EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
VESTA INSURANCE GROUP, INC.
AND
VESTA FIRE INSURANCE CORPORATION
AND
CENTRE SOLUTIONS (BERMUDA) LIMITED
MYND CORPORATION
ORIENTA POINT GROUP, L.L.C.
AND
KAMEHAMEHA SCHOOLS XXXXXXX XXXXXX XXXXXX ESTATE
AND
FLORIDA SELECT INSURANCE HOLDINGS INC.
TABLE OF CONTENTS
ARTICLE I - DEFINED TERMS.................................................................................... -2-
Section 1.1 Definitions........................................................................ -2-
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ARTICLE II - PURCHASE AND SALE OF STOCK...................................................................... -8-
ARTICLE III - CONSIDERATION AND MANNER OF PAYMENT............................................................ -8-
Section 3.1 Purchase Price..................................................................... -8-
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Section 3.2 Payment of Purchase Price.......................................................... -8-
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ARTICLE IV - THE CLOSING..................................................................................... -9-
Section 4.1 Date and Place..................................................................... -9-
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Section 4.2 Delivery of Stock.................................................................. -9-
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ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SELLERS........................................................ -9-
Section 5.1 Organization, Power and Authority of Seller; Effect of Agreement................... -10-
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Section 5.2 Title to Stock and Power to Convey................................................. -10-
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Section 5.3 Organization, Power and Authority of the Companies................................. -10-
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Section 5.4 Capital Stock; Subsidiaries........................................................ -11-
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Section 5.5 No Violation....................................................................... -12-
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Section 5.6 Compliance with Law................................................................ -12-
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Section 5.7 Insurance Regulatory Authority of the Companies.................................... -13-
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Section 5.8 Reinsurance Agreements............................................................. -13-
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Section 5.9 Statutory Financial Statements..................................................... -14-
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Section 5.10 Reserves.......................................................................... -14-
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Section 5.11 Audited Financial Statements...................................................... -15-
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Section 5.12 No Undisclosed Liabilities........................................................ -15-
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Section 5.13 Absence of Changes................................................................ -16-
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Section 5.14 Title to Properties; Encumbrances................................................. -16-
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Section 5.15 Real Property..................................................................... -17-
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Section 5.16 Leases............................................................................ -17-
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Section 5.17 Bank Accounts; Custodial Accounts................................................. -17-
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Section 5.18 Trademarks, Service Marks and Trade Names......................................... -17-
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Section 5.19 Material Contracts and Commitments................................................ -18-
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Section 5.20 Insurance......................................................................... -19-
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Section 5.21 Investments....................................................................... -19-
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Section 5.22 Employment Matters................................................................ -19-
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Section 5.23 Employee Benefits................................................................. -20-
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Section 5.24 Litigation and Regulatory Investigations.......................................... -22-
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Section 5.25 Governmental Consents............................................................. -22-
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Section 5.26 Other Consents.................................................................... -23-
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Section 5.27 Guarantees........................................................................ -23-
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Section 5.28 Producers for the Company......................................................... -23-
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Section 5.29 Taxes............................................................................. -24-
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Section 5.30 Improper Payments................................................................. -24-
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ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF PURCHASER..................................................... -25-
Section 6.1 Corporate Organization............................................................. -25-
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Section 6.2 Authorization...................................................................... -25-
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Section 6.3 No Violation....................................................................... -25-
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Section 6.4 Litigation and Regulatory Investigations........................................... -26-
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Section 6.5 Governmental Consents.............................................................. -26-
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Section 6.6 Other Consents..................................................................... -26-
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Section 6.7 Securities Act Representations..................................................... -26-
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Section 6.8 Securities Act Representations..................................................... -28-
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ARTICLE VII - CERTAIN COVENANTS OF SELLERS................................................................... -29-
Section 7.1 Cooperation........................................................................ -29-
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Section 7.2 Operations Pending Closing......................................................... -30-
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Section 7.3 Approvals and Consents............................................................. -31-
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Section 7.4 Access to Records.................................................................. -31-
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Section 7.5 Notification of Changes............................................................ -31-
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Section 7.6 Filing of Financial Statements..................................................... -31-
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Section 7.7 Continuing Agents.................................................................. -31-
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Section 7.8 Litigation......................................................................... -32-
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Section 7.9 Maintenance of Books............................................................... -32-
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Section 7.10 Solicitation Restriction.......................................................... -32-
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Section 7.11 Xxxx-Xxxxx-Xxxxxx................................................................. -32-
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Section 7.12 Investments....................................................................... -33-
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Section 7.13 Covenant Not to Compete........................................................... -33-
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Section 7.14 Non-Disclosure.................................................................... -35-
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Section 7.15 Certain Remedies.................................................................. -35-
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Section 7.16 Further Assurance................................................................. -35-
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ARTICLE VIII - CERTAIN COVENANTS OF PURCHASER AND VESTA FIRE................................................. -36-
Section 8.1 Cooperation........................................................................ -36-
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Section 8.2 Operations Pending Closing......................................................... -36-
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Section 8.3 Approvals and Consents............................................................. -36-
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Section 8.4 Notification of Changes............................................................ -36-
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Section 8.5 Litigation......................................................................... -36-
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Section 8.6 Confidentiality Regarding Records of the Companies................................. -36-
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Section 8.7 Xxxx-Xxxxx-Xxxxxx and State Insurance Department Filings........................... -37-
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Section 8.8 Further Assurance.................................................................. -37-
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Section 8.9 Form S-3........................................................................... -38-
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Section 8.10 Indemnification................................................................... -38-
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Section 8.11 Due Diligence..................................................................... -38-
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Section 8.12 Acknowledgment of Adequate Consideration.......................................... -38-
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ARTICLE IX - ADDITIONAL COVENANTS AND AGREEMENTS............................................................. -38-
Section 9.1 Payment of Certain Expenses........................................................ -38-
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Section 9.2 Public Announcements............................................................... -39-
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Section 9.3 Brokers' Fees...................................................................... -39-
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Section 9.4 Termination of Class A Warrant..................................................... -40-
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Section 9.5 Exercise of Class B Warrant........................................................ -40-
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Section 9.6 Commutation of Pro Rata Reinsurance Agreement....................................... -40-
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Section 9.7 Waiver of Rights Under Shareholders Agreement...................................... -40-
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Section 9.8 Termination of Reimbursement Agreement............................................. -40-
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Section 9.9 Reaction of the Market Place....................................................... -41-
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Section 9.10 Certain Information Included in Form S-3.......................................... -41-
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ARTICLE X - ADDITIONAL TAX MATTERS........................................................................... -42-
Section 10.1 Liability for Taxes............................................................... -42-
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ARTICLE XI - CONDITIONS TO THE OBLIGATIONS OF PURCHASER...................................................... -44-
Section 11.1 Representations and Warranties True............................................... -44-
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Section 11.2 Compliance with this Agreement.................................................... -44-
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Section 11.3 Documents to be Delivered......................................................... -45-
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Section 11.4 Regulatory Approvals.............................................................. -45-
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Section 11.5 Litigation........................................................................ -45-
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Section 11.6 No Change in Ratings of FSIC...................................................... -45-
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Section 11.7 Legal Opinions of Holding Company's Counsel....................................... -45-
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Section 11.8 Legal Opinions of Sellers' Counsel................................................ -46-
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Section 11.9 Material Adverse Change........................................................... -46-
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Section 11.10 Employment Agreement............................................................. -46-
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Section 11.11 Consents......................................................................... -46-
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Section 11.12 Termination of Agreements........................................................ -46-
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Section 11.13 Commutation Agreement............................................................ -46-
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ARTICLE XII - CONDITIONS TO THE OBLIGATIONS OF SELLERS....................................................... -46-
Section 12.1 Representations and Warranties True............................................... -46-
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Section 12.2 Compliance with this Agreement.................................................... -46-
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Section 12.3 Documents to be Delivered......................................................... -47-
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Section 12.4 Litigation........................................................................ -47-
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Section 12.5 Regulatory Approvals.............................................................. -47-
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Section 12.6 Legal Opinion of Purchaser's Counsel.............................................. -48-
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Section 12.7 Consents.......................................................................... -48-
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Section 12.8 Material Adverse Change........................................................... -48-
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Section 12.9 Commutation Agreement............................................................. -48-
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ARTICLE XIII - TERMINATION................................................................................... -48-
Section 13.1 Termination....................................................................... -48-
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Section 13.2 Effect of Termination............................................................. -48-
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ARTICLE XIV - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION..................................................................................... -49-
Section 14.1 Survival of Representations and Warranties........................................ -49-
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Section 14.2 Indemnification by Seller......................................................... -49-
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Section 14.3 Indemnification by Purchaser and Vesta Fire....................................... -50-
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Section 14.4 Limitations on Indemnification.................................................... -50-
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Section 14.5 Notice of Claims.................................................................. -51-
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Section 14.6 Survival of Indemnification....................................................... -52-
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Section 14.7 Disclosure........................................................................ -52-
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Section 14.8 Mitigation........................................................................ -52-
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Section 14.9 Sole and Exclusive Remedy......................................................... -52-
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Section 14.10 Materiality...................................................................... -52-
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Section 14.11 No Other Representations or Warranties........................................... -53-
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Section 14.12 No Special Damages............................................................... -53-
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Section 14.13 Reduction for Insurance.......................................................... -53-
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ARTICLE XV - MISCELLANEOUS PROVISIONS........................................................................ -53-
Section 15.1 Amendment......................................................................... -53-
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Section 15.2 Waiver of Compliance.............................................................. -53-
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Section 15.3 Notices........................................................................... -54-
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Section 15.4 Assignment........................................................................ -55-
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Section 15.5 Governing Law..................................................................... -56-
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Section 15.6 Counterparts...................................................................... -56-
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Section 15.7 Headings.......................................................................... -56-
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Section 15.8 Entire Agreement.................................................................. -56-
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Section 15.9 Third Parties..................................................................... -56-
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Section 15.10 Performance Following Closing.................................................... -56-
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Section 15.11 Incorporation of Schedules and Exhibits.......................................... -56-
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Section 15.12 Severability..................................................................... -57-
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Section 15.13 Litigation; Jurisdiction; Other Matters; Waivers................................. -57-
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
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April 18, 2001, by and among Centre Solutions (Bermuda) Limited (formerly known
as Centre Reinsurance (Bermuda) Limited), a Bermuda exempted company ("Centre"),
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Mynd Corporation (formerly known as Policy Management Systems Corporation), a
South Carolina corporation ("Mynd"), Orienta Point Group, L.L.C., a New York
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limited liability company ("Orienta"), Kamehameha Schools Xxxxxxx Xxxxxx Xxxxxx
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Estate, a testamentary trust created under the Will of Xxxxxxx Xxxxxx Xxxxxx and
existing under the laws of the State of Hawaii as a private educational trust
with perpetual existence ("Xxxxxx" and collectively with Centre, Mynd and
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Orienta, "Sellers"), and Vesta Insurance Group, Inc., a Delaware corporation
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("Purchaser"), and, as to Articles II, III, VI, XIV and XV and Section 8.2 only,
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Vesta Fire Insurance Corporation, an Illinois Corporation ("Vesta Fire"), and,
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as to Section 9.10 and Article XV only, Florida Select Insurance Holdings Inc.,
a Delaware corporation (the "Holding Company").
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WITNESSETH:
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WHEREAS, Sellers own all of the issued and outstanding shares of capital
stock of the Holding Company (other than five (5) shares (the "Harbor Shares")
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of Class A voting common stock, which are owned by Harbor Capital Advisors,
L.L.C. ("Harbor")); and
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WHEREAS, the Holding Company owns all of the issued and outstanding shares
of capital stock of Florida Select Insurance Company, a Florida corporation
("FSIC"), Florida Select Insurance Agency, Inc., a Florida corporation ("FSIA"),
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and, indirectly, through its ownership of FSIA, Select Insurance Services Inc.,
a Texas corporation ("SIS", and collectively with FSIC and FSIA, the "Holding
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Subsidiaries"); and
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WHEREAS, SIS is the attorney-in-fact for Texas Select Lloyds Insurance
Company, a Texas unincorporated association ("TSLIC", and collectively with the
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Holding Company and the Holding Subsidiaries, the "Companies"); and
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WHEREAS, Sellers desire to sell, and Purchaser desire to purchase, all of
the shares of the Holding Company's capital stock (other than the Harbor Shares)
which shall be issued and outstanding as of the consummation of the transactions
contemplated hereby (the "Stock") for the consideration and upon the terms and
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conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1 ARTICLE
DEFINED TERMS
1.1 Section Definitions. As used in this Agreement, the following terms
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have the meanings stated:
"Action" has the meaning set forth in Section 14.5(a).
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"Actuarial Opinions" has the meaning set forth in Section 5.10.
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"Adverse Effect" means an adverse effect on the business, operations,
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assets, properties or prospects of the Companies, considered as a whole, or any
Company, considered individually, which constitutes a diminution in value of the
Companies, considered as a whole, or any Company, considered individually, of at
least $200,000, except, in each case, for an adverse effect due to (w) changes
in general economic, regulatory or political conditions, (x) changes affecting
the insurance industry generally or the Florida or Texas residential home owners
insurance market or industry generally, (y) changes in law, rule or regulation
or (z) changes in the customer, client, policyholder, agent or broker
relationships of the Companies or in other business relationships of the
Companies as a result of the transactions contemplated by this Agreement.
"Affiliate" of a Person means any other Person that directly or
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indirectly controls, is controlled by or is under common control with, the
Person or any of its Subsidiaries.
"Agent Contracts" has the meaning set forth in Section 5.28(b).
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"Aggregate Cash Consideration" has the meaning set forth in Section
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3.2(b)(i).
"Aggregate Note Amount" has the meaning set forth in Section 3.2(b)(i).
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"Agreement" has the meaning set forth in the introductory paragraph.
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"Annual Statements" has the meaning set forth in Section 5.9.
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"Assets" has the meaning set forth in Section 5.14.
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"Balance Sheet Date" means December 31, 2000.
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"Class A Warrant" has the meaning set forth in Section 9.4.
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"Class B Warrant" has the meaning set forth in Section 9.5.
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"Closing" has the meaning set forth in Section 4.1.
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"Closing Date" has the meaning set forth in Section 4.1.
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"Commissioners" has the meaning set forth in Section 5.9.
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"Commutation Agreement" has the meaning set forth in Section 9.6.
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"Companies" has the meaning set forth in the Preambles.
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"Company Insurance Contracts" has the meaning set forth in Section
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5.7(b).
"Confidentiality Agreement" has the meaning set forth in Section 13.2.
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"Continuing Agents" has the meaning set forth in Section 5.28(a).
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"Credit Agreements" means the Unsecured Credit Agreement and the
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Secured Credit Agreement.
"Due Diligence Period" has the meaning set forth in Section 8.11.
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"Employee Benefit Plan" has the meaning set forth in Section 5.23(a).
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"Encumbrances" has the meaning set forth in Section 5.2.
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"Environmental Laws" means federal, state or local laws, rules or
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regulations relating to pollution or protection of the environment, including
regulations relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including without limitation ambient
air, surface water, groundwater, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Final Balance Sheet" means the audited consolidated balance sheet of
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the Holding Company and the Holding Subsidiaries as of December 31, 2000,
prepared in accordance with GAAP.
"Financial Statements" has the meaning set forth in Section 5.11.
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"Form S-3" has the meaning set forth in Section 8.9.
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"FSIA" has the meaning set forth in the Preambles.
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"FSIC" has the meaning set forth in the Preambles.
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"GAAP" means generally accepted accounting principles in the United
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States as in effect from time to time, consistently applied throughout the
periods to which reference is made.
"Governmental Body" means any agency, bureau, commission, court,
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department, official, political subdivision, tribunal or other instrumentality
of any government, whether federal, state, local, domestic or foreign.
"Harbor Shares" has the meaning set forth in the Preambles.
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"Holding Company" has the meaning set forth in the Preambles.
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"Holding Company Expense Payment" has the meaning set forth in Section
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9.1.
"Holding Subsidiaries" has the meaning set forth in the Preambles.
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"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of
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1976, as amended, and the related regulations and published interpretations.
"Immigration Laws" has the meaning set forth in Section 5.22(d).
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"Indemnification" and "Indemnify" have the meanings set forth in
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Section 14.4(a)(i).
"Insurance Laws" has the meaning set forth in Section 5.7(a).
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"IRS" means the Internal Revenue Service.
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"Knowledge of the Purchaser" means the actual knowledge, without
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inquiry, of Purchaser's chief executive officer, chief financial officer, chief
operating officer, president and general counsel.
"Knowledge of the Sellers" means the actual knowledge, without inquiry,
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of the following persons: (a) Xxxxxxx X. Xxxxxxxx, (b) Xxxxxxx X. Xxxxxx, (c)
Xxxxxxx Xxxxxx, (d) Xxxxxx Xxxxxxx Xxxxxx, and (e) Xxxx Xxxx.
"Licenses" has the meaning set forth in Section 5.6(c).
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"Loss" and "Losses" have the meaning set forth in Section 14.2.
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"Material Adverse Change" means a material adverse change since the
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Balance Sheet Date in the business, operations, assets, properties or prospects
of the Companies, considered as a whole, or any Company, considered
individually, which results in a net diminution in value (considering the net
effect on the Companies or such Company, as the case may be, of increases in
value and decreases in value) of the Companies, considered as a whole, of at
least $4,000,000,
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or any Company, considered individually, of at least $3,000,000, except, in each
case, for a material adverse change due to (w) changes in general economic,
regulatory or political conditions, (x) changes affecting the insurance industry
generally or the Florida or Texas residential home owners insurance market or
industry generally, (y) changes in law, rule or regulation or (z) changes in the
customer, client, policyholder, agent or broker relationships of the Companies
or in other business relationships of the Companies as a result of the
transactions contemplated by this Agreement; provided, however, that if the
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Closing has not taken place by August 1, 2001, the references to $4,000,000 and
$3,000,000 above shall be changed to $6,000,000 and $4,500,000, respectively,
from and after August 1, 2001. This definition of Material Adverse Change shall
be used solely for purposes of Sections 11.5, 11.9 and 14.10.
"Material Purchaser's Consents" means those Purchaser's Consents set
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forth on Schedules 6.5 and 6.6 that are marked with an asterisk.
"Material Sellers' Consents" means those Sellers' Consents set forth on
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Schedules 5.25 and 5.26 that are marked with an asterisk.
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"Material Contracts" has the meaning set forth in Section 5.19(a).
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"Material Leases" has the meaning set forth in Section 5.16.
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"NAIC" has the meaning set forth in Section 5.10.
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"Non-Compete Period" has the meaning set forth in Section 7.13.
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"Notes" has the meaning set forth in Section 3.2(b)(i).
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"Note Proportionate Shares" are the percentages set forth on Exhibit A
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in the column headed "Note Proportionate Shares".
"Offering" has the meaning set forth in Section 8.9.
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"Person" means any individual, corporation, partnership, limited
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liability company, association or other entity of any kind, including without
limitation, any Governmental Body.
"Plans" has the meaning set forth in Section 5.23(a).
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"Proportionate Shares" are the percentages set forth on Exhibit A in
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the column headed "Proportionate Shares", as such percentages may be changed in
accordance with a notice from Sellers at any time prior to the Closing.
"Pro Rata Amount" has the meaning set forth in Section 3.2(a).
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"Pro Rata Contract" has the meaning set forth in Section 9.6.
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"Pro Rata Note Amount" has the meaning set forth in Section 3.2(b).
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"Public Announcement" means the initial public announcement or
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statement regarding the transactions contemplated hereby.
"Purchase Price" has the meaning set forth in Section 3.1.
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"Purchaser Indemnified Persons" has the meaning set forth in Section
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14.2.
"Purchaser's Common Stock" means the common stock, par value $.01 per
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share, of Purchaser.
"Purchaser's Consents" has the meaning set forth in Section 6.2.
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"Reimbursement Agreement" has the meaning set forth in Section 9.8.
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"Residential Homeowners Person" has the meaning set forth in Section
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7.13(a).
"SEC" means the Securities and Exchange Commission under the Securities
---
Act.
"Secured Credit Agreement" means the Credit Agreement, dated as of
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March 3, 2000, by and between Purchaser and J. Xxxxxx Xxxxxx, Inc., as
Borrowers, and First Commercial Bank, as Lender and Secured Party, for a
$7,500,000 Revolving Credit Facility.
"Securities Act" means the Securities Act of 1933, as amended.
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"Seller Indemnified Persons" has the meaning set forth in Section 14.3.
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"Sellers' Consents" has the meaning set forth in Section 5.1.
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"Sellers' Expense Payment" has the meaning set forth in Section 9.1.
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"Sellers' Indemnification Limit" has the meaning set forth in Section
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14.4(a)(i).
"Shareholders Agreement" has the meaning set forth in Section 5.2.
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"SIS" has the meaning set forth in the Preambles.
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"Statutory Financial Statements" has the meaning set forth in Section
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5.9.
"Stock" has the meaning set forth in the Preambles.
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"Subsidiary" of a Person means any Person of which capital stock or
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other ownership interests having ordinary voting power to elect a majority of
the board of directors, the manager or other persons performing similar
functions are at the time directly or indirectly owned by the Person.
"Subsidiary Stock" has the meaning set forth in Section 5.4(b).
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"Tax Returns" has the meaning set forth in Section 5.29(a).
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"Taxes" has the meaning set forth in Section 5.29(a).
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"Termination Date" has the meaning set forth in Section 13.1(b).
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"Trade Secrets" has the meaning set forth in Section 7.14.
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"TSLIC" has the meaning set forth in the Preambles.
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"Unsecured Credit Agreement" means the Credit Agreement, dated as of
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March 3, 2000, by and between Purchaser, as Borrower, and First Commercial Bank,
as Lender, for a $7,500,000 Revolving Credit Facility.
"Vesta Companies" means Purchaser and its direct and indirect
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Subsidiaries.
"Vesta Material Adverse Change" means a material adverse change since
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the date of filing of Purchaser's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 in the business, operations, assets, properties or
prospects of Purchaser which results in a diminution in consolidated
shareholders' equity, determined in accordance with GAAP, of Purchaser of
$28,000,000 or more, except for a material adverse change due to (w) changes in
general economic, regulatory or political conditions, (x) changes affecting the
insurance industry generally, (y) changes in law, rule or regulation or (z)
changes in the customer, client, policyholder, agent or broker relationships of
the Vesta Companies or in other business relationships of the Vesta Companies as
a result of the transactions contemplated by this Agreement.
2 ARTICLE
PURCHASE AND SALE OF STOCK
Each Seller, severally, and not jointly and severally, hereby agrees to
sell, assign, transfer, convey and deliver to Purchaser (or Vesta Fire, at
Purchaser's option), and Purchaser hereby agrees to purchase (or to cause Vesta
Fire to purchase, as Purchaser's option), those shares of Stock set forth
opposite such Seller's name on Exhibit A hereof, subject to the terms and
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conditions set forth herein, for the purchase price set forth in Article III
hereof.
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3 ARTICLE
CONSIDERATION AND MANNER OF PAYMENT
3.1 Section Purchase Price. The purchase price (the "Purchase Price") for the
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Stock shall be Sixty-one Million Four Hundred Seventy-six Thousand Nine Hundred
and Forty-nine Dollars ($61,476,949), plus interest on such aggregate amount
from January 1, 2001 up to the Closing Date at the rate of 6% per annum. The
Purchase Price shall be payable in accordance with the terms of Section 3.2
hereof.
3.2 Section Payment of Purchase Price.
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(a) Payment in Cash. At the Closing, Purchaser shall deliver (or shall
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cause Vesta Fire to deliver, at Purchaser's option) to each Seller, to such
Seller's account designated on Exhibit B hereto, an amount (such Seller's "Pro
--------- ---
Rata Amount") equal to the Purchase Price multiplied by such Seller's
-----------
Proportionate Share set forth opposite such Seller's name on Exhibit A hereto,
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payable by wire transfer of immediately available funds. Purchaser hereby
acknowledges and agrees that Sellers, by notice from Sellers to Purchaser at any
time prior to the Closing Date, may change the Proportionate Shares.
(b) Payment in Cash and Note.
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(i) In the event that Purchaser is unable under Section 8.9 hereof to
sell shares of Purchaser's Common Stock with net proceeds of at least
$30,000,000 pursuant to the Form S-3 by the Closing Date, then Purchaser shall
pay the Purchase Price to Sellers by delivery to Sellers of (A) senior
promissory notes (the "Notes") issued by Purchaser in an aggregate outstanding
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principal amount of up to $30,000,000 minus the aggregate amount of net proceeds
received by Purchaser pursuant to the Offering (the "Aggregate Note Amount") and
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(B) cash in an aggregate amount equal to the Purchase Price minus the Aggregate
Note Amount (the "Aggregate Cash Consideration"), which Aggregate Cash
----------------------------
Consideration may be paid by Vesta Fire on behalf of Purchaser, at Purchaser's
option. At Closing, Purchaser (x) shall execute and deliver to each Seller a
Note in an outstanding principal amount (such Seller's "Pro Rata Note Amount")
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equal to the Aggregate Note Amount multiplied by such Seller's Note
Proportionate Share set forth opposite such Seller's name on Exhibit A hereto
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and (y) shall deliver to each Seller's account designated on Exhibit B hereto,
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cash in an amount equal to such Seller's Pro Rata Amount less such Seller's Pro
Rata Note Amount, payable by wire transfer of immediately available funds.
(ii) The Notes (A) shall be in the form attached as Exhibit C hereto, (B)
---------
shall be due and payable sixty (60) days after the Closing Date, and (C) shall
only be transferable on a book entry system.
-8-
4 ARTICLE
THE CLOSING
4.1 Section Date and Place. The closing of the sale, transfer, assignment and
--------------
conveyance of the Stock as contemplated by this Agreement and the other
transactions contemplated hereby (the "Closing") shall take place three (3)
-------
business days following the satisfaction or waiver of all conditions to closing
described in Article XI and XII of this Agreement at the offices of Xxxxxxxx
Xxxxxx Xxxxx & Xxxx, Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, or at
such other time and place as the parties mutually agree, but in no event later
than the Termination Date; provided, however, that the Closing shall not take
-------- -------
place prior to July 15, 2001 unless (i) the Offering has been completed or (ii)
Purchaser, at its option, agrees to close this transaction prior to the
completion of the Offering. The date upon which the Closing occurs is referred
to herein as the "Closing Date". The transactions contemplated by this Agreement
------------
shall be deemed to be effective as of 12:01 a.m. on the date thereof.
4.2 Section Delivery of Stock. At Closing, each Seller shall execute and
-----------------
deliver to Purchaser certificates for the shares of the Stock held by such
Seller, duly endorsed or accompanied by stock powers duly endorsed in blank, in
proper form for transfer, with all appropriate transfer tax stamps affixed. The
number of shares of each class of the Stock to be delivered by each Seller is
set forth on Exhibit A to this Agreement.
---------
5 ARTICLE
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby jointly and severally represents and warrants to
Purchaser (except with respect to the matters contained in Sections 5.1, 5.2 and
5.31 and, with respect to representations and warranties about such Seller only
in such Sections, Sections 5.5, 5.25 and 5.26 hereof, for which the
representations and warranties of each Seller contained therein shall be several
as to itself only, and not joint and several) as of the date hereof and as of
the Closing Date that:
5.1 Section Organization, Power and Authority of Seller; Effect of Agreement.
----------------------------------------------------------------
Such Seller is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, organization or formation, as the
case may be. Such Seller has all requisite power and authority under its
certificate of incorporation, articles of organization, declarations of trust or
other organizational documents, as the case may be, to enter into this
Agreement, consummate the transactions contemplated hereby and perform its
obligations hereunder. The execution and delivery of this Agreement by such
Seller, the performance by such Seller of its obligations under this Agreement
and the consummation by such Seller of the transactions contemplated hereby have
been duly authorized by the relevant governing body of such Seller, and no
further approvals are required from any other person holding a beneficial
interest in such Seller. This
-9-
Agreement has been duly and validly executed and delivered by such Seller and
constitutes the valid and binding agreement of such Seller, enforceable against
such Seller in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws of general applicability
relating to or affecting creditors' rights generally. Except for (i) the
consents set forth on Schedules 5.25 and 5.26 hereof and (ii) compliance with
-----------------------
the HSR Act (the consents referred to in clauses (i) and (ii) above are referred
to herein as the "Sellers' Consents"), no authorization or approval from any
-----------------
Governmental Body or any other Person is necessary for such Seller's due
execution and delivery of this Agreement or its performance hereunder.
5.2 Section Title to Stock and Power to Convey. Such Seller is the sole owner
----------------------------------
of, and has good and marketable title to, that number of shares of each class of
the Stock set forth beside such Seller's name on Exhibit A hereto and proposed
---------
to be sold by it hereunder. Such Seller has full right, power and authority to
sell and deliver the shares of the Stock to be delivered by it as contemplated
by this Agreement. Upon endorsement and delivery of certificates evidencing such
Seller's respective shares of the Stock to Purchaser at the Closing and
Purchaser's payment of the Purchase Price as contemplated herein, Purchaser
shall have acquired from such Seller good legal and equitable title to such
Seller's respective shares of the Stock transferred by such Seller, free and
clear of all pledges, liens, security interests, claims, charges, restrictions,
options or encumbrances of any nature whatsoever ("Encumbrances") other than (A)
------------
restrictions imposed by securities laws generally, (B) as provided in that
certain Shareholders Agreement, dated as of December 22, 1997, as amended
pursuant to Amendment No. 1 thereto, dated as of November 28, 2000 (as amended,
the "Shareholders Agreement"), by and among the Holding Company and Sellers,
----------------------
which shall be terminated at Closing and thereafter shall have no further force
or effect, and (C) Encumbrances as result from any action taken by Purchaser.
5.3 Section Organization, Power and Authority of the Companies. The Holding
--------------------------------------------------
Company is duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. FSIC is duly incorporated and validly existing
and in good standing under the laws of the State of Florida. FSIA is duly
incorporated, validly existing and in good standing under the laws of the State
of Florida. TSLIC is an unincorporated association in the State of Texas. SIS is
duly incorporated, validly existing and in good standing under the laws of the
State of Texas. Each of the Holding Company and the Holding Subsidiaries has all
requisite corporate power and authority to own or hold under lease its property
and to carry on its business as now conducted. All corporate actions taken by
the Holding Company and the Holding Subsidiaries approving the transactions
contemplated hereby have been duly authorized or subsequently ratified, and the
books and records of such Companies have been maintained in the ordinary course
of such Companies' business, in accordance with all applicable laws and
regulatory requirements.
5.4 Section Capital Stock; Subsidiaries.
---------------------------
-10-
(a) The authorized capital stock of the Holding Company consists of 2,000
shares of Class A voting common stock, 2,000 shares of Class B non-voting common
stock, 2,000 shares of Class C non-voting common stock, 2,000 shares of Class D
voting common stock, and 2,000 shares of preferred stock. Of these shares, 779
shares of Class A voting common stock are issued and outstanding, no shares of
Class B non-voting common stock are issued and outstanding (as of the date
hereof, but at Closing those shares of Class B non-voting common stock issued
upon the exercise of the Class B Warrant shall be issued and outstanding), l56
shares of Class C non-voting common stock are issued and outstanding, and 60
shares of Class D voting common stock are issued and outstanding. None of the
preferred stock has been issued. The issued and outstanding shares of capital
stock set forth in this Section 5.4(a), together with all (but no more than
1,000) shares of Class B non-voting common stock issued on exercise of the Class
B Warrant, but excluding the Harbor Shares, constitute the Stock.
(b) Schedule 5.4(b) sets forth all of the Holding Subsidiaries, their
---------------
respective authorized capital stock and number of shares of such stock issued
and outstanding (the "Subsidiary Stock"), and all corporations, partnerships or
----------------
other entities in which any of the Companies has an equity interest, other than
those investment interests listed on Schedule 5.21 hereto. The Holding Company
-------------
owns 100% of all issued and outstanding shares of the Subsidiary Stock, other
than the Subsidiary Stock of SIS, 100% of all issued and outstanding shares of
which are owned by FSIA.
(c) The Stock and the Subsidiary Stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to any preemptive
rights created by statute, charter or bylaws or any agreement to which the
Holding Company or any of the Holding Subsidiaries is a party or by which it is
bound, except, with respect to the Stock, the Shareholders Agreement, which
shall be terminated at Closing and thereafter shall have no further force or
effect.
(d) Except for the Class A Warrant (which shall be terminated at Closing)
and the Class B Warrant and, with respect to the Stock, the Shareholders
Agreement, which shall be terminated at Closing and thereafter shall have no
further force or effect, there are no convertible securities, options, warrants,
calls, rights, commitments or agreements of any character to which the Holding
Company or any of the Holding Subsidiaries is a party or by which any of them is
bound obligating such Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of such Company or obligating such Company to issue, grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such convertible security, option, warrant, call, right,
commitment or agreement.
5.8 Section No Violation. Except as may result from Sellers' inability to
------------
obtain Sellers' Consents or to terminate the Shareholders Agreement at or before
Closing, neither the execution and delivery of this Agreement by such Seller nor
the consummation of the transactions contemplated hereby will: (a) conflict with
or violate any provision of its certificate of incorporation, articles of
organization, declarations of trust or other organizational documents, as the
case may be, of such Seller or any Company; (b) violate, conflict with,
constitute a default
-11-
(or an event which, with or without notice, lapse of time or both, or the
occurrence of any other event, would constitute a default) under, result in the
termination of, accelerate the performance required by, cause the acceleration
of the maturity of any debt or obligation pursuant to any agreement or
commitment to which such Seller or any of the Companies is a party or by which
such Seller or any of the Companies is bound, or to which the property of such
Seller or any of the Companies is subject, or result in the creation or
imposition of any security interest, lien or other encumbrance upon any assets
of, such Seller or any of the Companies; (c) violate any federal, state or local
law or any judgment, decree, order, regulation or rule of any court or
governmental authority applicable to such Seller or any of the Companies; (d)
except in each case where such would not cause an Adverse Effect, result in a
breach of the terms or conditions, or constitute a default under or cause an
impairment of any license of such Seller or any License of any of the Companies;
or (e) except in each case where such would not cause an Adverse Effect, give a
Person the right to terminate, cancel or accelerate any Material Contract of any
of the Companies.
5.6 Section Compliance with Law. Except as set forth on Schedule 5.6:
------------------- ------------
(a) Each of the Companies has conducted its business in accordance
with, in all material respects, all applicable laws, rules, regulations,
judgments, orders and other requirements of all Governmental Bodies
having jurisdiction over the respective Company, including, without
limitation, applicable laws, rules, regulations and requirements
relating to antitrust, consumer protection, equal opportunity and
protection (including without limitation, the Americans with
Disabilities Act), occupational safety and health (including without
limitation the Occupational Safety and Health Act), pension, welfare and
securities matters and all Environmental Laws;
(b) To the Knowledge of the Sellers, none of the Companies has received
within the last three (3) years any written or oral notification of any
asserted present or past failure by such Company to comply in any
material respect with such laws, rules or regulations that relates in
any way to its business;
(c) Except in each case where such would not cause an Adverse Effect,
each of the Companies has all licenses, certificates of occupancy,
permits and other governmental authorizations or approvals
(collectively, "Licenses") required for the operation of its business
--------
and the current use of the properties of such Company, and all such
Licenses are valid and in effect; and
(d) To the Knowledge of the Sellers, none of the Companies is in
violation of any License, and, subject to obtaining Sellers' Consents,
the consummation of the transactions contemplated by this Agreement will
not result in a violation or termination of any License.
5.7 Section Insurance Regulatory Authority of the Companies.
-----------------------------------------------
-12-
(a) Schedule 5.7(a) lists each jurisdiction in which any of the Companies
---------------
is licensed or authorized to transact the business of insurance (as either an
agent or insurer), and attaches copies of all licenses or certificates of
authority indicated thereon. All of such licenses or certificates of authority
are currently in full force and effect, and none of Sellers or the Companies has
received any written or, to the Knowledge of the Sellers, oral notice of any
event, inquiry or proceeding which could materially restrict or adversely effect
such licenses or certificates of authority. To the Knowledge of the Sellers,
none of the Companies is required to be licensed or otherwise qualified or
authorized to transact business in any jurisdiction not listed on Schedule
--------
5.7(a), except where such failure to be licensed, qualified or authorized would
------
not constitute an Adverse Effect. The business and operations of each of the
Companies have been conducted in compliance in all material respects with all
applicable laws regulating the business of insurance, including all applicable
directives of insurance regulatory authorities and market conduct
recommendations resulting from market conduct examinations of insurance
regulatory authorities (collectively, "Insurance Laws"). Each of the Companies
--------------
has marketed, sold and issued insurance products in compliance in all material
respects with Insurance Laws applicable to the business of such Company and in
the respective jurisdictions in which such products have been sold. Except as
set forth on Schedule 5.7(a), none of the Companies is subject to any order or
---------------
decree of any insurance regulatory authority relating specifically to such
Company (as opposed to insurance companies generally). To the Knowledge of the
Sellers, each of the Companies has filed all material reports required to be
filed with any insurance regulatory authority.
(b) All agreements of insurance that are issued by any of the Companies
(the "Company Insurance Contracts"), and, except where such non-compliance would
---------------------------
not have an Adverse Effect, any and all marketing materials used by any of the
Companies, are, to the extent required under applicable Insurance Laws, on forms
approved by applicable insurance regulatory authorities or which have been filed
with and not objected to by such authorities within the period provided for
objection, and such forms comply in all material respects with Insurance Laws
applicable thereto and, as to premium rates established for Company Insurance
Contracts which are required to be filed with or approved by insurance
regulatory authorities, the rates have been so filed or approved, and the
premiums charged conform in all material respects thereto. Sellers have
delivered to Purchaser (in computer readable form) a true and complete list of
all Company Insurance Contracts (and their respective policy numbers) in force
as of the date of this Agreement. There are no pending filings or requests of
any of the Companies to the Commissioners or any other applicable regulatory
agency with respect to rates, policy forms, underwriting guidelines or anything
else that may have a material impact on the operation of their business.
5.8 Section Reinsurance Agreements . Schedule 5.8 sets forth (i) a true and
---------------------- ------------
complete list of all reinsurance agreements or arrangements which provide
coverage with respect to losses occurring on or after January 1, 1999 under
policies in force at January 1, 1999 and issued or renewed by any of the
Companies on or after January 1, 1999, and (ii) as of the date of this
-13-
Agreement, all amounts currently receivable and amounts currently payable
relating thereto. Schedule 5.8 sets forth a true and complete list of all
------------
agreements (whether written or oral) between any of the Companies and any of its
respective insurers, brokers, or others with respect to such reinsurance
agreements or arrangements.
5.9 Section Statutory Financial Statements . Sellers have delivered to
------------------------------
Purchaser complete copies of Annual Statements ("Annual Statements") (i) of
------------------
FSIC, dated as of December 31, 1999 and December 31, 2000 and (ii) of TSLIC,
dated as of December 31, 2000, as filed with the Commissioners of Insurance for
the States of Florida and Texas (the "Commissioners"), respectively. Sellers
--------------
will deliver to Purchaser prior to the Closing complete copies of any quarterly
financial statements of such Companies dated after December 31, 2000, as filed
with the Commissioners (all of such Annual Statements and quarterly financial
statements being collectively hereinafter referred to as the "Statutory
--------
Financial Statements"). The Statutory Financial Statements have been, or, with
--------------------
respect to quarterly financial statements for periods after December 31, 2000,
will be, exact copies of such Statutory Financial Statements, as filed with the
Commissioners, and Sellers are not aware of any filed amendments or adjustments
thereto. The Statutory Financial Statements fairly present the statutory
financial condition of each of FSIC and TSLIC as of such date in conformity with
the statutory accounting principles prescribed or permitted by the Commissioners
consistently applied during the periods involved, except as expressly set forth
within the subject Statutory Financial Statements.
5.10 Section Reserves. Sellers have provided to Purchaser actuarial opinions
--------
("Actuarial Opinions") and related actuarial work papers with respect to FSIC's
------------------
loss and loss adjustment expense reserves for the calendar years 1996, 1997,
1998, 1999 and 2000 in the form specified in the Annual Statement Instructions
(Property & Casualty) promulgated by the National Association of Insurance
Commissions ("NAIC"). The Actuarial Opinions are exact copies of such Actuarial
----
Opinions, as filed with the Commissioners, and there are no filed amendments or
adjustments thereto.
5.11 Section Audited Financial Statements. Sellers have delivered to Purchaser
----------------------------
true and complete copies of the audited consolidated balance sheets of the
Holding Company and the Holding Subsidiaries for the years ending December 31,
2000, December 31, 1999 and December 31, 1998, and the related audited
consolidated statements of income, cash flow and changes in shareholders' equity
for the fiscal years then ended, together with the report thereon by the
Companies' auditors (the "Financial Statements"), all of which have been
--------------------
prepared in accordance with GAAP consistently applied throughout the periods
involved. Such balance sheets, including the related notes, fairly present, in
accordance with GAAP, the financial position, assets and liabilities (whether
accrued, absolute, contingent or otherwise) of the Holding Company and the
Holding Subsidiaries at the dates indicated, and such statements of income, cash
flow and changes in shareholders' equity, including the related notes, fairly
present the results of operations, cash flow and changes in shareholders' equity
of the Holding Company and its Subsidiaries for the periods indicated.
-14-
5.12 Section No Undisclosed Liabilities . Neither the Holding Company nor any
--------------------------
of the Holding Subsidiaries has any liability or obligation of any nature
(whether absolute, accrued, contingent or otherwise, and whether due or to
become due), other than a liability or obligation that satisfies any one or more
of the following:
(a) a liability or obligation that is fully reflected or reserved against
in the Final Balance Sheet;
(b) a liability or obligation that is identified on Schedule 5.12 or
----------------
otherwise in this Agreement or any other Schedule hereto;
(c) a liability or obligation incurred by any Company in the ordinary
course of business after the Balance Sheet Date;
(d) an obligation that was or is to be performed after the Balance Sheet
Date under the contracts, agreements, leases, commitments, insurance
policies or understandings of any kind of any Company either (i) which are
properly disclosed to Purchaser pursuant to this Agreement if such
disclosure is required by this Agreement or (ii) which are not required by
this Agreement to be disclosed; or
(e) liabilities or obligations that are, in the aggregate, less than
$750,000 (excluding for purposes of this subpart (e) any liabilities or
obligations described in subparts (a) through (d)).
5.13 Section Absence of Changes . Except as described in Section 9.6, Section
-----------------
9.8, Section 7.2 or on Schedule 5.13 or Schedule 7.2 hereto, since the Balance
------------- ------------
Sheet Date, there has not occurred or arisen:
(a) Any Adverse Effect;
(b) Any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the
Holding Company's or any of the Holding Subsidiaries' capital stock;
(c) Any split, combination or reclassification of the Holding Company's
or any of the Holding Subsidiaries' capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of the Holding Company's or any of
the Holding Subsidiaries' capital stock;
(d) Any granting by any of the Companies to any director, officer or
employee of such Companies of any award or incentive payment or increase in
compensation or benefits;
-15-
(e) Any granting by any of the Companies to any director, officer or
employee of any increase in severance or termination pay;
(f) Any entry by any of the Companies into any employment, severance or
Termination agreement with any director, officer or employee;
(g) Any material change in accounting methods, principles or practices by
any of the Companies affecting their assets, liabilities or businesses,
except insofar as may have been required by a change in GAAP;
(h) Any amendment or termination of any Material Contract or License (i)
by any of the Companies, except where such would not cause an Adverse
effect, or (ii) to the Knowledge of the Sellers, by any other party to the
Material Contract or License; or
(i) Commencement or written or, to the Knowledge of the Sellers, oral
notice or, to the Knowledge of the Sellers, threat of commencement of any
material governmental proceeding against, or investigation of, any of the
Companies or their affairs.
5.14 Section Title to Properties; Encumbrances. Except as set forth on
---------------------------------
Schedule 5.14, each of the Companies has good, valid and marketable title to, or
-------------
in the case of leased property has valid leasehold interests in, all the
material properties, assets and rights which are reflected in the Final Balance
Sheet or otherwise used in the operation of the Companies' business (whether
real, personal or mixed, tangible or intangible) (the "Assets"). Except as set
------
forth on Schedule 5.14, all of the Assets are free and clear of all title
-------------
defects or objections, liens, claims, charges, security interests or other
encumbrances of any nature whatsoever including, without limitation, leases,
chattel mortgages, pledges, conditional sales contracts, collateral security
arrangements and other title or interest retention arrangements, except all (a)
liens for taxes (of any kind) or governmental assessments, charges or claims, in
each case the payment of which is not yet due, (b) liens imposed by applicable
law, rule or regulation such as mechanics', materialmen's, landlords',
warehousemen's and carriers' liens, and other similar liens, securing
obligations incurred in the ordinary course of business, (c) liens under
workers' compensation, unemployment insurance, Social Security or similar
legislation, and (d) liens set forth on Schedule 5.14.
-------------
5.15 Section Real Property. None of the Companies owns or has ever owned any
-------------
real property.
5.16 Section Leases. Schedule 5.16 sets forth an accurate and complete list of
------ -------------
all leases and subleases pursuant to which any of the Companies leases real or
personal property requiring annual payments in excess of $50,000 ("Material
--------
Leases"), identifying which Company is a party to the lease. Except as set forth
------
in Schedule 5.16, (a) there are no existing defaults by the relevant Companies
--------------
under such Material Leases, except where such default would not constitute an
Adverse Effect; (b) none of such Material Leases have been terminated (i) by any
of the
-16-
Companies, except where such would not cause an Adverse Effect, or (ii) to the
Knowledge of the Sellers, by any other party to any such Material Lease; and (c)
to the Knowledge of the Sellers, no event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default under such Material Leases by any party thereto.
5.17 Section Bank Accounts; Custodial Accounts. Schedule 5.17 sets forth a
--------------------------------- -------------
true and complete list of each and every bank account, safe deposit box,
brokerage account, trust account, depository account or other custodial account
of each of the Companies including, but not limited to, any deposits maintained
with any governmental agency or department for the purpose of obtaining or
continuing any authority within any jurisdiction. Other than the assets
deposited in the accounts listed on Schedule 5.17 and the investments listed on
-------------
Schedule 5.21, none of the Companies have any other liquid assets or investments
held or maintained with any other person or entity at any location.
5.18 Section Trademarks, Service Marks and Trade Names. Schedule 5.18 sets
----------------------------------------- -------------
forth a correct and complete list of all material trademarks, service marks,
trade names and copyrights (including trademarks, service marks, trade names and
copyrights relating to computer software and hardware) used by each of the
Companies in the conduct of their business. Except as set forth in Schedule
--------
5.18, there is no claim pending or, to the Knowledge of the Sellers, threatened
----
against any of the Companies with respect to alleged infringement of any
trademark, service xxxx, trade name or copyright owned by any person. To the
Knowledge of the Sellers, there is no material infringement by any Person of any
patent, trademark, copyright or trade name set forth on Schedule 5.18 of such
Company.
5.19 Section Material Contracts and Commitments.
----------------------------------
(a) Schedule 5.19(a) lists all of the written or oral contracts,
----------------
agreements and commitments which are material to the business or operations of
each of the Companies, other than (i) the Material Leases identified on Schedule
--------
5.16, (ii) the reinsurance agreements identified on Schedule 5.8, (iii) the
---- ------------
Agent Contracts identified on Schedule 5.28(b) (to be delivered at Closing),
----------------
(iv) the Company Insurance Contracts referred to in Section 5.7(b), and (v)
other contracts, agreements and commitments relating to the Companies entered
into in the ordinary course of business and providing, with respect to each such
contract, agreement or commitment, for annual payments of less than $75,000
(such contracts, agreements and commitments listed on Schedule 5.19(a) are
----------------
collectively referred to herein as, the "Material Contracts").
------------------
(b) Except as set forth on Schedule 5.19(b), or where such would not cause
----------------
an Adverse Effect, none of the Companies are in breach or default under or in
violation of any Material Contract;
-17-
(c) Except for the Shareholders Agreement and as set forth on Schedule
--------
5.19(c), none of the Holding Company or the Holding Subsidiaries is a party to
-------
any contract with any present or former employee;
(d) None of the Companies are a party to any written or oral agreement,
contract or commitment limiting or restraining the Company or any successor
thereto from engaging or competing in any manner or in any business, nor, to the
Knowledge of the Sellers, is any employee of the Company subject to any such
agreement, contract or commitment; and
(e) To the Knowledge of the Sellers, no Material Contract has been
terminated by a party thereto other than the Companies and copies of each
Material Contract have been provided to Purchaser, which copies Purchaser hereby
acknowledges that it has received and which copies, to the Knowledge of the
Sellers, are true and correct. Except where such would not have an Adverse
Effect, each of the Companies has performed all obligations required to be
performed by it under, has not terminated, and is not in default in any respect
under, or in violation in any respect of, any Material Contract.
5.20 Section Insurance.
---------
(a) Schedule 5.20(a) sets forth (i) an accurate and complete list of all
----------------
material insurance policies and programs of insurance providing coverage for the
Companies, including the amount of coverage and any retention or deductible of
the Companies, and (ii) the aggregate claims and all individual claims in excess
of $25,000 made under each such policy or program (or any predecessor policy or
program) during the last two (2) years.
(b) To the Knowledge of the Sellers, (i) no written notice of
cancellation, termination or reduction in coverage has been received with
respect to any policy listed on Schedule 5.20(a) other than as set forth on
----------------
Schedule 5.20(b), and (ii) none of the Companies has been refused any insurance
----------------
with respect to its assets or operations, nor has its coverage been limited, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance during the last two (2) years other than as set
forth on Schedule 5.20(b).
----------------
5.21 Section Investments. Schedule 5.21 sets forth a complete list of all
----------- -------------
stocks, bonds or other securities, or any other equity or proprietary interest
in any corporation, partnership, joint venture, business enterprise or other
entity of any nature whatsoever, owned, directly or indirectly, by each of the
Companies.
5.22 Section Employment Matters.
------------------
(a) Except as set forth on Schedule 5.22(a), there is no unfair labor
----------------
practice complaint against any of the Companies pending before the National
Labor Relations Board. Except as set forth on Schedule 5.22(a), none of the
----------------
Companies has any contracts, agreements, pension plans, profit sharing plans,
bonus plans, undertakings or arrangements, whether oral or written with
-18-
lessees, licensees, employees, managers, accountants, suppliers, agents,
officers, distributors, directors, lawyers, or others which cannot be terminated
on six months' notice.
(b) Schedule 5.22(b) sets forth a list of all full and part-time
---------------
employees of each of the Companies, their wages and other remuneration of every
kind, including current year vacation pay earned to date, and the date and
amount of the latest wage increase of each such employee. To the Knowledge of
the Sellers, except as restricted under applicable law, the employment of each
employee so listed is terminable at will by the relevant Company, without
restriction, penalty or payment of any kind.
(c) None of the Companies is a party to any collective bargaining
agreement with any labor union or other association of employees and, to the
Knowledge of the Sellers, no attempt has been made to organize or certify the
employees of the Company as a bargaining unit.
(d) Except as set forth on Schedule 5.22(d), none of the Companies is
---------------
the subject of any inspection or investigation relating to its compliance with
or violation of the Immigration Reform and Control Act of 1986, and the rules
and regulations promulgated thereunder (the "Immigration Laws"), nor has it been
----------------
fined or otherwise penalized by reason of any failure to comply with the
Immigration Laws, nor is any such proceeding pending or, to the Knowledge of the
Sellers, threatened in respect of the Company.
-19-
5.23 Section Employee Benefits.
-----------------
(a) Schedule 5.23(a) lists each written pension, retirement, profit-
----------------
sharing, deferred compensation, bonus, incentive, performance, stock option,
stock appreciation, phantom stock, stock purchase, restricted stock, medical,
hospitalization, vision, dental or other health, life, disability, severance,
termination or other employee benefit or compensation plan, program,
arrangement, agreement or policy (including, without limitation, each ERISA
Plan) (collectively, "Plans") (i) to which any Company contributes or is or has
-----
been obligated to contribute or is or has been a party or is or has been bound
or under which any Company may have any liability and (ii) under which employees
or former employees of any Company (or their respective beneficiaries or
dependents) are eligible to participate or receive benefits or to continue to
accrue a benefit (each, an "Employee Benefit Plan"). No Company has any
---------------------
liability or obligation, contingent or otherwise, under any Plan that is not an
Employee Benefit Plan. Each Employee Benefit Plan complies in all material
respects, and has been operated and administered in all material respects in
accordance with, all applicable requirements of all laws and regulations of any
public body or authority, including, but not limited to, ERISA, the Code and
applicable laws of foreign jurisdictions, and no (i) "reportable event", (ii) to
the Knowledge of the Sellers, "prohibited transaction" (as such terms are
defined in ERISA and the Code, as applicable) or (iii) termination has occurred
with respect to any Employee Benefit Plan. Except as set forth on Schedule
--------
5.23(a), each Employee Benefit Plan intended to qualify under section 401(a) of
-------
the Code has received an applicable current ruling or determination letter
concluding that such Employee Benefit Plan so qualifies, and no event has
occurred, amendment been adopted or action has been taken that would cause such
Employee Benefit Plan to lose its qualified status.
(b) Sellers have delivered or made available to Purchaser complete and
correct copies of each Employee Benefit Plan and any amendments thereto and any
related trust agreement, funding agreement and insurance contract relating
thereto and, if applicable (a) the most recent actuarial valuation report, (b)
the Form 5500 or 5500-C and Schedules A and B thereto or equivalent documents
required to be filed in foreign jurisdictions for the most recently completed
two plan years, (c) the summary plan description currently in effect for each
Employee Benefit Plan and all material modifications thereto, (d) the last
financial statements for each Employee Benefit Plan and its related trust, if
any, and (e) if applicable, the most recent determination letter (or equivalent
document in a foreign jurisdiction) issued with respect to each Employee Benefit
Plan. Sellers have also furnished to Purchaser copies of all current employee
manuals, handouts, policy statements and other written materials given to
employees of the Companies generally.
(c) Except as set forth on Schedule 5.23(c), there are no actions
-------------
existing or pending (other than routine claims for benefits) or, to the
Knowledge of the Sellers, threatened, with respect to any Employee Benefit Plan.
No event has occurred in connection with which any Company could be subject to
liability, directly or indirectly, under Section 406, 409, 502(i) or 502(l) of
ERISA or Section 4975 of the Code.
-20-
(d) Schedule 5.23(d) sets forth the amount for which the Companies
----------------
would be liable pursuant to section 4062, 4063 or 4064 of ERISA (or equivalent
legislation of any foreign jurisdiction) if all Employee Benefit Plans sponsored
solely by one or more of the Companies were to terminate as of the Closing Date.
(e) All contributions required under applicable law or the terms of
any Plan to be made by any of the Companies to each Employee Benefit Plan have
been made within the time prescribed by such law or Plan. There does not exist
any accumulated funding deficiency within the meaning of either section 412 of
the Code or section 302 of ERISA as to any Employee Benefit Plan, nor would
there exist any such deficiency but for the application of an alternative
minimum funding standard. There has not been issued any waiver of the minimum
funding standards imposed by the Code with respect to any such Employee Benefit
Plan.
(f) No Employee Benefit Plan is a multiple employer plan described in
section 4063 or 4064 of ERISA, and except as set forth on Schedule 5.23(f): (a)
----------------
no Employee Benefit Plan is a "multiemployer plan" within the meaning of section
4001(a)(3) of ERISA or other applicable employee benefit legislation; (b) no
Company has either primary or secondary liability under the provisions of
Section 4204 of ERISA or any agreement entered into in accordance with the
provisions of that Section; and (c) no Company has (i) engaged in any
transaction that could result in the imposition of any liability pursuant to
Section 4069 or 4212 of ERISA or (ii) incurred any material liability under or
pursuant to Title I (other than liability for funding or paying benefits under
one or more Employee Benefit Plans) or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, and no event or
condition has occurred or exists with respect to any Company which could result
in the imposition of any material liability with respect to any Company,
Purchaser or any of Purchaser's Subsidiaries under or pursuant to Title I (other
than liability for funding or paying benefits under one or more Employee Benefit
Plans) or IV of ERISA or such penalty or excise tax provisions of the Code.
(g) Except for payments to be made to the Holding Company's senior
management pursuant to the Holding Company's Long Term Incentive Plan, the
consummation of the transactions contemplated by this Agreement will not result
in an increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any benefits payable to or in respect of any
employee or former employee of any Company or the beneficiary or dependent of
any such employee or former employee.
(h) Neither any employee or former employee of any Company nor any
beneficiary or dependent of any such employee or former employee is or may
become entitled to post-employment benefits of any kind by reason of their
employment with such Company, including, without limitation, death or medical
benefits (whether or not insured), other than (a) coverage mandated by section
4980B of the Code or (b) retirement benefits payable under an Employee Benefit
Plan intended to qualify under Section 401(a) of the Code or under any other
funded Employee Benefit Plan which is maintained pursuant to the laws of a
foreign jurisdiction and under which assets are sufficient to satisfy all
liabilities accrued thereunder as of the Closing
-21-
Date. Schedule 5.23(h) sets forth the aggregate liability of the Companies,
----------------
which has been estimated by the Companies' actuary on a present value basis as
at December 31, 2000 using the assumptions, including trends affecting future
medical care costs and interest rates, identified in Schedule 5.23(h), for post-
----------------
retirement health and life insurance benefits to be provided to Business
Employees and their dependents and beneficiaries, along with the components of
the projected annual costs for such benefits used in such calculation. To the
Knowledge of the Sellers, there is no factor which would cause the projected
annual costs used in the calculation of such present value to be inaccurate in
any material respect.
(i) Except for liabilities under the Employee Benefit Plans, no Company has
or could incur any liability arising out of events or circumstances in existence
on or prior to the Closing Date under any Plan in existence on or prior to the
Closing Date.
5.24 Section Litigation and Regulatory Investigations. Except as set forth on
----------------------------------------
Schedule 5.24, there are no pending or, to the Knowledge of the Sellers,
-------------
threatened litigation or regulatory proceedings by or against any of the
Companies, except for lawsuits or claims arising under insurance policies issued
by FSIC or TSLIC which (i) do not allege or seek damages in excess of the policy
limits or exemplary or punitive damages and (ii) are not brought or purported to
be brought on behalf of a class of persons. Except as set forth on Schedule
--------
5.24, there is no pending or, to the Knowledge of the Sellers, threatened
----
action, proceeding, investigation, order, consent, decree or agreement with
regulatory authorities with respect to any of the Companies or any of Sellers
which questions the validity of this Agreement or could prevent or materially
adversely affect any action taken or to be taken by any Company or any Seller
pursuant hereto or which might result in any revocation, suspension or
limitation of any regulatory authority of any License or constitute an Adverse
Effect.
5.25 Section Governmental Consents. No consent, approval or authorization of,
---------------------
notice to, or declaration, filing or registration with, any governmental or
regulatory authority, domestic or foreign, is required of any Seller or any
Company in connection with the execution, delivery and performance of this
Agreement by Sellers or the consummation by them of the transactions
contemplated hereby other than those set forth on Schedule 5.25.
-------------
5.26 Section Other Consents. No consent, approval or authorization of, or
--------------
notice to, any other Person, not including those set forth on Schedule 5.25, is
-------------
required of any Seller or any Company, including, without limitation, parties to
loans, Material Contracts, Material Leases or reinsurance agreements, is
required in connection with the execution, delivery and performance of this
Agreement by Sellers or the consummation by them of the transactions
contemplated hereby other than those set forth on Schedule 5.26.
-------------
5.27 Section Guarantees. Except as set forth on Schedule 5.27, none of the
---------- -------------
Companies is a guarantor or indemnitor for any liability (including
indebtedness) of an Affiliate or any other Person.
-22-
5.28 Section Producers for the Company.
-------------------------
(a) Schedule 5.28(a) (which shall only be delivered at Closing)
---------------
contains a complete and accurate list of all material agents, brokers, other
persons or entities ("Continuing Agents") that currently produce insurance
-----------------
business for the Companies as of the Closing Date. Except as set forth on
Schedule 5.28(a), none of the Companies has received any written or, to the
---------------
Knowledge of the Sellers, oral notification from any Continuing Agents
threatening litigation or termination of their agency agreements or otherwise
indicating that such Agents are likely to cease to do business with the
Companies in the same manner as such business has been conducted historically,
whether as a result of the transactions contemplated by this Agreement or
otherwise.
(b) Schedule 5.28(b) (which shall only be delivered at Closing)
----------------
contains a complete and accurate list of all material agreements (whether oral
or written) ("Agent Contracts") between any of the Companies and any Continuing
---------------
Agents or former agents (to the extent that any compensation may be owing by any
Company to any such former agent after the Closing Date) with respect to the
payment of compensation by the Companies to its Continuing Agents or former
agents in existence on the Closing Date.
(c) Except as set forth on Schedule 5.28(c), or as would not cause an
---------------
Adverse Effect on the basis of an individual contract or agreement, none of the
Companies is in default with respect to any such contract or other agreement,
and no such contract or other agreement contains any provision providing that
the other party thereto may terminate the same by reason of the transactions
contemplated by this Agreement or any other provision which would be altered or
otherwise become applicable by reason of such transactions.
-23-
5.29 Section Taxes. Except as set forth on Schedule 5.29 hereto:
----- -------------
(a) All material federal, state, county, local and foreign taxes,
including, without limitation, income, gross receipts, corporate franchise,
stamp, transfer, sales and use, license, severance, excise, employment
(including unemployment compensation contributions) withholding, ad valorem or
similar taxes, special charges or levies, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties ("Taxes") (including, without limitation, any Taxes imposed on a
-----
combined or unitary basis with respect to a group of corporations that includes
or included any of the Companies) due and payable by each of the Companies on or
before the date hereof have been paid or provided for, and each of the Companies
has filed all tax returns and reports required to be filed by such Companies
with all applicable taxing authorities ("Tax Returns"). The provisions for Taxes
-----------
included in the audited Financial Statements represent adequate provision for
the payment of all accrued and unpaid Taxes of the Companies for the period
prior to the Balance Sheet Date. Each of the Companies has paid (or has made
provision for the payment of) all Taxes that could form a charge or encumbrance
on such Company or its assets or that could become payable by Purchaser as a
result of or in connection with any event relating to such Company occurring
before the Balance Sheet Date. None of the Companies has outstanding or
unsatisfied deficiency assessments with respect to any Taxes, and there are no
current audits or investigations by or disputes with any authority with respect
to any Taxes that may affect the Company or form a lien or charge on any of its
assets. Neither Sellers nor the any of the Companies has received notice that an
examination of or proceeding concerning any Tax Return of the Company is pending
or threatened.
(b) Sellers have delivered to Purchaser copies of all corporate income Tax
Returns filed by each of the Holding Company and the Holding Subsidiaries for
each of the 1999 and 1998 fiscal years.
5.30 Section Improper Payments. Since the commencement of their operations:
-----------------
(a) no funds or assets of any of the Companies have been used by the
Companies for any illegal purpose; and
(b) no unrecorded fund or asset of any of the Companies has been
established by the Companies, and no payment has been made by the
Companies, for any illegal purpose.
Section 5.31 Full Disclosure. The representations and warranties of
---------------
such Seller in this Agreement and in the Exhibits and Schedules hereto are true,
complete and correct, and no such representation or warranty contains any untrue
statement of fact or omits to state any fact necessary to make the statements
made not misleading.
-24-
6 ARTICLE
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each of Purchaser and Vesta Fire severally as to itself only, and not
jointly and severally, hereby represents and warrants to each Seller as of the
date hereof and as of the Closing Date that:
6.1 Section Corporate Organization. Purchaser is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and Vesta Fire is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois. Each of Purchaser and
Vesta Fire has all requisite corporate power and authority to own or hold under
lease its property and to carry on its business as now conducted.
6.2 Section Authorization. Each of Purchaser and Vesta Fire has full
-------------
corporate power and authority to enter into this Agreement, consummate the
transactions contemplated hereby and perform its obligations hereunder. Each of
Purchaser and Vesta Fire has taken all action required by law, its Articles of
Incorporation and By-Laws or otherwise to authorize the execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby and
the performance of its obligations hereunder, and no further approvals are
required from any other person holding a beneficial interest in Purchaser or
Vesta Fire, as the case may be. This Agreement has been duly and validly
executed and delivered by each of Purchaser and Vesta Fire and constitutes the
valid and binding agreement of Purchaser and Vesta Fire, enforceable in
accordance with its terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and remedies generally. Except for (i) the consents set forth
on Schedules 6.5 and 6.6 hereof and (ii) compliance with the HSR Act (the
---------------------
referred to in clauses (i) and (ii) are referred to herein as the "Purchaser's
-----------
Consents"), no authorization or approval from any Governmental Body or any other
--------
Person is necessary for Purchaser's or Vesta Fire's due execution and delivery
of this Agreement or its performance hereunder.
6.3 Section No Violation. Except as may result from Purchaser's inability to
------------
obtain Purchaser's Consents, neither the execution and delivery of this
Agreement by Purchaser or Vesta Fire nor the consummation of the transactions
contemplated hereby (including, without limitation, the issuance of the Notes,
if necessary) will: (a) conflict with or violate any provision of the Articles
of Organization or By-Laws of Purchaser or Vesta Fire; (b) violate, conflict
with, constitute a default (or an event which, with or without notice, lapse of
time or both, or the occurrence of any other event, would constitute a default)
under, result in the termination of, accelerate the performance required by,
cause the acceleration of the maturity of any debt or obligation pursuant to any
agreement or commitment to which Purchaser or Vesta Fire or any of Purchaser's
Subsidiaries is a party or by which Purchaser or Vesta Fire or any of
Purchaser's
-25-
Subsidiaries is bound (including, without limitation, the Credit Agreements), or
to which the property of Purchaser or Vesta Fire or any of Purchaser's
Subsidiaries is subject, or result in the creation or imposition of any security
interest, lien or other encumbrance upon any assets of Purchaser or Vesta Fire
or any of Purchaser's Subsidiaries; (c) violate federal, state or local law or
any judgment, decree, order, regulation or rule of any court or governmental
authority; (d) result in a breach of the terms or conditions, or constitute a
default under or cause an impairment of any License of Purchaser or Vesta Fire
or any of Purchaser's Subsidiaries; or (e) give a Person the right to terminate,
cancel or accelerate any material contract of Purchaser or Vesta Fire or any of
Purchaser's Subsidiaries.
6.4 Section Litigation and Regulatory Investigations. Except as set forth on
----------------------------------------
Schedule 6.4, there is no pending or, to the Knowledge of Purchaser, threatened
------------
action, proceeding, investigation, order, consent, decree or agreement with
regulatory authorities with respect to any of the Vesta Companies which
questions the validity of this Agreement or could prevent or materially
adversely affect any action taken or to be taken by any Vesta Company pursuant
hereto.
6.5 Section Governmental Consents. No consent, approval or authorization of,
---------------------
notice to, or declaration, filing or registration with, any governmental or
regulatory authority, domestic or foreign, is required of any Vesta Company in
connection with the execution, delivery and performance of this Agreement by
Purchaser and Vesta Fire or the consummation by Purchaser and Vesta Fire of the
transactions contemplated hereby other than those set forth on Schedule 6.5.
------------
6.6 Section Other Consents. No consent, approval or authorization of, or
--------------
notice to, any other Person, not including those set forth on Schedule 6.5, is
------------
required of any Vesta Company, including, without limitation, parties to loans,
contracts, leases or other agreements, is required in connection with the
execution, delivery and performance of this Agreement by Purchaser and Vesta
Fire or the consummation by Purchaser and Vesta Fire of the transactions
contemplated hereby other than those set forth on Schedule 6.6.
-------------
6.7 Section Securities Act Representations. If Purchaser purchases the
------------------------------
Stock:
(a) Except as expressly contemplated hereby, Purchaser is acquiring the
Stock for investment for its own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the Securities Act. Except as expressly contemplated hereby, Purchaser does not
have any present intention of selling, granting any participation in, or
otherwise distributing the Stock it is acquiring otherwise than pursuant to an
effective registration statement under the Securities Act or in a transaction
exempt from the registration requirements under the Securities Act and
applicable state securities laws. Except as expressly contemplated hereby,
Purchaser has no contract, undertaking, agreement or arrangement with any Person
to sell, transfer or grant participations to such Person or to any third Person,
with respect to any of the Stock it is purchasing.
-26-
(b) Purchaser acknowledges that the issuance of the Stock will not be
registered under the Securities Act or any state securities laws on the basis of
a claimed exemption by Sellers that the issuance of the Stock as provided for
herein is exempt from registration under the Securities Act and applicable state
securities laws. Purchaser acknowledges that the availability of such exemption
is predicated in part on Purchaser's representations set forth in this Section
6.7 and that Sellers are relying on such representations.
(c) Purchaser has received all the information it considers necessary or
appropriate for deciding whether to accept the Stock it is acquiring. Purchaser
has had an opportunity to ask questions of and to receive answers from Sellers
and the Companies regarding the terms and conditions of the issuance of the
Stock it is acquiring and the business, properties, financial condition and
prospects of the Companies and to obtain additional information (to the extent
Sellers or the Companies possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to Purchaser or to which Purchaser had access.
(d) Purchaser acknowledges that it is able to bear the economic risk of
the investment in the Stock it is acquiring, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the benefits and risks of the investment in the Stock it is purchasing.
(e) Purchaser is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
(f) Purchaser acknowledges that the Stock it is purchasing may not be
sold, transferred or otherwise disposed of without registration under the
Securities Act or an applicable exemption therefrom and that in the absence of
any effective registration statement covering such Stock or an available
exemption from registration under the Securities Act, such Stock must be held
indefinitely. Purchaser further acknowledges that the Stock it is acquiring may
not be sold pursuant to Rule 144 promulgated under the Securities Act unless all
of the conditions of that rule are met.
(g) Purchaser acknowledges that each certificate representing any of the
Stock it is acquiring will be endorsed with a legend substantially similar to
the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
-27-
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii)
ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
6.8 Section Securities Act Representations. If Vesta Fire purchases the
------------------------------
Stock:
(a) Except as expressly contemplated hereby, Vesta Fire is acquiring the
Stock for investment for its own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the Securities Act. Except as expressly contemplated hereby, Vesta Fire does not
have any present intention of selling, granting any participation in, or
otherwise distributing the Stock it is acquiring otherwise than pursuant to an
effective registration statement under the Securities Act or in a transaction
exempt from the registration requirements under the Securities Act and
applicable state securities laws. Except as expressly contemplated hereby, Vesta
Fire has no contract, undertaking, agreement or arrangement with any Person to
sell, transfer or grant participations to such Person or to any third Person,
with respect to any of the Stock it is purchasing.
(b) Vesta Fire acknowledges that the issuance of the Stock will not be
registered under the Securities Act or any state securities laws on the basis of
a claimed exemption by Sellers that the issuance of the Stock as provided for
herein is exempt from registration under the Securities Act and applicable state
securities laws. Vesta Fire acknowledges that the availability of such exemption
is predicated in part on Vesta Fire's representations set forth in this Section
6.7 and that Sellers are relying on such representations.
(c) Vesta Fire has received all the information it considers necessary or
appropriate for deciding whether to accept the Stock it is acquiring. Vesta Fire
has had an opportunity to ask questions of and to receive answers from Sellers
and the Companies regarding the terms and conditions of the issuance of the
Stock it is acquiring and the business, properties, financial condition and
prospects of the Companies and to obtain additional information (to the extent
Sellers or the Companies possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to Vesta Fire or to which Vesta Fire had access.
(d) Vesta Fire acknowledges that it is able to bear the economic risk of
the investment in the Stock it is acquiring, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the benefits and risks of the investment in the Stock it is purchasing.
(e) Vesta Fire is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
-28-
(f) Vesta Fire acknowledges that the Stock it is purchasing may not be
sold, transferred or otherwise disposed of without registration under the
Securities Act or an applicable exemption therefrom and that in the absence of
any effective registration statement covering such Stock or an available
exemption from registration under the Securities Act, such Stock must be held
indefinitely. Vesta Fire further acknowledges that the Stock it is acquiring may
not be sold pursuant to Rule 144 promulgated under the Securities Act unless all
of the conditions of that rule are met.
(g) Vesta Fire acknowledges that each certificate representing any of the
Stock it is acquiring will be endorsed with a legend substantially similar to
the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii)
ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
6.9 Section Full Disclosure. The representations and warranties of Purchaser
---------------
and Vesta Fire in this Agreement and in the Exhibits and Schedules hereto are
true, complete and correct, and no such representation or warranty contains any
untrue statement of fact or omits to state any fact necessary to make the
statements made not misleading.
7 ARTICLE
CERTAIN COVENANTS OF SELLERS
Sellers hereby covenant to and agree with Purchaser as follows:
7.1 Section Cooperation. From the date of this Agreement through the Closing
-----------
Date (or the termination of this Agreement), Sellers shall use best efforts in
good faith to satisfy or cause the satisfaction of the conditions specified in
Article XI hereof and to assist Purchaser in carrying out the transactions
contemplated by this Agreement.
-29-
7.2 Section Operations Pending Closing.
--------------------------
(a) Except (i) as set forth on Schedule 7.2(a) or (ii) as otherwise
---------------
expressly provided in or contemplated by this Agreement, from the date of this
Agreement through the Closing Date (or the termination of this Agreement),
Sellers agree that none of the Companies shall, without the consent of
Purchaser:
(i) amend its Articles of Incorporation (as applicable), By-laws or
other comparable charter or organizational documents;
(ii) except for the issuance of Class B non-voting common stock by the
Holding Company upon Centre's exercise of the Class B Warrant pursuant to
Section 9.5 hereof, issue, sell or purchase, or enter into any contract
or other agreement to issue, sell or purchase, any share of its capital
stock, any options or rights to subscribe for any share of its capital
stock or any bonds, notes, debentures or other evidences of indebtedness;
(iii) incur any indebtedness for borrowed money, or incur or assume any
other liability outside of the ordinary course of business in excess of
$25,000 in each instance or $50,000 in the aggregate;
(iv) declare or pay any dividend or declare or make any other
distributions to Sellers of any kind;
(v) make any material change in its accounting methods or practices or
make any change in depreciation or amortization policies, except as
required by law, GAAP or statutory accounting principles;
(vi) enter into any employment agreements with, increase the rate of
compensation of, or pay or agree to pay any bonus to any of its
directors, officers or employees;
(vii) implement any new employee benefit plan or modify any arrangement
now in effect;
(viii) amend any existing employee benefit plan or arrangement, except
as required by law;
(ix) except for the renewal or replacement by any Company of its
catastrophe reinsurance agreements on terms substantially similar to
those in the predecessor agreements, enter into, amend in any material
respect or terminate any Material Contract;
(x) make any material change in the nature of its business or
operations; or
-30-
(xi) make or commit to make any capital expenditure outside of the
ordinary course of business in excess of $25,000 in the aggregate or as
may otherwise be reasonably required for the continued efficient
operation of the business of the Company.
(b) Unless Purchaser consents in writing to the contrary, Sellers
covenant and agree that, from the date of this Agreement through the Closing
Date (or the termination of this Agreement), they shall use their respective
commercially reasonable efforts to not take any action which would be reasonably
expected to cause, and actually causes, any of the representations and
warranties of Sellers made under Article V of this Agreement to be materially
untrue, inaccurate or incorrect.
7.3 Section Approvals and Consents. From and after the date of this
----------------------
Agreement through the Closing Date (or the termination of this Agreement),
Sellers shall use their best efforts to obtain Sellers' Consents. Sellers shall
also provide Purchaser with such information and assistance as Purchaser may
reasonably request.
7.4 Section Access to Records. From and after the date of this Agreement
-----------------
through the Closing Date (or the termination of this Agreement), Sellers shall
provide and shall cause each of the Companies to provide Purchaser and its
representatives, counsel, accountants, agents and employees reasonable access
(including the right to make copies during regular business hours), to all
books, files, records and documents relating to each of the Companies, except
for the information to be provided under Sections 5.28(a) and (b), which shall
be provided by Sellers at Closing.
7.5 Section Notification of Changes. From the date of this Agreement through
-----------------------
the Closing Date (or the termination of this Agreement), Sellers shall promptly
notify Purchaser of any occurrence or state of facts that shall have come to
Sellers' attention that would render any of the representations and warranties
contained in Article V of this Agreement materially untrue, materially
incomplete or materially incorrect as of the Closing Date.
7.6 Section Filing of Financial Statements. From the date of this Agreement
------------------------------
through the Closing Date (or the termination of this Agreement), Sellers shall
cause FSIC and TSLIC to file all Statutory Financial Statements with the
Commissioners in a timely manner and to provide copies of such Statutory
Financial Statements to Purchaser within five (5) business days after filing.
7.7 Section Continuing Agents. From the date of this Agreement through the
-----------------
Closing Date (or the termination of this Agreement), Sellers shall not take any
action that would cause the the Continuing Agents to terminate their
relationships with any Company. Purchaser acknowledges and agrees that after the
Public Announcement, Sellers shall have no liability under this Section 7.7 for
the termination by any Continuing Agent of its relationship with any Company;
provided, that no Seller caused such termination.
--------
-31-
7.8 Section Litigation. From the date of this Agreement through the Closing
----------
Date (or the termination of this Agreement), Sellers shall, promptly following
the receipt of notice thereof by Sellers or any of the Companies, notify
Purchaser of any action or proceeding of the type required to be disclosed
pursuant to Section 5.24 hereof that is commenced or, to the Knowledge of the
Sellers, threatened against (i) any of the Companies or (ii) against any
officer, director or employee of any of the Companies with respect to the
affairs of any of the Companies.
7.9 Section Maintenance of Books. From the date of this Agreement through
--------------------
the Closing Date (or the termination of this Agreement), Sellers shall cause the
books and records of each of the Companies to be maintained in the usual,
regular and ordinary course of business on a basis generally consistent with
past business practices.
7.10 Section Solicitation Restriction.
------------------------
(a) Until the Closing or earlier termination of this Agreement, neither
Sellers nor any of the Companies, nor any of their respective officers,
employees, representatives, agents or other persons controlled by them, shall
directly or indirectly encourage, assist, solicit or initiate discussions or
negotiations with, or provide any information to any Person (other than
Purchaser) concerning the acquisition of any equity interest in any of the
Companies, whether contingent or actual, or in any merger, consolidation,
liquidation, dissolution, disposition of assets, or like transaction involving
any of the Companies after the date hereof.
(b) In the event any of the Companies shall receive any such written
offer or proposal, directly or indirectly, or any request for disclosure or
access pursuant to clause (a) above, Sellers shall immediately inform Purchaser
as to all material facts relating to any such offer or proposal (including the
identity of the party making such offer or proposal and the specific terms
thereof) and will cooperate with Purchaser by furnishing any information it may
reasonably request.
7.11 Section Xxxx-Xxxxx-Xxxxxx. To the extent applicable, each Seller
-----------------
severally, and not jointly and severally, shall make or cause to be made all
filings and furnish all information required to be provided by such Seller with
respect to the transactions contemplated by this Agreement by the HSR Act;
provided, however, that Sellers shall not be required to agree to pay any filing
-------- -------
fees payable in connection with such filings (such filing fees shall be paid by
Purchaser as set forth in Section 8.7). Sellers agree to (i) promptly respond to
any inquiry or request for further information from any Governmental Body, (ii)
promptly inform Purchaser on the status of any filings made by Sellers, (iii)
keep Purchaser informed as to the status of any filings required of Sellers
hereunder, and (iv) pre-clear with Purchaser any material information given
about Purchaser to any Governmental Body.
7.12 Section Investments. For the period from the date of this Agreement
-----------
through the Closing Date (or the termination of this Agreement), the Companies
will invest funds only in (i) United States Government Treasury Bills with
maturities of six months or less, (ii) securities rated category I or II by the
NAIC's SVO, or (iii) institutional liquid assets (e.g., money market
-32-
funds and bank certificates of deposit having maturities of six months or less).
Nothing in this Section 7.12 shall require the Companies to liquidate any
existing investment.
7.13 Section Covenant Not to Compete. In order to further ensure that
-----------------------
Purchaser receives the expected benefits of acquiring the Stock, each Seller
hereby severally (but not jointly) agrees that, throughout the period that
commences on the Closing Date and ends on the second anniversary of the Closing
Date, except for the covenants and restrictions contained in Section 7.13(e)
hereof which shall last indefinitely, (with such period that ends on such second
anniversary being referred to herein as the "Non-Compete Period"), such Seller
------------------
will not at any time directly or indirectly (through any Person in which Seller
has a controlling interest):
(a) Own, acquire or hold any controlling interest in or operate (x) any
Person (a "Residential Homeowners Person") that provides any primary
-----------------------------
residential homeowners insurance on properties located in the States of
Florida or Texas where the gross written premium from the residential
homeowners insurance business of such Person related to properties in
either of those two states exceeds the greater of (A) $10,000,000 or (B)
10% of the gross written premium of such Person, or (y) any Person that
owns, acquires or holds a controlling interest in or operates any
Residential Homeowners Person; provided, however, that nothing in this
-------- -------
Section 7.13(a) shall prohibit:
(i) such Seller from, directly or indirectly, owning (A) an
undivided share of not more than 30% of any investment fund which
owns any such Residential Homeowners Person; provided, that the
--------
percentage of such fund owned by all Sellers, in the aggregate,
does not exceed 45%; provided further that such Seller shall not
--------
have the power to exercise any voting rights with respect to such
Residential Homeowners Person, appoint any officers or directors
of such Residential Homeowners Person or otherwise influence or
control the operations or policies of such Residential Homeowners
Person, or (B) not more than 15% of the outstanding shares of any
class of stock of a corporation if such class of stock is
regularly traded on a recognized national securities exchange;
(ii) such Seller maintaining existing relationships with any
Person, including, without limitation, Centre providing insurance
capacity to and reinsuring ZC Sterling Holdings, Inc.; or
(iii) Mynd and its Affiliates from (A) licensing software to,
consulting with, providing outsourcing services to, or providing
information technology services (including, without limitation,
facilities management services) to, any Person, including without
limitation any Residential Homeowners Person and the Florida
Residential Joint Underwriters Association and its successor in
interests; or (B) owning any interest in Online! Financial
Solutions, Inc., or any other e-business entity or insurance
portal, or any other Person that markets or sells as a retail
insurance agent, but does not act as a general insurance agent,
program manager
-33-
or insurance company or actually underwrite and insure, any
residential homeowners insurance in the States of Florida or
Texas.
(b) Knowingly solicit, request, advise or induce any policy holder,
agent, supplier or other business contact of any of the Companies to
cancel, curtail or otherwise adversely change its relationship with any of
the Companies insofar as such policy holder, agent, supplier or other
business contact relates to or supports any Residential Homeowners Person;
(c) Knowingly (i) employ or attempt to employ any person who is now or
later becomes an officer or employee of, or who is now or later provides
employment services to, any of the Companies or (ii) otherwise interfere
with or disrupt any employment relationship or employment services
(contractual or other) of any of the Companies; provided, however, that it
-------- -------
shall not be deemed to be a violation of this Section 7.13(c) if (A) such
Seller employs or attempts to employ a person who (after such employment
or attempt) subsequently becomes a director, officer or employee of, or
provides employment services to, any Company or Purchaser; or (B) such
person has not served as a director, officer or employee of, and has not
provided employment services to, any Company or Purchaser within the six-
month period immediately prior to such Seller's employment of or attempt
to employ such person.
(d) Criticize or disparage in any manner or by any means (whether written
or oral, express or implied) any of the Companies' or any aspect of any of
the Companies' management, policies, operations, products, services,
practices or personnel; or
(e) Use any name that includes:
(i) the word combination "Florida Select," "Texas Select" or any
confusingly similar combination or variation thereof in any
geographical area; or
(ii) the word "Select" (except for a use that is not related to
the sale of residential homeowners insurance on properties
located in the States of Florida or Texas).
7.14 Section Non-Disclosure. Each Seller hereby severally (but not jointly)
--------------
acknowledges and agrees that all non-public information and data of any of the
Companies, including without limitation that related to product and service
formation, underwriting and rating methods, reserving practices, customers,
pricing, sales and financial results (collectively, "Trade Secrets"), are of
-------------
substantial value to each of the Companies, provide them with a substantial
competitive advantage in their business and will be maintained by Sellers in the
strictest confidence as trade secrets. Except as (but only to the extent)
required by law, legal process or regulatory authority or as (but only to the
extent) otherwise approved in advance by Purchaser in writing, such Seller will
not at any time divulge, furnish or make accessible to anyone (other than any
affiliates of Purchaser or any of their respective directors or officers) any
Trade Secrets. Any Trade Secrets
-34-
that are disclosed to the public after the date hereof by Purchaser or any of
its directors, officers, employees, agents or representatives, shall no longer
be deemed to be Trade Secrets for purposes of this Section 7.14.
7.15 Section Certain Remedies. Each Seller hereby specifically acknowledges
----------------
and agrees that (a) each provision of Sections 7.13, 7.14 and 7.15 hereof is
reasonable and necessary to ensure that Purchaser receives the expected benefits
of acquiring the Stock, (b) Purchaser has refused to enter into this Agreement
in the absence of each provision of Sections 7.13, 7.14 and 7.15 hereof, and (c)
violation of any provision of Sections 7.13 or 7.14 hereof will harm Purchaser
to such an extent that monetary damages alone would be an inadequate remedy.
Therefore, in the event of any violation by such Seller of any provision of
Sections 7.13 or 7.14 hereof, (i) Purchaser (in addition to all other remedies
Purchaser may have) shall be entitled to seek a temporary restraining order,
injunction and other equitable relief restraining such Seller from committing or
continuing such violation and (ii) in the case of any violation of Section
7.13(a), (b), (c) or (d) hereof, the duration of the Non-Compete Period shall be
extended beyond its then-scheduled termination date for a period equal to the
duration of the violation with respect to such Seller; provided, however, that
-------- -------
Purchaser shall only be permitted to seek remedies for the violation of any
provision of Sections 7.13 or 7.14 hereof against such Seller that is in breach
of such provision (and not against all Sellers jointly and severally). If any
provision or application of Sections 7.13, 7.14 or 7.15 is held unlawful or
unenforceable in any respect, Sections 7.13, 7.14 or 7.15 shall be revised or
applied in a manner that renders it lawful and enforceable to the fullest extent
possible.
7.16 Section Further Assurance. Subject to the terms and conditions hereof,
-----------------
each of Sellers agree to use its best efforts to take, or cause to be taken, all
actions and to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as possible. If at
any time after Closing further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers, directors and trustees of each
of Sellers shall take all such necessary action.
8 ARTICLE
CERTAIN COVENANTS OF PURCHASER AND VESTA FIRE
Purchaser hereby covenants to and agrees with each Seller as follows:
8.1 Section Cooperation. From the date of this Agreement through the Closing
-----------
Date (or the termination of this Agreement), Purchaser shall use best efforts in
good faith to satisfy or cause the satisfaction of the conditions specified in
Article XII hereof and to assist Sellers in carrying out the transactions
contemplated by this Agreement.
-35-
8.2 Section Operations Pending Closing. Unless Sellers consent in writing to
--------------------------
the contrary, each of Purchaser and Vesta Fire covenants and agrees that, from
the date of this Agreement through the Closing Date (or the termination of this
Agreement), it shall use its commercially reasonable efforts to not take any
action which would be reasonably expected to cause, and actually causes, any of
the representations and warranties of Purchaser and Vesta Fire made under
Article VI of this Agreement to be materially untrue, inaccurate or incorrect.
8.3 Section Approvals and Consents. From and after the date of this Agreement
----------------------
through the Closing Date (or the termination of this Agreement), Purchaser shall
use its best efforts to obtain Purchaser's Consents. Purchaser shall also
provide Sellers with such assistance and information as Sellers reasonably may
request.
8.4 Section Notification of Changes. From the date of this Agreement through
-----------------------
the Closing Date (or the termination of this Agreement), Purchaser shall
promptly notify Sellers of any occurrence or state of facts that may come to
Purchaser's attention at any time prior to the Closing that would render any of
the representations and warranties contained in Article VI of this Agreement
materially untrue, materially incomplete or materially incorrect as of the
Closing Date.
8.5 Section Litigation. From the date of this Agreement through the Closing
----------
Date (or the termination of this Agreement), Purchaser shall, promptly following
the receipt of notice thereof by Purchaser or any of its Subsidiaries, notify
Sellers of any action or proceeding of the type required to be disclosed
pursuant to Section 6.4 hereof that is commenced or, to the Knowledge of the
Purchaser, threatened against (i) any of the Vesta Companies or (ii) against any
officer, director or employee of any of the Vesta Companies with respect to the
affairs of any of the Vesta Companies.
8.6 Section Confidentiality Regarding Records of the Companies. Purchaser
--------------------------------------------------
shall maintain (and shall cause its Affiliates, directors, officers and
representatives to maintain) the confidentiality of all books, records, files,
documents and information it has been provided access prior to the date hereof
and to which it is provided access hereafter, whether pursuant to Section 7.4
hereof or any other provision of this Agreement or otherwise, until after the
occurrence of the Closing, and Purchaser shall not use any such books, records,
files and documents other than for the purposes contemplated herein. If the
Closing does not occur as contemplated by this Agreement, Purchaser shall return
all original books, records, files, documents and information of the Companies
to the Companies and shall destroy all copies thereof in its possession.
Purchaser acknowledges and agrees that the Trade Secrets are of substantial
value to each of the Companies, provide each of the Companies with a substantial
competitive advantage in their business and will be maintained by Purchaser in
the strictest confidence as trade secrets. Until after the occurrence of the
Closing, except as (but only to the extent) required by law, legal process or
regulatory authority or as (but only to the extent) otherwise approved in
advance by each Seller in writing, Purchaser will not at any time divulge,
furnish or make accessible to anyone (other than Sellers, any Affiliates of
Purchaser or any of
-36-
their respective directors or officers) any Trade Secrets. Any Trade Secrets
that are disclosed to the public after the date hereof by any Seller or any of
their directors, officers, employees, agents or representatives, shall no longer
be deemed to be Trade Secrets for purposes of this Section 8.6.
8.7 Section Xxxx-Xxxxx-Xxxxxx and State Insurance Department Filings. To the
--------------------------------------------------------
extent applicable, Purchaser shall make or cause to be made all filings and
furnish all information required with respect to the transactions contemplated
by this Agreement by the HSR Act and shall use its best efforts to obtain the
early termination of the waiting period thereunder; provided, however, that
-------- -------
Purchaser shall not be required to agree to dispose of or hold separate any
portion of its business or assets. Purchaser shall pay any filing fee(s) payable
in connection with each Seller's and/or Purchaser's filings pursuant to HSR Act.
Purchaser shall promptly prepare and file all documents required to be filed by
Purchaser with the Departments of Insurance (or similar Governmental Body) of
the States of Florida, Texas, or South Carolina or any other state (as
applicable) to consummate the transactions contemplated hereby within three
weeks following the date hereof. Purchaser agrees to (i) promptly respond to any
inquiry or request for further information from any Governmental Body, (ii)
promptly inform Sellers on the status of any filings made by Purchaser, (iii)
keep Sellers informed as to the status of any filings required of Purchaser
hereunder, and (iv) pre-clear with Sellers any material information given about
any Seller to any Governmental Body.
8.8 Section Further Assurance. Subject to the terms and conditions hereof,
-----------------
Purchaser agrees to use its best efforts to take, or cause to be taken, all
actions and to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as possible. If at
any time after Closing further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of Purchaser shall
take all such necessary action.
8.9 Section Form S-3. Purchaser shall prepare and file with the SEC by
--------
May 15, 2001, a registration statement on Form S-3 (the "Form S-3"). Purchaser
--------
shall use its good faith efforts to have the Form S-3 declared effective under
the Securities Act on or before Closing and to complete the sale of shares of
Purchaser's Common Stock with net proceeds to Purchaser of at least $30,000,000
pursuant to such Form S-3 (the "Offering").
--------
8.10 Section Indemnification. Purchaser will cause each Company to keep
---------------
in effect the provisions in its certificate of incorporation, articles of
organization, declarations of trust or other organizational documents and by-
laws with respect to indemnification no less favorable to the directors,
officers and other agents of such Company than those contained therein on the
date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of at least three (3) years from the Closing
Date in any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Closing Date were directors,
-37-
officers or other agents of the Company in respect of actions or omissions at or
prior to the Closing, including, without limitation, the transactions
contemplated hereby.
8.11 Section Due Diligence. Purchaser acknowledges and agrees that (i)
-------------
Sellers shall have the right to conduct a due diligence examination of
Purchaser, (ii) to conduct such examination, Sellers shall require full access
to Purchaser, the other Vesta Companies, their assets and their businesses and
(iii) Purchaser shall provide Sellers and their authorized representatives with
full access during regular business hours to all properties, facilities,
personnel, contracts, books and records of Purchaser and the other Vesta
Companies; provided, however, that any such access given to Sellers and their
-------- -------
representatives shall not exceed five (5) business days in the aggregate (the
"Due Diligence Period"). Sellers shall notify Purchaser in writing three (3)
---------------------
business days in advance when Sellers wish to conduct due diligence and shall
designate specific days which shall constitute the Due Diligence Period.
8.12 Section Acknowledgment of Adequate Consideration. If Purchaser causes
----------------------------------------
Vesta Fire to purchase the Stock and pay the Purchase Price pursuant to Articles
II and III hereof, Purchaser hereby acknowledges that the sale and transfer of
the Stock to Vesta Fire, which is a wholly-owned direct subsidiary of Purchaser,
constitutes fair and adequate consideration for Purchaser making the
representations, warranties, covenants, agreements and indemnities contained
herein and that all such representations, warranties, covenants, agreements and
indemnities shall be fully enforceable against Purchaser.
9 ARTICLE
ADDITIONAL COVENANTS AND AGREEMENTS
9.1 Section Payment of Certain Expenses. Except as otherwise explicitly
---------------------------
provided herein, whether or not the transactions contemplated by this Agreement
are consummated, each of the parties hereto shall pay its own expenses and
costs, including legal and accounting fees, incurred by it in connection with
the negotiation, execution and performance of this Agreement; provided, however,
-------- -------
that the Holding Company shall pay all transaction costs and expenses of Sellers
and the Companies, including without limitation, any payment due to Xxxxxxx,
Xxxxxxx & Co. pursuant to Section 9.3, any expenses under the Holding Company's
Long Term Incentive Plan for senior management and the legal fees of counsel to
Sellers, up to an aggregate of $1,500,000 for all such expenses (the "Holding
-------
Company Expense Payment"). For avoidance of doubt, Sellers and Purchaser
-----------------------
acknowledge and agree that the Holding Company Expense Payment shall not reduce
the Purchase Price. All transaction costs and expenses of Sellers and the
Companies in excess of $1,500,000 (the "Sellers' Expense Payment") shall be paid
------------------------
by Sellers. To the extent that any part of the Seller's Expense Payment is paid
out of the funds of any of the Companies, such amount shall be reimbursed to
such Company at Closing from the Purchase Price as part of the payment and
settlement of funds at the Closing.
-38-
9.2 Section Public Announcements. Notwithstanding Sections 2 and 5 of the
--------------------
Confidentiality Agreement, Sellers and Purchaser hereby agree that Purchaser
shall have the exclusive right to make the Public Announcement with respect to
the transactions contemplated hereby; provided, however, that in the event the
-------- -------
Public Announcement mentions the name of any Seller, Purchaser will provide a
copy of the text of any such Public Announcement to such Seller prior to the
making thereof; provided further, however, that any such Public Announcement
---------------- -------
which mentions the name of any Seller shall be subject to such Seller's prior
approval, which shall not be unreasonably withheld or delayed and which shall be
provided or reasonably denied within three (3) business days. This Section 9.2
shall not limit or prohibit any Seller from making any public disclosure
required by law if Seller provides written notice to Purchaser of any such
disclosure. Notwithstanding Sections 2 and 5 of the Confidentiality Agreement
(in the case of Purchaser) and this Section 9.2, Purchaser, any Company or any
Seller shall be permitted to communicate with any Person regarding the
transactions contemplated by this Agreement after the Public Announcement;
provided, however, that Purchaser and any Seller shall be afforded an
-------- -------
opportunity to review and approve such communication which mentions Purchaser or
such Seller, as the case may be.
9.3 Section Brokers' Fees. Except for the representation of the Companies
-------------
by Xxxxxxx, Xxxxxxx & Co., neither Purchaser nor Sellers has taken or will take
any action that would cause the other party hereto or any Company to have any
obligation or liability to any person for a finders' or brokers' fee or
commission relative to the transactions contemplated by this Agreement. Sellers
and Purchaser acknowledge and agree that the Holding Company shall pay any fee
or commission due to Xxxxxxx, Xxxxxxx & Co. from any Company or any Seller
relative to the transactions contemplated by this Agreement. Purchaser agrees to
indemnify, defend and hold Sellers harmless from any liabilities or damages
arising out of any claim of any finder or broker retained by Purchaser. Each
Seller, severally but not jointly and severally, agrees to indemnify, defend and
hold Purchaser and the Companies harmless from any liabilities or damages
arising out of any claim of any finder or broker retained by such Seller.
Sellers, jointly and severally, agree to indemnify, defend and hold harmless
Purchaser and the Companies from any liabilities or damages arising out of any
claim of any finder or broker retained by any Company, other than any claim of
Xxxxxxx, Xxxxxxx & Co.
9.4 Section Termination of Class A Warrant. At or prior to Closing, Centre
------------------------------
and the Holding Company shall have cancelled and terminated Warrant Certificate
No. 3 dated December 22, 1997 (the "Class A Warrant").
---------------
9.5 Section Exercise of Class B Warrant. At or prior to Closing, but in any
---------------------------
event prior to the commutation of the Pro Rata Contract pursuant to Section 9.6
hereof, Centre shall have exercised its right to purchase up to 1,000 shares of
the Holding Company's Class B common stock represented by Warrant Certificate
No. 2 dated December 22, 1997, as amended pursuant to Amendment No. 1 to Warrant
No. 02, dated as of November 28, 2000 (the "Class B Warrant"), it being
---------------
understood that any shares of Class B common stock issued to Centre upon
exercise of the Class B Warrant are included in the Stock. Purchaser
acknowledges and agrees
-39-
(a) that Centre shall exercise the Class B Warrant pursuant to a cashless
exercise provision and, accordingly, shall receive as a result of its exercise
fewer than 1,000 shares of Class B common stock and (b) there shall be no
reduction of the Purchase Price due to Centre's delivery at Closing of fewer
than 1,000 shares of Common Stock to Purchaser; provided, that Centre delivers
--------
to Purchaser all shares of Class B common stock received by it upon its exercise
of the Class B Warrant. The defined term "Stock" shall include that number of
shares of Class B common stock issued upon the exercise of the Class B Warrant
and no other shares of Class B common stock.
9.6 Section Commutation of Pro Rata Reinsurance Agreement. At or prior
---------------------------------------------
to Closing, but in any event after the exercise of the Class B Warrant, the
issuance to Centre by the Holding Company of the shares of Class B common stock
issuable thereunder and the receipt by Centre thereof, the Pro Rata Reinsurance
Agreement, dated January 1, 1999 and amended September 18, 2000, between Centre
Insurance Company and FSIC (the "Pro Rata Contract") shall be commuted in
-----------------
accordance with the Commutation and Settlement Agreement (the "Commutation
-----------
Agreement") in the form attached hereto as Exhibit D.
--------- ---------
9.7 Section Waiver of Rights Under Shareholders Agreement. Each of Sellers
---------------------------------------------
and the Holding Company expressly waives at Closing any rights of first refusal
or other rights of any nature arising from the Shareholders Agreement that may
arise from the offer of the Stock contemplated by this Agreement.
9.8 Section Termination of Reimbursement Agreement. The Reimbursement
--------------------------------------
Agreement, dated as of December 22, 1997, by and between Centre Reinsurance
(Bermuda) Limited and the Holding Company (the "Reimbursement Agreement") shall
-----------------------
be terminated with an effective date of January 1, 2001 in accordance with the
Termination Agreement in the form attached hereto as Exhibit E, which
---------
Termination Agreement shall provide that the parties to the Reimbursement
Agreement shall execute mutual releases of all claims thereunder, but which
Termination Agreement shall provide that any Sellers' Expense Payment shall be
apportioned among Sellers in accordance with the terms and provisions of the
Reimbursement Agreement.
9.9 Section Reaction of the Market Place. Notwithstanding any term of
----------------------------
this Agreement to the contrary, the parties hereto agree that no representation,
warranty, covenant or indemnity is made herein regarding the general reaction in
the marketplace of third parties (including without limitation policy holders,
clients and business prospects) to the sale of the Stock to Purchaser hereunder.
9.10 Section Certain Information Included in Form S-3. The Holding Company
----------------------------------------
has provided to Purchaser access to audited Financial Statements and Purchaser
is bound by confidentiality obligations to the Holding Company contained in the
Confidentiality Agreement with respect thereto. Purchaser wishes to include in
its Form S-3 referred to in Section 8.9 the audited Financial Statements for the
fiscal years ended December 31, 2000 and December 31, 1999 (the "Relevant
--------
Financial Statements") and wishes the Holding Company to consent thereto.
--------------------
-40-
A material term of this Agreement is that the potential obligations and
liabilities of Sellers in connection with the transactions contemplated by this
Agreement hereby will be limited as set forth in Article XIV hereof.
Accordingly, the parties hereto agree that:
(a) The Holding Company hereby consents (i) to the inclusion of the
Relevant Financial Statements referred to above in the Form S-3 and (ii) to
Purchaser discussing the information contained in the Relevant Financial
Statements and the transactions contemplated hereby in connection with the
Offering. Purchaser acknowledges that it must also obtain consent of Ernst
& Young with respect thereto before such inclusion. Purchaser shall send
each draft of the Form S-3 to the Holding Company prior to any filing or
publication thereof. Purchaser agrees to include the information contained
within the Relevant Financial Statements fully and accurately.
(b) With respect to Purchaser's decision to include the Relevant Financial
Statements in the Form S-3 and any discussions Purchaser may have regarding
the information contained in the Relevant Financial Statements, Purchaser
(i) is relying solely on the Holding Company and (ii) is not relying on any
Seller nor upon any representations, warranties, covenants or agreements of
any Seller contained herein. For avoidance of doubt, this Section 9.10(b)
shall not limit Purchaser's rights under Article XIV hereof with respect to
such representations, warranties, covenants and agreements.
(c) The Holding Company's consent to the inclusion of the Relevant
Financial Statements in the Form S-3, such inclusion of the Relevant
Financial Statements in the Form S-3 and the Offering shall not give rise
to any obligation or liability of Sellers (or of their directors, officers
or Affiliates). Sellers' obligations (if any) will only be those
obligations to Purchaser under and subject to the terms of Article XIV of
this Agreement.
(d) Purchaser agrees and acknowledges that (i) no Seller has any duty to
Purchaser or to any of Purchaser's Affiliates or shareholders in respect of
the Form S-3 (including, without limitation, the inclusion of the Relevant
Financial Statements therein), the Offering or any other matter, (ii) no
Person shall have any rights or remedies against any Seller in connection
with the Form S-3 or the Offering, and (iii) no Person shall have any
rights or remedies against any Seller in connection with the transactions
under this Agreement other than Purchaser's rights under Article XIV
hereof, and there are no third party beneficiaries of any of Purchaser's
rights thereunder. For avoidance of doubt, this Section 9.10(d) shall not
limit Purchaser's rights under Article XIV hereof.
10 ARTICLE
ADDITIONAL TAX MATTERS
10.1 Section Liability for Taxes.
-------------------
-41-
(a) Sellers, jointly and severally, shall be liable for and indemnify
Purchaser for all Taxes (including without limitation any Taxes imposed on a
combined or unitary basis with respect to a group of corporations that includes
or included the Holding Company and Taxes resulting from the Holding Company
ceasing to be a part of such group) imposed on any of the Companies or for which
any of the Companies may otherwise be liable for any taxable year or period that
ends on or before December 31, 2000 and, with respect to any taxable year or
period beginning before and ending after December 31, 2000, the portion of such
taxable year ending on and including December 31, 2000. Sellers' liability
under this Section 10.1 shall be reduced by the amount of Taxes paid by any of
the Companies on or before December 31, 2000 and the amount of any liability for
Taxes reflected on the Final Balance Sheet and the amount of any refunds of
Taxes or Tax credits for any of the Companies relating to any taxable year or
period for which Sellers have liability under this Section 10.1(a).
(b) Purchaser shall be liable for and indemnify Sellers for Taxes of any
of the Companies for any taxable year or period that begins after December 31,
2000 and, with respect to any taxable year or period beginning before and ending
after December 31, 2000, the portion of such taxable year after December 31,
2000. Sellers or Purchaser, respectively, shall be entitled to any refunds of
Taxes or Tax credits of any of the Companies for any taxable year or period for
which each is liable. To the extent that Purchaser receives any such refunds or
credits to which Seller is entitled or to the extent any liability for Taxes
reflected on the Final Balance Sheet is overstated, Purchaser shall immediately
notify Sellers of such receipt, credit or overstatement and shall within three
business days pay to Sellers in their Proportionate Shares an amount equal
thereto.
(c) There are no Tax allocation or sharing arrangements, whether or not
written, that have been entered into by any Seller or any member of any Seller's
group, and no payments are owed by or to the Company pursuant to any such
agreement.
(d) With respect to the Tax Returns for any Company not already filed as
of the date hereof, to the extent that any such Tax Returns are due prior to the
Closing Date, Sellers shall cause the relevant Company to file when due
(including extensions) all Tax Returns that are required to be filed by or with
respect to such Company for taxable years or periods ending on or before
December 31, 2000, shall cause the relevant Company to remit any Tax due in
respect of such Tax Returns, and shall provide Purchaser with copies of such Tax
Returns within five (5) days after filing. Purchaser shall file or cause to be
filed when due (including extensions) all Tax Returns that are not filed prior
to the Closing and shall remit or cause to be remitted any Tax due in respect of
such Tax Returns. Purchaser shall provide copies of such Tax Returns that relate
to any Taxes for which Sellers may be liable under this Article X to Sellers for
their approval at least thirty (30) days prior to their due date. Sellers shall
pay Purchaser the Taxes for which Sellers are liable pursuant to Section 10.1(a)
but which are payable with the Tax Returns to be filed by Purchaser pursuant to
the second sentence of this Section 10.1(d) within twenty (20) days after
Sellers' receipt of such Tax Returns and proof of their filing by Purchaser;
provided, however, that no such payments shall be made unless Sellers shall
-------- -------
have approved such Tax Returns, which approval shall not be unreasonably
withheld.
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(e) Sellers shall promptly notify Purchaser in writing upon receipt by any
of Sellers or the Companies after the date hereof of notice of any pending or
threatened Tax audits which may affect the Tax liabilities of any of the
Companies with respect to any Tax Return filed by the Companies, which relates
to any taxable year or period ending on or before the Balance Sheet Date. From
and after the Closing Date, Purchaser shall notify Seller in writing upon
receipt by Purchaser of notice of any pending or threatened Tax audits or
assessments which may affect the Tax liabilities of any of the Companies for
which Sellers would be required to indemnify Purchaser pursuant to Section
10.1(a) in accordance with Article XIV hereof. Sellers, at their election, may
represent the Companies in any Tax audit or administrative or court proceeding
relating to taxable years or periods ending on or before the Balance Sheet Date.
However, Purchaser may, at its option and expense, participate in the audit,
including the use of accountants retained by Purchaser, in addition to the
accountants regularly employed by the Companies. If Sellers elect to represent
the Companies in such audit, Purchaser shall cooperate, and shall cause the
Companies to cooperate, with Sellers' representatives, which cooperation shall
include making available to them the records of the Companies which relate to
the periods included in the Tax Returns which are the subject of the audit. If
Purchaser elects to participate in such audit, Sellers shall cooperate with
Purchaser's representatives, which cooperation shall include making available to
them the records of the Companies which relate to the periods included in the
Tax Returns which are the subject of the audit (to the extent that Sellers have
such records). Notwithstanding the foregoing, Sellers shall not be entitled to
settle, either administratively or after commencement of litigation, any claim
for Taxes which would adversely affect the liability of any of the Companies or
Purchaser for any period after the Balance Sheet Date (including but not limited
to the imposition of Tax deficiencies, the reduction of asset basis or cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions, or the loss or reduction of
credit carryforwards) without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld. Sellers shall be entitled to
observe at their expense any claim for Taxes for a year or period ending after
the Balance Sheet Date which may be the subject of indemnification by Sellers
and, if they so elect, at their sole expense, may assume the entire defense of
such Tax claim.
(f) In addition to the obligations of Sellers and Purchaser regarding
Taxes contained in this Article X, Sellers and Purchaser shall each be obligated
to pay one-half of all state and local sales and stock transfer taxes and all
recording costs and fees however styled or designated and any other such taxes,
fees and costs payable in connection with the transfer of the Stock contemplated
by this Agreement. Sellers shall cause all appropriate stock transfer tax
stamps, if any, to be affixed to the certificate(s) representing the Stock.
-43-
11 ARTICLE
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
All obligations of Purchaser under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
11.1 Section Representations and Warranties True. The representations and
-----------------------------------
warranties of Sellers contained in this Agreement shall be true and accurate
as of the Closing Date; provided, however, that, notwithstanding the foregoing,
-------- -------
if the effect of any and all inaccuracies in such representations and warranties
would not reasonably be expected to result in Losses to Purchaser in excess of
$5,000,000 in the aggregate, the condition set forth in this Section 11.1 to
Purchaser's obligations under this Agreement (including, without limitation,
Purchaser's obligation to effect the Closing of the transactions contemplated by
this Agreement) shall be deemed satisfied; and, provided, further, however, that
-------- ------- -------
in calculating the amount of such Losses to Purchaser, no effect shall be given
to any (A) qualification of a representation or warranty to the extent of an
Adverse Effect and (B) subpart (e) of Section 5.12.
11.2 Section Compliance with this Agreement. Sellers shall have performed
------------------------------
and complied in all material respects with all agreements and conditions
required by this Agreement required to be performed or complied with by it prior
to or at the Closing.
11.3 Section Documents to be Delivered. At or prior to Closing, Purchaser
-------------------------
shall have received from Sellers:
(a) a certificate of each of Sellers, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that the
conditions specified in Sections 11.1 and 11.2 hereof have been fulfilled
and certifying that Sellers have obtained all Material Sellers' Consents
and updating the Schedules to this Agreement as of the Closing Date;
(b) the certificate or certificates evidencing the Stock, properly
executed (endorsed) for transfer to Purchaser, with all required
documentation relating thereto;
(c) such other instruments, documents or written information as Purchaser,
or Purchaser's legal counsel, may reasonably request; and
(d) all other previously undelivered items required to be delivered by
Sellers to Purchaser at or prior to Closing pursuant to this Agreement.
11.4 Section Regulatory Approvals. All authorizations, approvals, or permits,
--------------------
including necessary insurance regulatory approvals and Xxxx-Xxxxx-Xxxxxx
approval, if any, of any governmental authority or regulatory body of the United
States or of any state that is required in
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connection with the consummation of the transactions contemplated hereby shall
have been duly obtained and shall be effective on and as of the Closing Date.
11.5 Section Litigation. None of the Companies shall be subject to any
----------
order, decree or injunction by a court of competent jurisdiction, or otherwise
be a party to any filed or threatened litigation, which (i) prevents the
consummation of the transactions contemplated by this Agreement; or (ii) might
reasonably be expected to cause a Material Adverse Change.
11.6 Section No Change in Ratings of FSIC. Except for actions taken or
----------------------------
notices received in anticipation of or any other event related to the
transactions contemplated hereby, FSIC shall have not received any notice of
downgrade, been placed on a "watch list" with negative implications, or have
notice of or be subject to any other similar event since May 31, 1999, with
respect to FSIC's ratings by A.M. Best, Standard & Poor's Corporation, Xxxxx'x
Investor Service or Duff & Xxxxxx; provided, however, that this Section 11.6
-------- -------
shall no longer be in effect upon the making of any Public Announcement.
11.7 Section Legal Opinions of Holding Company's Counsel. Purchaser shall
-------------------------------------------
have received from counsel to the Holding Company an opinion, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit F.
---------
11.8 Section Legal Opinions of Sellers' Counsel. Purchaser shall have
----------------------------------
received from counsel to each of the Sellers an opinion, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit G.
---------
11.9 Section Material Adverse Change. There shall not have been any
-----------------------
Material Adverse Change.
11.10 Section Employment Agreement. Xxxxxxx X. Xxxxxxxx shall have entered
--------------------
into an employment agreement with Purchaser or the Companies, as determined by
Purchaser, in form and substance substantially similar to that attached hereto
as Exhibit H.
---------
11.11 Section Consents. Purchaser shall have received copies of all Material
--------
Sellers' Consents.
11.12 Section Termination of Agreements. At or prior to Closing, the
-------------------------
Reimbursement Agreement shall have been terminated, the Class A Warrant shall
have been terminated, the Class B Warrant shall have been exercised and the
Shareholders Agreement shall have been terminated as to Sellers and to the
Holding Company.
11.13 Section Commutation Agreement. At or prior to Closing, Centre
---------------------
Insurance Company and FSIC shall have executed and delivered the Commutation
Agreement and Centre Insurance Company shall have paid the Commutation Amount
(as defined in the Commutation Agreement) in full, as provided in Article One-A
of the Commutation Agreement.
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12 ARTICLE
CONDITIONS TO THE OBLIGATIONS OF SELLERS
All obligations of Sellers under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
12.1 Section Representations and Warranties True. The representations and
-----------------------------------
warranties of Purchaser and Vesta Fire contained in this Agreement shall be true
and accurate in all material respects as of the Closing Date.
12.2 Section Compliance with this Agreement. Each of Purchaser and Vesta
------------------------------
Fire shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement required to be performed or
complied with by it prior to or at the Closing, including without limitation,
the payment of the Purchase Price in full by Purchaser (or Vesta Fire) to
Sellers pursuant to Section 3.2 hereof.
12.3 Section Documents to be Delivered. At or prior to Closing, Sellers
-------------------------
shall have received from Purchaser:
(a) a certificate of Purchaser and Vesta Fire, dated as of the date of
Closing Date, certifying in such detail as Sellers may reasonably request
that the conditions specified in Sections 12.1 and 12.2 hereof have been
fulfilled and certifying that Purchaser has obtained all Material
Purchaser's Consents and updating the Schedules to this Agreement as of the
Closing Date;
(b) certificates of duly authorized officers of Purchaser and Vesta Fire,
dated the Closing Date, certifying that attached thereto is a true, correct
and complete certified copy of the Articles of Incorporation of such
Person, a true, correct and complete copy of the By-Laws of such Person and
a true and correct copy of the resolutions of the Board of Directors of
such Person authorizing the transactions contemplated in this Agreement, in
each case as are then in full force and effect;
(c) Certificates of Good Standing, issued by the Secretary of State of the
jurisdictions of Purchaser's organization and Vesta Fire's organization, of
recent date;
(d) to the extent that the payment of the Purchase Price is delivered
pursuant to Section 3.2(b), the Notes, in the form and in the amounts as
provided in Section 3.2(b);
(e) such other instruments, documents or written information as Sellers,
or Sellers' legal counsel, may reasonably request; and
-46-
(f) all other previously undelivered items required to be delivered by
Purchaser at or prior to Closing pursuant to this Agreement.
12.4 Section Litigation. None of the Vesta Companies shall be subject to
----------
any order, decree or injunction by a court of competent jurisdiction, or
otherwise be a party to any filed or threatened litigation, which prevents the
consummation of the transactions contemplated by this Agreement. There shall be
no effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction prohibiting or imposing any
condition on the consummation of any of the transactions contemplated hereby.
12.5 Section Regulatory Approvals. All authorizations, approvals, or
--------------------
permits, including necessary insurance regulatory approvals and Xxxx-Xxxxx-
Xxxxxx approval, if any, of any governmental authority or regulatory body of the
United States or of any state that is required in connection with the
consummation of the transactions contemplated hereby shall have been duly
obtained and shall be effective on and as of the Closing Date.
12.6 Section Legal Opinion of Purchaser's Counsel. Sellers shall have
------------------------------------
received from counsel to Purchaser an opinion, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit I.
---------
12.7 Section Consents. Sellers shall have received copies of all Material
--------
Purchaser's Consents.
12.8 Section Material Adverse Change. In the event that Purchaser intends to
-----------------------
pay any part of the Purchase Price by issuance of Notes in accordance with
Section 3.2(b)(i), (i) Sellers and their representatives shall have been
provided with the requisite access to perform their due diligence examination of
the Purchaser and the other Vesta Companies during the Due Diligence Period as
set forth in Section 8.11 hereof and (ii) there shall not have been any Vesta
Material Adverse Change.
12.9 Section Commutation Agreement. At or prior to Closing, Purchaser shall
---------------------
have executed and delivered the Commutation Agreement and shall have paid the
Commutation Fee (as defined in the Commutation Agreement) in full, as provided
in Article One-B of the Commutation Agreement.
13 ARTICLE
TERMINATION
13.1 Section Termination. The obligations of the parties under this
-----------
Agreement may be terminated at any time prior to the Closing by:
(a) the mutual consent of Sellers and Purchaser;
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(b) Sellers if the conditions set forth in Article XII shall not have been
satisfied or waived by Sellers by August 1, 2001, unless such date shall
be extended by mutual agreement of Sellers and Purchaser (such date being
the "Termination Date"), unless the failure of such condition is the result
----------------
of a material breach of this Agreement by Sellers; or
(c) Purchaser, if the conditions set forth in Article XI shall not have
been satisfied or waived by Purchaser by the Termination Date, unless the
failure of such condition is the result of a material breach of this
Agreement by Purchaser.
32.2 Section Effect of Termination. In the event of a termination of this
---------------------
Agreement under Section 13.1, this Agreement will become void and of no further
force or effect, except for the provisions of (a) Section 9.1 hereof relating to
the payment of expenses, (b) Section 8.6 relating to the confidentiality of the
Companies' books and records, (c) Article XV, (d) this Section 13.2 and (e)
Section 9.10. For the avoidance of doubt, Purchaser's obligations under that
certain Confidentiality Agreement, dated December 18, 2000 (the "Confidentiality
---------------
Agreement"), between Purchaser and Xxxxxxx, Xxxxxxx & Co., for the benefit of
---------
the Holding Company, shall continue. Notwithstanding any provision of this
Agreement to the contrary, neither the termination of this Agreement, nor
anything contained in this Section 13.2 will be deemed to release any party from
any liability for breach by any such party of the terms and provisions of this
Agreement or to impair the right of any party to compel specific performance by
the other parties of their obligations under this Agreement.
14 ARTICLE
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
14.1 Section Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made by the parties in this Agreement shall survive the Closing
for a period of eighteen (18) months provided, however, that representations and
-------- -------
warranties contained in Sections 5.2 (relating to title to the Stock), and
Section 5.4 (relating to capital stock and Subsidiaries) shall not terminate.
Notwithstanding the decision of any party to complete the Closing, each party
shall be entitled to rely upon the representations and warranties set forth
herein.
14.2 Section Indemnification by Seller. Sellers hereby jointly and severally
-------------------------
covenant and agree (except with respect to breaches by any Seller of the
covenants made by it in Article II and Sections 4.2, 7.11, 7.13 and 7.14 and the
representations and warranties made by it in Sections 5.5., 5.25 and 5.26 (with
respect to representations and warranties about such Seller), and 5.1, 5.2 and
5.31, for which each Seller, severally as to itself only, and not jointly and
severally, covenants and agrees) to protect, defend and indemnify Purchaser and
its officers, directors, agents, employees and controlled Affiliates
(collectively, the "Purchaser Indemnified Persons"), and to hold all of them
-----------------------------
harmless, against and with respect to any and all loss, liability, damage and
expense (including, without limitation, all actions, suits, proceedings, claims,
demands,
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assessments, judgments, costs, fines, expenses, injunctions and penalties, and
any and all reasonable legal and accounting fees incident to any of the
foregoing) (each a "Loss" and collectively "Losses") suffered or incurred as a
---- ------
result of (i) Sellers' breach of any covenant or agreement contained in this
Agreement, (ii) any inaccuracy in the representations and warranties of Sellers
set forth herein, without for this purpose giving effect to (A) any
qualification of a representation or warranty to the extent of an Adverse Effect
and (B) subpart (e) of Section 5.12, (iii) any liability for Taxes pursuant to
Article X hereof and (iv) the ownership of the Harbor Shares by Harbor following
the Closing Date and the assertion of any rights under the Shareholders
Agreement by Harbor, including, without limitation, any distribution with
respect to the Harbor Shares and any amounts paid by any of the Companies or
Purchaser to acquire the Harbor Shares.
As an illustration of subpart (ii) above, if a Seller's representation
qualified by Adverse Effect is true because an inaccuracy therein has a monetary
cost of less than $200,000 (for example, $100,000), then while such Seller shall
not be deemed to have breached such representation, the amount of $100,000 shall
be deemed to be a Loss for purposes of indemnification under this Section 14.2.
Similarly, the parties hereby confirm that the $750,000 of liabilities described
in subpart (e) of Section 5.12, if any, shall be considered a Loss for purposes
of indemnification under this Section 14.2.
14.3 Section Indemnification by Purchaser and Vesta Fire.
-------------------------------------------
(a) Indemnification by Purchaser. Purchaser hereby covenants and agrees
----------------------------
to protect, defend and indemnify Sellers, and their respective officers,
directors, shareholders, managers, members, trustees, agents, employees and
Affiliates (collectively, the "Seller Indemnified Persons"), and to hold all of
--------------------------
them harmless, against and with respect to any and all Loss suffered or incurred
as a result of (i) Purchaser's or Vesta Fire's breach of any covenant or
agreement contained in this Agreement, (ii) any inaccuracy in the
representations and warranties of Purchaser and Vesta Fire set forth herein, and
(iii) any liability for Taxes pursuant to Article X hereof.
(b) Indemnification by Vesta Fire. Vesta Fire hereby covenants and agrees
-----------------------------
to protect, defend and indemnify the Seller Indemnified Persons, and to hold all
of them harmless, against and with respect to any and all Loss suffered or
incurred as a result of (i) its breach of any covenant or agreement made by it
contained in this Agreement, and (ii) any inaccuracy in the representations and
warranties of Vesta Fire set forth herein.
-49-
14.4 Section Limitations on Indemnification.
------------------------------
(a) Notwithstanding any other provision of this Agreement to the
contrary,
(i) the liability of Sellers to protect, defend, indemnify and/or hold
harmless (collectively referred to herein as "Indemnification" or "Indemnify")
--------------- ---------
Purchaser Indemnified Persons pursuant to this Agreement, including, without
limitation, pursuant to Article X hereof and this Article XIV, shall be limited,
in the aggregate, to an amount equal to fifty percent (50%) of (A) the cash
actually paid as Purchase Price to Sellers at Closing and (B) if applicable,
cash paid in full and final settlement of the Notes (the "Sellers'
--------
Indemnification Limit");
---------------------
(ii) Sellers shall have no obligation to Indemnify any Purchaser
Indemnified Person pursuant to this Agreement, including, without limitation,
pursuant to Article X hereof and this Article XIV, until and except to the
extent that the aggregate amount of Indemnification to which the Purchaser
Indemnified Persons are entitled (including, without limitation, for third party
claims) exceeds $750,000; provided, however, subject to Sections 14.4(a)(i) and
-------- -------
(iii), that any Indemnification of Purchaser pursuant to Section 14.2(iv) shall
not be subject to this Section 14.4(a)(ii); and
(iii) the maximum aggregate liability of each Seller to Indemnify Purchaser
Indemnified Persons pursuant to this Agreement, including, without limitation,
pursuant to Article X hereof and this Article XIV, shall be limited to an amount
equal to the product of (x) the Sellers' Indemnification Limit multiplied by (y)
such Seller's Proportionate Share set forth on Exhibit A hereto.
---------
(b) Notwithstanding any other provision of this Agreement to the
contrary, except for the obligation of Purchaser to pay the Purchase Price for
which the Purchaser shall be responsible in full,
(i) the liability of Purchaser and Vesta Fire to Indemnify Seller
Indemnified Persons pursuant to this Agreement, including, without limitation,
pursuant to Article X hereof and this Article XIV, shall be limited, in the
aggregate, to an amount equal to $30,000,000; and
(ii) Neither Purchaser nor Vesta Fire shall have any obligation to
Indemnify any Seller Indemnified Person pursuant to this Agreement, including,
without limitation, pursuant to Article X hereof and this Article XIV, until and
except to the extent that the aggregate amount of Indemnification to which the
Seller Indemnified Persons are entitled (including without limitation for third
party claims) exceeds $750,000.
14.5 Section Notice of Claims.
----------------
(a) Promptly after receipt by an indemnified party of written notice of
the commencement of any investigation, claim, proceeding or other action in
respect of which
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Indemnity may be sought from the indemnitor under either Section 14.2 or 14.3
(each, an "Action"), such indemnified party shall notify the indemnitor in
------
writing of the commencement of such Action; but the omission to so notify the
indemnitor shall not relieve it from any liability that it may otherwise have to
such indemnified party, except to the extent that the indemnitor is materially
prejudiced or forfeits substantive rights or defenses as a result of such
failure. In connection with any Action in which the indemnitor and any
indemnified party are parties, the indemnitor shall be entitled to participate
therein, and may assume the defense thereof. Notwithstanding the assumption of
the defense of any such Action by the indemnitor, each indemnified party shall
have the right, at its own expense, to employ separate counsel and to
participate in the defense of such Action. The party from whom Indemnification
is sought shall not, without the written consent of the party seeking
indemnification (which consent shall not be unreasonably withheld), settle or
compromise any claim or consent to entry of any judgment unless such settlement
includes an unconditional release of the party seeking Indemnification from all
liabilities with respect to such claim.
(b) In the event one party hereunder should have a claim for
Indemnification that does not involve a claim or demand being asserted by a
third party, the party seeking Indemnification shall promptly send notice of
such claim to the party from whom Indemnification is sought.
14.6 Section Survival of Indemnification. The obligations of Sellers, on the
---------------------------
one hand, and Purchaser and Vesta Fire, on the other, to Indemnify the other
pursuant to the provisions of this Article XIV (i) shall terminate on the
eighteenth (18th) month anniversary of the Closing with respect to any claims
pursuant to Sections 14.2(ii) and 14.3(ii) that have not been made by the
indemnified party prior to such date; provided, however, that the obligations of
-------- -------
Sellers to Indemnify for any breach of Sections 5.2 and 5.4 shall not terminate,
(ii) shall terminate on the fifth anniversary of the Closing with respect to any
claims pursuant to Sections 14.2(i), 14.2(iv) and 14.3(i) that have not been
made by the indemnified party prior to such date, and (iii) shall terminate in
accordance with the relevant statute of limitations with respect to any claims
pursuant to Sections 14.2(iii) and 14.3(iii).
14.7 Section Disclosure. Seller, Purchaser and Vesta Fire agree that any
----------
fact, matter or information disclosed in any part of this Agreement or on
any Schedule thereto shall be deemed to have been disclosed thereby in, for the
purposes of and in this Agreement, and any Schedule thereto. Any item set forth
on a Schedule to this Agreement shall be considered an exception to all of the
representations and warranties even if not specifically cross-referenced or
referred to in such Schedule.
14.8 Section Mitigation. Each of the parties covenants and agrees that it
----------
will use its commercially reasonable efforts to mitigate any Losses with respect
to which such party is or may become entitled to be indemnified by the other
party pursuant to this Agreement.
14.9 Section Sole and Exclusive Remedy. Notwithstanding any other provision
-------------------------
in this Agreement to the contrary, Sellers, Purchaser and Vesta Fire hereby
agree that if the Closing
-51-
occurs and in the absence of fraud, the indemnification provisions set forth in
Sections 14.2 and 14.3 shall be the sole and exclusive remedy for (a) breaches
or inaccuracies of any of the representations and warranties contained in this
Agreement or (b) the breach or non-performance of any covenant or agreement
contained in this Agreement. Except for rights to Indemnification under this
Article XIV, if the Closing occurs and in the absence of fraud, none of Sellers,
Purchaser or Vesta Fire shall have any other claim or remedy relating to the
transactions (or the failure thereof) contemplated by this Agreement (whether
resulting from breach or otherwise).
14.10 Section Materiality. Except to the extent that the representation
-----------
and warranty to which a Schedule attached hereto relates to provides, the mere
inclusion of an item on such a Schedule as an exception to a representation or
warranty shall not be deemed an admission by any Seller that such an item
represents a material exception or fact, event or circumstance or that such item
is reasonably likely to cause an Adverse Effect or a Material Adverse Change on
any Company.
14.11 Section No Other Representations or Warranties. Sellers, Purchaser
--------------------------------------
and Vesta Fire hereby agree that the representations and warranties contained in
this Agreement (including the Schedules attached hereto) are the only
representations and warranties made by the respective parties hereto and
supersede and replace any and all other prior representations or warranties of
the respective parties hereto with respect to the specific matters contained
therein, whether written or oral, whenever or however made.
14.12 Section No Special Damages. Notwithstanding anything to the contrary
------------------
contained in this Agreement, no party hereto shall be liable or responsible to
any other party hereto for exemplary, special, punitive or consequential damages
or damages for loss of reputation (except to the extent an indemnified party is
required to pay such exemplary, special, punitive or consequential damages or
damages for loss of reputation to an unaffiliated third party in respect of a
Loss). The foregoing shall not be deemed an agreement or acknowledgment by the
parties hereto as to any other types of damages recoverable under this
Agreement.
14.13 Section Reduction for Insurance. The amount of indemnification that
-----------------------
a party hereto is required to pay to, for, or on behalf of any indemnified party
pursuant to Section 14.2 or Section 14.3 will be reduced, including without
limitation retroactively, by (but only to the extent of) any insurance proceeds
from policies carried by any Company that are actually recovered by such
indemnified party in reduction of the related Loss. If an indemnified party has
received, or if an indemnifying party has paid on the indemnified party's
behalf, an indemnity payment in respect of a Loss and the indemnified party
subsequently receives, directly or indirectly, insurance proceeds in respect of
such Loss from policies carried by any Company, then such indemnified party will
promptly pay to the indemnifying party the amount of such insurance proceed, or,
if less, the amount of such payment, and on request, will assign such insurance
claim to the indemnifying party. The parties hereto agree that the foregoing
will not affect the subrogation rights of any insurance companies making
payments hereunder.
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15 ARTICLE
MISCELLANEOUS PROVISIONS
15.1 Section Amendment. This Agreement may be amended only by a written
---------
agreement signed by the parties. Any amendment of any provision of this
Agreement that does not apply to the Holding Company or Vesta Fire shall not
require its agreement.
15.2 Section Waiver of Compliance. Any waiver of any failure to comply with
--------------------
any obligation, covenant, agreement or condition under this Agreement must be in
writing and signed by the parties. Any waiver or failure to insist upon strict
compliance with any obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
15.3 Section Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be provided in writing and shall be deemed
to have been duly given if delivered by hand or sent by telefacsimile (with
confirmation by telefacsimile answerback) or certified or registered mail, with
postage prepaid:
(a) If to Sellers, to:
Zurich Centre Group LLC
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Xxxxxxx Xxxxxxxx, Esq.
Vice-President
Centre Solutions (Bermuda) Limited
Post Box 1788
HMHX Xxxxxxxx
Bermuda
Facsimile: 000-000-0000
Xxxx Xxxxxxxx
President
Orienta Point Group, L.L.C.
The Distinguished Programs Group
0 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Xxxxx X. Xxxxxxx
-00-
Xxxxxxxxxx Xxxxxxx
Xxxxxxx Xxxxxx Xxxxxx Xxxxxx
000 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Facsimile: 000-000-0000
Xxxxx Xxx, Esq.
-and-
Mynd Corporation
X.X. Xxx Xxx - Xxxx Xxxx 0X0
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: 000-000-0000
Xxxx Xxxxx
Senior Vice President
with a copy to:
Xxxxxxxx Xxxxxx Xxxxx & Xxxx
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn.: Jahangier Xxxxxxx, Esq.
Fax: 000-000-0000
(b) If to Purchaser or Vesta Fire, to:
Vesta Insurance Group, Inc.
X.X. Xxx 00000
0000 Xxxxx Xxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
General Counsel
Fax: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxx LLP
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
or to such other person or address as a party shall notify all other parties in
writing.
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15.4 Section Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties; provided, however, that
-------- -------
Purchaser may assign its rights, but may not delegate its obligations, under
this Agreement to any of its direct and indirect Subsidiaries; provided,
--------
further, that any such assignee of Purchaser's rights hereunder prior to the
-------
Closing Date shall make all of the representations, warranties, covenants,
agreements and indemnities to and for the benefit of Sellers as are made by
Purchaser hereunder. Subject to the preceding sentence, this Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The
parties agree and acknowledge that the inclusion of Vesta Fire as a party to
this Agreement for purposes of Articles II, III, VI, XIV and XV does not
constitute an assignment of Purchaser's rights or a delegation of Purchaser's
obligations hereunder. Purchaser and Vesta Fire agree that they shall be jointly
and severally liable for Vesta Fire's obligations hereunder.
15.5 Section Governing Law. This Agreement and the legal relations among the
-------------
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York, without regard to its conflict of laws doctrine.
15.6 Section Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.7 Section Headings. The headings of the Articles and Sections of this
--------
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
15.8 Section Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules hereto, as well as the other documents and certificates delivered
pursuant hereto set forth the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof, and supersede all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto. For avoidance of doubt, the Confidentiality
Agreement, and Purchaser's obligations thereunder, shall survive the execution
and delivery of this Agreement but shall be terminated as of the Closing.
15.9 Section Third Parties. Except as specifically set forth or referred to
-------------
herein, nothing expressed or implied herein is intended or shall be construed to
confer upon or give to any Person (including, without limitation, any current or
future shareholder of Purchaser), other than the parties hereto, and their
successors or permitted assigns, any rights or remedies under or by reason of
this Agreement.
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15.10 Section Performance Following Closing. Nothing in this Agreement shall
-----------------------------
be construed to limit any covenant or agreement of the parties hereto which by
its terms contemplates performance after the Closing.
15.11 Section Incorporation of Schedules and Exhibits. The Schedules and
---------------------------------------
Exhibits attached hereto are incorporated into this Agreement and will be deemed
a part hereof as if set forth herein in full. The words "herein" and "hereof"
and words of similar import refer to this Agreement (including the Schedules and
Exhibits) as an entirety. In the event of any conflict between the provisions of
this Agreement and any Schedule or Exhibit, the provisions of this Agreement
will control. Capitalized terms used in the Schedules have the meanings assigned
to them in this Agreement. The section references referred to in the Schedules
are to sections of this Agreement, unless otherwise expressly indicated.
15.12 Section Severability. The provisions of this Agreement shall, where
------------
possible, be interpreted so as to sustain their legality and enforceability, and
for that purpose the provisions of this Agreement shall be read as if they cover
only the specific situation to which they are being applied. The invalidity or
unenforceability of any provision of this Agreement in a specific situation
shall not affect the validity or enforceability of that provision in other
situations or of other provisions of this Agreement.
15.13 Section Litigation; Jurisdiction; Other Matters; Waivers.
------------------------------------------------
(a) Each party hereto acknowledges that any dispute or controversy
between or among the parties hereto would be based on difficult and complex
issues of law and fact and would result in delay and expense to the parties.
Accordingly, to the extent permitted by applicable law, each of the parties
hereto hereby waives its right to a trial by jury in any action or proceeding of
any kind or nature in any court or tribunal in which an action may be commenced
by or against any party hereto arising out of this Agreement, the Notes, or any
other related document and agrees that any action will be tried before a court
and not before a jury.
(b) Each of the parties hereto hereby agrees that the Federal District
Court of the Southern District of New York (or, to the extent such court is not
available, the courts of the State of New York) shall have exclusive
jurisdiction to hear and determine any claims or disputes between or among the
parties hereto, pertaining directly or indirectly to this Agreement, the Notes
or any other document or to any matter arising herefrom or therefrom. Each of
the parties hereto submits and consents in advance to such jurisdiction in the
State of New York in any action or proceeding commenced in such court. Each of
the parties hereto hereby waives personal service of the summons and complaint,
or other process or papers issued therein, and agrees that service of such
summons and complaint, or other process or papers may be made by registered or
certified mail addressed to such party at its address for notices provided for
herein.
-56-
(c) Each party hereto further waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient forum and each
agrees not to plead or claim the same.
(d) The foregoing waivers have been made with the advice of counsel and
with a full understanding of the legal consequences thereof and shall survive
the termination of this Agreement.
-57-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, all as of the day and year first above written.
SELLERS:
CENTRE SOLUTIONS (BERMUDA) LIMITED
By:/s/ Xxxxx X'Xxxxxxxxxxx
----------------------------------------
Name: Xxxxx X'Xxxxxxxxxxx
-----------------------------------
Its: Vice President
------------------------------------
MYND CORPORATION
By: X.X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------------
Its: President
------------------------------------
ORIENTA POINT GROUP, L.L.C.
By: Xxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------------
Its: Manager
------------------------------------
By: Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
-----------------------------------
Its: Manager
------------------------------------
-00-
XXXXXXXXXX XXXXXXX XXXXXXX XXXXXX XXXXXX XXXXXX
By: /s/ Xxxxxxxx XxXxxxxx
--------------------------------------------
Name: Xxxxxxxx XxXxxxxx
---------------------------------------
Its: Chief Executive Officer
----------------------------------------
By:
--------------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
By:
--------------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
PURCHASER:
VESTA INSURANCE GROUP, INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------------------
Name: Xxxxx X. Xxxx
---------------------------------------
Its: Chairman
----------------------------------------
For purposes of Articles II, III, VI, XIV and XV
and Section 8.2 only:
VESTA FIRE INSURANCE CORPORATION
By: /s/ Xxxxx X. Xxxx
--------------------------------------------
Name: Xxxxx X. Xxxx
---------------------------------------
Its: Chairman
----------------------------------------
For the purposes of Section 9.10 and Article XV
only:
-59-
FLORIDA SELECT INSURANCE HOLDINGS INC.
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
---------------------------------
Its: President
----------------------------------
-60-
