Exhibit 1
[EXECUTION COPY]
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SECURITIES PURCHASE AGREEMENT
AMONG
INSTANT INSURANCE HOLDINGS, INC.,
AND
THE PURCHASERS NAMED HEREIN
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DATED AS OF DECEMBER 21, 2000
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TABLE OF CONTENTS
PAGE
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Article 1 THE TRANSACTIONS........................................................................1
1.1 Purchase and Sale of the Company Shares......................................................1
1.2 Purchase and Sale of the Vesta Shares........................................................2
1.3 Closing Matters..............................................................................2
1.4 The Closing..................................................................................2
1.5 Waiver of Preemptive Rights..................................................................3
Article 2 CONCURRENT EVENTS AND DELIVERIES........................................................3
2.1 Termination of Lyon Option Agreement.........................................................3
2.2 Termination of Fund II Option Agreement......................................................3
2.3 Termination of Private Fund II Option Agreement..............................................3
2.4 Stockholders Agreement.......................................................................3
2.5 Termination of Employee $6.71 Option Agreements..............................................4
2.6 Management Stock Call Agreement..............................................................4
2.7 Promote Stock Agreement......................................................................4
2.8 Amendment to Omnibus Incentive Plan and Reservation of Additional Shares.....................4
2.9 Xxxxxxx Employment Agreement.................................................................4
2.10 Xxxxxxx Option Agreement.....................................................................4
2.11 Vesta Registration Rights Agreement..........................................................5
Article 3 REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER TO THE COMPANY.........................5
3.1 Organization.................................................................................5
3.2 Authority....................................................................................5
3.3 No Violation.................................................................................5
3.4 Brokers......................................................................................6
3.5 Funds Available..............................................................................6
3.6 Securities Act Representations...............................................................6
Article 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO THE PURCHASERS.........................7
4.1 Corporate Organization.......................................................................7
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TABLE OF CONTENTS
(CONTINUED)
4.2 Capital Stock................................................................................8
4.3 Newly Issued Shares..........................................................................8
4.4 Subsidiaries.................................................................................9
4.5 Authority....................................................................................9
4.6 No Violation................................................................................10
4.7 Litigation..................................................................................10
4.8 Financial Statements........................................................................10
4.9 Compliance with Laws........................................................................11
4.10 No Material Adverse Change..................................................................11
4.11 No Undisclosed Liabilities..................................................................11
4.12 Conduct of Business; Certain Actions........................................................11
4.13 Contracts...................................................................................12
4.14 Taxes.......................................................................................13
4.15 Employee Benefit Plans......................................................................13
4.16 Brokers.....................................................................................13
4.17 Representations Regarding the Insurer.......................................................13
4.18 Private Offering............................................................................14
4.19 Accuracy of Information Furnished...........................................................14
Article 5 REPRESENTATIONS AND WARRANTIES OF CAPITAL Z TO VESTA...................................15
5.1 Organization................................................................................15
5.2 Authority...................................................................................15
5.3 No Violation................................................................................15
5.4 Brokers.....................................................................................15
5.5 Securities Act Representations..............................................................16
Article 6 REPRESENTATIONS AND WARRANTIES OF VESTA TO CAPITAL Z...................................17
6.1 Corporate Organization......................................................................17
6.2 Capital Stock...............................................................................17
6.3 Vesta Shares................................................................................18
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TABLE OF CONTENTS
(CONTINUED)
6.4 Subsidiaries................................................................................18
6.5 Authority...................................................................................18
6.6 No Violation................................................................................19
6.7 Brokers.....................................................................................19
6.8 Litigation..................................................................................19
6.9 Patents and Trademarks......................................................................20
6.10 Agreements; Action..........................................................................20
6.11 Registration Rights.........................................................................20
6.12 Disclosure..................................................................................20
6.13 Corporate Documents.........................................................................20
6.14 Title to Property and Assets................................................................21
6.15 Insurance...................................................................................21
6.16 No Adverse Changes..........................................................................21
6.17 Taxes.......................................................................................22
6.18 Private Offering............................................................................22
Article 7 COVENANTS AND AGREEMENTS...............................................................22
7.1 Company Access..............................................................................23
7.2 Vesta Access................................................................................23
7.3 Conduct of Business of the Company Prior to Closing.........................................23
7.4 Conduct of Business of the Company Prior to Conversion of the Series E Preferred Stock......23
7.5 Conduct of Business of Vesta................................................................25
7.6 Commercially Reasonable Efforts.............................................................25
7.7 Updating of Company Disclosure Schedules....................................................26
7.8 Updating of Vesta Disclosure Schedules......................................................26
7.9 Regulatory Approvals........................................................................26
Article 8 CONDITIONS PRECEDENT...................................................................27
8.1 Conditions to Each Party's Obligations......................................................27
8.2 Conditions to the Obligations of the Company................................................27
8.3 Conditions to the Obligations of Each Purchaser.............................................27
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TABLE OF CONTENTS
(CONTINUED)
8.4 Conditions to the Obligations of Vesta......................................................28
8.5 Conditions to the Obligations of Capital Z..................................................28
8.6 Conditions to the Obligations of Xxxxxxx....................................................29
Article 9 INDEMNIFICATION........................................................................29
9.1 Indemnification.............................................................................29
9.2 Defense of Third Party Claims...............................................................30
9.3 Limitations.................................................................................31
Article 10 MISCELLANEOUS..........................................................................32
10.1 Termination.................................................................................32
10.2 Effect of Termination.......................................................................32
10.3 Amendment...................................................................................32
10.4 Waiver......................................................................................32
10.5 Survival....................................................................................32
10.6 Notices.....................................................................................33
10.7 Confidentiality.............................................................................34
10.8 Headings....................................................................................34
10.9 Publicity...................................................................................34
10.10 Disclosure Schedules........................................................................34
10.11 Entire Agreement............................................................................34
10.12 Conveyance Taxes............................................................................34
10.13 Assignment..................................................................................35
10.14 Counterparts................................................................................35
10.15 Governing Law...............................................................................35
10.16 Third Party Beneficiaries...................................................................35
10.17 Costs and Expenses..........................................................................35
10.18 Incorporated by Reference...................................................................35
10.19 Number and Gender of Words..................................................................35
10.20 Execution of Additional Documents...........................................................35
10.21 Interpretation..............................................................................35
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TABLE OF CONTENTS
(CONTINUED)
10.22 Reformation; Severability...................................................................35
10.23 Time of the Essence.........................................................................36
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EXHIBITS
Exhibit A Form of Lyon Termination Agreement
Exhibit B Form of Fund II Termination Agreement
Exhibit C Form of Private Fund II Termination Agreement
Exhibit D Form of Stockholders Agreement
Exhibit E Form of $6.71 Termination Agreement
Exhibit F Form of Management Stock Call Agreement
Exhibit G Form of Promote Stock Agreement
Exhibit H Form of Xxxxxxx Employment Agreement
Exhibit I Form of Xxxxxxx Option Agreement
Exhibit J Form of Vesta Registration Rights Agreement
Exhibit K Form of Amended Company Charter
Exhibit L Insurance Reps
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SCHEDULES
Schedule 1.1 Company Shares to be Purchased
Schedule 1.2 Vesta Shares to be Purchased
Schedule 2.5 $6.71 Options
Schedule 4.2 $1.00 Options
Schedule 4.4 Company Subsidiaries
Schedule 4.6 Company Consents and/or Regulatory Approvals
Schedule 4.7 Company Litigation
Schedule 4.9 Company Compliance with Laws
Schedule 4.10 No Company Material Adverse Change
Schedule 4.11 No Company Undisclosed Liabilities
Schedule 4.12 Company Conduct of Business
Schedule 4.13 Company Contracts
Schedule 4.15 Company Benefit Plans
Schedule 4.17(a) Insurer's Insurance Matters
Schedule 4.17(b) Insurer's Licenses
Schedule 6.4 Vesta Subsidiaries
Schedule 6.6 Vesta Consents and/or Regulatory Approvals
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Cross-Reference Regarding Defined Terms:
SECTION
DEFINED TERM WHERE DEFINED
------------ -------------
$1.00 Options 4.15
$6.71 Options 2.5
$6.71 Termination Agreement 2.5
ACE 2.4
Affiliate 9.1
Agreement Preamble
Amended Company Charter 4.2
Breach 9.1
Capital Z Preamble
Closing 1.4
Closing Date 1.4
Company Preamble
Company Common Stock 2.5
Company Purchase Price 1.1
Company Shares 1.1
Company Subsequent Event 7.7
control 9.1
Employee Benefit Plan 4.15
Encumbrances 4.3
ERISA 4.15
Exchange Act 6.13
Financial Statements 4.8
Fund II Preamble
Fund II Option Agreement 2.2
Fund II Termination Agreement 2.2
GAAP 4.8
Xxxx 2.4
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SECTION
DEFINED TERM WHERE DEFINED
------------ -------------
Governmental Authority 3.3
Xxxxxxxxxx 2.4
Indemnified Party 9.2
Indemnifying Party 9.2
Insurance Reps 4.17
Insurer 4.17
Interim Financial Statements 4.8
Losses 9.1
Lyon 2.1
Lyon Option Agreement 2.1
Management Stock Call Agreement 2.6
Xxxxxxx Preamble
Xxxxxxx Employment Agreement 2.8
Xxxxxxx Option Agreement 2.9
Millers Mutual 2.4
Notes Recitals
Option Plan 2.8
Xxxx 2.4
Person 3.3
Xxxxxx 2.4
Preferred Stock 4.2
Private Fund II Preamble
Private Fund II Option Agreement 2.3
Private Fund II Termination Agreement 2.3
Promote Stock Agreement 2.7
Purchaser Transaction Documents 3.2
Purchasers Preamble
Requirements of Law 3.3
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SECTION
DEFINED TERM WHERE DEFINED
------------ -------------
Second Amended and Restated Management Stock Call Agreement 2.6
Second Amended and Restated Promote Stock Agreement 2.7
Second Amended and Restated Stockholders Agreement 2.4
SEC 6.13
Securities Act 3.6
Series A Preferred Stock 4.2
Series B Preferred Stock 4.2
Series C Preferred Stock 4.2
Series D Preferred Stock Recitals
Series E Preferred Stock Recitals
Series D Shares 1.1
Series E Shares 1.1
Stockholder 4.12
Stockholders Agreement 2.4
Subsequent Company Disclosure Schedule 7.7
Subsidiaries 4.4
Subsidiary 4.4
Transaction Documents 4.5
Vesta Preamble
Vesta Balance Sheet 6.13
Vesta Bylaws 6.1
Vesta Charter 6.1
Vesta Common Stock Recitals
Vesta Documents 6.13
Vesta Preferred Stock 6.2
Vesta Purchase Price 1.2
Vesta Registration Rights Agreement 2.11
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SECTION
DEFINED TERM WHERE DEFINED
------------ -------------
Vesta Series A Preferred Stock 6.2
Vesta Shares 1.2
Vesta Subsequent Event 7.8
Vesta Subsidiaries 6.4
Vesta Subsidiary 6.4
Vesta Transaction Documents 6.5
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement"), dated as
of December 21, 2000 by and among Instant Insurance Holdings, Inc., a Delaware
corporation (the "Company"), Vesta Insurance Group, Inc., a Delaware corporation
("Vesta"), Xxxxxx X. Xxxxxxx ("Xxxxxxx"), Capital Z Financial Services Fund II,
L.P., a Bermuda limited partnership ("Fund II"), and Capital Z Financial
Services Private Fund II, L.P., a Bermuda limited partnership ("Private Fund II"
and, collectively with Fund II, "Capital Z"). Vesta, Mangold, Fund II and
Private Fund II are referred to herein as the "Purchasers").
R E C I T A L S:
WHEREAS, the Purchasers desire to purchase from the
Company, and the Company desires to issue and sell to the Purchasers, the number
of shares of (a) Series D Convertible Preferred Stock, par value $1.00 per share
(the "Series D Preferred Stock"), of the Company or (b) Series E Convertible
Preferred Stock, par value $1.00 per share (the "Series E Preferred Stock"), of
the Company, as is set forth in Section 1.1 below, on the terms and subject to
the conditions set forth herein;
WHEREAS, Capital Z is the holder of Convertible Notes of
the Company in aggregate principal amount of $1,835,576.94 (the "Notes");
WHEREAS, as partial consideration for its purchase of
shares of Series E Preferred Stock, Capital Z will surrender the Notes to the
Company for cancellation;
WHEREAS, as partial consideration for its purchase of
shares of Series E Preferred Stock, Capital Z contributed
$500,000 in cash to the Company on December 20, 2000;
WHEREAS, the Capital Z desires to purchase from Vesta, and
Vesta desires to issue and sell to Capital Z, the number of shares of common
stock, par value $0.1 per share (the "Vesta Common Stock"), of Vesta, as is set
forth in Section 1.2 below, in consideration for the sale by Capital Z of
3,000,000 shares of Series E Preferred Stock being acquired by Capital Z
pursuant hereto;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to set forth the
terms and conditions of the transactions described herein and the mode of
carrying the same into effect, the parties hereby agree as follows:
A G R E E M E N T:
Article 1
THE TRANSACTIONS
1.1 Purchase and Sale of the Company Shares. Subject to the
terms and conditions of this Agreement, the Purchasers hereby agree to purchase
from the Company, and the Company agrees to issue and sell to the Purchasers, at
the Closing, up to an aggregate of (a) 1,359,115 shares of Series D Preferred
Stock (the "Series D Shares"), at a purchase price of $1.00 per Series D Share
and 11,840,885 shares of Series E Preferred Stock (the "Series E Shares" and,
collectively with the Series D Shares, the "Company Shares") at a purchase price
of $1.00 per Series E Share. The total purchase price to be paid by the
Purchasers for the Company Shares pursuant to this Section 1.1 is referred to
herein as the "Company Purchase Price." The purchase obligation of each
Purchaser will be the several obligation of such Purchaser to purchase, at the
Closing, the number of Company Shares indicated on Schedule 1.1 hereto to be
purchased at the Closing by such Purchaser, and no Purchaser will have any
obligation with respect to the purchase obligations of any other Purchaser.
1.2 Purchase and Sale of the Vesta Shares. Subject to the
terms and conditions of this Agreement, Capital Z hereby agrees to purchase from
Vesta, and Vesta agrees to issue and sell to Capital Z, at the Closing, up to an
aggregate of 555,738 shares of Vesta Common Stock (the "Vesta Shares"), at a
purchase price of $6.10 per Vesta Share, which purchase price will be paid by
transfer by Capital Z to Vesta of 3,000,000 shares of Series E Preferred Stock,
valued at $1.13 per share. The total purchase price to be paid by Capital Z for
the Vesta Shares pursuant to this Section 1.2 is referred to herein as the
"Vesta Purchase Price." The purchase obligation of each of Fund II and Private
Fund II will be the several obligation of such Purchaser to purchase, at the
Closing the number of Vesta Shares indicated on Schedule 1.2 hereto to be
purchased at the Closing by such Purchaser, and no Purchaser will have any
obligation with respect to the purchase obligations of any other Purchaser.
1.3 Closing Matters. At the Closing:
(a) Each of the Purchasers shall transfer by wire or
otherwise deliver or cause to be delivered to the Company, in accordance with
written wiring instructions delivered to the Purchasers at least two (2) days
prior to the Closing, the cash portion of the Company Purchase Price for the
Company Shares being purchased by such Purchaser at the Closing, in same day
funds, in accordance with the amounts set forth opposite such Purchaser's name
on Schedule 1.1; Capital Z shall surrender the Notes for cancellation and the
Company shall deliver to each Purchaser (or its designees) a certificate or
certificates, validly executed by a duly authorized officer of the Company and
in proper form, representing the Company Shares being purchased by each such
Purchaser at the Closing; and
(b) Each of Fund II and Private Fund II shall transfer to
Vesta, the Series E Shares being transferred by Fund II and Private Fund II in
accordance with the amounts set forth opposite such Purchaser's name on Schedule
1.2, for the Vesta Shares being purchased by Fund II and Private Fund II at the
2
Closing, and Vesta shall deliver to each such Purchaser a certificate or
certificates, validly executed by a duly authorized officer of Vesta and in
proper form, representing the Vesta Shares being purchased by each such
Purchaser at such Closing.
1.4 The Closing. Subject to the fulfillment of the
conditions precedent specified in Article 8 (any or all of which may be waived
in writing by the respective parties whose performance is conditioned upon
satisfaction of such conditions precedent), the closing of the purchase and sale
of the Company Shares and the Vesta Shares (the "Closing") shall be held at 9:00
a.m., central standard time, at the offices of Weil, Gotshal & Xxxxxx LLP,
Dallas, Texas, on (a) December 21, 2000 or on the first practicable business day
thereafter following the satisfaction of the conditions set forth in Article 8
hereof (other than any such conditions that, by their terms, cannot be satisfied
until the Closing) or (b) such other date as the parties hereto may agree. The
date on which the Closing occurs is referred to herein as the "Closing Date."
1.5 Waiver of Preemptive Rights. Each Purchaser hereby
waives any preemptive rights (and any notices in connection therewith) that
otherwise may be applicable to the issuance of the Company Shares (or to the
issuance of any other securities contemplated by this Agreement).
Article 2
CONCURRENT EVENTS AND DELIVERIES
Concurrently with the execution and delivery of this
Agreement, the following events are occurring and the following deliveries are
being made:
2.1 Termination of Lyon Option Agreement. X. Xxxxxxxx Xxxx
III ("Xxxx") and the Company are entering into a Termination Agreement in the
form of Exhibit A hereto (the "Lyon Termination Agreement"), which terminates
(effective upon the Closing) that certain Amended and Restated Option Agreement
(the "Lyon Option Agreement"), dated as of February 17, 2000, by and between
Lyon and the Company and which provides for the termination of the options
granted pursuant thereto.
2.2 Termination of Fund II Option Agreement. The Company
and Fund II are entering into a Termination Agreement in the form of Exhibit B
hereto (the "Fund II Termination Agreement"), which terminates (effective upon
the Closing) that certain Amended and Restated Option Agreement (the "Fund II
Option Agreement"), dated as of February 17, 2000, by and between the Company
and Fund II and which provides for the termination of the options granted
pursuant thereto.
2.3 Termination of Private Fund II Option Agreement. The
Company and Private Fund II are entering into a Termination Agreement in the
form of Exhibit C hereto (the "Private Fund II Termination Agreement"), which
terminates (effective upon the Closing) that certain Amended and Restated Option
Agreement (the "Private Fund II Option Agreement"), dated as of February 17,
2000, by and between the Company and Private Fund II and which provides for the
termination of the options granted pursuant thereto.
3
2.4 Stockholders Agreement. The Company, the Purchasers,
Lyon, X.X. Xxxxxx ("Xxxxxx"), Xxxxxxx Xxxxxxxxxx ("Xxxxxxxxxx"), Xxxxxx X. Xxxx
("Xxxx"), Xxxxx Xxxx ("Xxxx"), The Millers Mutual Fire Insurance Company, a
Texas insurance company ("Millers Mutual"), Millers Holding Corporation, a
Nevada corporation, and ACE Cash Express, Inc. ("ACE") are entering into a Third
Amended and Restated Stockholders Agreement in the form of Exhibit D hereto (the
"Stockholders Agreement"), which amends and restates (effective upon the
Closing) that certain Second Amended and Restated Stockholders Agreement (the
"Second Amended and Restated Stockholders Agreement"), dated as of September 13,
2000, by and among all of the foregoing parties other than Vesta and Xxxxxxx.
2.5 Termination of Employee $6.71 Option Agreements. The
Company and each of the individuals indicated on Schedule 2.5 are entering into
a Termination Agreement in the form of Exhibit E hereto (each a "$6.71
Termination Agreement"), which terminates (effective upon the Closing) each
Incentive Stock Option Agreement listed on Schedule 2.5, which agreements
pertain to options having an exercise price of $6.71 per share of Company Common
Stock and are by and between the Company and each such individual (collectively,
the "$6.71 Options").
2.6 Management Stock Call Agreement. Fund II, Lyon, Porter,
Grandstaff, Gohr, Xxxx and the Company are entering into a Third Amended and
Restated Management Stock Call Agreement in the form of Exhibit F hereto (the
"Management Stock Call Agreement"), which amends and restates (effective upon
the Closing) that certain Second Amended and Restated Management Stock Call
Agreement (the "Second Amended and Restated Management Stock Call Agreement"),
dated as of September 13, 2000, by and among the foregoing parties and which
provides for the existence of call rights on the part of Fund II with respect to
the issuance of certain shares of common stock, par value $.01 per share (the
"Company Common Stock"), of the Company, held by certain members of management,
on the terms and subject to the conditions set forth in the Management Stock
Call Agreement.
2.7 Promote Stock Agreement. Lyon, Porter, Grandstaff,
Gohr, Xxxx and the Company are entering into a Third Amended and Restated
Promote Stock Agreement in the form of Exhibit G hereto (the "Promote Stock
Agreement"), which amends and restates (effective upon the Closing) that certain
Second Amended and Restated Promote Stock Agreement (the "Second Amended and
Restated Promote Stock Agreement"), dated as of September 13, 2000, by and among
the foregoing parties, and which provides for the issuance to certain members of
management of certain shares of Company Common Stock, on the terms and subject
to the conditions set forth in the Promote Stock Agreement.
2.8 Amendment to Omnibus Incentive Plan and Reservation of
Additional Shares. The Instant Insurance Holdings, Inc. Omnibus Incentive Plan
(the "Option Plan") is being amended by the Company (effective upon the Closing)
to increase the maximum number of shares of Company Common Stock reserved and
available for issuance under the Option Plan from 2,700,000 shares to 6,700,000
shares, and all of such shares, to the extent not already the subject of
existing option grants and other than the shares subject to the Xxxxxxx Option
Agreement, are being reserved for issuance to members of management on terms
approved by the Board of Directors of the Company.
4
2.9 Xxxxxxx Employment Agreement. The Company and Xxxxxxx
are entering into an Employment Agreement in the form of Exhibit H hereto (the
"Xxxxxxx Employment Agreement"), which (effective upon the Closing) provides for
the employment of Xxxxxxx by the Company.
2.10 Xxxxxxx Option Agreement. The Company and Xxxxxxx are
entering into an Option Agreement in the form of Exhibit I hereto (the "Xxxxxxx
Option Agreement"), which (effective upon the Closing) provides for the grant by
the Company to Xxxxxxx of certain options to purchase Company Common Stock.
2.11 Vesta Registration Rights Agreement. Fund II, Private
Fund II and Vesta are entering into a Registration Rights Agreement in the form
of Exhibit J hereto (the "Vesta Registration Rights Agreement"), which
(effective upon the Closing) grants certain registration rights to Capital Z
with respect to the shares of Vesta Common Stock owned by Capital Z.
Article 3
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER TO THE COMPANY
Each of the Purchasers severally, and not jointly,
represents and warrants to the Company as follows:
3.1 Organization. If such Purchaser is an entity, such
Purchaser is a corporation, limited liability company or limited partnership, as
applicable, validly existing and in good standing under the laws of the
jurisdiction of its organization.
3.2 Authority. (a) Such Purchaser has full corporate,
partnership or limited liability company power (or, in the case of an
individual, capacity) and authority to execute and deliver this Agreement and
each other agreement to which it is or will be a party that is contemplated
hereby (as to each such Purchaser, collectively, the "Purchaser Transaction
Documents"), to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated on its part hereby and thereby; (b) the
execution, delivery and performance by such Purchaser of this Agreement and each
of the other applicable Purchaser Transaction Documents to which such Purchaser
is or will be a party and the consummation of the transactions contemplated on
its part hereby or thereby have been duly authorized by all necessary corporate,
partnership, limited liability company or other action on the part of such
Purchaser; and (c) this Agreement and each of the other applicable Purchaser
Transaction Documents has been or will be duly executed and delivered by such
Purchaser and (assuming due execution and delivery by the other parties hereto
and thereto), constitutes or will constitute a legal, valid and binding
agreement of such Purchaser, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting creditors' rights generally and subject to general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.3 No Violation. The execution and delivery by such
Purchaser of this Agreement and the Stockholders Agreement, the performance by
5
such Purchaser of its obligations hereunder and thereunder and the consummation
by it of the transactions contemplated hereby and thereby will not (a) assuming
compliance with the requirements of the Missouri Department of Insurance,
violate any provision of law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award (collectively, "Requirements of Law")
applicable to such Purchaser, (b) require such Purchaser to obtain the consent,
waiver, approval, license or authorization of, or make any notice or filing by
such Purchaser with, any Person or Governmental Authority, except as may be
required by the Missouri Department of Insurance, or (c) violate, result (with
or without notice or the passage of time, or both) in a breach of or give rise
to the right to accelerate, terminate or cancel any obligation under or
constitute (with or without notice or the passage of time, or both) a default
under, any of the terms or provisions of any charter, bylaws, certificate of
limited partnership or limited liability company, partnership or limited
liability company agreement, indenture, mortgage, agreement, contract, order,
judgment, ordinance, regulation or decree to which such Purchaser is subject or
by which such Purchaser is bound. As used in this Agreement, "Person" shall mean
any individual, corporation, partnership, limited liability company, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity. As used in this Agreement, "Governmental
Authority" means any United States (federal, state, or local), foreign or
supra-national government, or governmental regulatory or administrative
authority, agency, commission, court or tribunal. 3.4 Brokers. Such Purchaser
has not paid or become obligated to pay any fee or commission to any broker,
finder, investment banker or other intermediary (not including attorneys' fees)
in connection with this Agreement.
3.5 Funds Available. Such Purchaser has funds available, or
commitments from third parties to provide funds, sufficient to pay the cash
portion of the Company Purchase Price to be paid by such Purchaser.
3.6 Securities Act Representations.
(a) Except as expressly contemplated hereby, such Purchaser
is acquiring its portion of the Company Shares 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 of 1933, as
amended (the "Securities Act"). Except as expressly contemplated hereby, such
Purchaser does not have any present intention of selling, granting any
participation in, or otherwise distributing the Company Shares it is purchasing
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, such Purchaser does not have any 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
Company Shares it is purchasing.
(b) Such Purchaser acknowledges that the issuance of its
portion of the Company Shares will not be registered under the Securities Act or
any state securities laws on the basis of a claimed exemption by the Company
that the issuance of the Company Shares as provided for herein is exempt from
registration under the Securities Act and applicable state securities laws. Such
6
Purchaser acknowledges that the availability of such exemption is predicated in
part on such Purchaser's representations set forth in this Article 3 and that
the Company is relying on such representations.
(c) Such Purchaser has received all the information it
considers necessary or appropriate for deciding whether to accept the Company
Shares it is purchasing. Such Purchaser has had an opportunity to ask questions
of and to receive answers from the Company regarding the terms and conditions of
the issuance of the Company Shares it is purchasing and the business,
properties, financial condition and prospects of the Company and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to such Purchaser or to which such
Purchaser had access.
(d) Such Purchaser acknowledges that it is able to bear the
economic risk of the investment in the Company Shares it is purchasing, 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 Company
Shares it is purchasing.
(e) Such Purchaser is an "accredited investor" as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act.
(f) Such Purchaser acknowledges that the Company Shares 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
Company Shares or an available exemption from registration under the Securities
Act, such Company Shares must be held indefinitely. Such Purchaser further
acknowledges that the Company Shares it is purchasing may not be sold pursuant
to Rule 144 promulgated under the Securities Act unless all of the conditions of
that rule are met.
(g) Such Purchaser acknowledges that each certificate
representing any of the Company Shares it is purchasing 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.
7
Article 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO THE PURCHASERS
The Company represents and warrants to each Purchaser as
follows (each such representation and warranty being qualified by the
information set forth in any disclosure schedule relating to such representation
or warranty, as described in Section 10.10 hereof), provided, that the term
"Company" shall refer to the Company and each of its Subsidiaries (as defined
herein), unless the context otherwise requires:
4.1 Corporate Organization. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to lease the
properties it operates as lessee and to carry on its business as it is now being
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which such qualification is necessary, except
where the failure to be so qualified or licensed or be in good standing would
not reasonably be expected, individually or in the aggregate, to have a material
adverse effect on the Company. True and complete copies of the Certificate of
Incorporation and the Bylaws of the Company, as amended to date, have been
delivered to each of the Purchasers.
4.2 Capital Stock. As of the date hereof and before giving
effect to the Closing, the authorized capital stock of the Company consists in
its entirety of (a) 22,000,000 shares of Common Stock, of which 182,100 shares
are issued and outstanding and (b) 11,000,000 shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), of which (i) 701,250 shares are
designated as Series A Convertible Preferred Stock, par value $1.00 per share
(the "Series A Preferred Stock"), of which 330,000 shares are issued and
outstanding, (ii) 2,235,469 shares are designated as Series B Convertible
Preferred Stock, par value $1.00 per share (the "Series B Preferred Stock"), of
which no shares are issued and outstanding and (iii) 7,898,000 shares are
designated as Series C Convertible Preferred Stock, par value $1.00 per share
(the "Series C Preferred Stock"), of which 7,898,000 shares are issued and
outstanding. Prior to the Closing, a Certificate of Elimination and a
Certificate of Amendment of the Certificate of Incorporation of the Company in
the form of Exhibit K (the "Amended Company Charter") hereto shall be filed by
the Company with the Secretary of State of the State of Delaware to (A)
eliminate the Series B Preferred Stock, (B) increase the number of authorized
shares of Common Stock to 40,000,000, (C) increase the number of authorized
shares of Preferred Stock to 40,000,000 shares, (D) amend certain terms of the
Series A Preferred Stock and the Series C Preferred Stock (including to provide
for the issuance of 10,000 shares of Series C Preferred Stock to Xxxxx Xxxxxxxx,
an employee of the Company), and (E) designate 13,200,000 shares of Series D
Preferred Stock and 11,840,885 shares of Series E Preferred Stock. All of the
outstanding shares of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable and were issued in
compliance with all applicable federal and state securities laws. Except for
shares of capital stock of the Company issuable pursuant to (1) this Agreement,
(2) that certain Amended and Restated Option Agreement, dated as of February 17,
2000, by and between the Company and ACE, (3) the Lyon Option Agreement, (4) the
Fund II Option Agreement, (5) the Private Fund II Option Agreement, (8) the
$6.71 Options, (9) the $1.00 Options listed on Schedule 4.2, (10) the Second
8
Amended and Restated Management Stock Call Agreement, (11) the Second Amended
and Restated Promote Stock Agreement, (12) the currently issued and outstanding
shares of Series A Preferred Stock and Series C Preferred Stock and (13) the
2,700,000 shares of Company Common Stock authorized for issuance pursuant to the
Option Plan, as amended (certain of which options have already been granted as
described above), there are no options, warrants, conversion privileges or other
rights outstanding to purchase or otherwise acquire any authorized but unissued
shares of capital stock or other securities of the Company. Except as provided
in the Second Amended and Restated Stockholders Agreement, there are no
preemptive rights held by any Person with respect to any capital stock or other
securities of the Company.
4.3 Newly Issued Shares. The Company Shares to be issued
and sold by the Company to the Purchasers in accordance with the terms of this
Agreement have been duly authorized (other than the filing of the Amended
Company Charter) and when issued as contemplated hereby at the Closing, will be
validly issued, fully paid and non-assessable. At the Closing, each Purchaser
will acquire good and marketable title to the Company Shares it is purchasing,
free and clear of any and all liens, encumbrances, security interests,
pre-emptive rights, adverse claims of another or restrictions on transfer
("Encumbrances"), except such Encumbrances as may exist under the Stockholders
Agreement or applicable federal and state securities laws. The Common Stock to
be issued upon conversion of the Series D Preferred Stock is duly authorized,
will be reserved for issuance prior to the Closing, and, when so issued, will be
validly issued, fully paid and non-assessable. The Series D Preferred Stock to
be issued upon conversion of the Series E Preferred Stock is duly authorized,
will be reserved for issuance prior to the Closing, and, when so issued, will be
validly issued, fully paid and non-assessable.
4.4 Subsidiaries.
(a) Schedule 4.4 sets forth (i) the name and number of
shares of stock (or other equity interest) owned by the Company of each
corporation, partnership, joint venture or in which the Company has, directly or
indirectly, an equity interest therein (individually, a "Subsidiary" and
collectively, "Subsidiaries"); (ii) the jurisdiction of incorporation or
organization, capitalization and ownership of each Subsidiary; and (iii) the
jurisdictions in which each Subsidiary is qualified or licensed to do business
as a foreign entity.
(b) The Company owns of record and beneficially all the
capital stock of each of the Subsidiaries free and clear of all Encumbrances.
Each Subsidiary is a Person duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and is duly qualified to do
business as a foreign entity and is in good standing in each jurisdiction listed
on Schedule 4.4.
(c) No Subsidiary has a taxable presence or permanent
establishment in any country other than the United States.
(d) Each of the outstanding shares of capital stock (or
other equity interests) of each Subsidiary has been duly authorized and is
validly issued, fully paid and nonassessable and is free of preemptive rights.
9
Except as set forth on Schedule 4.4, there are not, and on
the Closing Date there will not be, outstanding any (i) options, warrants or
other rights to purchase or acquire the capital stock of any Subsidiary, (ii)
securities convertible into or exchangeable for shares of such capital stock or
any other debt or equity security of any Subsidiary or (iii) other commitments
of any kind for the issuance of additional shares of capital stock or any other
debt or equity security of any Subsidiary or options, warrants or other rights
to purchase or acquire such securities.
4.5 Authority. The Company has full corporate power and
authority to execute and deliver this Agreement and each other agreement to
which it is or will be a party that is contemplated hereby (collectively, the
"Transaction Documents"), to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated on its part, hereby and thereby.
The execution, delivery and performance by the Company of this Agreement and
each of the other Transaction Documents to which it is or will be a party and
the consummation of the transactions contemplated on its part hereby or thereby
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement and each of the other Transaction Documents to which the
Company currently is a party have been duly executed and delivered by the
Company and (assuming due execution and delivery by the other parties hereto and
thereto) constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and subject to general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Each Transaction Document to be executed by the
Company at the time of or following the execution of this Agreement will be duly
executed and delivered by the Company, and (assuming due execution and delivery
by the other party or parties thereto) will constitute a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium,
reorganization, or similar laws affecting creditors' rights generally and
subject to general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.6 No Violation. The execution, delivery and performance
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (a) assuming compliance with requirements of the Missouri
Department of Insurance and assuming the receipt of the other regulatory
approvals identified on Schedule 4.6, violate any Requirements of Law applicable
to the Company, (b) require the Company to obtain the consent, waiver, approval,
license or authorization of, or make any notice or filing by the Company with,
any Person or Governmental Authority, except as may be required by the Missouri
Department of Insurance and for any other regulatory filings or consents
identified on Schedule 4.6, or (c) violate, result (with or without notice or
the passage of time, or both) in a breach of or give rise to the right to
accelerate, terminate or cancel any obligation under, or constitute (with or
without notice or the passage of time, or both) a default under, any of the
terms or provisions of any charter or bylaws, indenture, mortgage, agreement,
contract, order, judgment, ordinance, regulation or decree to which the Company
is subject or by which the Company is bound.
10
4.7 Litigation. Except as set forth on Schedule 4.7 hereto,
there are no actions, suits, proceedings, claims, disputes or investigations
pending or, to the knowledge of the Company, threatened, at law, in equity, in
arbitration or before any Governmental Authority against the Company or
involving any assets of the Company. To the knowledge of the Company, no basis
exists for any such action, suit, proceeding, claim, dispute or investigation.
4.8 Financial Statements. The following financial
statements (the "Financial Statements") of the Company have been delivered to
the Purchasers by the Company:
(a) audited consolidated balance sheet, statement of income
and cash flow, and statement of changes in financial position of the Company as
of and for the year ended December 31, 1999, together with the notes thereto and
the report of its independent auditors with respect thereto; and
(b) unaudited consolidated balance sheet, statements of
income and cash flow, and statement of changes in financial position of the
Company as of and for each of the nine months ended September 30, 2000 and 1999
(collectively, the "Interim Financial Statements").
The Financial Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods indicated and fairly present the financial
position, results of operations, and changes in financial position of the
Company as of the indicated dates and for the indicated periods (except, in the
case of the Interim Financial Statements, for the absence of notes thereto and
subject to normal year-end audit adjustments and accruals required to be made in
the ordinary course of business which are not materially adverse to and are
consistent with past practices of the Company).
4.9 Compliance with Laws. Except as set forth on Schedule
4.9, the Company is and since January 1, 1999, has been, in compliance, in all
material respects, with all Requirements of Law.
4.10 No Material Adverse Change. Except as set forth on
Schedule 4.10, since December 31, 1999, there has not been (a) any material
adverse change in the assets, properties, liabilities, businesses, prospects,
condition (financial or otherwise) or results of operations of the Company or
(b) any sale, lease or other disposition or encumbrance of any material asset of
the Company or any breach, default, violation or termination of any material
contract of the Company.
4.11 No Undisclosed Liabilities. Except as set forth on
Schedule 4.11 or disclosed or referred to in this Agreement, the Company:
(a) does not have any debts, liabilities or obligations,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, except to the extent incurred in the ordinary course of business or
reflected in the Financial Statements; and
(b) has not incurred any debts, liabilities or obligations,
materially adversely affecting, in the aggregate, the business, or financial
condition, of the Company taken as a whole.
11
4.12 Conduct of Business; Certain Actions. Except as set
forth on Schedule 4.12 or as contemplated by this Agreement or the Transaction
Documents, since September 30, 2000, the Company has conducted its business and
operations in the ordinary course and consistent with its past practices and has
not (a) paid or declared any dividend or distribution or purchased or retired
any indebtedness from any holder of capital stock of the Company (a
"Stockholder") and has not purchased, retired, or redeemed any capital stock
from any Stockholder, (b) increased the compensation of any of the directors,
officers, or key employees of the Company, except for wage and salary increases
made in the ordinary course of business and consistent with the past practices
of the Company, (c) made any capital expenditures exceeding $100,000
individually or $800,000 in the aggregate, (d) sold any asset (or any group of
related assets) in any transaction (or series of related transactions) in which
the purchase price for such asset (or group of related assets) exceeded $25,000
individually or $100,000 in the aggregate, (e) discharged or satisfied any
material Encumbrance or paid any obligation or liability, absolute or
contingent, other than current liabilities incurred and paid in the ordinary
course of business, (f) made or guaranteed any loans or advances to any party
whatsoever, (g) suffered or permitted any Encumbrance to arise or be granted or
created against or upon any of the assets of the Company, real or personal,
tangible or intangible, (h) cancelled, waived, or released any of the Company's
debts, rights, or claims against third parties, (i) amended the Certificate of
Incorporation or Bylaws of the Company, (j) made, paid or incurred any severance
or termination payment or obligation therefor with respect to any employee,
consultant, or sales representative of the Company, (k) made any change in the
method of accounting of the Company, (l) made any investment or commitment
therefor in any Person, (m) made, entered into, amended, or terminated any
written employment contract (or any oral employment contract involving more than
$50,000 per year) created, made, amended, or terminated any bonus, stock option,
pension, retirement, profit sharing, or other employee benefit plan or
arrangement, or withdrawn from any "multi-employer plan" (as defined in Section
414(f) of the Internal Revenue Code of 1986, as amended) so as to create any
liability under Article IV of ERISA to any entity, (n) amended or experienced a
termination of any material contract, agreement, lease, franchise, or license to
which the Company is a party, except in the ordinary course of business, (o)
incurred or assumed any indebtedness (whether directly or by way of guaranty or
otherwise) for borrowed money, except in the ordinary course of business, (p)
entered into any other material transaction, except in the ordinary course of
business, (q) entered into any contract, commitment, agreement, or understanding
to do any acts described in the foregoing clauses (a)-(p) of this Section 4.12,
(r) suffered any material damage, destruction, or loss (whether or not covered
by insurance) to any assets, (s) experienced any strike, slowdown, or demand for
recognition by a labor organization by or with respect to any of the employees
of the Company, (t) experienced or effected any shutdown, slow-down, or
cessation of any operations conducted by, or constituting part of, the Company,
(u) materially accelerated the collection of accounts receivable or decelerated
payment of accounts payable, except in the ordinary course of business
consistent with past practice, or (v) made or rescinded any material express or
deemed election relating to taxes, settled or compromised any material claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to taxes, or except as may be required by applicable law,
made any change to any of its material methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of its
most recently filed federal income tax return.
12
4.13 Contracts. Set forth on Schedule 4.13 is a list of all
written or oral contracts (other than the Transaction Documents), commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness) to which the Company is a
party or by which the Company or its properties are bound, pursuant to which the
obligations thereunder of either party thereto are, or are contemplated as
being, in respect of any such individual contracts, commitments, leases, or
other agreements during the term thereof, $50,000 or greater, or which are
otherwise material to the business of the Company (including, without
limitation, all mortgages, deeds of trust, security agreements, pledge
agreements, and similar agreements and instruments and all confidentiality
agreements). Each such contract, commitment, lease and other agreement is in
full force and effect, and, except as set forth on Schedule 4.13, the Company is
not and, to the knowledge of the Company, no other party thereto is in default
(and no event has occurred which, with the passage of time or the giving of
notice, or both, would constitute a default) under any such contracts,
commitments, leases, or other agreements. The Company has not waived any right
under any such contracts, commitments, leases, or other agreements. Except as
set forth on Schedule 4.13, the Company has not guaranteed any obligations of
any other Person.
4.14 Taxes. The Company has filed or caused to be filed, or
has properly filed extensions for, all income tax returns that are required to
be filed and has paid or caused to be paid all amounts as shown on said returns
and on all assessments received by it to the extent that such taxes have become
due, except taxes the validity or amount of which is being contested in good
faith by appropriate proceedings and with respect to which adequate reserves, in
accordance with GAAP, have been set aside. The Company has paid or caused to be
paid, or has established reserves in accordance with GAAP that the Company
reasonably believes to be adequate in all material respects, for all income tax
liabilities applicable to the Company for all fiscal years that have not been
examined and reported on by the taxing authorities (or closed by applicable
statutes). The Company is not a party to any tax sharing agreements.
4.15 Employee Benefit Plans. Set forth on Schedule 4.15 is
a list and accurate description of all bonus, deferred compensation, pension,
retirement, profit-sharing, thrift savings, stock option (other than the Option
Plan, the $6.71 Options and the $1.00 Options), stock ownership or other
employee benefit plans applicable to any current or former employees of the
Company or any subsidiary each as ("Employee Benefit Plan") including but not
limited to "employee benefit plans" within meaning of Section 3(3) of the
Employee Retirement and Income Security Act of 1974, as amended ("ERISA"). The
Company is in compliance in all material respects with all Requirements of Law
in connection with each Employee Benefit Plan.
4.16 Brokers. The Company has not paid and will not be
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary (not including attorneys' fees) in connection with any of
the transactions contemplated by this Agreement or by any of the other
Transaction Documents.
4.17 Representations Regarding the Insurer.
(a) Except as expressly provided on Schedule 4.17(a), the
Company hereby reaffirms the representations and warranties (the "Insurance
Reps") set forth in subparagraphs (a) through (n) of Section 4.2 of that certain
13
Amended and Restated Investment and Stock Transfer Agreement, dated as of
December 11, 1998, by and between the Company and Millers Mutual and relating to
the acquisition by the Company of The Millers Specialty Insurance Company, a
Missouri property and casualty insurance company (the "Insurer"), and represents
and warrants that such representations are true and correct as of the date
hereof (other than representations and warranties that are made as of a specific
date, which are true and correct as of the dates set forth below), and such
subparagraphs (including for this purpose, any definitions of terms used in such
subparagraphs, regardless of whether such definitions are included in such
subparagraphs) are hereby incorporated by reference in this Section 4.17;
provided, that in each case the name "Millers Specialty" shall be read instead
to say "Instant Auto Insurance Company." Notwithstanding the foregoing, for the
purposes of such representations and warranties that are incorporated by
reference herein, (i) all references to "1997" shall instead be deemed to be
references to "1999" and all references to "December 31, 1997" shall instead be
deemed to be references to "December 31, 1999," (ii) all references to "March
26, 1997" shall instead be deemed to be references to "September 30, 2000,"
(iii) Sections 4.2(f)(v) and 4.2(g)(iii) and (iv) are not reaffirmed or
incorporated by reference herein, (iv) Sections 4.2(i)and 4.2 (l) are not
reaffirmed or incorporated by reference herein, and (v) all references to the
"Annual Statement" and the "Interim Statement" shall be deemed to be references
to the most recent annual statements and quarterly statements, respectively, of
the Insurer, as filed with the appropriate insurance regulatory authorities. A
copy of the Insurance Reps are attached hereto as Exhibit L.
(b) Schedule 4.17(b) attached hereto sets forth a complete
list of all licenses, permits and authorizations of any insurance regulatory
authority that are held by or applied for by the Insurer (together, in the case
of each such license, permit or authorization that has been applied for but not
received, the status of such application). None of such licenses, permits or
authorizations has been revoked, suspended or restricted by any insurance
regulatory authority and, to the knowledge of the Company, no such action on the
part of any insurance regulatory authority has been threatened.
(c) The loss reserves of the Insurer on the most recent
statutory financial statements of the Insurer (copies of which have been
supplied to the Purchasers) have been determined in all material respects in
accordance with generally accepted actuarial principles consistently applied,
are fairly stated in accordance with sound actuarial principles, meet the
requirements of applicable insurance laws and regulations of the applicable
insurance regulatory authority and have been reviewed and approved of by
Xxxxxxxx & Xxxxxxxxx, Inc. in their Statement of Actuarial Opinion for the year
ended December 31, 1999.
(d) The Company has previously furnished to the Purchasers
true and complete copies of the annual convention statements and quarterly
convention statements of the Insurer for the years ended December 31, 1998 and
December 31, 1999. Such statements and the statutory balance sheets and
statements of operating included therein fairly present the admitted assets,
liabilities and surplus, results of operations and changes in surplus of the
Insurer as of the dates and for the periods indicated therein and have been
prepared in conformity with applicable statutory accounting practices, applied
on a consistent basis throughout the periods indicated.
14
4.18 Private Offering. No form of general solicitation or
general advertising has been used by the Company or its representatives in
connection with the offer or sale of the Company Shares. Assuming the accuracy
of the representations made by each of the Purchasers, no registration of the
Company Shares, pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws, will be required by the offer, sale or issuance
of such securities.
4.19 Accuracy of Information Furnished. Except as may be
qualified by the information contained in this Agreement, including the exhibits
and schedules hereto, the representations and warranties of the Company
contained in this Agreement and the other historical factual information
furnished by the Company to the Purchasers, taken as a whole, did not contain
(as of the time any such statement was made or any such information was
delivered) any untrue statement of a material fact, or omission to state any
fact which is necessary to make such statements, in the light of the
circumstances under which they were made, not misleading.
Article 5
REPRESENTATIONS AND WARRANTIES OF CAPITAL Z TO VESTA
Each of Fund II and Private Fund II severally, and not
jointly, represents and warrants to Vesta as follows:
5.1 Organization. Such Purchaser is a limited partnership,
validly existing and in good standing under the laws of the jurisdiction of its
organization.
5.2 Authority. (a) Such Purchaser has full partnership
power and authority to execute and deliver this Agreement and the Vesta
Registration Rights Agreement, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated on its part hereby
and thereby; (b) the execution, delivery and performance by such Purchaser of
this Agreement and the Vesta Registration Rights Agreement have been duly
authorized by all necessary partnership action on the part of such Purchaser;
and (c) each of this Agreement and the Vesta Registration Rights Agreement has
been duly executed and delivered by such Purchaser and (assuming due execution
and delivery by the other parties hereto and thereto) constitutes a legal, valid
and binding agreement of such Purchaser, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally and subject
to general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3 No Violation. The execution and delivery by such
Purchaser of this Agreement and the Vesta Registration Rights Agreement, the
performance by such Purchaser of its obligations hereunder and thereunder and
the consummation by it of the transactions contemplated hereby and thereby will
not (a) assuming compliance with the requirements of the Missouri Department of
Insurance, violate any Requirements of Law applicable to such Purchaser, (b)
require such Purchaser to obtain the consent, waiver, approval, license or
authorization of, or make any notice or filing by such Purchaser with, any
Person or Governmental Authority, except as may be required by the requirements
15
of the Missouri Department of Insurance, or (c) violate, result (with or without
notice or the passage of time, or both) in a breach of or give rise to the right
to accelerate, terminate or cancel any obligation under or constitute (with or
without notice or the passage of time, or both) a default under, any of the
terms or provisions of any certificate of limited partnership or partnership
agreement, indenture, mortgage, agreement, contract, order, judgment, ordinance,
regulation or decree to which such Purchaser is subject or by which such
Purchaser is bound.
5.4 Brokers. Such Purchaser has not paid or become
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary (not including attorneys' fees) in connection with this
Agreement.
5.5 Securities Act Representations.
(a) Except as expressly contemplated hereby, such Purchaser
is acquiring its portion of the Vesta Shares 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, such Purchaser does not have any present intention of
selling, granting any participation in, or otherwise distributing the Vesta
Shares it is purchasing 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, such Purchaser does
not have any 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 Vesta Shares it is purchasing.
(b) Such Purchaser acknowledges that the issuance of its
portion of the Vesta Shares will not be registered under the Securities Act or
any state securities laws on the basis of a claimed exemption by Vesta that the
issuance of the Vesta Shares as provided for herein is exempt from registration
under the Securities Act and applicable state securities laws. Such Purchaser
acknowledges that the availability of such exemption is predicated in part on
such Purchaser's representations set forth in this Article 5 and that Vesta is
relying on such representations.
(c) Such Purchaser has received all the information it
considers necessary or appropriate for deciding whether to accept the Vesta
Shares it is purchasing. Such Purchaser has had an opportunity to ask questions
of and to receive answers from Vesta regarding the terms and conditions of the
issuance of the Vesta Shares it is purchasing and the business, properties,
financial condition and prospects of Vesta and to obtain additional information
(to the extent Vesta possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to such Purchaser or to which such Purchaser had access.
(d) Such Purchaser acknowledges that it is able to bear the
economic risk of the investment in the Vesta Shares it is purchasing, and has
such knowledge and experience in financial and business matters that it is
16
capable of evaluating the benefits and risks of the investment in the Vesta
Shares it is purchasing.
(e) Such Purchaser is an "accredited investor" as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act.
(f) Such Purchaser acknowledges that the Vesta Shares 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 Vesta
Shares or an available exemption from registration under the Securities Act,
such Company Shares must be held indefinitely. Such Purchaser further
acknowledges that the Vesta Shares it is purchasing may not be sold pursuant to
Rule 144 promulgated under the Securities Act unless all of the conditions of
that rule are met.
(g) Such Purchaser acknowledges that each certificate
representing any of the Vesta Shares it is purchasing 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.
Article 6
REPRESENTATIONS AND WARRANTIES OF VESTA TO CAPITAL Z
Vesta represents and warrants to each of Fund II and
Private Fund II as follows (each such representation and warranty being
qualified by the information set forth in any disclosure schedule relating to
such representation or warranty, as described in Section 10.10 hereof),
provided, that the term "Vesta" shall refer to Vesta and each of the Vesta
Subsidiaries, unless the context otherwise requires:
6.1 Corporate Organization. Vesta is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to lease the
properties it operates as lessee and to carry on its business as it is now being
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which such qualification is necessary, except
where the failure to be so qualified or licensed or be in good standing would
not reasonably be expected, individually or in the aggregate, to have a material
adverse effect on Vesta. True and complete copies of the Restated Certificate of
17
Incorporation of Vesta (the "Vesta Charter") and the Bylaws of Vesta (the "Vesta
Bylaws"), as amended to date, have been delivered to each of Fund II and Private
Fund II.
6.2 Capital Stock. As of the date hereof, the authorized
capital stock of Vesta consists in its entirety of (a) 100,000,000 shares of
Vesta Common Stock, of which 18,825,832 shares are issued and outstanding (as of
December 15, 2000) and (b) 5,000,000 shares of Preferred Stock, par value $.01
per share (the "Vesta Preferred Stock"), of which 2,950,000 shares are
designated as Series A Convertible Preferred Stock, par value $.01 per share
(the "Vesta Series A Preferred Stock"), of which 2,950,000 shares are issued and
outstanding. All of the outstanding shares of capital stock of Vesta have been
duly and validly authorized and issued, are fully paid and nonassessable and
were issued in compliance with all applicable federal and state securities laws.
Except for shares of capital stock of Vesta issuable pursuant to (i) this
Agreement, (ii) the conversion of the Vesta Series A Preferred Stock, and (iii)
stock options granted under (A) the Vesta Insurance Group, Inc. Long Term
Incentive Plan and (B) the Vesta Insurance Group, Inc. Non-Employee Directors
Stock Plan, there are no options, warrants, conversion privileges or other
rights outstanding to purchase or otherwise acquire any authorized but unissued
shares of capital stock or other securities of Vesta. There are no preemptive
rights held by any Person with respect to any capital stock or other securities
of Vesta.
6.3 Vesta Shares. The Vesta Shares to be sold by Vesta to
Capital Z in accordance with the terms of this Agreement have been duly
authorized and have been or, by the Closing, will be, validly issued, fully paid
and non-assessable. At the Closing, each of Fund II and Private Fund II will
acquire good and marketable title to the Vesta Shares it is purchasing, free and
clear of any and all Encumbrances, except such Encumbrances as may exist under
applicable federal and state securities laws.
6.4 Subsidiaries.
(a) Schedule 6.4 sets forth (i) the name and percentage of
the equity interests owned by Vesta of each Person in which Vesta has, directly
or indirectly, an equity interest therein (individually, a "Vesta Subsidiary"
and collectively, "Vesta Subsidiaries"); (ii) the jurisdiction of incorporation
or organization and ownership of each Vesta Subsidiary; and (iii) the
jurisdictions in which each Vesta Subsidiary is qualified or licensed to do
business as an insurance company.
(b) Vesta owns of record and beneficially all the capital
stock of each of the Vesta Subsidiaries free and clear of all Encumbrances. Each
Vesta Subsidiary is a Person duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and is duly qualified to do
business as an insurance company and is in good standing in each jurisdiction
listed on Schedule 6.4.
(c) No Vesta Subsidiary has a taxable presence or permanent
establishment in any country other than the United States.
18
(d) Each of the outstanding shares of capital stock (or
other equity interests) of each Vesta Subsidiary has been duly authorized and is
validly issued, fully paid and nonassessable and is free of preemptive rights.
There are not, and on the Closing Date there will not be,
outstanding any (i) options, warrants or other rights to purchase or acquire the
capital stock of any Vesta Subsidiary, (ii) securities convertible into or
exchangeable for shares of such capital stock or any other debt or equity
security of any Vesta Subsidiary or (iii) other commitments of any kind for the
issuance of additional shares of capital stock or any other debt or equity
security of any Vesta Subsidiary or options, warrants or other rights to
purchase or acquire such securities.
6.5 Authority. Vesta has full corporate power and authority
to execute and deliver this Agreement and each other agreement to which it is or
will be a party that is contemplated hereby (collectively, the "Vesta
Transaction Documents"), to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated on its part, hereby and thereby.
The execution, delivery and performance by Vesta of this Agreement and each of
the other Vesta Transaction Documents to which it is or will be a party and the
consummation of the transactions contemplated on its part hereby or thereby have
been duly authorized by all necessary corporate action on the part of Vesta.
This Agreement and each of the other Vesta Transaction Documents to which Vesta
currently is a party have been duly executed and delivered by Vesta and
(assuming due execution and delivery by the other parties hereto and thereto)
constitute the legal, valid and binding obligation of Vesta, enforceable against
Vesta in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally and subject to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Each Vesta Transaction Document to be executed by Vesta at the time of or
following the execution of this Agreement will be duly executed and delivered by
Vesta, and (assuming due execution and delivery by the other party or parties
thereto) will constitute a legal, valid and binding obligation of Vesta,
enforceable against Vesta in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting
creditors' rights generally and subject to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6.6 No Violation. The execution, delivery and performance
of this Agreement and each of the other Vesta Transaction Documents by Vesta and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (a) assuming compliance with the requirements of the Missouri
Department of Insurance and assuming the receipt of the other regulatory
approvals identified on Schedule 6.6, violate any Requirements of Law applicable
to Vesta, (b) require Vesta to obtain the consent, waiver, approval, license or
authorization of, or make any notice or filing by Vesta with, any Person or
Governmental Authority, except as may be required by the Missouri Department of
Insurance and for any other regulatory filings or consents identified on
Schedule 6.6 hereto, or (c) violate, result (with or without notice or the
passage of time, or both) in a breach of or give rise to the right to
accelerate, terminate or cancel any obligation under, or constitute (with or
without notice or the passage of time, or both) a default under, any of the
terms or provisions of the Vesta Charter or Vesta Bylaws or any indenture,
19
mortgage, agreement, contract, order, judgment, ordinance, regulation or decree
to which Vesta is subject or by which Vesta is bound.
6.7 Brokers. Vesta has not paid or become obligated to pay
any fee or commission to any broker, finder, investment banker or other
intermediary (not including attorneys' fees) in connection with this Agreement.
6.8 Litigation. Except as disclosed in the Vesta Documents,
to the best of Vesta's knowledge, there is no action, suit, proceeding or
investigation pending or overtly threatened against Vesta which questions the
validity of this Agreement or any of the Vesta Transaction Documents or the
right of Vesta to enter into them, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition, affairs
or prospects of Vesta, financially or otherwise, nor is Vesta aware that there
is any basis for the foregoing. Except as disclosed in the Vesta Documents,
Vesta is not subject to the provisions of any order, writ, action, judgment or
decree of any court or government agency or instrumentality which names Vesta as
a party.
6.9 Patents and Trademarks. Vesta 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.
6.10 Agreements; Action.
(a) Except for agreements explicitly identified herein or
in the Vesta Documents, there are no employment or other material agreements,
understandings or proposed transactions between Vesta and any of its officers,
directors, affiliates, or any affiliate thereof that would be required to be
disclosed pursuant to the Securities Act or the Exchange Act or the rules and
regulations promulgated by the SEC with respect thereto.
(b) Except in the ordinary course of business consistent
with past practices or as set forth in the Vesta Documents, there are no
agreements, understandings, instruments, contracts or proposed transactions to
which Vesta is a party or by which it is bound which involve obligations of, or
payments to Vesta of, amounts in excess of one million dollars ($1,000,000).
(c) Vesta is not a party to or is not bound by any
contract, agreement or instrument, or subject to any restriction under the Vesta
Charter or the Vesta Bylaws, which materially and adversely affects its business
as now conducted, its properties or its financial conditions.
6.11 Registration Rights. Except as contemplated by this
Agreement and except for registration rights granted to (a) the holders of the
Vesta Series A Preferred Stock, (b) FolksAmerica Reinsurance Company and (c) RK
20
Xxxxxxx Ltd., Xxxxx has not granted or agreed in writing to grant any
registration rights, including piggyback rights, to any Person.
6.12 Disclosure. Vesta has fully provided each of Fund II
and Private Fund II with all the information that such Purchaser has requested
relating to Vesta, the issuance of the Vesta Shares and the Vesta Registration
Rights Agreement. No representation, warranty or statement by Vesta in this
Agreement or in any written statement or certificate furnished or to be
furnished to either Fund II or Private Fund II pursuant to this Agreement
contains or will contain any 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.
6.13 Corporate Documents.
(a) Vesta has heretofore furnished each of Fund II and
Private Fund II with a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by it with the
Securities and Exchange Commission (the "SEC") (as any such documents have since
the time of their original filing been amended, the "Vesta Documents") since
January 1, 1999, which are all the documents (other than preliminary material)
that it was required to file with the SEC since such date. As of its respective
dates, each Vesta Document 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; provided, however, that the financial statements set
forth in Vesta's Annual Report on Form 10-K for the year ended December 31, 1999
were subsequently restated. As of its respective date, each Vesta Document
complied in all material respects with the applicable requirements of the
Securities Act, and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated under each of such
statutes. The financial statements contained in the Vesta 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 Vesta 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 Vesta at and as of said dates and the
consolidated results of operations and cash flows of Vesta for the periods then
ended; provided, however, that the financial statements set forth in Vesta's
Annual Report on Form 10-K for the year ended December 31, 1999 were
subsequently restated. The consolidated balance sheet of Vesta at September 30,
2000 included in the Vesta Documents is herein sometimes referred to as the
"Vesta Balance Sheet."
(b) Except as disclosed in the Vesta Documents and except
for liabilities and obligations incurred in the ordinary course of business
consistent with past practices, since the date of the Vesta Balance Sheet,
neither Vesta nor any of the Vesta 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 Vesta (including the notes thereto) prepared in accordance with
GAAP, as applied in preparing the Vesta Balance Sheet.
21
6.14 Title to Property and Assets. Vesta owns its property
and assets free and clear of all Encumbrances, except such Encumbrances which
arise in the ordinary course of business and do not materially impair Vesta's
ownership or use of such property or assets. With respect to the property and
assets it leases, Vesta is in compliance with such leases and, to the best of
its knowledge, holds a valid leasehold interest with respect thereto, free of
any Encumbrances.
6.15 Insurance. Vesta 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 Vesta.
6.16 No Adverse Changes. Except as set forth in the Vesta
Documents, since September 30, 2000, there has not been (a) any material adverse
change in the financial condition, results of operations, assets, liabilities,
business or prospects of Vesta; (b) any material liability or obligation of any
nature whatsoever (contingent or otherwise) incurred by Vesta, other than (i)
liabilities incurred in the ordinary course of business and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under GAAP to be reflected in the financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of Vesta; (c) any material asset or property of Vesta made
subject to an Encumbrance of any kind; (d) any waiver of any material valuable
right of Vesta, or any cancellation of any material debt or claim held by Vesta;
(e) except for (i) the payment of quarterly dividends and interest on Vesta's
trust preferred securities and (ii) interest on unpaid dividends owing to the
holders of Vesta's Class A Preferred Stock, in each case in the ordinary course
of business consistent with past practice, 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 Vesta, or any agreement
or commitment therefor; (f) any issuance of any capital stock of Vesta, other
than (1) upon the exercise of employee stock options, and (2) the issuance of
shares of Vesta Common Stock, or stock options to purchase Vesta Common Stock,
to members of the Board of Directors, key employees, special advisors and
consultants of Vesta, all of which issuances were authorized by the Board of
Directors of Vesta, including committees and individuals authorized by the Board
of Directors of Vesta; (g) any sale, assignment or transfer of any tangible or
intangible material assets of Vesta, except for sales, assignments or transfers
in the ordinary course of business; (h) any loan by Vesta to any officer,
director, employee, consultant or shareholder of Vesta, or any agreement or
commitment therefor other than routine travel or relocation advances, or loans
made in the ordinary course of business; (i) any material damage, destruction or
loss (whether or not covered by insurance) affecting the assets, property,
business or prospects of Vesta; or (j) any change in the accounting methods,
practices or policies followed by Vesta, including any change in depreciation or
amortization policies or rates.
6.17 Taxes. Vesta 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 Vesta's knowledge, all such returns are true and correct. Except
for taxes which are being contested in good faith by Vesta or for which adequate
reserves are being held by Vesta, Vesta has paid or caused to be paid all taxes
pursuant to such returns or pursuant to any assessments received by it or which
22
it is obligated to withhold from amounts owing to any employee, creditor or
third party. The income tax returns of Vesta have never been audited by any
federal, state, or local authorities.
6.18 Private Offering. No form of general solicitation or
general advertising has been used by Vesta or its representatives in connection
with the offer or sale of the Vesta Shares. Assuming the accuracy of the
representations made by each of Fund II and Private Fund II, no registration of
the Vesta Shares, pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws, will be required by the offer, sale or issuance
of such securities.
Article 7
COVENANTS AND AGREEMENTS
To induce the other parties to enter into this Agreement
and to consummate the transactions contemplated hereby, and without limiting any
covenant, agreement, representation or warranty made elsewhere in this
Agreement, each party agrees that between the date of this Agreement and the
termination of this Agreement pursuant to Section 9.1, except as may be
consented to by each of the other parties or as otherwise contemplated by this
Agreement, as follows:
7.1 Company Access. Upon reasonable notice, the Company
will afford each Purchaser and each of the officers, employees, counsel,
accountants, actuaries and other authorized representatives of each Purchaser
access, during normal business hours, to all the properties, books, contracts,
commitments, records and employees of the Company and the Company will furnish
promptly to each Purchaser true and complete copies of all such information
concerning the business, properties and personnel of the Company as such
Purchaser may reasonable request.
7.2 Vesta Access. Upon reasonable notice, Vesta will afford
each of Fund II and Private Fund II and each of the officers, employees,
counsel, accountants, actuaries and other authorized representatives of each
such Purchaser access, during normal business hours, to all the properties,
books, contracts, commitments, records and employees of Vesta and Vesta will
furnish promptly to each such Purchaser true and complete copies of all such
information concerning the business, properties and personnel of Vesta as such
Purchaser may reasonable request.
7.3 Conduct of Business of the Company Prior to Closing.
After the date hereof and prior to the Closing Date, except as expressly
provided for in this Agreement or as consented to in writing by Vesta and Fund
II, the Company will not:
(a) amend its Certificate of Incorporation or Bylaws or
similar organizational documents; provided, however, that prior to the Closing,
the Company will file the Certificate of Elimination and the Certificate of
Amendment of the Certificate of Incorporation of the Company in the form
attached as Exhibit K hereto;
23
(b) split, combine or reclassify any shares of the
Company's capital stock;
(c) declare or pay any dividend or distribution (whether in
cash, stock or property) in respect of its capital stock;
(d) take any action, or knowingly omit to take any action,
that would, or that would reasonably be expected to, result in (i) any of the
representations and warranties of the Company set forth in Article 4 becoming
untrue or (ii) any of the conditions to the obligations of the Purchasers set
forth in Section 8.1 or Section 8.3 not being satisfied; or
(e) enter into any agreement or commitment to do any of the
foregoing.
7.4 Conduct of Business of the Company Prior to Conversion
of the Series E Preferred Stock. After the date hereof and prior to the earlier
of (i) date on which the Series E Preferred Stock is automatically converted
into Series D Preferred Stock pursuant to Section 7(b) of the Certificate of
Designations of the Series E Preferred Stock and (ii) June 1, 2001, except as
expressly provided for in this Agreement or as consented to in writing by Vesta,
the Company will carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted, pay its debts and
taxes when due, pay or perform other obligations when due, and, to the extent
consistent with its business, use all reasonable efforts consistent with past
practice and policies to preserve intact the Company's present business
organization, keep availabomers, suppliers, distributors, licensors, licensees,
and others having business dealings with itle the services of its present
officers and key employees and preserve its relationships with cust, to the end
that the goodwill and ongoing business of the Company shall be unimpaired at the
time of the conversion of the Series E Preferred Stock into Series D Preferred
Stock. The Company shall promptly notify Vesta of any event or occurrence not in
the ordinary course of business of the Company. Except as expressly contemplated
by this Agreement, the Company shall not, without the prior written consent of
Vesta:
(a) enter into any commitment or transaction (i) that
requires performance over a period longer than six months in duration except
transactions in the ordinary course of business, or (ii) to purchase fixed
assets for a purchase price in excess of $10,000;
(b) grant any severance or termination pay to any director,
officer or any other employee;
(c) transfer to any Person any rights to patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are used or currently proposed to be used in the
business of the Company;
(d) enter into or amend any agreements pursuant to which
any other party is granted marketing or other rights of any type or scope with
respect to any products or technology of the Company;
24
(e) violate, amend or otherwise modify the terms of any of
the contracts set forth in Schedule 4.13;
(f) commence or settle any litigation or arbitration;
(g) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others, in an amount in excess of $50,000;
(h) adopt or amend any employee benefit plan, or enter into
any employment contract, pay any special bonus or special remuneration to any of
its directors or employees, or increase the salaries or wage rates of its
employees;
(i) revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(j) pay, discharge or satisfy in an amount in excess of
$10,000 with respect to any one case, claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Company's financial statements
(or the notes thereto);
(k) make or change any material election in respect of
taxes, adopt or change any accounting method in respect of taxes, file any
material return or any amendment to a material return, enter into any closing
agreement, settle any claim or assessment in respect of taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(l) consummate the acquisition of the capital stock of, or
all or substantially all of the assets of, the Harbor Insurance Group, Inc.; or
(m) take, or agree in writing or otherwise to take, any of
the actions described in Sections 7.4(a) through (l) above, or any action which
would make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect or prevent the Company from performing its
covenants hereunder.
7.5 Conduct of Business of Vesta. After the date hereof and
prior to the Closing Date, except as expressly provided for in this Agreement or
as consented to in writing by Fund II, Vesta will not:
(a) amend the Vesta Charter of the Vesta Bylaws;
(b) split, combine or reclassify any shares of Vesta's
capital stock;
25
(c) declare or pay any dividend or distribution (whether in
cash, stock or property) in respect of its capital stock, other than (i) the
declaration and payment of regular quarterly dividends and interest on its trust
preferred securities and (ii) interest on unpaid dividends owing to the holders
of Vesta's Class A Preferred Stock in the ordinary course of business consistent
with practice;
(d) take any action that would, or that would reasonably be
expected to, result in (i) any of the representations and warranties of Vesta
set forth in Article 6 becoming untrue or (ii) any of the conditions to the
obligations of Fund II or Private Fund II set forth in Section 8.1 or Section
8.5 not being satisfied; or
(e) enter into any agreement or commitment to do any of the
foregoing.
7.6 Commercially Reasonable Efforts. Subject to the terms
and conditions of this Agreement, each party will use its commercially
reasonable efforts to fulfill all conditions to the Closing within the party's
reasonable control, and to consummate and make effective as promptly as
practicable the transactions provided for herein.
7.7 Updating of Company Disclosure Schedules. If,
subsequent to the date of this Agreement and prior to the Closing Date, an event
occurs that renders untrue any representation or warranty of the Company made
herein (a "Company Subsequent Event"), the Company shall promptly deliver to
each Purchaser an amended or supplemented disclosure schedule (a "Subsequent
Company Disclosure Schedule") which will contain a description of the Company
Subsequent Event. Neither the existence of any Company Subsequent Event nor the
delivery of any Company Subsequent Disclosure Schedule shall in any way modify
the representations and warranties of the Company in this Agreement made as of
the date of this Agreement, nor shall the foregoing in any way be taken into
account in determining whether the conditions to the obligations of each
Purchaser to effect the Closing have been satisfied. If the Company acknowledges
in writing that, as a result of any Company Subsequent Event disclosed in any
Company Subsequent Disclosure Schedule, the conditions to the obligations of
each Purchaser to effect the Closing are not satisfied, and if each Purchaser
nevertheless elects to effect the Closing, then such Company Subsequent
Disclosure Schedule shall be deemed (for purposes of the Company's bring-down of
its representations and warranties to the Closing Date in accordance with
Section 8.3(b) hereof) to modify the representations and warranties to which it
relates.
7.8 Updating of Vesta Disclosure Schedules. If, subsequent
to the date of this Agreement and prior to the Closing Date, an event occurs
that renders untrue any representation or warranty of Vesta made herein (a
"Vesta Subsequent Event"), Vesta shall promptly deliver to each of Fund II and
Private Fund II an amended or supplemented disclosure schedule (a "Subsequent
Vesta Disclosure Schedule") which will contain a description of the Vesta
Subsequent Event. Neither the existence of any Vesta Subsequent Event nor the
delivery of any Vesta Subsequent Disclosure Schedule shall in any way modify the
representations and warranties of the Vesta in this Agreement made as of the
date of this Agreement, nor shall the foregoing in any way be taken into account
in determining whether the conditions to the obligations of each of Fund II and
Private Fund II to effect the Closing have been satisfied. If Vesta acknowledges
26
in writing that, as a result of any Vesta Subsequent Event disclosed in any
Vesta Subsequent Disclosure Schedule, the conditions to the obligations of each
of Fund II and Private Fund II to effect the Closing are not satisfied, and if
each such Purchaser nevertheless elects to effect the Closing, then such Vesta
Subsequent Disclosure Schedule shall be deemed (for purposes of Vesta's
bring-down of its representations and warranties to the Closing Date in
accordance with Section 8.5(b) hereof) to modify the representations and
warranties to which it relates.
7.9 Regulatory Approvals. As promptly as practicable, Vesta
will file with the Missouri Department of Insurance a statement relating to its
acquisition of voting securities of the Company (the "Acquisition of Control
Statement"). Vesta will diligently seek the approval of the Missouri Department
of Insurance with respect to the transactions contemplated by this Agreement and
referred to in the Acquisition of Control Statement and will consult with the
Company in connection with Vesta's attempts to obtain such approval. The Company
will provide reasonable cooperation with respect to Vesta's attempts to obtain
such approval.
Article 8
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment (or waiver by each Purchaser and
the Company) on or before the Closing Date of the following conditions:
(a) No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other order (whether temporary, preliminary, or permanent) which is in effect
and has the effect of prohibiting consummation of the transactions contemplated
by this Agreement or restricting in any material respect the operation of the
business of the Company and its Subsidiaries or Vesta and the Vesta Subsidiaries
(in each case, as contemplated to be conducted following the Closing).
(b) Vesta shall have filed a Notice of Disclaimer with the
Missouri Department of Insurance relating to its acquisition of Series D
Preferred Stock and Series E Preferred Stock hereunder.
8.2 Conditions to the Obligations of the Company. The
obligation of the Company to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment (or waiver by the Company) on or
before the Closing Date of the following additional conditions:
(a) Each Purchaser shall have performed in all material
respects its obligations under this Agreement required to be performed by it on
or prior to the Closing Date pursuant to the terms hereof.
27
(b) The representations and warranties of each Purchaser to
the Company contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of such
date, except to the extent that any such representation or warranty is made as
of a specified date in which case such representation or warranty shall have
been true and correct as of such date.
(c) Each of the agreements referenced in Article 2 hereof
shall be in full force and effect on the Closing Date.
8.3 Conditions to the Obligations of Each Purchaser. The
obligation of each Purchaser to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment (or waiver by such Purchaser) on
or before the Closing Date of the following additional conditions:
(a) The Company shall have performed in all material
respects its obligations under this Agreement required to be performed by it on
or prior to the Closing Date pursuant to the terms hereof.
(b) The representations and warranties of the Company set
forth in this Agreement shall be true and correct in all material respects at
and as of the Closing Date as if made at and as of such date, except to the
extent that any such representation or warranty is made as of a specified date
in which case such representation or warranty shall have been true and correct
as of such date.
(c) Each of the agreements referenced in Article 2 hereof
shall be in full force and effect on the Closing Date.
(d) There shall not have occurred, since the date of this
Agreement, any material adverse change in the assets, properties, liabilities,
businesses, business prospects, condition (financial or otherwise) or results of
operation of the Company.
8.4 Conditions to the Obligations of Vesta. The obligation
of Vesta to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment (or waiver by Vesta) on or before the Closing Date of
the following additional conditions:
(a) Each of Fund II and Private Fund II shall have
performed in all material respects its obligations under this Agreement required
to be performed by it on or prior to the Closing Date pursuant to the terms
hereof.
(b) The representations and warranties of each of Fund II
and Private Fund II to Vesta contained in this Agreement shall be true and
correct in all material respects at and as of the Closing Date as if made at and
as of such date, except to the extent that any such representation or warranty
is made as of a specified date in which case such representation or warranty
shall have been true and correct as of such date.
8.5 Conditions to the Obligations of Capital Z. The
obligation of each of Fund II and Private Fund II to effect the transactions
contemplated by this Agreement shall be subject to the fulfillment (or waiver by
28
such Purchaser) on or before the Closing Date of the following additional
conditions:
(a) Vesta shall have performed in all material respects its
obligations under this Agreement required to be performed by it on or prior to
the Closing Date pursuant to the terms hereof.
(b) The representations and warranties of Vesta set forth
in this Agreement shall be true and correct in all material respects at and as
of the Closing Date as if made at and as of such date, except to the extent that
any such representation or warranty is made as of a specified date in which case
such representation or warranty shall have been true and correct as of such
date.
(c) There shall not have occurred, since the date of this
Agreement, any material adverse change in the assets, properties, liabilities,
businesses, business prospects, condition (financial or otherwise) or results of
operation of Vesta.
8.6 Conditions to the Obligations of Xxxxxxx. The
obligation of Xxxxxxx to effect the transactions contemplated by this Agreement
shall be subject to the fulfillment (or waiver by Xxxxxxx) on or before the
Closing Date of the following additional conditions:
(a) Vesta shall have purchased the Series D Preferred Stock
and the Series E Preferred Stock to be purchased by it pursuant hereto.
Article 9
INDEMNIFICATION
9.1 Indemnification.
(a) From and after the Closing, each Purchaser severally,
and not jointly, shall indemnify and hold harmless the Company, its officers,
directors, employees, agents, representatives, subsidiaries, Affiliates and
permitted successors and assigns from and against, and promptly reimburse for,
any and all loss, diminution in value, damage, cost, expense (including court
costs and reasonable attorneys' fees and expenses and costs of investigation),
fine, penalty, suit, action, claim, deficiency, liability or obligation
(collectively, "Losses"), whether or not involving a Third Party Claim caused by
or arising from (i) any Breach by such Purchaser, or (ii) any and all claims of
third parties made based upon facts alleged that, if true, would constitute such
a Breach by such Purchaser. As used herein, "Affiliate" means, with respect to
any Person, any Person who, directly or indirectly, controls, is controlled by
or is under common control with that Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise. As
used herein, "Breach" means, with respect to a party hereto, any representation
or warranty of such party to the applicable other party under this Agreement or
29
in any certificate delivered pursuant to this Agreement being untrue when made
by such first party to such other party or any breach of any of such first
party's covenants or agreements with such other party under this Agreement.
(b) From and after the Closing, the Company shall indemnify
and hold harmless each Purchaser, its officers, directors, employees, agents,
partners, representatives, subsidiaries, Affiliates and permitted successors and
assigns from and against, and promptly reimburse for, any and all Losses,
whether or not involving a Third Party Claim, caused by or arising from (i) any
Breach by the Company, or (ii) any and all claims of third parties made based
upon facts alleged that, if true, would constitute such a Breach by the Company.
(c) From and after the Closing, each of Fund II and Private
Fund II severally, and not jointly, shall indemnify and hold harmless Vesta, its
officers, directors, employees, agents, representatives, subsidiaries,
Affiliates and permitted successors and assigns from and against, and promptly
reimburse for, any and all Losses, whether or not involving a Third Party Claim
caused by or arising from (i) any Breach by such Purchaser, or (ii) any and all
claims of third parties made based upon facts alleged that, if true, would
constitute such a Breach by such Purchaser.
(d) From and after the Closing, Vesta shall indemnify and
hold harmless each of Fund II and Private Fund II, its officers, directors,
employees, agents, partners, representatives, subsidiaries, Affiliates and
permitted successors and assigns from and against, and promptly reimburse for,
any and all Losses, whether or not involving a Third Party Claim, caused by or
arising from (i) any Breach by Vesta, or (ii) any and all claims of third
parties made based upon facts alleged that, if true, would constitute such a
Breach by Vesta.
(e) The representations, warranties, covenants and
agreements contained in this Agreement shall not be affected by any party hereto
or by anyone on behalf of any such party: (i) investigating, verifying or
examining any matters with respect to the Company, Vesta, any Purchaser or the
transactions contemplated hereby; (ii) having the opportunity to investigate,
verify or examine any matters related to the Company, Vesta, any Purchaser or
the transactions contemplated hereby; or (iii) failing to determine or discover
any facts which were determinable or discoverable by any such party. All rights
contained in this Article 9 are cumulative and are in addition to all other
rights and remedies which are otherwise available, pursuant to the terms of this
Agreement or applicable law. All indemnification rights shall be deemed to apply
in favor of the indemnified party's officers, directors, employees, agents,
partners, representatives, subsidiaries, affiliates, and permitted successors
and assigns.
9.2 Defense of Third Party Claims. With respect to each
third party claim subject to this Article 9 (a "Third Party Claim"), the party
seeking indemnification (the "Indemnified Party") shall give prompt notice to
the indemnifying party (the "Indemnifying Party") of the Third Party Claim,
provided that failure to give such notice promptly shall not relieve or limit
the obligations of the Indemnifying Party except to the extent the Indemnifying
Party is materially prejudiced thereby. The Indemnifying Party, at its sole cost
and expense, may, upon notice to the Indemnified Party within fifteen (15) days
after the Indemnifying Party receives notice of the Third Party Claim, assume
the defense of the Third Party Claim. If it assumes the defense of a Third Party
Claim, then the Indemnifying Party shall select counsel reasonably satisfactory
30
to the Indemnified Party to conduct the defense. The Indemnifying Party shall
not consent to a settlement of, or the entry of any judgment arising from, any
Third Party Claim, unless (a) the settlement or judgment is solely for money
damages and the Indemnifying Party admits in writing its liability to hold the
Indemnified Party harmless from and against any losses, damages, expenses and
liabilities arising out of such settlement or (b) the Indemnified Party consents
thereto, which consent shall not be unreasonably withheld and, in the case of
either clause (a) or clause (b), the settlement contains an unconditional
release of the Indemnified Party with respect to the Third Party Claim from each
Person asserting such claim. The Indemnifying Party shall provide the
Indemnified Party with fifteen (15) days prior notice before it consents to a
settlement of, or the entry of a judgment arising from, any Third Party Claim.
The Indemnified Party shall be entitled to participate in the defense of any
Third Party Claim, the defense of which is assumed by the Indemnifying Party,
with its own counsel and at its own expense. With respect to Third Party Claims
in which the remedy sought is not solely money damages, (i) the Indemnifying
Party shall, upon notice to the Indemnified Party within fifteen (15) days after
the Indemnifying Party receives notice of the Third Party Claim, be entitled to
participate in the defense with its own counsel at its own expense and (ii) the
Indemnified Party shall not consent to any settlement of, or entry of any
judgment arising from, such Third Party Claim unless the Indemnifying Party
consents thereto, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not elect to assume or participate in the defense of any
Third Party Claim in accordance with the terms of this Section, then the
Indemnifying Party shall be bound by the results obtained by the Indemnified
Party with respect to the Third Party Claim. The parties shall cooperate in the
defense of any Third Party Claim and the relevant records of each party shall be
made available on a timely basis.
9.3 Limitations.
(a) Company Basket. Notwithstanding anything in this
Agreement to the contrary (including Section 9.1(e) hereof), neither the
Purchasers, on the one hand, nor the Company, on the other hand, shall be
entitled to indemnification from the other for breaches of representations or
warranties hereunder unless and until the aggregate amount of indemnifiable
claims of the Purchasers, on the one hand, or the Company, on the other hand, as
applicable, equals or exceeds $250,000, but the party entitled to
indemnification then will be entitled to recover the full amount of all such
claims, including the first $250,000 thereof.
(b) Vesta Basket. Notwithstanding anything in this
Agreement to the contrary (including Section 9.1(e) hereof), neither Capital Z,
on the one hand, nor Vesta, on the other hand, shall be entitled to
indemnification from the other for breaches of representations or warranties
hereunder unless and until the aggregate amount of indemnifiable claims of
Capital Z, on the one hand, or Vesta, on the other hand, as applicable, equals
or exceeds $100,000, but the party entitled to indemnification then will be
entitled to recover the full amount of all such claims, including the first
$100,000 thereof.
(c) Company Cap. Notwithstanding anything in this Agreement
to the contrary (including Section 9.1(e) hereof), following the Closing,
neither the Purchasers, on the one hand, nor the Company, on the other hand,
shall be liable for, and neither the Purchasers, on the one hand pursuant to
Section 9.1(a) or 9.2, nor the Company, on the other hand pursuant to Section
31
9.1(b) or 9.2, shall be obligated to pay, an amount in excess of the total
amount that, as of such date, the Purchasers have invested in securities of the
Company.
(d) Vesta Cap. Notwithstanding anything in this Agreement
to the contrary (including Section 9.1(e) hereof), following the Closing,
neither Capital Z, on the one hand, nor Vesta, on the other hand, shall be
liable for, and neither Capital Z, on the one hand pursuant to Section 9.1(c) or
9.2, nor Vesta, on the other hand pursuant to Section 9.1(d) or 9.2, shall be
obligated to pay, an amount in excess of the total amount that, as of such date,
Capital Z has invested in securities of Vesta.
(e) Commencing Claims for Indemnification. No party shall
have any liability for any Breach or for any claims for indemnification
hereunder unless a demand for indemnification is made (or the parties agree in
writing that a party shall have liability for a Loss hereunder as provided in
Section 9.1 related to such Breach, prior to the thirty-sixth (36) month
anniversary of the Closing and any such liability shall be deemed waived, and no
Person shall have any remedy for any such Breaches; it being the intention of
the parties that all claims relating to a Breach of the Agreement shall
thereafter be forever barred. Any demand for indemnification hereunder made
during such thirty-sixth (36) month period shall remain valid and the
representations, warranties, covenants and agreements relating thereto shall
remain in effect for purposes of such indemnification claim notwithstanding that
the amount or validity of such claim may not be established or resolved within
such thirty-sixth (36) month period.
Article 10
MISCELLANEOUS
10.1 Termination. This Agreement (and the transactions
contemplated hereby) may be terminated as follows:
(a) Upon the mutual written consent of the Company, Fund II
and Vesta;
(b) By the Company or Fund II, if Vesta or Xxxxxxx is in
material breach of this Agreement and such breach has not been cured within
thirty (30) days following the delivery of notice thereof to the applicable
Purchaser (provided, that the Company shall not be permitted to terminate this
Agreement pursuant to this Section 10.1(b) if, within such thirty (30) day
period, another Purchaser that is not in breach agrees to purchase the Company
Shares to be purchased by the Purchaser that is in breach);
(c) By Vesta, if the Company, Fund II or Private Fund II is
in material breach of this Agreement and such breach has not been cured within
thirty (30) days following the delivery of notice thereof to the Company; or
(d) By any party, if the Closing has not occurred on or
before December 31, 2000.
10.2 Effect of Termination. Upon the termination of this
Agreement in accordance with Section 10.1 hereof, the parties shall be relieved
of any further obligations under this Agreement (other than the obligations set
32
forth in Section 10.7; provided, however, that no termination shall relieve any
party of liability for its breach prior to such termination.
10.3 Amendment. This Agreement may be amended only by an
instrument in writing signed by each of the parties hereto.
10.4 Waiver. The observance of any term of this Agreement
may be waived by the party or parties entitled to enforce such term, but such
waiver shall be effective only if it is in a writing signed by the party or
parties entitled to enforce such term and against which such waiver is to be
asserted. No delay or omission on the part of any party in exercising any right
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right or privilege under this
Agreement operate as a waiver of any other right or privilege under this
Agreement nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or the exercise of any other
right or privilege under this Agreement.
10.5 Survival. The representations, warranties, covenants
and agreements set forth in this Agreement shall survive the Closing.
10.6 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been given
or made if in writing and delivered personally, sent by commercial carrier or
registered or certified mail (postage prepaid, return receipt requested) or
transmitted by facsimile with automated receipt confirmation to the parties at
the following addresses and numbers:
If to the Company, to:
Instant Insurance Holdings, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: President
with copies, which shall not constitute notice, to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Fax: (000) 000-0000
Attention: R. Xxx Xxxxx
33
If to Fund II or Private Fund II, to:
Capital Z Financial Services Fund II, L.P.
00 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with copies, which shall not constitute notice to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Fax: (000) 000-0000
Attention: R. Xxx Xxxxx
If to Vesta, to:
Vesta Insurance Group, Inc.
0000 Xxxxx Xxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. XxXxxxxxxx
If to Xxxxxxx, to:
00 Xxxxxxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
10.7 Confidentiality. Each party hereto shall, and shall
cause its respective officers, directors, employees, agents and representatives
to, maintain confidentiality with respect to, and not disclose, any proprietary
or otherwise confidential information of any other party hereto; provided,
however, that the limitations provided in this Section 10.7 shall not apply,
with respect to any party, to (a) information in the public domain or otherwise
publicly available (other than as a result of disclosure by such party or its
officers, directors, employees, agents or representatives, in violation of this
Agreement), (b) information the disclosure of which is required by law or
compelled by judicial or administrative process, or (c) disclosure of any such
information to such party's officers, directors, employees, agents and
representatives for legitimate purposes in connection with the transactions
contemplated by this Agreement (provided that the Persons to whom such
information is disclosed are notified of such party's confidentiality
obligations under this Agreement), or (d) information already in the possession
of such party prior to its receipt from the other party.
10.8 Headings. The headings contained in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
34
10.9 Publicity. So long as this Agreement is in effect,
except as required by law, regulation or stock exchange requirements, the
parties hereto shall not, and shall cause their Affiliates not to, issue or
cause the publication of any press release or other announcement with respect to
the transactions contemplated by this Agreement or the other agreements
contemplated hereby without the consent of the other parties, which consent
shall not be unreasonably withheld or delayed.
10.10 Disclosure Schedules. Matters disclosed in any
disclosure schedule shall be deemed to be disclosed also in each other
disclosure schedule to the extent that it is reasonably apparent from such
disclosure that the matters disclosed in the first disclosure schedule would
apply also to such other disclosure schedule.
10.11 Entire Agreement. This Agreement constitutes the
entire agreement among the parties and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
10.12 Conveyance Taxes. The Company agrees to assume
liability for and to hold each Purchaser harmless against any sales, use,
transfer, stamp, stock transfer, real property transfer or gains, and value
added taxes, any transfer, registration, recording or other fees, and any
similar taxes incurred as a result of the issuance and sale to such Purchaser of
his or its portion of the Company Shares, issuance of Common Stock upon
conversion of shares of Series D Preferred Stock or issuance of Series D
Preferred Stock upon conversion of shares of Series E Preferred Stock.
10.13 Assignment. 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. Prior to the Closing, no
party shall assign any of its rights under this Agreement; provided, however,
that each of Fund II, Private Fund II and Vesta may assign its rights (but not
obligations) under this Agreement, in whole or in part, to any entity that,
directly or indirectly, controls, is controlled by, or is under common control
with such Purchaser. No assignment of rights will relieve the assigning party of
liability in the event of any breach hereof. Any attempted assignment in
violation of this Agreement shall be void ab initio.
10.14 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
10.15 Governing Law. The validity and interpretation of
this Agreement shall be governed by the laws of the State of Delaware, without
reference to the conflict of laws principles thereof.
10.16 Third Party Beneficiaries. This Agreement (except as
otherwise expressly indicated in the indemnification provisions hereof) is not
intended to confer upon any other Person any rights or remedies hereunder.
35
10.17 Costs and Expenses. Each party hereto shall bear its
own legal and due diligence fees and expenses and other out-of-pocket expenses
relating to the transactions contemplated by this Agreement.
10.18 Incorporated by Reference. The disclosure schedules,
Company Subsequent Disclosure Schedules and Vesta Subsequent Disclosure
Schedules are incorporated as a part of this Agreement by reference.
10.19 Number and Gender of Words. When the context so
requires in this Agreement, words of any gender shall include either or both of
the other genders and the singular number shall include the plural.
10.20 Execution of Additional Documents. Each party hereto
shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby.
10.21 Interpretation. References to "Sections" herein are
references to sections of this Agreement. The words "herein," "hereof," "hereto"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision.
10.22 Reformation; Severability. In case any provision
hereof shall be invalid, illegal or unenforceable, such provision shall be
reformed to best effectuate the intent of the parties and permit enforcement
thereof, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If such
provision is not capable of reformation, it shall be severed from this Agreement
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
10.23 Time of the Essence. With regard to all dates and
time periods set forth or referred to in this Agreement, time is of the essence.
36
IN WITNESS WHEREOF, each of the Purchasers and the Company
has caused this Agreement to be duly signed as of the date first written above.
THE COMPANY:
INSTANT INSURANCE HOLDINGS, INC.
By: /s/ X. X. Xxxxxx
-------------------------------------------------
Name: X. X. Xxxxxx
Title: President
THE PURCHASERS:
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P., its sole general
partner
By: Capital Z Partners, Ltd., its sole
general partner
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P., its sole general
partner
By: Capital Z Partners, Ltd., its sole
general partner
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
VESTA INSURANCE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx, III
-------------------------------------------
Name: Xxxxxx X. Xxxxx, III
Title: President
/s/ Xxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxxx
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
SCHEDULE 1.1
COMPANY SHARES
--------------
NUMBER OF COMPANY SHARES TOTAL PORTION OF COMPANY
PURCHASER PURCHASED AT CLOSING PURCHASE PRICE
--------- -------------------- --------------
Capital Z Financial Services Fund II, L.P. 2,984,148 shares of Series E Preferred Stock $1,825,877.57 principal amount of
Notes and $1,158,270.13 in cash(1)
Capital Z Financial Services Private Fund 15,852 shares of Series E Preferred Stock $9,699.37 principal amount of Notes
II, L.P. and $6,152.93 in cash(2)
Vesta Insurance Group, Inc. or its
designees 1,159,115 shares of Series D Preferred Stock $10,000,000 in cash
8,840,885 shares of Series E Preferred Stock
Xxx Xxxxxxx 200,000 shares of Series D Preferred Stock $200,000 in cash
TOTAL
1,359,115 SHARES OF SERIES D PREFERRED STOCK $1,835,576.94 PRINCIPAL AMOUNT OF NOTES
11,840,885 SHARES OF SERIES E PREFERRED STOCK $11,364,423.06 IN CASH(3)
------------------------------
1 $497,358.00 of which was paid to the Company on December 20, 2000.
2 $2,642.00 of which was paid to the Company on December 20, 2000.
3 $500,000 of which was paid to the Company on December 20, 2000.
SCHEDULE 1.2
VESTA SHARES
------------
NUMBER OF VESTA SHARES TOTAL PORTION OF
PURCHASER PURCHASED AT CLOSING VESTA PURCHASE PRICE
--------- -------------------- --------------------
Capital Z Financial Services Fund II, L.P. 552,801 2,984,148 shares of Series E Preferred
Stock, valued at $1.13 per share
Capital Z Financial Services Private Fund 2,937 15,852 shares of Series E Preferred
II, L.P. Stock, valued at $1.13 per share
TOTAL 555,738 3,000,000 SHARES OF SERIES E PREFERRED
STOCK, VALUED AT $1.13 PER SHARE
EXHIBIT L
INSURANCE REPS
--------------
4.2 Representation and Warranties by Millers and Millers
Mutual Regarding Millers Specialty. Millers represents and warrants to the
Company that to the knowledge of Millers and Millers Mutual:
(a) Organization and Qualification, Etc. Millers Specialty
is incorporated as an insurance company, duly organized, validly existing and in
good standing under the laws of the State of Missouri has full corporate power
to own all its properties and assets, to carry on its business as it is now
being conducted, and to perform and consummate the transactions contemplated by
this Agreement, and is duly licensed to conduct insurance business in the State
of Missouri and all those states outlined on Schedule A attached hereto.
(b) Subsidiaries. Millers Specialty has no subsidiaries.
The only stocks, bonds, or securities owned by Millers Specialty are those which
it owns and controls as investments.
(c) Capital Stock. The authorized capital stock of Millers
Specialty consists solely of four hundred thousand (400,000) shares of common
stock, Three and No/100 Dollars ($3.00) par value per share, of which as of
Effective Date hereof all four hundred thousand (400,000) shares are issued and
outstanding. All such issued and outstanding shares are duly authorized and
validly issued, fully paid and non-assessable, and none of such outstanding
shares was issued in violation of any preemptive right of any shareholder.
Millers Specialty is not bound by any option, warrant, call or other commitment
of any kind to issue or sell any shares of its capital stock, or any securities
or obligations convertible into or exchangeable for, or giving, any person any
right to acquire from Millers Specialty, any shares of its capital stock.
(d) Financial Condition of Millers Specialty. The Annual
Statement and the Interim Statement each correctly and accurately reflects and
financial condition and operations of Millers Specialty as of their respective
dates, reported in accordance with statutory insurance accounting principles as
established by the laws of the State of Missouri, the rules, regulations and
practices of the State of Missouri, the rules, regulations and practices of the
Missouri Department of Insurance and the National Association of Insurance
Commissioners, as applicable. The Annual Statement and the Interim Statement
were each prepared in accordance with applicable laws, regulations and statutory
accounting principles applied on a consistent basis.
(e) Changes. Since December 31, 1997 there has not been:
(i) any material adverse change in the financial condition
or results of operations Millers Specialty, taken as a whole, from those
reflected in its 1997 Annual Statement, or any material adverse change in the
nature of the business or the assets of Millers Specialty taken as a whole;
(ii) any damage, destruction or other casualty loss with
respect to property owned or leased by Millers Specialty (whether or not covered
by insurance) materially and adversely affecting the business, financial
condition or results of operations of Millers Specialty, or any sale, lease or
other disposition or encumbrance of any material asset or property of Millers
Specialty, or any breach, default, violation or termination of any material
contract or lease;
(iii) any direct or indirect redemption, purchase or
acquisition of any Millers Specialty shares, or any declaration, setting aside
or payment of any dividend or distribution in respect of Millers Specialty
shares.
(f) Tax Returns and Payments.
(i) since March 26, 1997, Millers Specialty has filed all
tax returns on extensions required to be filed and has paid, or setup adequate
reserves for the payment of, all taxes and duties required or anticipated to be
paid on account of the operations, acts or omissions of Millers Specialty;
(ii) since March 26, 1997, Millers Specialty is not
delinquent in the payment of any tax, duty, assessment or governmental charge
for 1997 and has not requested any extension of time within which to file any
duty or tax return for 1997 which return has not since been filed, and further
has timely paid all amounts withheld or payable by Millers Specialty under or in
respect of F.I.C.A. (including but not limited to agents and employees) or
employee income tax withholdings;
(iii) since March 26, 1997, no deficiencies for any duty,
tax, assessment or governmental charge have been asserted or assessed against
Millers Specialty for 1997, which have not been paid, settled or otherwise
disposed of; Millers Specialty has provided for all tax liabilities of every
kind, direct or contingent (excluding tax on amounts accumulated in the
policyholder surplus account);
(iv) the Internal Revenue Service is not presently auditing
the federal income tax returns of Millers Specialty for any years; and
(v) at the Closing, Millers Mutual and Millers Specialty
shall enter into an Addendum No. 3 to Consolidated Federal Income Tax Allocation
Agreement in the form of Exhibit F.
L-2
(g) No Undisclosed Liabilities or Agreements. Except as
disclosed in writing in or pursuant to this Agreement or as an exhibit hereto,
Millers Specialty:
(i) did not have, as of December 31, 1997, any debts,
liabilities or obligations materially adversely affecting the business condition
(financial or otherwise) of Millers Specialty, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, except to the extent
reflected in the Annual Statement or the Interim Statement;
(ii) has not incurred since December 31, 1997, any debts,
liabilities or obligations which, in the aggregate, materially adversely affect
the business, or financial condition of Millers Specialty taken as a whole;
(iii) has not conducted business other than cash and
investment activity since December 31, 1997; and
(iv) has not issued policies of insurance since December
31, 1997.
(h) Litigation, Disciplinary or Delinquency Action. There
is no action, suit, proceeding, disciplinary or delinquency action pending, or
threatened, against Millers Specialty before any court or arbitration tribunal
or before any governmental department, agency or instrumentally which will
survive the Closing.
(i) Contracts.
(i) Millers Specialty is not a party to outstanding
executory contracts of any kind or nature.
(ii) Millers Specialty does not have any liability of the
type normally covered by insurance by a substantial corporate entity arising out
of or in connection with any act, omission, error or other event occurring prior
to the Closing Date that is not covered in full (except for customary deductible
amounts) by such in force policies or by a prior issued policy or policies
insuring Millers Specialty.
(iii) Millers Specialty has no agency contracts in force.
(iv) Millers Specialty has no insurance policies in force.
(j) Regulatory Filings. Millers Specialty has filed all
required registrations, filings or submissions for 1997 with any federal
regulatory commission, agency or authority and each and every annual statement
or other report for 1997 (including without limitation any statements under each
applicable Holding Company Act) required to be filed by Millers Specialty with
any state insurance regulatory commission, and all other reports or documents
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required to be filed by it for 1997; and all such filings were in material
compliance with applicable law when filed and no material deficiencies have been
asserted by any such regulatory commission, agency or authority with respect to
such filings or submissions which will survive Closing.
(k) Compliance with Applicable Law. Millers Specialty is,
in the conduct of its business, in compliance with all federal, state or local
laws, statutes, ordinances and regulations, which failure to comply with would
materially adversely affect the business of Millers Specialty taken as a whole
or in the value of its properties or assets, including without limitation EEOC
or similar laws, ERISA, and any advertising or Deceptive Trade Practice or
similar law.
(l) Non-Contravention. The execution, delivery and
performance by Millers and Millers Mutual of this Agreement and each of the
Transaction Documents do not and, subject to compliance with regulatory
requirements, the consummation of the transactions contemplated hereby and
thereby will not (i) violate any provision of the Articles of Incorporation or
Bylaws of Millers, Millers Mutual or Millers Specialty, (ii) violate or result
with the passage of time in the violation of any provision of, or result in the
acceleration of, or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation under, or result in the creation
or imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the shares of stock of Millers Specialty, or any of the
property of Millers Specialty pursuant to any provisions of any mortgage, lien,
lease, agreement, license, instrument, law, order, arbitration award, judgment
or decree, to which Millers, Millers Mutual or Millers Specialty is a party or
by which is bound, (iii) violate or conflict with any other restriction of any
kind or character to which Millers, Millers Mutual or Millers Specialty is
subject, or by which any of its assets may be bound, nor will the same
constitute an event permitting termination of an agreement to which Millers
Specialty is subject except for such violations, conflict or other similar
events which would not have a material adverse effect on the business or
financial condition of Millers Specialty or (iv) require Millers, Millers Mutual
or Millers Specialty to obtain the consent, waiver, approval, license or
authorization of, or make any notice or filing by Millers, Millers Mutual or
Millers Specialty with, any Person or Governmental Authority (as such terms are
defined in the Securities Purchase Agreement), except for the filing of the
Acquisition of Control Statement with, and approval by, the Missouri Department
of Insurance and any filings required with respect to a Reinsurance Agreement
and any contracts referenced in the Securities Purchase Agreement.
(m) Accuracy of Information Furnished. Except as may be
qualified by the information contained in this Agreement including the exhibits
and schedules hereto, no representations or warranty by Millers contained in
this Agreement, no factual information furnished by Millers Specialty or Millers
contained in this Agreement, no factual information furnished by Millers
Specialty or Millers, and no statement contained in any exhibit hereto,
certificate, schedule or other instrument furnished or to be furnished to the
Company pursuant hereto in connection with the transactions contemplated hereby,
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contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact which is necessary to make the statement
contained therein not misleading.
(n) Illegal Payments. Millers Specialty has not made, and
no employee, agent or representative of Millers Specialty has made, (i) any
bribes, kickbacks, illegal payments, political contributions with corporate
funds not recorded on the books and records of Millers Specialty, (ii) payments
from corporate funds that were falsely recorded on the books and records of
Millers Specialty, or (iii) payments from corporate funds to governmental
officials for improper purposes or illegal payments from corporate funds to
obtain or retain business either within the United States or abroad.
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