Exhibit 10.1
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VESTA INSURANCE GROUP, INC.
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made and entered into by and among VESTA INSURANCE GROUP, INC., a Delaware
corporation (the "Company"), having its principal office at 0000 Xxxxx Xxx
Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, and Birmingham Investment Group, LLC (the
"Investor") acting on behalf of the investors named on the schedule of investors
attached hereto as Exhibit A (the "Schedule of Investors"), each of which may be
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herein referred to individually as "Investor" or collectively as "Investors,"
with reference to the following:
RECITALS
A. The Investor has received information from the Company which describes
the Company's offer (the "Offering") to issue and sell 2,950,000 shares of its
$.01 par value, Series A Convertible Preferred Stock (the "Preferred Stock").
The terms and conditions of the Preferred Stock are set forth in the Company's
Certificate of Designation of Preferences and Rights, attached hereto as Exhibit
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B (the "Certificate of Designation"). The Preferred Stock will be convertible
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into shares of the Company's $.01 par value, Common Stock ("Common Stock") at a
price of $4.25 per share subject to adjustment as set forth in the Certificate
of Designation.
B. Based upon the Investor's review of materials set forth on Schedule C
hereto received by them relating to the Offering and their discussions with
representatives of the Company, the Investor desires to purchase from the
Company 2,950,000 shares of the Company's Preferred Stock, at a purchase price
of $8.50 per share.
C. Based upon its investigation of Investor's experience in financial
investments, including its reliance on the investment representations made by
the Investor in Section 3 of the Agreement, and upon the Investor's ability to
evaluate the merits and risks of its investment hereunder and to bear the
economic risk thereof, the Company desires to sell the Preferred Stock to the
Investors.
AGREEMENT
In consideration of the foregoing and the representations, warranties,
conditions and covenants contained herein, the Company and the Investor hereby
agree as follows:
1. Issuance and Sale of the Preferred Stock.
On the basis of the representations, warranties and covenants contained
herein, and subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to the Investor, and the Investor agrees to purchase
from the Company, 2,950,000 shares of the Preferred Stock by paying the Company
the purchase price of $25,075,000 (the "Purchase Price").
The consummation of the purchase and sale of the Preferred Stock pursuant
to this Agreement shall be held at the offices of Xxxxxxx Xxxxxxxxx & Xxxxx,
L.L.C. at 10:00 a.m. on the second business day following the satisfaction or
waiver of the conditions to closing set forth in Sections 4 and 5 or on such
other date as the parties may mutually agree (the "Closing Date").
At the Closing, the Company will deliver a Preferred Stock certificate or
certificates to the Investor, registered in the Investor's name, representing
the number of shares purchased by the Investor hereunder, against payment of the
Purchase Price amount which may be made by check payable to the order of the
Company or by wire transfer of such amount to the Company's bank account.
2. Representations and Warranties of the Company.
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit C (the "Schedule of Exceptions"), the Company hereby represents and
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warrants to the Investor that:
2.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as presently conducted and carry out the transactions
contemplated hereunder. The Company is duly qualified to transact business and
is in good standing in each jurisdiction of the United States in which the
failure so to qualify would have a material adverse effect on its business or
properties.
2.2. Capitalization. The authorized capital of the Company consists of:
a. Preferred Stock. 5,000,000 shares of $.01 par value Preferred Stock,
2,950,000 shares of which have been designated Series A Convertible Preferred
Stock, none of which has been issued or is outstanding. The rights, preferences
and privileges of the Preferred Stock are as set forth in the Restated
Certificate of Incorporation.
b. Common Stock. 100,000,000 shares of Common Stock, par value $.01 per
share, of which 18,681,237 shares are issued and outstanding.
c. All outstanding shares of Preferred Stock and Common Stock have been
duly authorized and validly issued, are fully paid and non-assessable, and were
or will be issued in compliance with all applicable federal and state securities
laws.
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d. Except for the 2,950,000 shares of Preferred Stock which will be
issued pursuant to this Agreement, which shares will be convertible into
5,900,000 shares of Common Stock subject to adjustment as set forth in the
Certificate of Designation, there are no outstanding options, warrants,
conversion rights, rights of first refusal, preemptive rights or other rights or
agreements for the purchase or acquisition from the Company of any of the
securities of the Company or rights thereto.
2.3. Subsidiaries. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, association, or other
business entity.
2.4. Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of the
Company hereunder including the issuance, sale and delivery of the Preferred
Stock and of the Common Stock issuable upon conversion of the Preferred Stock
(the "Common Conversion Shares") has been taken or will be taken prior to the
Closing. Upon execution and delivery, this Agreement will be a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting
enforcement of creditors' rights and by general equitable principles.
2.5. Validity of Securities. The Preferred Stock has been duly authorized
and upon issuance in accordance with the terms of this Agreement and the
Restated Certificate of Incorporation will be validly issued and outstanding,
fully paid and nonassessable. The Common Conversion Shares have been duly
authorized and reserved, and upon issuance in accordance with the terms of the
Certificate of Designation, will be validly issued and outstanding, fully paid
and nonassessable.
2.6. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the valid execution and delivery of this Agreement,
or the offer, sale or issuance of securities of the Company hereunder, except
such as has already been obtained or as is not required to be obtained prior to
the Closing.
2.7. Litigation. To the best of the Company's knowledge, there is no
action, suit, proceeding or investigation pending or overtly threatened against
the Company which questions the validity of this Agreement or the right of the
Company to enter into it, or to consummate the transactions contemplated hereby,
or which might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, nor is the Company aware that there is any basis for
the foregoing. The Company is not subject to the provisions of any order, writ,
action, judgment or decree of any court or government agency or instrumentality
which names the Company as a party.
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2.8. Patents and Trademarks. The Company has sufficient right, title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
licenses, information and proprietary rights, or adequate licenses, rights or
purchase options with respect to the foregoing, necessary for its business as
presently conducted, or is able to obtain on terms which will not materially
adversely affect its business all necessary permits, licenses and other
authority with respect thereto without any known conflict with or infringement
of the rights of others.
2.9. Compliance with Other Instruments. The Company is not in violation
or default of any provisions of its Restated Certificate of Incorporation or
Bylaws, as amended and in effect on and as of the date hereof and as of the date
of the Closing, or each of any material contract, agreement or instrument to
which it is a party or by which it is bound or, to its knowledge, of any
provision of any federal, state or local judgment, writ, decree, order, statute,
rule or governmental regulation applicable to the Company. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or
contravene or constitute, with or without the passage of time and giving of
notice, either a default under any such provision or result in the creation or
imposition of any lien, charge or encumbrance upon any assets of the Company.
2.10. Agreements; Action.
a. Except for agreements explicitly identified herein or in the Company
Documents, there are no employment or other material agreements, understandings
or pro-posed transactions between the Company and any of its officers,
directors, affiliates, or any affiliate thereof.
b. Except in the ordinary course of business consistent with past
practices or as set forth in the Company Documents (as hereinafter defined),
there are no agreements, understandings, instruments, con-tracts or proposed
transactions to which the Company is a party or by which it is bound which
involve obligations of, or payments to the Company of, amounts in excess of one
million dollars ($1,000,000).
c. The Company is not a party to or is not bound by any contract,
agreement or instrument, or subject to any restriction under the Restated
Certificate of Incorporation or Bylaws, which materially and adversely affects
its business as now conducted, its properties or its financial conditions.
2.11. Registration Rights. Except as provided for in Section 6 of this
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.12. Disclosure. The Company has fully provided the Investor with all
the information which such Investor has requested relating to the Company and
the Offering. No representation, warranty or statement by the Company in this
Agreement or in any written statement or certificate furnished or to be
furnished to such Investor pursuant to this Agreement contains or will contain
any
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untrue statement of a material fact or, when taken together, omits or will omit
to state a material fact necessary to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
2.13. Corporate Documents.
a. The Company has heretofore furnished the Investor with a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by it with the SEC (as any such documents have since the
time of their original filing been amended, the "Company Documents") since
January 1, 1998, which are all the documents (other than preliminary material)
that it was required to file with the SEC since such date. As of their
respective dates, the Company Documents did not contain any untrue statements of
material facts or omit to state material facts required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates, the Company
Documents complied in all material respects with the applicable requirements of
the Securities Act of 1933, as amended (the "Act"), and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated under such
statutes. The financial statements contained in the Company Documents, together
with the notes thereto, have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods indicated
(except as may be indicated in the notes thereto, or, in the case of the
unaudited financial statements, as permitted by Form 10-Q), reflect all known
liabilities of the Company required to be stated therein, including all known
contingent liabilities as of the end of each period reflected therein, and
present fairly the financial condition of the Company at said dates and the
consolidated results of operations and cash flows of the Company for the periods
then ended. The consolidated balance sheet of the Company at March 31, 1999
included in the Company Documents is herein sometimes referred to as the
"Company Balance Sheet."
b. Except as disclosed in the Company Documents and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practices, since the date of the Company Balance Sheet,
neither the Company nor any of its subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would be required to be reflected or reserved against on a consolidated
balance sheet of the Company (including the notes thereto) prepared in
accordance with generally accepted accounting principles as applied in preparing
the Company Balance Sheet.
2.14. Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims and encumbrances.
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2.15. Insurance. The Company maintains such types and amounts of insurance
with respect to its business and properties, on both a per occurrence and an
aggregate basis, as are customarily carried by persons or entities engaged in
the same or similar business as the Company.
2.16. No Adverse Changes. Except as set forth in the Company Documents,
since March 31, 1999, there has not been (1) any material adverse change in the
financial condition, results of operations, assets, liabilities, business or
prospects of the Company; (2) any material liability or obligation of any nature
whatsoever (contingent or otherwise) incurred by the Company, other than (a)
liabilities incurred in the ordinary course of business and (b) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company; (3) any
material asset or property of the Company made subject to a lien of any kind;
(4) any waiver of any material valuable right of the Company, or any
cancellation of any material debt or claim held by the Company; (5) any payment
of dividends on, other distributions with respect to, or any direct or indirect
redemption or acquisition of, any shares of the capital stock of the Company, or
any agreement or commitment therefor; (6) any issuance of any capital stock,
other than (a) upon the exercise of employee stock options, and (b) the issuance
of shares of Common Stock, or stock options to purchase Common Stock, to members
of the Board of Directors, key employees, special advisors and consultants of
the Company, all of which issuances were authorized by the Board of Directors,
including committees and individuals authorized by the Board of Directors; (7)
any sale, assignment or transfer of any tangible or intangible material assets
of the Company, except for sales, assignments or transfers in the ordinary
course of business; (8) any loan by the Company to any officer, director,
employee, consultant or shareholder of the Company, or any agreement or
commitment therefor other than routine travel or relocation advances, or loans
made in the ordinary course of business; (9) any material damage, destruction or
loss (whether or not covered by insurance) affecting the assets, property,
business or prospects of the Company; or (10) any change in the accounting
methods, practices or policies followed by the Company, including any change in
depreciation or amortization policies or rates.
2.17. Taxes. The Company has filed or caused to be filed all federal,
state and local tax returns which are required to be filed by it, and, to the
best of the Company's knowledge, all such returns are true and correct. Except
for taxes which are being contested in good faith by the Company or for which
adequate reserves are being held by the Company, the Company has paid or caused
to be paid all taxes pursuant to such returns or pursuant to any assessments
received by it or which it is obligated to with-hold from amounts owing to any
employee, creditor or third party. The income tax returns of the Company have
never been audited by any federal, state, or local authorities.
2.18. Securities Laws. Based in part upon the representations of the
Investor, the issuance, sale and delivery of the Preferred Stock pursuant to the
terms of this Agreement and the Common Conversion Shares pursuant to this
Agreement and the Certificate of Designation shall be exempt from the
registration requirements of Section 5 of the Act by virtue of Section 4(2)
thereof and Rule 506 promulgated thereunder, and any state securities laws by
virtue of Section 18 thereof.
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3. Representations and Warranties of the Investor.
The Investor hereby represents and warrants to the Company that:
3.1. Investment Representations.
a. The Investor is experienced in evaluating and investing in companies
such as the Company.
b. The Investor has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management and has had the
opportunity to inspect the Company's facilities. The Investor has made its own
independent investigation of the Company and has been furnished by the Company
with such information relating to the Company and the Offering as the Investor
has requested.
c. In making its decision to purchase the Preferred Stock pursuant to
this Agreement, the Investor has relied solely upon the information furnished or
made available by the Company as described in Section 3.1(b), the Company's
representations and warranties contained in Section 2 hereof and documents and
certificates delivered pursuant hereto.
d. The Investor understands that no federal or state agency has passed
upon an investment in the Preferred Stock or made any finding or determination
as to the advisability or fairness of an investment in the Preferred Stock.
e. The Investor understands that it must bear the economic risk of
investment in the Preferred Stock for an indefinite period of time because the
Preferred Stock and the Common Conversion Shares have not been registered under
the Act and, therefore, cannot be sold until they are either subsequently
registered under the Act or an exemption from such registration is available.
f. The Investor understands that, upon issuance of the Preferred Stock
and Common Conversion Shares, the certificates representing such shares shall
bear the legends set forth in Section 3.2 hereof.
g. The Investor understands that there is presently no established market
for the Preferred Stock to be issued by the Company pursuant to this Agreement
and it is uncertain whether any public market for the Preferred Stock will
develop.
h. The Investor is acquiring the Preferred Stock for investment for its
own account and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Preferred Stock and the Common
Conversion Shares have not been registered under the Act by reason of a
specified exemption from the registration provisions of the Act, which requires,
among other things, the bona fide nature of the Investor's investment intent as
expressed herein.
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i. All information that the Investor has furnished to the Company with
respect to its organization, financial position and business experience is
correct as of the date of this Agreement and, if there should be any material
change in such information prior to the Company's execution of this Agreement,
the Investor will immediately furnish such revised or corrected information in
writing to the Company.
j. Each member of the Investor is an "accredited investor" (as defined in
Section 501 of Regulation D under the Act).
k. As of the date of this Agreement and as of the Closing Date, the
Investor has or will have sufficient funds, or firm commitments for sufficient
funds, to fulfill its obligations under this Agreement. The individuals set
forth on Exhibit E will guarantee the ability of the Investor to meet its
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obligations under this Section 3.1(k) and will join in this Agreement solely for
that limited purpose.
l. As of the date of this Agreement, the Investor is not aware of any
fact, or set of facts, it reasonably believes that would be sufficient grounds
for any state or federal regulator to deny approval of the consummation of the
transactions contemplated by this Agreement.
3.2. Legends. It is understood that the certificate(s) representing the
Preferred Stock and the certificate(s) representing the Common Conversion Shares
may bear one or all of the following legends:
a. "The securities evidenced by this Certificate have been acquired for
investment and have not been registered under the Securities Act of 1933 (the
"1933 Act") in reliance on certain exemptions contained therein, or under the
securities act of any state (the "State Acts") in reliance on certain exemptions
contained therein. These securities shall not be sold, transferred or otherwise
disposed of except in a transaction (i) registered under the 1933 Act or exempt
from registration thereunder and registered under the State Acts or exempt from
registration thereunder, or (ii) otherwise in compliance with the 1933 Act and
the State Acts."
b. Any legend required by the laws of any state.
Each Investor hereby understands and agrees that the Company shall have no
obligation to remove the legends set forth in Section 3.2 unless and until the
securities covered thereby have been registered or can be sold pursuant to Rule
144(k) promulgated under the Act.
3.3. Authorization. All corporate action on the part of the Investor, its
officers, directors and members necessary for the authorization, execution and
delivery of this Agreement and the performance of all obligations of the
Investor hereunder has been taken or will be taken prior to the Closing. Upon
execution and delivery, this Agreement will be a valid and binding obligation of
the Investor, enforceable in accordance with its terms, except as may be limited
by applicable
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bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors' rights and by
general equitable principles.
4. Conditions of Investor's Obligations at the Respective Closing.
The obligations of the Investor to the Company under Section 1 of this
Agreement are subject to the fulfillment or waiver on or before the respective
Closing of each of the following conditions, the waiver of which shall not be
effective by or against the Investor unless in writing:
4.1. Material Adverse Change. Since the date of this Agreement, there have
been no material adverse changes, occurrences or developments in the business of
the Company that have, or would be expected to have, a material adverse effect
on the business, operations or financial condition of the Company, and Investor
shall not have discovered any fact or circumstance not disclosed by the Company
prior to the date of this Agreement that has resulted in, or could reasonably be
expected to result in, a material adverse effect on the business, operations or
financial condition of the Company.
4.2. Representations and Warranties. The representations and warranties of
the Company contained in Section 2 shall be true and correct on and as of the
Closing Date. Each other representation and warranty of the Company set forth
in this Agreement that is not so qualified shall be true and correct in all
material respects as of the Closing Date as though made at and as of such time,
except to the extent that any such representation and warranty expressly relates
to an earlier date (in which case any such representation and warranty that is
qualified as to materiality shall be true and correct, and any such
representation and warranty that is not so qualified shall be true and correct
in all material respects, as of such earlier date).
4.3. Performance. The Company shall have performed and complied with in
all material respects all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before such Closing.
4.4. Compliance Certificate. The Company's President or Chief Financial
Officer shall deliver to each Investor at the respective Closing a certificate,
dated the Closing Date, certifying that the conditions specified in Section 4
have been fulfilled.
4.5. Qualifications. All authorizations, approvals, or permits, including
necessary insurance regulatory approvals, solicitation permits 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 lawful
issuance and sale of the Preferred Stock pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing Date. The
Investor shall have no obligation or responsibility under Section 1 of this
Agreement unless all such authorizations, approvals, or permits, whether
required to be obtained by the Company or by the Investor, are duly obtained and
are effective on and as of the Closing Date.
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4.6. Proceedings and Documents. All corporate and other proceedings,
including shareholder approval, if required, in connection with the transactions
contemplated hereby and all documents and instruments incident thereto shall be
reasonably satisfactory in form and substance to the Investor. The Investor
shall have received all such counterpart original and certified or other copies
of such documents as it may reasonably request.
4.7. Opinion of Company Counsel. The Investor shall have received from
counsel for the Company, an opinion, dated as of the respective Closing, and in
substantially the form attached hereto as Exhibit D.
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4.8. Legal Investment. At the time of the respective Closing, the purchase
of the Preferred Stock to be purchased by the Investor hereunder shall be
legally permitted by all laws and regulations to which the Investor and the
Company are subject.
4.9. Credit Facility. No later than the Closing Date, the Company shall
have entered into a credit facility in form and substance reasonably
satisfactory to the Investor, pursuant to that certain commitment letter
attached hereto as Exhibit F.
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4.10. No Change in Ratings of the Company. The Company 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 the Company's ratings by A.M. Best, Standard &
Poor's Corporation, Xxxxx'x Investor Service or Duff & Xxxxxx.
4.11. Appointment of Directors. Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxxxx,
Xx. shall have been appointed to the Board of Directors of the Company.
4.12. Employment Agreements With Existing Senior Management. The Company
and certain existing senior management of the Company shall have entered into
employment agreements in form and substance mutually satisfactory to both the
Investor and the Company.
4.13. Removal of Regulatory Limits. The limits imposed on the insurance
subsidiaries of the Company by the departments of insurance of Alabama and Ohio
shall have been removed.
4.14. No Defaults. The Company shall not be in default with respect to any
of its outstanding indebtedness and shall have received all necessary lender
approvals.
4.15. Amendments to Corporate Documents. All necessary amendments to the
Company's Restated Certificate of Incorporation and Bylaws to accomplish the
foregoing would be approved by the Company's stockholders or Board of Directors
as required.
4.16. Waiver of Business Combinations With Interested Stockholders. The
Company shall hereby and forthwith waive any and all provisions that would
prohibit or preclude a business
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combination with Investor as an interested stockholder of the Company as
provided in Section 203 of the General Corporation Law of the State of Delaware
(the "DGCL").
4.17. Orders, Decrees or Injunctions. Neither the Company nor any of its
subsidiaries, nor the Investor, shall be subject to any order, decree or
injunction by a court of competent jurisdiction which (i) prevents the
consummation of the transactions contemplated by this Agreement; or (ii) would
impose any material limitation on the ability of the Investor effectively to
exercise full rights of ownership of the Preferred Stock or the Common Stock of
the Company.
4.18. Statutes, Rules or Regulations. No statute, rule or regulation shall
have been enacted after the date of this Agreement by the government (or any
governmental agency) of the United States or any state, municipality or other
political subdivision thereof that makes the consummation of the transactions
contemplated by this Agreement hereby illegal.
5. Conditions of the Company's Obligations at the Respective Closing.
The obligations of the Company to the Investor under Section 1 of this
Agreement are subject to the fulfillment or waiver on or before the respective
Closing of each of the following conditions, the waiver of which shall not be
effective by or against the Company unless in writing.
5.1. Representations and Warranties. The representations and warranties of
the Investor contained in Section 3 shall be true on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.
5.2. Legal Investment. At the time of the respective Closing, the
purchase of the Preferred Stock to be purchased by the Investor hereunder shall
be legally permitted by all laws and regulations to which the Investor and the
Company are subject.
5.3. Qualifications. All authorizations, approvals, or permits, including
necessary insurance regulatory approvals, solicitation permits 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 lawful
issuance and sale of the Preferred Stock pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing Date. The
Company shall have no obligation or responsibility under Section 1 of this
Agreement unless all such authorizations, approvals, or permits, whether
required to be obtained by the Company or by the Investor, are duly obtained and
are effective on and as of the Closing Date.
5.4. Proceedings and Documents. All corporate and other proceedings,
including shareholder approval, if required, in connection with the transactions
contemplated hereby and all documents and instruments incident thereto shall be
reasonably satisfactory in form and substance to the Company. The Company shall
have received all such counter-part original and certified or other copies of
such documents as it may reasonably request.
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5.5. Credit Facility. No later than the Closing Date, the Company shall
have entered into a credit facility in form and substance reasonably
satisfactory to the Company, pursuant to that certain commitment letter attached
hereto as Exhibit F.
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5.6. Orders, Decrees or Injunctions. Neither the Company nor any of its
subsidiaries, nor the Investor, shall be subject to any order, decree or
injunction by a court of competent jurisdiction which (i) prevents the
consummation of the transactions contemplated by this Agreement; or (ii) would
impose any material limitation on the ability of the Investor effectively to
exercise full rights of ownership of the Preferred Stock or the Common Stock of
the Company.
5.7. Statutes, Rules or Regulations. No statute, rule or regulation shall
have been enacted after the date of the Agreement by the government (or any
governmental agency) of the United States or any state, municipality or other
political subdivision thereof that makes the consummation of the transactions
contemplated by this Agreement hereby illegal.
6. Registration Rights.
The Company covenants and agrees as follows:
6.1. Definitions. For purposes of this Section 6:
a. The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
b. The term "Registrable Securities" means (a) the Preferred Stock, (b)
the Common Con-version Shares, and (c) any Common Stock of the Company issued as
a dividend or other distribution with respect to, or in exchange for or in
replacement of the Preferred Stock or Common Stock issued or issuable upon
conversion thereof; provided, however, that any Registrable Securities sold by a
person in a transaction in which his or her rights under this Section 6 are not
assigned shall no longer be deemed to be Registrable Securities from and after
such sale; as to any particular Registrable Securities, once issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Act and such securities shall have been disposed of in
accordance with such registration statement, (ii) they are eligible to be
distributed to the public pursuant to Rule 144(k) of the Act, or (iii) they
shall have ceased to be outstanding;
c. The term "Holder" means any Investor owning or having the right to
acquire Registrable Securities or any assignee of registration rights hereunder
in accordance with Section 6.13 hereof; and
d. The term "Form S-3" means such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently adopted by the
Securities and Exchange
12
Commission (the "Commission") which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the Commission.
e. The term "Form S-1" means any such form under the Act as in effect on
the date hereof or any successor registration form under the Act subsequently
adopted by the Commission.
f. The term "Securities with Piggyback Rights" means securities of the
Company which are entitled upon request to be included in a registration
effected by the Company (including a registration statement effected by the
Company for shareholders).
6.2. Immediate Registration. Within thirty (30) days after the Closing
Date, the Company shall file a registration statement covering the Registrable
Securities on Form S-1 or Form S-3, as appropriate, under the Act, or a similar
document pursuant to any other statute then in effect corresponding to the Act,
and shall use its best efforts to effect, within ninety (90) days of the
Closing, the effectiveness of the Registration Statement and the registration
under the Act of all Registrable Securities.
6.3. Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan, relating to a Rule 145 transaction or a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
such Holder given within twenty (20) days after mailing of such notice by the
Company in accordance with Section 7.6 hereof, the Company shall, subject to the
provisions of Section 6.8 hereof, cause to be registered under the Act all of
the Registrable Securities (except for Preferred Stock) that each such Holder
has requested to be registered to the extent permitted by applicable law and
regulation.
6.4. Obligations of the Company. Whenever required under this Section 6 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
a. Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective.
b. Prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may
13
be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
c. Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
d. Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdiction.
e. In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with terms generally
satisfactory to the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
6.5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 6 that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
6.6. Expenses of Demand Registration. All expenses incurred in connection
with registrations pursuant to Section 6.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.
6.7. Expenses of Company Registration. The Company shall bear and pay all
costs of and incidental to any registration, filing or qualification of
Registrable Securities with respect to the registrations pursuant to Section 6.3
for each Investor (which right may be assigned as provided in Section 6.12),
including (without limitation) all registration, filing, and qualification fees,
printers' and accounting fees relating or apportionable thereto and the reason-
able fees and disbursements of one counsel for the selling Holders and the
Holders will bear and pay their pro rata portion of any underwriting discounts
and commissions.
6.8. Underwriting Requirements.
a. In connection with any offering involving an underwriting of shares,
the Company shall not be required under Section 6.3 to include any of the
Holders' securities in such underwriting
14
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity as
will not, in the opinion of the underwriters, jeopardize the success of the
offering by the Company or the Company shareholders demanding such registration.
If the total amount of Registrable Securities that all selling Holders of
Securities with Piggyback Registration Rights under Section 6.3 request to be
included in such offering exceeds (when combined with the securities being
offered by the Company or its share-holders demanding such registration) the
amount of securities that the underwriters reasonably believe compatible with
the success of the offering, then the Company shall be required to include in
the offering only that number of such Registrable Securities which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling Holders and
other holders of Securities with Piggyback Rights according to the total amount
of Securities with Piggyback Rights owned by each selling Holder or in such
other proportions as shall mutually be agreed to by such selling Holders), but
in no event shall the amount of securities of the selling Holders included in an
offering by the Company of its shares be reduced below twenty-five percent (25%)
of the total amount of securities included in such offering, unless, in the good
faith judgement of the Board of Directors, further reduction is necessary in
order to ensure that the offering raises sufficient capital to satisfy the
Company's regulatory obligations, or to prevent a lowering of a credit rating by
a nationally recognized credit rating service, provided that preference may be
given to other shareholders to the extent their securities have been included in
the registration upon exercise of a demand registration right held by them.
b. The Company shall have the right, upon the advice of the Board of
Directors of the Company, upon giving written notice to Investor of the exercise
of such right to require Investor not to sell any shares pursuant to the
registration statement filed pursuant hereto for a period (as determined in good
faith by the Board of Directors) from the date on which such notice is given (a
"black-out period"), if (i)(A) the Company is engaged in discussions or
negotiations with respect to, or has proposed or taken a substantial step to
commence, or there otherwise is pending, any merger, acquisition, other form of
business combination, divestiture, tender offer, financing or other transaction,
or there is an event or state of facts relating to the Company, in each case
which is material to the Company (as reasonably determined by the Board of
Directors) (any such negotiation, step, event or state of facts being herein
called "Material Activity"), (B) in the reasonable judgment of the Board of
Directors, after consultation with and acting upon the written advice of outside
counsel, disclosure of such Material Activity would be necessary or advisable
under applicable securities laws and (C) such disclosure would, in the
reasonable judgment of the Board of Directors, be adverse to the interests of
the Company, or (ii) the Board of Directors, in its reasonable judgment, after
consultation with and acting upon the written advice of outside counsel, deems
it necessary to file a post-effective amendment to such registration statement
or to prepare a supplement to, or otherwise amend, the form of prospectus
contained therein. During any such black-out period, Investor agrees not to
sell any Registrable Shares under such registration statement for such period of
time as the Board of Directors, acting on the written advice of outside counsel,
may in good xxxxx xxxx advisable; provided, however, that no single black-out
period will be longer than sixty (60) calendar days and, in the aggregate, all
black-out periods in any twelve (12) month period shall not include more than
sixty (60) calendar days; provided, further, however, that no black-out period
may
15
be imposed by the Company during the first thirty (30) calendar days after the
effectiveness of the registration statement filed pursuant to Section 6.2. The
period of effectiveness of any registration statement in effect at the time of a
black-out period and the termination period under Section 6.8 shall be extended
for a period equal to the black-out period.
6.9. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 6.
6.10. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 6:
a. To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers, directors and partners of each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities joint or several to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (a) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (b) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (c) any violation or
alleged violation by the Company of the Act, the 1934 Act, any state securities
law or any rule or regulation promulgated under the Act, the 1934 Act or any
state securities law; and the Company will reimburse each such Holder, officer,
director and partners of each Holder, underwriter or controlling person for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section 6.10
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld); provided further,
however, that the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement, alleged untrue
statement, omission or alleged omission made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the Commission at
the time the registration statement becomes effective or the amended prospectus
filed with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any underwriter if a copy
of the Final Prospectus was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Act. The Company shall not be liable under any of the foregoing
circumstances for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
16
b. To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter (within the meaning of
the Act) for the Company or such other Holders, any person who controls such
underwriter, and any other Holder selling securities in such registration
statement or any of its directors, officers or partners or any person who
controls such Holder, against any losses, claims, damages, or liabilities (joint
or several) to which the Company or any such director, officer, partners,
controlling person, or underwriter or controlling person, or other such Holder
or director, officer or controlling person may become subject, under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, partner,
controlling person, underwriter or controlling person, other Holder, officer,
director, partner, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 6.10 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld.
c. Promptly after receipt by an indemnified party, under this Section
6.10, of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6.10, notify the
indemnifying party in writing of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
6.10, but the omission so to notify the indemnifying party will not relieve it
of any liability that it may have to any indemnified party otherwise than under
this Section 6.10.
6.11. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
17
a. make and keep current public information available, as that term is
understood and defined in Commission Rule 144, at all times after the Closing;
b. take such action as is reasonably necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities;
c. file with the Commission in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
d. furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (a) a written statement by the Company that
it has complied with the reporting requirements of Commission Rule 144, the Act
and the 1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies); (b) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company; and (c) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the
Commission which permits the selling of any such securities without registration
or pursuant to such form.
6.12. Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 6 may be assigned by a
Holder to (1) any affiliate of such Holder, or if such Holder is a partner-ship,
any partner or partners of such Holder, and (2) any other transferee or assignee
of such securities provided that (a) such assignment or transfer relates to not
less than 500,000 Common Conversion Shares, or 250,000 shares of Preferred
Stock, subject to any adjustment for stock splits, subdivision or similar
capital reorganization of the Company's capital stock, (b) the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned, (c) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act, (d) such rights may not be assigned to any person or
entity which, in the Company's reasonable judgment, is a competitor of the
Company, and (e) without the Company's written consent, such rights may not be
assigned to anyone who is not an accredited investor or to anyone for whom
regulatory approval is required without such approval first being obtained. No
such assignment shall occur prior to the Closing Date without the Company's
consent.
7. Covenants.
7.1. Conduct of the Company's Business. From the date hereof until the
earliest of (a) the termination of this Agreement or (b) the Closing, except for
activities previously disclosed in writing to the Investor or set forth on
Schedule 7.1 hereto, the Company shall conduct its business only in the ordinary
course, consistent with past practice.
18
7.2. Standstill Agreement. Without the prior written consent of the
Company, for a period of three years from the Closing Date, the Investor will
not acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or direct or indirect rights or
options to acquire any voting securities of the Company if, as a result of such
acquisition, the Investor or any "group" (within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934) of which the Investor is a member would
then beneficially own 40% or more of such outstanding voting securities of the
Company. In addition, without prior written consent of the Company, for a
period of two years, the Investor agrees not to (a) make, or in any way
participate, directly or indirectly, in any "solicitation" of proxies to vote
(as such terms are used in the proxy rules of the Commission) or to seek to
advise or influence any person or entity with respect to the voting of greater
than 40% of the voting securities of the Company; or (b) form, join or in any
way participate in a "group" within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934 with respect to greater than 40% of the voting
securities of the Company. For a period of two years from the Closing Date,
Investor will not acquire, offer to acquire, or agree to acquire by purchase, by
joining a partnership, limited partnership, syndicate or other "group" (as such
term is used in Section 13(d)(3) of the Exchange Act, hereinafter referred to as
a "13D Group"), greater than 40% of the voting securities of the Company. The
Investor may, however, acquire up to 40% of the voting securities of the Company
and, in that event, the Investor will obtain all necessary regulatory approvals
in acquiring up to 40% of the voting securities of the Company, and the Company
will cooperate with the Investor to obtain such approvals. Prior to acquiring
any shares of capital stock of the Company, other than upon exercise of its
rights hereunder and the Preferred Stock, the Investor shall give written notice
of its intention to do so to the Company. Within (10) ten days after receipt of
such notice, the Company will advise the Investor, in writing, if it believes
that the proposed acquisition would require regulatory approval or would violate
the provisions of this paragraph, and the Company and the Investor will
cooperate to obtain regulatory approval to consummate the proposed acquisition
or in structuring the transaction in such a way that it does not violate this
paragraph.
The Investor shall not participate, in, or encourage, the formation of any
13D Group which owns or seeks to acquire beneficial ownership of or otherwise
act in respect of, greater than 40% of the voting securities, other than any 13D
Group which is comprised exclusively of the Investor and any other permitted
transferee or transferee of Preferred Stock from the Investor.
7.3. Notice of Subsequent Events. The Company shall notify the Investor of
any changes, additions or events which would cause any material change in or
material addition to the Schedule of Exceptions delivered by the Company under
this Agreement, promptly after the occurrence of the same. If the effect of
such change or addition would, individually or in the aggregate with the effect
of changes or additions previously disclosed pursuant to this Section 7.3,
constitute a material adverse effect on the notifying party, the Investor may,
within ten (10) days after receipt of such notice, but prior to closing, elect
to terminate this Agreement.
7.4. Public Disclosures. The Company and the Investor will consult with
each other, and agree upon the contents thereof, before issuing any press
release or otherwise making any public
19
statement with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation and agreement except as may be required by applicable law
or requirements of the New York Stock Exchange.
7.5. Approvals; Governmental Filings. From and after execution of this
Agreement, the Company and the Investor shall use their respective best efforts
to obtain all third party consents and approvals, if any, including from
stockholders of the Company, financial institutions, regulatory authorities and
other persons, necessary to consummate the transactions contemplated hereby.
The parties hereto will cooperate in the preparation and filing of any required
governmental or regulatory notices and filings. Without limiting the foregoing,
promptly after execution of this Agreement, the parties shall cooperate in
preparing and making all necessary filings under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and obtaining the early termination of the
waiting period thereunder.
7.6. Meeting of Stockholders. The Company will take all steps necessary in
accordance with its Restated Certificate of Incorporation and Bylaws and the
DGCL to call, give notice of, convene and hold a meeting of its stockholders
(the "Stockholders' Meeting") as soon as reasonably practicable after the date
of this Agreement for the purpose of approving the transactions contemplated by
this Agreement and for such other purposes as may be necessary. Unless this
Agreement shall have been validly terminated as provided herein, the Board of
Directors of Directors, subject to Section 7.9, will (i) recommend to its
stockholders the approval of this Agreement, the transactions contemplated
hereby and any other matters submitted to the stockholders in connection
therewith, to the extent such approval is required, and (ii) use its reasonable
good faith efforts to obtain the approval by its stockholders of this Agreement
and the transactions contemplated hereby.
7.7. Proxy Statement. As soon as practicable after the date of this
Agreement, the Company shall prepare and distribute to its stockholders a proxy
statement (the "Proxy Statement") designed to provide its stockholders with such
information as needed about this Agreement in order to comply with the
provisions of the 1934 Act and the DGCL. The Investor shall provide the Company
with such information as shall be reasonably requested by the Company in order
to prepare the Proxy Statement. The information supplied by the Company for
inclusion in the Proxy Statement shall not, at the time of the mailing of the
Proxy Statement, the Stockholders' Meeting or the Closing, contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The information supplied by the Investor for inclusion in the Proxy
Statement shall not, at the time of the mailing of the Proxy Statement, the
Stockholders' Meeting or the Closing, contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. If at any
time prior to the Closing any fact or circumstance should be discovered by
either party which should be set forth in an amendment or supplement to the
Proxy Statement, that party shall promptly inform the other party and the
Company shall promptly prepare and distribute such amendment or supplement to
the Proxy Statement.
20
7.8. Use of Proceeds. The Company shall use all proceeds from the
Offering to reduce its outstanding debt under its Amended and Restated Credit
Agreement among Vesta Insurance Group, Inc., the Lenders named therein,
SouthTrust Bank of Alabama as Documentation Agent and First Union National Bank
of North Carolina, as administrative agent dated April 8, 1997, as amended (the
"Revolving Credit Facility").
7.9. Non-Solicitation.
a. During the Exclusivity Period (as defined below), the Company and its
affiliates shall not, and shall not authorize or permit any officer, director,
employee, agent, advisor or other representative (each, a "Representative") of
the Company or any of its affiliates to, directly or indirectly, (i) solicit or
initiate, or encourage the submission of, any Proposal (as defined below), (ii)
except to the extent necessary, if any, to satisfy the Company's fiduciary
obligations, participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Proposal or Alternative Transaction (as defined below),
other than with the Investor, or (iii) except to the extent necessary, if any,
to satisfy the Company's fiduciary obligations, authorize, engage in or enter
into any agreement with respect to, any Alternative Transaction. The Company
will promptly advise the Investor of, and communicate to the Investor the terms
of, any Proposal that the Company, any of its affiliates or any of their
respective Representatives may receive during the Exclusivity Period.
b. For purposes of this Agreement: (i) "Proposal" means any inquiry,
proposal or offer from any person relating to an Alternative Transaction; (ii)
"Alternative Transaction" means any (A) direct or indirect acquisition or
purchase of any equity securities of, or other equity interest in, any member of
the Company that if consummated would result in any person beneficially owning
(or having the right to acquire) 10% or more of any class of equity securities
of or of the equity interest in any member of the Company or which would require
approval under any federal, state or local law, rule, regulation or order
governing or relating to the current or contemplated operations of any member of
the Company, (B) merger, consolidation, business combination, sale of a material
portion of the assets (including, without limitation, by means of any
reinsurance or renewal rights transaction), recapitalization, liquidation,
dissolution or similar transaction involving any member of the Company, or (C)
other transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the transactions with the
Investor contemplated by this Agreement or which would reasonably be expected to
materially dilute the benefits of such transactions to the Investor; and (iii)
"Control Transaction" means any transaction that involves a (A) merger or
consolidation or similar business combination involving the Company or a
significant subsidiary of the Company (other than a "merger of equals"
transaction), (B) sale of all or substantially all of the assets of the Company,
or (C) sale or issuance of Company Common Stock or other equity securities of
the Company to a person which, following the completion of such sale or
issuance, will beneficially own Company Common Stock or other equity securities
of the Company representing 10% of the voting power with respect to the election
of the directors of the Company.
21
c. For purposes of this Agreement, "Exclusivity Period" means the period
commencing upon the Company's execution hereof and ending on the earlier of
(i) the termination of this Agreement pursuant to paragraph 8 hereof or (ii) the
Closing Date. For purposes of this paragraph 7, the term "person" shall be
construed broadly to include any corporation, partnership or other entity and
any "group" (within the meaning of Rule 13d-5 under the Securities Exchange Act
of 1934, as amended).
d. In the event of any breach or threatened breach of any of the
provisions of this paragraph 7 by the Company, the Investor shall be entitled to
equitable relief by way of injunction in addition to any other rights or
remedies available to it.
7.10. Conversion of the Preferred Stock; Director Nominees. In the
event that the Preferred Stock is automatically converted into Common Stock of
the Company pursuant to the Certificate of Designation of Preferences and Rights
of Series A Convertible Preferred Stock (the "Certificate of Designation"),
subsequent to such conversion for as long as the Investor owns at least 15% of
the issued and outstanding Common Stock of the Company, the Investor shall be
entitled to designate nominees to the Company's Board of Directors as if it were
the sole holder of all of the Preferred Stock as set forth in the Certificate of
Designation.
8. Termination. This Agreement shall terminate upon the earliest to
occur of (a) the mutual written agreement of the Company and the Investor, (b)
the delivery of written notice by the Investor to the Company or by the Company
to the Investor after the Company announces, or enters into any agreement with
respect to, a Control Transaction or any Control Transaction is consummated, (c)
the delivery by the Investor to the Company of written notice to terminate in
the Investor's sole discretion based on its determination that a material
adverse change has occurred in the business, operations, prospects or financial
condition of the Company and (d) unless extended by the parties hereto in
writing, 5:00 p.m. Central Time on December 31, 1999. In addition, upon any
such termination any obligations under this Agreement shall terminate and no
party shall have any liability whatsoever to any other party other than as set
forth in paragraph 9.
9. Fees and Expenses. The parties hereto shall each bear their own
respective costs and expenses in connection with the transactions contemplated
hereby; provided, however, that if this Agreement is terminated pursuant to
Section 8(b) hereof, the Company shall, promptly upon request therefor,
reimburse Investor for its costs and expenses (including, without limitation,
the reasonable fees and expenses of its counsel and other representatives of the
Investor) in connection with the transactions contemplated hereby. In the event
the transactions contemplated by this Agreement are consummated, the expenses
incurred by the Investor shall be borne by the Company.
10. Survival of Representations and Warranties; Indemnification
10.1. Survival of Warranties. The warranties, representations and
covenants of the Company contained in or made pursuant to this Agreement shall
survive the execution and delivery
22
of this Agreement and the Closing and for a period of six years following the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor.
10.2. Indemnification. The Company will indemnify and hold harmless
Investor and its representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
a. any breach of any representation or warranty made by the Company in
this Agreement (without giving effect to any supplement to the Schedule of
Exceptions), the Schedule of Exceptions, the supplements to the Schedule of
Exceptions, or any other certificate or document delivered by the Company
pursuant to this Agreement;
b. any breach of any representation or warranty made by the Company in
this Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Schedule of
Exceptions, other than any such breach that is disclosed in a supplement to the
Schedule of Exceptions and is expressly identified in the certificate delivered
pursuant to Section 4 as having caused the condition specified in Section 4 not
to be satisfied;
c. any breach by the Company of any covenant or obligation of the
Company in this Agreement;
d. any claim by any person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such person with (or any person acting on their behalf) in
connection with any of the transactions contemplated by this Agreement.
The remedies provided in this Section 10 will not be exclusive of or limit
any other remedies that may be available to the Investor or the other
Indemnified Persons.
11. Miscellaneous
11.1. Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Investor shall not assign this Agreement in any manner
which violates this Agreement. Further, without the written consent of the
Company, the Investor shall not assign this Agreement during the period
subsequent to the first regulatory filing seeking approval to consummate the
transactions contemplated by this Agreement and prior to the Closing. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective
23
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
11.2. Further Assurances. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
11.3. "Including." The word "including," when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation," "but not limited to," or words of
similar import) is used with reference to the word "including" or the similar
items or matters, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the possible scope of the general
statement, term or matter.
11.4. "Material," or "Material Adverse Effect." "Material" means, when
used in connection with one or more entities, material to the business,
prospects, assets, properties, operations, results of operations or condition
(financial or other) of such entity or entities and all other entities with
which such entity or entities are consolidated for financial accounting
purposes, taken as a whole. "Material adverse change" or "material adverse
effect" means, when used in connection with one or more entities, any change,
effect, event, circumstance or occurrence that has, or is reasonably likely to
have, individually or in the aggregate, a material adverse impact on the
business, prospects, assets, properties, operations, results of operations or
condition (financial or other) of such entity or entities and all other entities
with which such entity or entities are consolidated for financial accounting
purposes, taken as a whole; provided, however, that "material adverse change"
and "material adverse effect" shall be deemed to exclude the impact of changes
in generally accepted accounting principles.
11.5. Knowledge. Whenever the term "knowledge," "best knowledge" or
similar expression is used in this Agreement, it shall mean knowledge of a
party's respective directors and the executive officers and to include the
assurance that such knowledge is based upon reasonable investigation unless
otherwise expressly provided.
11.6. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Alabama applicable to agreements between
residents of such state entered into and to be performed entirely within such
state.
11.7. Counterparts. This Agreement may be executed 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.
11.8. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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11.9. Notices. Any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or telex, or seven days after deposit with
a domestic Post Office, by registered mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party below, or at such
other address as such party may designate by ten days' advance written notice to
the other parties:
a. If to the Company:
Vesta Insurance Group, Inc.
0000 Xxxxx Xxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, III, President & CEO
b. If to the Investor:
Birmingham Investment Group, LLC
00 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Manager
11.10. Entire Agreement; Amendment.
a. This Agreement (including the Exhibits hereto) and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
b. Any term of this Agreement, other than terms contained in Section 6,
may be amended, waived or discharged (either generally or in a particular
instance and either retroactively or prospectively), by a written instrument
signed by the Company and the Investor; provided, however, that, except for the
conditions set forth in Section 4 hereof, holders of a majority in interest of
the Common Conversion Shares, and excluding all Common Conversion Shares sold to
the public, may by written instrument waive satisfaction of any term or
condition which operates for the benefit of an Investor under this Agreement,
but in no event shall the obligations of an Investor hereunder be increased,
except upon the written consent of such Investor.
c. Any term of Section 6 may be amended and the observance of any term
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the con-sent of the Company and the
holders of a majority of the Registrable Securities (as defined in Section
6.1(1)).
d. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon the holder of any securities purchased under this
Agreement at the time outstanding (including
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securities into which such securities are convertible), each future holder of
all such securities, and the Company.
11.11. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
11.12. No Rule of Construction. The parties acknowledge that this
Agreement was mutually prepared and that all parties have read and negotiated
the language used in this Agreement. The parties agree that, because all parties
participated in negotiating and drafting this Agreement, no rule of construction
shall apply to this Agreement which construes ambiguous language in favor of or
against any party by reason of that party's role in drafting this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
VESTA INSURANCE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx III
---------------------------------------------
Its: President and CEO
---------------------------------------------
BIRMINGHAM INVESTMENT GROUP, LLC
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------------
Name: Xxxxx X. Xxxxxx
---------------------------------------------
Title: Manager
-------------------------------------------
/s/ Xxxxx X. Xxxxxxxx, Xx.
--------------------------------------------------
L.S.
Solely for purposes of Section 3.1(k) hereof.
/s/ Xxxxx X. Xxxxxx
--------------------------------------------------
L.S.
Solely for purposes of Section 3.1(k) hereof.
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