DEFERRED PAYMENT AGREEMENT
This Deferred Payment Agreement ("AGREEMENT"), dated as of November 16,
1998, is by and among THE INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
a Texas corporation (the "COMPANY"), FIRST COMMAND FINANCIAL CORPORATION, a
Texas corporation ("FIRST COMMAND") and XXXXX X. XXXXX, an individual resident
of Dallas, Dallas County, Texas ("XXXXX") (individually, a "PARTY" and together,
the "PARTIES").
WHEREAS, the Company and Xxxxx are parties to that certain Settlement
Agreement of even date herewith (the "SETTLEMENT AGREEMENT"); and
WHEREAS, in connection with the Settlement Agreement, the Parties desire to
enter into this Agreement whereby the Company and First Command agree, in the
event of each Sale (as defined below) at any time within ten (10) years of the
date hereof (the "TERM"), to pay to Xxxxx the Deferred Payment Amount (as
defined below) attributable to that Sale.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. DEFERRED PAYMENT AMOUNT. The "DEFERRED PAYMENT AMOUNT" attributable
to a Sale shall be equal to the excess of (a) the value of the Subject
Interests (as defined below) in that Sale over (b) the sum of $6,100,000 plus
all prior Deferred Payment Amounts paid hereunder. The "SUBJECT INTERESTS"
are the following: (a) twelve percent (12%) of the direct or indirect voting
equity interests of the Company (on a fully diluted basis) (the "VOTING
INTERESTS") thereby entitling the holder thereof to receive that percent of
the Sales Proceeds (as defined below) otherwise attributable to those
interests; and (b) four and fifty-five hundredths percent (4.55%) of the
Non-Voting Interests (as defined below) (on a fully diluted basis) thereby
entitling the holder thereof to receive that percent of the Sales Proceeds
otherwise attributable to those interests; provided, however, as a result of
any Sale, such percentages shall be adjusted for future Sales in the same
proportions that existing holders' percentages thereof are adjusted in that
Sale (E.G., if, as a result of any Sale, existing holders of Voting Interests
tender sixty percent (60%) of their Voting Interests to a third party, the
percentage of Voting Interests on future Sales shall be reduced by sixty
percent (60%)). The "NON-VOTING INTERESTS" are (a) the Mission
Accomplishment Plan ("MAP") Units ("MAP UNITS") (or successor or similar
rights, which specifically exclude the Company's other existing deferred
compensation plans) and (b) the non-voting equity interests of the Company
(on a fully diluted basis). For these purposes, "SALES PROCEEDS" mean the
payments or proceeds or value resulting from a Sale, whether payable or
realizable at the time of the Sale or thereafter, to the holders of the
Voting Interests or Non-Voting Interests, as appropriate.
2. NATURE AND TIMING OF PAYMENT. The Company and First Command shall
immediately notify Xxxxx upon the occurrence of any Sale. The Company and
First Command hereby agree that, in the event of each Sale during the Term,
the Company shall make a cash payment (by wire transfer) to Xxxxx equal to
the Deferred Payment Amount attributable to that Sale, within fifteen (15)
days of the closing of that Sale.
3. SALE OF THE COMPANY. For purposes of this Agreement, "SALE" shall
mean each of the following occurrences: (a) the sale or transfer, directly or
indirectly, pursuant to a purchase, merger, exchange or reorganization agreement
of (i) more than fifty percent (50%) of the issued and outstanding capital stock
of the Company, or (ii) more than fifty percent (50%) of the issued and
outstanding voting stock
of the Company, or (iii) all or substantially all of the Company's assets; or
(b) the consummation by the Company of a registered public offering of any
class of its capital stock thereby creating the opportunity for a public
trading market for such stock; or (c) a merger, exchange or other
reorganization transaction after which the Company is not the surviving
entity or after which the Company is the surviving entity and the
shareholders of the Company immediately prior to such transaction do not own
a majority of the Company immediately following such transactions; provided,
however, none of the following transactions shall constitute a Sale: (i) the
merger (the "MERGER") of the Company with and into First Command as described
in the Company's Proxy Statement dated October 30, 1998; (ii) the Company's
customary purchases of its stock pursuant to its existing shareholders'
agreements or its Articles (as such will be amended pursuant to the Merger)
or payments for MAP Units (or successor or similar rights) as contemplated by
the MAP (or successor or similar plan); (iii) a restructuring of the Company
in which each of its then existing shareholders thereafter directly or
indirectly hold equity interests in the Company in roughly the same
percentages held immediately prior thereto; and (iv) the transfer by one or
more shareholders of any of their shares to an entity in which their ultimate
beneficial ownership in the Company or its assets is not substantially
changed as a result thereof (e.g., a transfer to an "electing small business
trust" under Section 1361(e) of the Code). This Agreement shall survive the
Merger and is binding on the Company's successor in the Merger.
4. NO OBLIGATION TO EFFECT A SALE. This Agreement does not create any
obligation on behalf of the Company or any successor of the Company, or on the
Board of Directors or officers of the Company or any of their successors, to
effect or to attempt to effect any transaction which would constitute a Sale.
5. NO INTEREST AS A STOCKHOLDER. This Agreement does not xxxxx Xxxxx any
interest or rights as a stockholder or owner of any other equity interest in the
Company. Likewise, as a result of this Agreement, the Board of Directors and
the officers of the Company shall not owe Xxxxx any of the duties or
obligations, if any, owed to shareholders of the Company, other equity holders
in their capacities as such holder, or holders of MAP Units (or successor or
similar rights). The Board of Directors and the officers of the Company shall
have full discretionary power to make all management and operational decisions
based on their determination of the best interest of the Company.
6. TERMINATION. This Agreement shall terminate and shall be of no
further force or effect immediately after the earlier of (a) the payment by the
Company to Xxxxx of the Deferred Payment Amount from a Sale that results in no
continuing equity interest in the Company by any of the Company's existing
shareholders as of the date hereof, (b) the tenth (10th) anniversary of the date
of this Agreement or (c) the mutual agreement of the Parties.
7. REPRESENTATIONS AND WARRANTIES. The parties to this Agreement hereby
represent and warrant as follows:
(a) AUTHORIZATION OF AGREEMENT; BINDING OBLIGATION. Each Party has
the requisite power and authority to execute and to deliver this Agreement and
to perform the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each Party and thus, constitutes a valid and binding
obligation enforceable against each such Party in accordance with its terms.
(b) NO CONFLICTS. The execution and delivery of this Agreement by
the Parties and the consummation of the transactions contemplated herein do
not, and will not, conflict with or result in any violation of any charter,
bylaws or other organizational document of the Company or any other agreement,
document or law to which any Party is bound.
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8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the Parties with respect to the subject matter hereof and
supersedes all prior agreements and/or understandings, oral or written, between
the Parties with respect to the subject matter hereof. No representation,
warranty, promise, inducement or statement of intention has been made by any
Party which is not embodied in this Agreement, and no Party hereto shall be
bound by, or liable for, any alleged representation, warranty, promise,
inducement or statement of intention not embodied herein.
(b) APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
principles of conflicts of laws.
(c) BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the Parties and their respective successors, assigns, heirs or
devisees.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
to be effective as of the date first above written.
/s/ Xxxxx X. Xxxxx
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XXXXX X. XXXXX
THE INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
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Title: Chairman/C.E.O.
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FIRST COMMAND FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
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Title: Chairman/C.E.O.
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