Loss Reserve Indemnification
Date" shall be the Initial Loss Reserve Indemnification Date unless
a Secondary Loss Reserve Indemnification Date has been elected
under this Section 9.3.3), with the latest time period to govern.
9.3.4 Fifteen (15) days after receipt of the Post-
Closing Loss Reserve Calculation, the Seller may agree with the
Purchaser's determination of the Post-Closing Loss Reserve
Calculation or it may object to such determination. If the Seller
objects to such determination, such objection must be in writing
and set forth in reasonable detail the basis for such objection,
and within the next thirty (30) days, the parties will endeavor to
reach a final determination of the Post-Closing Loss Reserve
Calculation. If after such thirty days the parties cannot agree
upon the amount of the Post-Closing Loss Reserve Calculation, upon
notice from either party, within thirty (30) days the parties shall
select an independent actuary to determine such amount (and if the
parties cannot agree on such a person, each of the Seller and the
Purchaser shall select an independent actuary, and the two selected
independent actuaries will choose a third independent actuary, and
such third independent actuary shall determine such amount). Each
actuary selected by the parties under this Section 9.3.4 must meet
the qualification standards of the American Academy of Actuaries
and be approved by the California Department. The costs associated
with hiring each and every such independent actuary to determine
the amount of the Post-Closing Loss Reserve Calculation shall be
borne equally by the Purchaser and the Seller. Any such
determination by such person of the amount of the Post-Closing Loss
Reserve Calculation shall be final and binding on all the parties
to this Agreement.
9.3.5 Within ten (10) days from the date the Post-
Closing Loss Reserve Calculation finally is determined by either
agreement between the parties or by an independent actuary as
provided in Section 9.3.4 of this Agreement, (a) the Seller shall
pay to the Purchaser the amount of the Post-Closing Loss Reserve
Calculation, net of any tax deduction to which the Company is
entitled on account of such reserve, in excess of $200,000 if the
amount of the Loss Reserves as of the Most Recent Balance Sheet
Date is less than the Loss Reserve Sum as of the Loss Reserve
Indemnification Date, or (b) the Purchaser shall pay to the Seller
the amount of the Post-Closing Loss Reserve Calculation, net of
taxes payable by the Company or the Purchaser with respect to the
recognition of the redundancy, in excess of $200,000 if the amount
of the Loss Reserves as of the Most Recent Balance Sheet Date is
more than the amount of the Loss Reserve Sum as of the Loss Reserve
Indemnification Date. Any payment made pursuant to this Section
9.3.5 shall constitute an adjustment to the Purchase Price.
9.4 LIMITED REMEDIES. The remedies provided in this
Article 9 shall be exclusive and shall preclude assertion by the
Seller or the Purchaser of any other rights or the seeking of any
other remedies against the other party other than equitable relief.
ARTICLE 10
MODIFICATION, WAIVERS AND TERMINATION
10.1 MODIFICATION. The Purchaser and the Seller may, by
mutual consent, amend, modify or supplement this Agreement in such
manner as may be agreed upon by them in writing at any time.
10.2 WAIVERS. Each of the Purchaser and the Seller, by an
instrument in writing, may extend the time for or waive the
performance of any of the obligations of the other or waive
compliance by the other with any of the covenants or conditions
contained herein.
10.3 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby abandoned, prior to the Closing as
follows:
10.3.1 By the Purchaser and the Seller by mutual
written consent at any time;
10.3.2 By the Purchaser by giving written notice to
the Seller at any time (a) in the event the Seller has breached any
representation, warranty, covenant or agreement of the Seller
contained in this Agreement (other than the representations and
warranties contained in Article 4 hereof) in any material respect,
the Purchaser has notified the Seller of the breach, and the breach
has continued without cure for a period of 30 days after the notice
of breach, or (b) if the Closing shall not have occurred on or
before September 30, 1995 (unless the failure results primarily
from the Purchaser itself breaching any representation, warranty,
covenant or agreement of the Purchaser contained in this
Agreement);
10.3.3 By the Seller by giving written notice to the
Purchaser at any time (a) in the event the Purchaser has breached
any representation, warranty, covenant or agreement
of the Purchaser contained in this Agreement in any material
respect, the Seller has notified the Purchaser of the breach, and
the breach has continued without cure for a period of 30 days after
the notice of breach, or (b) if the Closing shall not have occurred
on or before September 30, 1995 (unless the failure results
primarily from the Seller itself breaching any representation,
warranty, covenant or agreement of the Seller contained in this
Agreement); or
10.3.4 By the Seller or by the Purchaser at any time
prior to the Closing Date if the Closing shall violate any order,
decree or judgment of any court of any Authority having competent
jurisdiction.
10.4 EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Section 10.3, all rights and obligations of
the parties hereunder shall terminate without liability of any
party to any other party (except for any liability of any party
then in breach); provided, however, that (a) the provisions of
Sections 6.5, 11.7 and this 10.4 shall remain in full force and
effect, and (b) the Purchaser shall not, for a period of two years
after the date of such termination, without the prior written
approval of the Seller, directly or indirectly solicit, encourage,
entice or induce any employee of the Company on the date hereof or
at any time hereafter prior to such termination, to terminate his
or her employment with the Company.
ARTICLE 11
MISCELLANEOUS
11.1 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given when delivered in person or by
electronic facsimile transmission (with confirmation) or on the
next business day after delivery to an overnight courier of
national reputation to the respective parties as follows:
If to the Purchaser, to it at:
The Commerce Insurance Company
211 Main Street
Webster, Massachusetts 01570
Attention: Regan P. Remillard, Esquire
General Counsel
fax: (508) 949-4411
with a copy to:
Nutter, McClennen & Fish
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander, Esquire
Michael K. Krebs, Esquire
fax: (617) 973-9748
If to the Seller or the Company, to either or both at:
Atlantis Plastics, Inc.
266 South Bayshore Drive, Suite 800
Miami, Florida 33133
Attention: Peter W. Klein, Esquire
Vice President, Secretary and General Counsel
fax: (305) 285-0102
or to such other address as the person to whom notice is given may
have previously furnished to the others in writing in the manner
set forth above (provided that notice of any change of address
shall be effective only upon receipt thereof).
11.2 ENTIRE AGREEMENT. This Agreement and the Escrow
Agreement constitute the entire agreement among the parties hereto
and supersede all prior agreements, understandings, negotiations
and discussions, both written and oral, among the parties hereto
with respect to the subject matter hereof.
11.3 BENEFITS; BINDING EFFECT; ASSIGNMENT. This Agreement
shall be for the benefit of and binding upon the parties hereto,
their respective successors and, where applicable, assigns. No
party may assign this Agreement or any of its rights, interests or
obligations hereunder without the prior written consent of the
other party; provided, however, that before the Closing is
effected, the Purchaser may (a) assign any or all of its rights and
interests hereunder to one or more of its Affiliates, and
(b) designate one or more of its Affiliates to perform its
obligations hereunder (but in any or all of such cases the
Purchaser shall nonetheless remain responsible for the performance
of all of its obligations hereunder).
11.4 WAIVER. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly so
provided.
11.5 NO THIRD PARTY BENEFICIARY. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to
confer upon or give any Person other than the parties hereto and
their respective successors and assigns any rights or remedies
under or by reason of this Agreement.
11.6 SEVERABILITY. The invalidity of any one or more of
the words, phrases, sentences, clauses, sections or subsections
contained in this Agreement shall not affect the enforceability of
the remaining portions of the Agreement or any part hereof, all of
which are inserted conditionally on their being valid in law and,
in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall
be declared invalid, this Agreement shall be construed as if such
invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or
subsections, had not been inserted.
11.7 EXPENSES. Except as otherwise set forth herein and in
the Escrow Agreement, whether or not the transactions contemplated
by this Agreement shall be consummated, all legal, accounting and
other costs and expenses incurred in connection with this Agreement
and any of the transactions contemplated hereby on behalf of the
Purchaser shall be borne and paid by the Purchaser, and all such
costs and expenses incurred on behalf of the Seller and the Company
shall be borne and paid by the Seller (other than costs which in
the aggregate are less than $2,500, which may be paid by the
Company), and no party shall be obligated for any cost or expense
incurred by any other party unless this Agreement expressly so
provides.
11.8 SECTION HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of any provisions of
this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the several parties hereto in
separate counterparts, each of which shall be deemed to be one and
the same instrument.
11.10 REMEDIES CUMULATIVE. Subject to the provisions of
Section 9.4 of this Agreement, no remedy made available by any of
the provisions of this Agreement is intended to be exclusive of any
other remedy, and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity.
11.11 APPLICABLE LAW/CONSENT TO JURISDICTION. This
Agreement shall be governed by the law of The Commonwealth of
Massachusetts (without regard to the conflict of laws provisions
thereof) and all questions concerning the validity and construction
thereof shall be determined in accordance with the laws of said
state. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States federal court sitting in The
Commonwealth of Massachusetts in any action or proceeding arising
out of or relating to this Agreement and hereby irrevocably agrees,
on behalf of itself and on behalf of such party's successor's and
assigns, that all claims in respect of such action or proceeding
may be heard and determined in any such court and irrevocably
waives any objection such person may now or hereafter have as to
the venue of any such suit, action or proceeding brought in such a
court or that such court is an inconvenient forum.
11.12 WAIVER OF JURY TRIAL. The parties hereto hereby waive
trial by jury in any judicial proceeding involving, directly or
indirectly, any matter (whether in tort, contract or otherwise) in
any way arising out of, related to, or connected with this
Agreement, the related documents or the relationship established
hereunder.
11.13 CONSTRUCTION. The specification of any dollar amount
in the representations and warranties or otherwise in this
Agreement or in the Schedules hereto or the inclusion of any
specific item in the Schedules hereto is not intended and shall not
be deemed to be an admission or acknowledgement of the materiality
of such amounts or items, nor shall the same be used in any dispute
or controversy between the parties to determine whether any
obligation, item or matter (whether or not described herein or
included in any Schedule) is or is not material for purposes of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above
written.
ATLANTIS PLASTICS, INC.
By:/s/Troy D. Templeton
Troy D. Templeton
Vice President
THE COMMERCE INSURANCE COMPANY
By:/s/Gerald Fels
Gerald Fels
Executive Vice President
EXHIBIT A
Form of Escrow Agreement
ESCROW AGREEMENT dated effective May , 1995 by and among
Nutter, McClennen & Fish, as escrow agent (the "Escrow Agent"),
Atlantis Plastics, Inc., a Florida corporation (the "Seller"), and
The Commerce Insurance Company, a Massachusetts corporation (the
"Purchaser"). Capitalized terms used but not defined herein shall
have the meanings given to them in the Stock Purchase Agreement
dated effective the even date herewith between the Seller and the
Purchaser (the "Stock Purchase Agreement").
WHEREAS, the Seller and the Purchaser have entered into the
Stock Purchase Agreement;
WHEREAS, pursuant to the Stock Purchase Agreement, the parties
thereto have agreed in part that the Purchaser will deposit with
the Escrow Agent the total amount of $1,000,000 (the "Contributed
Amount") in partial payment of the Net Purchase Price for the
Shares;
WHEREAS, the Stock Purchase Agreement contemplates that the
Contributed Amount will be released upon notification of the Escrow
Agent by the Seller and the Purchaser of the consummation of the
sale and purchase of the Shares at the Closing; and
WHEREAS, the Contributed Amount is to be held by the Escrow
Agent and delivered pursuant to the Stock Purchase Agreement and
this Agreement; and the Purchaser has deposited in escrow the
Contributed Amount.
NOW, THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT. The Escrow Agent agrees to act as the escrow
agent as set forth herein, and as such Escrow Agent to receive,
administer and dispose of the Contributed Amount pursuant to the
terms of this Agreement.
2. RIGHTS, DUTIES AND IMMUNITIES.
(a) Acceptance by the Escrow Agent of its duties under this
Agreement is subject to the following terms and conditions, which
all parties to this Agreement hereby agree shall govern and control
the rights, duties and immunities of the Escrow Agent:
(i) The duties and obligations of the Escrow Agent shall
be determined solely by the express provisions of this Agreement;
the Escrow Agent shall not be responsible for the performance of
any duties or obligations other than the performance of such duties
and obligations as are specifically set forth in this Agreement,
and the Escrow Agent shall not be deemed to have any knowledge of
or responsibility for the terms of any other agreement other than
the Stock Purchase Agreement;
(ii) The Escrow Agent shall not be responsible in
any manner whatsoever for any failure or inability of any other
party to honor any of the provisions of this Agreement, the Stock
Purchase Agreement or any other agreement;
(iii) The Escrow Agent shall be fully protected in
acting on and relying upon any written notice, direction, request,
waiver, consent, receipt or other paper or document which the
Escrow Agent in good faith believes to have been signed or
presented by the proper party or parties, and shall be entitled to
rely upon any notice, instruction, waiver or other document
received from the Seller or the Purchaser;
(iv) The Escrow Agent shall not be liable for any
error of judgment, or for any act done or step taken or omitted by
it in good faith or for any mistake of fact or law, or for anything
which it may do or refrain from doing in connection herewith,
unless caused by or arising out of its willful misconduct;
(v) The Escrow Agent may seek the advice of legal
counsel of its own selection in the event of any dispute or
question as to the construction of any of the provisions of this
Agreement of its duties hereunder, and, in the absence of willful
misconduct, it shall incur no liability and shall be fully
protected in respect of any action taken, omitted or suffered by it
in accordance with the advice of such counsel;
(vi) The Escrow Agent makes no representation as to
the validity, value, genuineness or collectibility of any security,
document or instrument held by or delivered to it; and
(vii) The Escrow Agent has acted and is acting as
counsel to the Purchaser, and the Escrow Agent may continue to act
in such capacity regardless of its obligations as Escrow Agent
hereunder, and even in the event of any dispute or litigation
between any of the undersigned arising hereunder or otherwise, the
acting by Nutter, McClennen & Fish as Escrow Agent hereunder shall
in no way preclude it from acting as counsel for the Purchaser.
(b) If a controversy arises between one or more of the
parties hereto, or between any of the parties hereto and any person
not a party hereto, as to whether or not or to whom the Escrow
Agent shall deliver any of the Contributed Amount or as to any
other matter arising out of or relating to the Contributed Amount
or this Agreement, the Escrow Agent shall not be required to
determine the same and shall not make any delivery of the
Contributed Amount or any portion thereof but shall retain the
Contributed Amount until the rights of the parties to the dispute
shall have been finally determined by written agreement among the
parties in the dispute or by final order of a court of competent
jurisdiction after the time for appeal of any such final order has
expired without an appeal having been made. The Escrow Agent shall
deliver the Contributed Amount on the next business day after the
Escrow Agent has received written notice of any such agreement or
final order (accompanied by an affidavit that the time for appeal
has expired without an appeal having been made) in accordance with
the instructions set forth in such agreement or order. The Escrow
Agent shall be entitled to assume that no such controversy has
arisen unless it has received a written notice that such a
controversy has arisen which refers specifically to this Agreement
and identifies by name and address the adverse claimants in the
controversy. If a controversy of the type referred to in this
paragraph arises, the Escrow Agent may, in its sole discretion (but
shall not be obligated to), commence interpleader or similar
actions or proceedings for determination of the controversy.
(c) The Purchaser and the Seller jointly and severally shall
exonerate and indemnify the Escrow Agent against all claims, suits,
obligations, liabilities and damages, including Attorneys' fees,
based upon, arising out of or resulting from the performance on
non-performance by the Escrow Agent of its obligations hereunder,
unless such performance or non-performance constitutes willful
misconduct.
(d) Each of the Purchaser and the Seller shall pay one-half
of the expenses and compensation of the Escrow Agent pursuant to
this Section 2 and for the preparation of this Agreement.
3. DEPOSIT OF CLOSING INSTRUMENTS; RELEASE OF CLOSING
INSTRUMENTS.
(a) The Escrow Agent will deposit the Contributed Amount in
a separate account (the "Escrow Account") as directed by the joint
instructions of the Purchaser and the Seller until it is instructed
to deliver the Contributed Amount in accordance with the terms of
this Section 3. All interest or other income earned with respect
to the Contributed Amount shall be payable to the Purchaser.
(b) Except as otherwise expressly provided in this Agreement,
the Contributed Amount shall be released by the Escrow Agent only
as follows:
(i) Promptly after the Closing, the Escrow Agent shall:
(1) Deposit the Contributed Amount by wire
transfer in immediately available funds to an
account specified by the Seller; and
(2) Pay the Purchaser all interest or other income
earned with respect to the Contributed Amount.
(ii) In the event that the Closing does not occur
on or before September 30, 1995, or on or
before such other date as the Seller and the
Purchaser may agree:
(1) The Escrow Agent shall pay to the Seller the
Contributed Amount (such payment to constitute
full and complete liquidated damages and the
Seller's sole and exclusive remedy with
respect thereto, it being specifically
understood and agreed that, in the event of
such failure to consummate the transactions
under the Stock Purchase Agreement, the
damages suffered by the Seller will be
difficult to ascertain) and to the Purchaser
any interest or other income earned on such
monies while held in the Escrow Account; or
(2) If the Purchaser gives the Escrow Agent notice
that the Closing did not occur because of the
failure of the Purchaser to consummate the
transactions under the Stock Purchase
Agreement for reason of a failure of any
condition contained in Section 7.1 or 7.2 of
the Stock Purchase Agreement (which includes,
without limitation, the condition that the
Seller shall have performed or complied with
in all material respects its agreements and
covenants required to be performed or complied
with under the Stock Purchase Agreement as of
or prior to the Closing), the Escrow Agent
shall return to the Purchaser the Contributed
Amount and any interest or other income on
such monies while held in the Escrow Account.
4. CONSTRUCTION. This Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of
law.
5. NOTICES. All notices, demands, requests and other
communications required or permitted to be given hereunder shall be
deemed duly given if personally delivered or if mailed by
registered or certified mail, postage prepaid, and, pending the
designation of another address, addressed as follows:
(a) If to the Purchaser: The Commerce Insurance Company
211 Main Street
Webster, Massachusetts 01570
Attention: Regan P. Remillard,
Esquire
General Counsel
with a copy to: Nutter, McClennen & Fish
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander,
Esquire
Michael K. Krebs,
Esquire
(b) If to the Seller: Atlantis Plastics, Inc.
2665 South Bayshore Drive,
Suite 800
Miami, Florida 33133
Attention: Peter W. Klein,
Esquire
Vice President,
Secretary and
General Counsel
(c) If to the Escrow
Agent: Nutter, McClennen & Fish
One International Place
Boston, Massachusetts 02110-2699
Attention: Constantine Alexander,
Esquire
Michael K. Krebs,
Esquire
6. HEADINGS. The headings of the paragraphs of this Agreement
are inserted as a matter of convenience and for reference purposes
only, are of no binding effect and in no respect define, limit or
describe the scope of this Agreement or the intent of any
paragraph.
7. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each were
upon the same instrument.
8. ENTIRE AGREEMENT. This Agreement and the Stock Purchase
Agreement represent the entire understanding and agreement among
the parties hereto with respect to the subject matter hereof and
supersede all prior negotiations among the parties. This Agreement
may be amended, modified, supplemented, extended, terminated,
discharged or changed only by an agreement in writing which makes
specific reference to this Agreement and which is signed by all
parties hereto.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their
permitted successors and assigns and shall not be enforceable by or
create or evidence any right of any third party; provided, that
this Agreement cannot be assigned without the express written
consent of all parties hereto.
10. SEVERABILITY. Any provision of this Agreement which may be
determined by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. It is expressly understood,
however, that the parties hereto intend each and every provision of
this Agreement to be valid and enforceable and hereby knowingly
waive all rights to object to any provision of this Agreement.
11. TERMINATION. This Agreement shall terminate and the Escrow
Agent shall be released from all obligations hereunder at such time
as there is no Contributed Amount or funds in the Escrow Account
remaining in escrow hereunder.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed in its name and on its behalf, all as
of the date first above written.
ATLANTIS PLASTICS, INC.
By:
Troy D. Templeton
Vice President
THE COMMERCE INSURANCE COMPANY
By:
Gerald Fels
Executive Vice President
NUTTER, McCLENNEN & FISH
By
A Partner of Said Firm
EXHIBIT B
Opinion of the Purchaser's Counsel
The law covered by the Opinion of the Purchaser's Counsel may
be limited to the Federal law of the United States and the laws of
The Commonwealth of Massachusetts and the State of California. As
to matters concerning the laws of the State of California, the
opinion giver may rely expressly on a special opinion of Daar &
Newman. The opinion giver may state that it has no obligation to
advise the recipient of any future change in the Opinion, that the
Opinion has been prepared solely for the recipient's use in
connection with the Closing under the Agreement on the date of this
letter and should not be quoted in whole or in part or otherwise be
referred to, nor be filed with or furnished to any governmental
agency or other person or entity, without the prior written consent
of the opinion giver.
Statements of Opinion:
1. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts. The Purchaser has the corporate power and authority
necessary to carry on the businesses currently conducted by it, own
or lease all of the properties presently owned or leased by it,
enter into and perform the Agreement and consummate the
transactions contemplated thereby.
2. The Agreement has been duly authorized by all necessary
corporate action, has been duly executed and delivered on behalf of
the Purchaser, and represents the legal, valid and binding
obligation of the Purchaser enforceable in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization and
similar laws affecting creditors' rights generally and by the
application of general principles of equity.
3. The Purchaser has obtained all Requisite Regulatory
Approvals.
4. Neither the execution and delivery of the Agreement nor
the consummation of the transactions contemplated thereby, nor
compliance with the terms, conditions and provisions thereof, by
the Purchaser will (a) contravene any provision of existing law or
regulation that we would, in our experience, reasonably recognize
as directly applicable to the Purchaser, or of the Purchaser's
Articles of Organization or By-Laws, or (b), to our knowledge,
conflict with or result in any breach of the terms, conditions or
provisions of, or constitute a default, breach or violation (or an
event that might, with the passage of time or the giving of notice
or both, constitute a default, breach or violation) under, or
result in or permit the creation or imposition of any lien, charge
or encumbrance upon, any of the properties of the Purchaser
pursuant to, any indenture, mortgage or other agreement or
instrument or any judgment, decree, order or decision to which the
Purchaser is a party or by which it is bound.
5. We know of no action, suit, preceding or investigation
pending or threatened against the Purchaser that, if adversely
determined would, either in any single case or the aggregate,
question the validity of, or prevent the consummation of the
transactions contemplated by, the Agreement.
EXHIBIT C
Opinion of the Seller's Counsel
The Opinion of the Seller's Counsel may be governed by, and
interpreted in accordance with, the Legal Opinion Accord of the ABA
Section of Business Law (1991). The law covered by the Opinion may
be limited to (a) the Federal law of the United States and (b) (i)
the laws of the State of California where reference is made to the
Company or (ii) the laws of the State of Florida where reference is
made to the Seller. As to certain matters concerning the laws of
the State of California, the opinion giver may rely expressly on a
special opinion of McNitt, Schraner & Loeb. The opinion giver may
state that it has no obligation to advise the recipient of any
future change in the Opinion, that the Opinion has been prepared
solely for the recipient's use in connection with the Closing under
the Agreement on the date of this letter and should not be quoted
in whole or in part or otherwise be referred to, nor be filed with
or furnished to any governmental agency or other person or entity,
without the prior written consent of the opinion giver. The
opinion giver shall represent that it has reviewed the minutes of
all meetings of the Company's stockholders and directors, including
all committees thereof, and all stock records of the Company.
Statements of Opinion:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Florida. Each of the Company and the Seller has the corporate
power and authority necessary to carry on the businesses currently
conducted by it, own or lease all of the properties presently owned
or leased by it, enter into and perform the Agreement and
consummate the transactions contemplated thereby.
2. The Agreement has been duly authorized by all necessary
corporate action, has been duly executed and delivered on behalf of
the Seller, and, except Section 8.5 of the Agreement, as to which
no opinion is expressed, represents the legal, valid and binding
obligation of the Seller enforceable in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization and
similar laws affecting creditors' rights generally and by the
application of general principles of equity.
3. The Company's authorized capital stock consists of
100,000 shares of Common Stock, $15.00 par value per share, of
which 66,667 shares (the "Shares") are duly and validly issued and
outstanding, and fully paid and non-assessable, and no shares are
held in the treasury of the Company. To our knowledge, there is no
outstanding subscription, warrant, call, option, right, commitment
or agreement by which the Company or the Seller is bound calling
for the issuance of shares of any class of capital stock of
Company, or the issuance of any securities convertible or
exchangeable into shares of such capital stock. The Shares are
owned of Record by the Seller. The Seller is conveying to the
Purchaser good and valid title to the Shares, free and clear of any
lien, pledge, encumbrance, charge, agreement or claim.
4. The Company has in effect those material approvals,
authorizations, licenses and permits from all federal, state and
local authorities necessary for the conduct of its business and
operations as presently conducted by it.
5. Neither the execution and delivery of the Agreement nor
the consummation of the transactions contemplated thereby, nor
compliance with the terms, conditions and provisions thereof, by
the Company or the Seller will (a) contravene any provision of
existing law or regulation that we would, in our experience,
reasonably recognize as directly applicable to the Company or the
Seller, or of the Company's or the Seller's charter or bylaws, (b)
require any consent, approval or authorization of, or permit of, or
filing with or notification to, any governmental or regulatory
authority, by the Company or the Seller which the Company or the
Seller has not already obtained or (c) to our knowledge, conflict
with or result in any breach of the terms, conditions or provisions
of, or constitute a default (or an event that might, with the
passage of time or the giving of notice or both, constitute a
default) under, or result in or permit the creation or imposition
of any lien, charge or encumbrance upon any of the properties of
the Seller or the Company or the Sharers being conveyed under the
Agreement pursuant to, any indenture, mortgage or instrument of the
Company, or, with respect to the Company, any Scheduled Contract or
any contract that, to our knowledge, should be deemed to be a
Scheduled Contract, or, with respect to the Seller, any material
contract listed in the Seller's Annual Report on Form 10-K for the
year ended December 31, 1994 or Seller's Quarterly Report on Form
10-Q for the period ended March 31, 1995, or contract entered into
by the Seller after March 31, 1995 which the Seller has represented
to us would have been listed in such Form 10-Q as a material
contract had the Seller entered into it on or before March 31,
1995, or any judgment, decree, order or decision to which the
Company or the Seller is a party or by which either is bound.
6. We know of no action, suit, proceeding or investigation
pending or threatened against the Company or the Seller that, if
adversely determined would, either in any single case or the
aggregate, question the validity of, or prevent the consummation of
the transactions contemplated by, the Agreement, or materially and
adversely affect the properties, existence, financial condition or
business of the Company or materially impair its businesses
substantially as now conducted by it.
EXHIBIT E
DEMAND PROMISSORY NOTE
(Floating Rate)
May 8, 1995
(Date)
1870 The Exchange Ste. 200, Atlanta, Cobb County, Georgia
(Street Address of Maker) (Town) (County) (State)
FOR VALUE RECEIVED, Atlantis Plastic Films, Inc. (hereinafter
called the "Maker") promises (jointly and severally, if more than
one) to pay upon demand to the order of General Electric Capital
Corporation (hereinafter called "Payee") at its office located at
3379 Peachtree Road N.E. 400, Atlanta, Georgia 30326 or at such
other place as Payee or the holder hereof may designate, the
principal sum of One Million Two Hundred Eighty Thousand Five
Hundred Seventy Nine and 70/100 Dollars ($1,280,579.70), with
interest thereon at a floating simple interest per annum rate equal
to the sum of (a) Two and Seventy Hundredths percent (2.70%) per
annum (the "Fixed Rate") plus (b) an interest rate per annum
defined as the current "Commercial Paper Rate." "Commercial Paper
Rate" shall mean the latest monthly average for commercial paper of
one month maturity as indicated in the "Interest Rates, Money, and
Capital Markets" table contained in the Federal Reserve Bulletin as
last published as of the first business day of the month in which
an installment of interest is due. The floating simple interest
per annum rate of interest as determinable herein shall hereafter
be referred to as the "Monthly Rate."
The Maker shall, without demand, pay to Payee on the first day
of each calendar month, until such time as this Note has been paid
in full, all interest accrued hereunder during the preceding
calendar month.
This Note is given in connection with and secured by an
Interim Loan and Security Agreement, dated as of December 30, 1994
between Payee and the Maker (the "Agreement").
All payments shall be paid in lawful money of the United
States. The acceptance by Payee or the holder hereof of any
payment which is less than payment in full of all amounts due and
owing at such time shall not constitute a waiver of Payee's or the
holder's right to receive payment in full at such time or at any
prior or subsequent time. All payments shall be applied first to
interest and then to principal.
Time is of the essence hereof. If any payment of principal
and interest or any other sum due under this Note or the Agreement
is not paid within ten (10) days after demand or the due date (as
the case may be), the Maker agrees to pay a late charge of five
cents ($.05) per dollar on, and in addition to, the amount of each
such payment, but not exceeding any lawful maximum. The Maker
agrees that upon the failure of the Maker to make payment of any
amount due hereunder within ten (10) days after demand or the same
becomes due and payable or upon the happening of any Default under
the Agreement, the entire principal sum remaining unpaid, together
with all accrued interest thereon and any other sum payable under
this Note or the Agreement, shall, at the election of Payee or the
holder hereof, immediately become due and payable, with interest
thereon at 18% per annum or the highest rate allowable by law
(whichever is lower) from the date of such accelerated maturity
until paid.
The Maker and all sureties, endorsers, guarantors or any
others whom may at any time become liable for the payment hereof
jointly and severally consent of, and all substitutions or releases
of security or of any party primarily or secondarily liable on this
Note or the Agreement or any term and provision of either, which
may be made, granted or consented to by Payee or the holder hereof,
and agree that suit may be brought and maintained against any one
or more of them, at the election of Payee or the holder hereof,
without joinder of any other as a party thereto, and that Payee or
the holder hereof shall not be required first to foreclose, proceed
against, or exhaust any security hereof in order to enforce payment
of this Note. The Maker and all sureties, endorsers, guarantors or
any others who may at any time become liable for the payment hereof
jointly and severally hereby waive presentment, demand for payment,
notice of nonpayment, protest, notice of protest, and all other
notices in connection herewith, as well as filing of suit (if
permitted by law) and diligence in collecting this Note or
enforcing any of the security hereof, and agree to pay (if
permitted by law) all expenses incurred in collection, including
Payee's actual attorney's fees if placed with an attorney for the
collection hereof, or if prohibited by law, such lesser sum as may
not be so prohibited, and hereby waive all benefits of valuation,
appraisement and exemption laws.
Notwithstanding the foregoing, in no event shall the interest
to be charged hereunder exceed the maximum which Payee is lawfully
entitled to collect from the Maker.
(Name: signature if Maker an
individual)
By:/s/ M. James Feeney, V.P.
(Witness) (Signature and title if Maker
not individual)
By:
(Witness) (Signature and title if Maker
not individual)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Atlantis Plastic, Inc. 10-Q Financial Data Schedule June 30, 1995
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 2,236,036
<SECURITIES> 0
<RECEIVABLES> 34,002,745
<ALLOWANCES> 1,059,476
<INVENTORY> 19,878,591
<CURRENT-ASSETS> 60,256,547
<PP&E> 111,873,520
<DEPRECIATION> 47,732,653
<TOTAL-ASSETS> 205,415,017
<CURRENT-LIABILITIES> 25,814,477
<BONDS> 131,840,097
<COMMON> 709,280
0
2,000,000
<OTHER-SE> 36,387,209
<TOTAL-LIABILITY-AND-EQUITY> 205,415,017
<SALES> 146,201,406
<TOTAL-REVENUES> 146,201,406
<CGS> 124,239,760
<TOTAL-COSTS> 124,239,760
<OTHER-EXPENSES> 15,154,449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,401,533
<INCOME-PRETAX> (594,336)
<INCOME-TAX> 188,822
<INCOME-CONTINUING> (783,158)
<DISCONTINUED> (606,842)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,390,000)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
