Exhibit 10.2
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ACQUISITION AGREEMENT
THIS AGREEMENT, as of the _______ day of ______, 1999, is between Vesta
Insurance Group, Inc., a Delaware corporation ("VIG"), with its principal office
at 0000 Xxxxx Xxx Xxxxx, Xxxxxxxxxx, Xxxxxxx, Vesta Management Corporation of
Texas, a Texas corporation ("VESTA MANAGEMENT") with its principal office at
00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx, and Employers Reinsurance
Corporation, a Missouri corporation ("PURCHASER") with its principal office at
0000 Xxxxxxx, Xxxxxxxx Xxxx, Xxxxxx.
P R E A M B L E
This transaction involves the acquisition by PURCHASER of the authority and
right to control and manage the affairs of Vesta County Mutual Insurance
Company.
Vesta County Mutual Insurance Company ("VESTA COUNTY MUTUAL") is a mutual
company organized under Chapter 17 of the Texas Insurance Code (the "Code") and
is located in Dallas, Texas.
VESTA MANAGEMENT currently has the authority to manage and control VESTA
COUNTY MUTUAL under the terms of a management agreement (the "MANAGEMENT
CONTRACT") dated January 22, 1997.
VIG, as sole shareholder of VESTA MANAGEMENT, is the ultimate controlling
person of VESTA COUNTY MUTUAL. For purposes of this AGREEMENT, VIG and VESTA
MANAGEMENT shall hereinafter be referred to jointly as "VESTA".
PURCHASER desires to acquire, and VESTA desires to assign and transfer to
PURCHASER the authority and right to manage and control VESTA COUNTY MUTUAL
under the terms of the MANAGEMENT CONTRACT.
PURCHASER also desires to enter into a Loss Portfolio Transfer agreement
("Loss Portfolio Transfer") to acquire from VESTA COUNTY MUTUAL certain of its
business currently ceded to Vesta Fire Insurance Corporation, and VESTA desires
to effect such transfer.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties agree as follows:
ARTICLE I. ASSIGNMENT AND TRANSFER
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1.1 The Management and Control. Subject to the terms and conditions of
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this AGREEMENT, on the closing date (defined in Section 1.2 below), PURCHASER
agrees to acquire by assignment, and VESTA MANAGEMENT agrees to assign, transfer
and convey to PURCHASER, all rights and interests in the MANAGEMENT CONTRACT.
VIG joins in this assignment to PURCHASER, being the sole shareholder of VESTA
MANAGEMENT and the ultimate controlling person of VESTA COUNTY MUTUAL.
1.2 Closing Date. The closing shall occur on the fifth (5th) business day
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following the issuance of an official order of the Commissioner of Insurance of
Texas (the "COMMISSIONER") approving the acquisition by PURCHASER of control of
VESTA COUNTY MUTUAL through the assignment of the MANAGEMENT CONTRACT,
hereinafter referred to as the "CLOSING DATE", provided an earlier or later
CLOSING DATE may be mutually agreed upon by PURCHASER and VESTA.
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1.3 Closing Time and Place. The consummation of the transaction
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contemplated hereby (the "CLOSING") will take place on the CLOSING DATE at the
offices of Thompson, Coe, Cousins & Irons, L.L.P., 000 Xxxxxxxx Xxxxx, 00/xx/
Xxxxx, Xxxxxx, Xxxxx, at 10:00 a.m. The effective time of the assignment and
transfer pursuant hereto shall be deemed to be 11:59:59 p.m. C.S.T. on the
CLOSING DATE.
ARTICLE II. PURCHASER'S INVESTMENT
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2.1 Purchase Price. At the CLOSING, PURCHASER shall pay to VESTA
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MANAGEMENT the sum of Eleven Million Two Hundred Thousand Dollars
($11,200,000.00) in consideration of the assignment of the MANAGEMENT CONTRACT
to PURCHASER and the acquisition of control of VESTA COUNTY MUTUAL by PURCHASER,
which amount shall hereinafter be referred to as the "PURCHASE PRICE". Such
payment shall be made by wire transfer of United States funds to an account
designated by VESTA MANAGEMENT prior to the CLOSING DATE.
2.2 Surplus of Vesta County Mutual. Upon the CLOSING, PURCHASER will pay
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into the surplus of VESTA COUNTY MUTUAL at least Two Million Five Hundred
Thousand Dollars ($2,500,000.00), in exchange for a surplus debenture to be
issued by VESTA COUNTY MUTUAL to PURCHASER. VESTA COUNTY MUTUAL'S surplus
debenture issued to PURCHASER shall be in substantially the same form as the
existing surplus debenture issued to VIG, a copy of which is attached hereto as
Exhibit 2.2. VIG'S surplus debenture, including all interest accrued through
the CLOSING, shall be paid and discharged by VESTA COUNTY MUTUAL concurrently
with the PURCHASER'S payment pursuant hereto.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF VESTA
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VESTA represents and warrants to PURCHASER that, as of the date of this
AGREEMENT and on the CLOSING DATE, the facts stated in this article are true and
correct:
3.1 Corporate Authorization. All corporate actions required to be taken
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by VESTA to authorize them to enter into and to carry out this AGREEMENT have
been duly and properly taken. This AGREEMENT has been duly executed and
delivered by VESTA pursuant to such authorization and is valid and enforceable
against them in accordance with its terms.
3.2 Consents. Other than as described in Section 6.1, no approval,
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consent, authorization, or action of, or filing with any governmental body or
other third party is required for the execution, delivery or performance by
VESTA of this AGREEMENT or the other documents required to be executed by them
pursuant to the terms of this AGREEMENT.
3.3 No Breach or Violation. The execution and delivery of this AGREEMENT
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and the consummation of the transactions contemplated hereby, upon satisfaction
of the conditions set forth in Article VI, will not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under, or violate, as the case may be, the
respective certificates of incorporation or by-laws of VIG or VESTA
MANAGEMENT, or any material agreement, lease, mortgage, note, bond,
indenture, license or other document or undertaking to which VESTA is
a party; or
(b) result in a material violation of any rule or regulation, or
any order, writ, injunction or decree of any court, administrative
agency, or governmental body; provided, however, that no
representation or warranty is made hereunder in any manner whatsoever
with respect to any requirement of PURCHASER with respect to federal
or state antitrust laws.
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3.4 Representations and Warranties Concerning Vesta Management. VESTA'S
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representations and warranties concerning VESTA MANAGEMENT are:
3.4.1 Ownership of Vesta Management. VIG is the sole stockholder of
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VESTA MANAGEMENT.
3.4.2 Organization and Standing. VESTA MANAGEMENT is a corporation
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duly organized, validly existing and in good standing under the laws
of the State of Texas and has full corporate power and authority to
carry on its business as now conducted and to enter into this
AGREEMENT.
3.4.3 Assets and Liabilities. VESTA MANAGEMENT'S sole asset is the
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MANAGEMENT CONTRACT, a copy of which is included in Exhibit 3.4.3,
under which VESTA MANAGEMENT manages the business affairs of VESTA
COUNTY MUTUAL and VESTA controls VESTA COUNTY MUTUAL. VESTA
MANAGEMENT has no liabilities whatsoever, nor has any claim therefor
been made which would give rise to any such liability, nor is there
any possibility of any such claim known to VESTA, which have, or will
have an effect upon the MANAGEMENT CONTRACT.
3.4.4 Litigation. There is no claim, action, suit proceeding,
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arbitration or litigation pending or threatened against VESTA
MANAGEMENT or its business or assets which involves the reasonable
likelihood of any judgment against, liability of, or material adverse
effect on VESTA MANAGEMENT or the MANAGEMENT CONTRACT. A claim,
action, suit, proceeding, arbitration or litigation shall be
considered "threatened" for purposes of this Subsection 3.4.4 if VESTA
has received a written notice that an action, suit or proceeding may
be commenced.
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3.4.5 No Material Changes. There has not occurred any event, or been
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realized any condition, which has had, or which will have, any
material adverse effect on the MANAGEMENT AGREEMENT, including, but
not limited to, any events effecting a material change in the business
relationship or course of dealing between VESTA MANAGEMENT and VESTA
COUNTY MUTUAL under the MANAGEMENT CONTRACT.
3.4.6 Assignment of Management Contract. VESTA MANAGEMENT may sell,
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assign, and transfer all of its rights and interests under the
MANAGEMENT CONTRACT without the approval of any persons, including,
without limitation, policyholders of VESTA COUNTY MUTUAL, except for
the approval of the Commissioner of Insurance, as described in
Subsection 6.1.1, and the approval of VESTA COUNTY MUTUAL.
3.5 Representations and Warranties. VESTA'S representations and
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warranties are:
3.5.1 Organization and Existence. VESTA COUNTY MUTUAL is a Texas
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county mutual insurance company is duly organized and validly existing
under Chapter 17 of the CODE and is in good standing under the laws of
the State of Texas, and has all requisite corporate power to carry on
its business as now being conducted; and is duly authorized and
licensed; and has all permits and governmental authorizations required
under all applicable laws, regulations, ordinances and orders of
public authorities necessary to carry on its business in Texas in the
manner now conducted. VESTA COUNTY MUTUAL holds a valid certificate
of authority issued by the Texas Department of Insurance, a copy of
which is attached as Exhibit 3.5.1 authorizing VESTA COUNTY MUTUAL to
conduct insurance business in Texas in accordance with Chapter 17 of
the
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CODE. A true and correct copy of the Articles of Incorporation of
VESTA COUNTY MUTUAL, as amended, as well as the Restated Bylaws, are
attached as part of Exhibit 3.5.1.
3.5.2 Voting Rights. The only persons entitled to vote with respect
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to the affairs of VESTA COUNTY MUTUAL are its duly elected directors
and its members (i.e. policyholders who are holders of in force
policies of insurance issued by VESTA COUNTY MUTUAL), or the President
of VESTA COUNTY MUTUAL to the extent the President may be named in
proxies granted by its members.
3.5.3 Subsidiaries. VESTA COUNTY MUTUAL has no subsidiaries and has
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no proprietary interest, directly or indirectly, in any corporation,
association, partnership, firm, joint venture or other business
organization, and VESTA COUNTY MUTUAL does not control, directly or
indirectly, the management of any such entities.
3.5.4 Financial Statements. The statutory financial statements of
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VESTA COUNTY MUTUAL for each of the two years ended December 31, 1997
and 1998 ("Annual Statements"), and its Quarterly Statement as of
March 31, 1999 (collectively referred to herein as "Financial
Statements") have been prepared in a manner prescribed or permitted
under statutory authority of the Texas Department of Insurance on a
consistent basis during the periods covered by each Annual Statement.
Copies of such Financial Statements have been provided to PURCHASER
and are, to VESTA'S knowledge after due investigation, in all material
respects true, correct and complete and present fairly the financial
position of VESTA COUNTY MUTUAL at the respective dates thereof,
except as may be set forth in the notes thereto.
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3.5.5 Properties. VESTA COUNTY MUTUAL does not own or have an
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interest in any real property. VESTA COUNTY MUTUAL has good and
marketable title to, and is in possession of all its personal
properties and assets, including nonadmitted assets, reflected in the
Quarterly Statement of VESTA COUNTY MUTUAL as of March 31, 1999 (other
than properties and assets reflected in such Quarterly Statement that
have been sold or otherwise disposed of in the ordinary course of
business consistent with past practice), free and clear of all liens,
mortgages, pledges, security interests and encumbrances, subject to
applicable insurance laws and regulations.
3.5.6 Absence of Certain Changes or Events. Since March 31, 1999,
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there has not occurred, nor has there been: (i) any material, adverse
change in the operations, business, properties or assets of VESTA
COUNTY MUTUAL, nor, to the best knowledge and belief of VESTA, is
there currently any other condition of any character materially and
adversely affecting the business of VESTA COUNTY MUTUAL or that, with
the passage of time, is likely to have such effect; or (ii) any
borrowing or loan obligating VESTA COUNTY MUTUAL ; or (iii) any
transaction by VESTA COUNTY MUTUAL that was not in the ordinary course
of business conducted on a basis consistent with past practice.
3.5.7 Tax Matters. Other than as disclosed in the Closing Balance
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Sheet:
(a) VESTA and VESTA COUNTY MUTUAL have no liability or obligation for
or in respect of Taxes that would be imposed on or adversely
affect PURCHASER, or that would adversely affect the MANAGEMENT
CONTRACT, the Loss Portfolio Transfer or the consummation of the
transactions contemplated hereby, and
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(b) no Tax imposed on VESTA or VESTA COUNTY MUTUAL for any period
ending or prior to the CLOSING would be imposed on or adversely
affect the PURCHASER or would adversely affect the MANAGEMENT
CONTRACT, the Loss Portfolio Transfer or the consummation of the
transactions contemplated hereby;
(c) all federal, foreign, state, county, local and other Taxes due
and payable by VESTA COUNTY MUTUAL, on or before the date of this
AGREEMENT, have been paid;
(d) VESTA COUNTY MUTUAL has filed all Tax returns and reports
required to be filed by it with all such taxing authorities and
all such Tax returns were correct and complete in all material
respects;
(e) VESTA COUNTY MUTUAL has (or by the CLOSING DATE will have) paid,
or adequately reserved for the payment of Taxes with respect to
periods ending on or prior to the CLOSING DATE;
(f) no claim has been made by a Tax authority in respect to tax
returns filed by VESTA COUNTY MUTUAL, and
(g) no claim has been made by a tax authority in a jurisdiction where
VESTA COUNTY MUTUAL does not file a Tax return.
VESTA COUNTY MUTUAL is not a party to any tax sharing or similar agreement
with any third party. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the filing of any tax return,
the payment of any tax or the assessment of any tax or deficiency of any nature
against VESTA COUNTY MUTUAL. Additional tax matters appear in Article XI.
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3.5.8 Employees. VESTA COUNTY MUTUAL has no employees and is not subject
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to any collective bargaining agreements. VESTA COUNTY MUTUAL has no
liability to any of its insurance agents as a result of termination, or for
any other reason, except commissions due in the ordinary course of
business.
3.5.9 No Default. VESTA COUNTY MUTUAL is not currently in default with
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respect to any material obligation to be performed by it under any
contract, lease, agreement, commitment or undertaking to which it is a
party, or by which it or any of its assets or properties are bound, nor has
VESTA COUNTY MUTUAL waived any material right under any such contract,
lease, agreement, commitment or undertaking (except to the extent VESTA
COUNTY MUTUAL may have waived rights in the ordinary course of
administering insurance policies).
3.5.10 Surplus. The surplus of VESTA COUNTY MUTUAL meets the surplus
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requirements of the Texas Insurance Code for VESTA COUNTY MUTUAL as of the
date of the date of this AGREEMENT and will meet such requirements upon the
CLOSING provided PURCHASER complies with Section 2.2.
3.5.11 Associations. VESTA COUNTY MUTUAL is not a member of any guaranty
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associations, or any insurance pools, funds or facilities, except for the
Texas Catastrophe Property Insurance Pool.
3.6 Contracts. Other than the MANAGEMENT CONTRACT, all agreements to
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which VESTA COUNTY MUTUAL is a party are scheduled and described in Exhibit 3.6
attached hereto. Except as described in Exhibit 3.6, no party to the agreements
is in any material default thereunder, nor, to the knowledge of VESTA, does
there exist any condition which, with the passage of time or notice, or both,
might constitute such a material default by any party thereto. No such
agreement will be
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breached by, or prohibit any transactions contemplated by, this AGREEMENT.
Except for agreements described in Exhibit 3.6 (copies of which have been
delivered to PURCHASER), VESTA COUNTY MUTUAL is not a party to, nor bound by,
any written or oral contract, other than insurance policies issued in the
ordinary course of business, including any: (i) employment contract, consulting
contract or contract providing for the services of an independent contractor
(other than agency contracts entered into with insurance agents in the ordinary
course of business); (ii) contract with any labor union or association; (iii)
lease with respect to any property, real or personal, whether as lessor or
lessee; (iv) contract or commitment for the purchase of materials, supplies or
equipment; (v) sale or franchise agreement or legally enforceable commitment or
obligation with respect thereto; (vi) contract or commitment for capital
expenditures; (vii) contract relating to patents, trademarks, trade names,
copyrights, inventions, processes, formulae or trade secrets; or (viii) contract
or commitment for the sale of its products (other than contracts entered into
with insurance agents in the ordinary course of business).
3.7 Service Marks and Trademarks. VESTA COUNTY MUTUAL does not own, nor
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has it applied for, any patents, patent applications, patent licenses,
copyrights, inventions, service marks, trademarks, trademark application,
trademark licenses, trade names or brand names. There is not currently any
pending or, to the best knowledge and belief of VESTA, threatened claim that
either party has infringed upon, or owes compensation to any other person with
respect to their use of any of such properties.
3.8 Litigation. Other than claims relating to coverage under insurance
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policies issued by VESTA COUNTY MUTUAL, there is no claim, action, suit,
litigation, arbitration, proceeding or governmental investigation pending
against either VESTA MANAGEMENT or VESTA COUNTY MUTUAL, or, to the best
knowledge and belief of VESTA, threatened against either VESTA MANAGEMENT or
VESTA COUNTY MUTUAL, or any of their businesses, operations, assets or
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properties. A claim, action, suit, litigation, arbitration, proceeding or
governmental investigation shall be considered "threatened", for purposes of
this section, if either VESTA or VESTA COUNTY MUTUAL has received a written
notice that an action, suit or proceeding may be commenced.
3.9 Compliance with Laws. VESTA MANAGEMENT and VESTA COUNTY MUTUAL are in
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substantial compliance with all laws, regulations, rules and decrees of all
governmental authorities whatsoever, including, without limitation, those
relating to the conduct of their businesses and the ownership of their assets,
and VESTA MANAGEMENT and VESTA COUNTY MUTUAL have, and shall have on the CLOSING
DATE, all required permits, licenses, certificates and authorizations necessary
for the conduct of their businesses and the ownership of their assets. Subject
to the satisfaction of the conditions of Article VI, the execution, delivery and
performance of this AGREEMENT will not (i) result in the breach or violation of
any statute or regulation applicable to VESTA COUNTY MUTUAL; (ii) cause to be
terminated or modified, or in any way adversely affected, any permit, license,
certificate or governmental authorization of any kind now held by VESTA COUNTY
MUTUAL relevant to the continued conduct of any of its business as heretofore
conducted; or (iii) cause VESTA COUNTY MUTUAL to require any additional permit,
license, certificate or governmental authorization of any kind in order to
continue to conduct its business as heretofore conducted.
3.10 Bank Accounts. A schedule setting forth the name of each bank,
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custodian and safe deposit facility in which VESTA COUNTY MUTUAL has an account,
funds or securities in custody, or safe deposit box, the style and number of
each such account or safe deposit box, and the names of all persons authorized
to write checks upon such accounts or have access, is attached hereto as Exhibit
3.10.
3.11 Management Contract Free of Debt and Security Interests. The
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MANAGEMENT CONTRACT, and all rights or income appurtenant thereto or granted
thereunder, is free and clear of any
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and all pledges, liens, encumbrances, mortgages, or security interests, or
impingements of any kind upon VESTA MANAGEMENT'S right to exercise full
authority in accordance with its terms.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
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PURCHASER represents and warrants to VESTA that, as of the date of this
AGREEMENT and on the CLOSING DATE, the facts are true and correct.
4.1. Organization and Standing. PURCHASER is a corporation duly organized,
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validly existing and in good standing under the laws of Missouri, and has full
power and authority to carry on its business as now conducted and to own all of
its properties and assets.
4.2 Corporate Authorization. All corporate action required to be taken by
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PURCHASER to authorize PURCHASER to enter into and carry out this AGREEMENT has
been duly and properly taken. This AGREEMENT has been duly executed and
delivered by PURCHASER, and is valid and enforceable against PURCHASER in
accordance with its terms.
4.3 Compliance. The execution and delivery of this AGREEMENT and the
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consummation of the transactions contemplated hereby, upon satisfaction of the
conditions set forth in Article VI, will not: (i) result in the breach of any of
the terms or conditions of, or constitute a default under or violate, as the
case may be, the Certificate of Incorporation or By-laws of PURCHASER or any
material agreement, lease, mortgage, note, bond, indenture, license or other
document or undertaking to which PURCHASER, or any of its affiliates, is bound,
or by which any of its or their properties or assets may be affected; or (ii)
result in a material violation of any rule or regulation, or any writ,
injunction, order or decree of any court, administrative agency or governmental
body.
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4.4 Financial Condition. PURCHASER'S financial condition, business
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experience and other qualifications are sufficient to obtain all necessary
approvals and authorizations, including that described in Subsection 6.1.1
hereof, and to consummate the transactions contemplated by this AGREEMENT.
4.5 Consents. Other than as described in Article VI, no approval,
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consent, authorization or action of or filing with any governmental body or
other third party is required for the execution, delivery or performance by
PURCHASER of this AGREEMENT or any other documents required to be executed by
PURCHASER pursuant to the terms of this AGREEMENT.
ARTICLE V. CONDUCT OF BUSINESS PENDING CLOSING
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5.1 Conduct of Business by Vesta Pending Closing. VESTA covenants,
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pending the CLOSING, unless provided herein or otherwise agreed to in writing by
PURCHASER, that (a) no changes will be made in the business operations of VESTA
COUNTY MUTUAL; and (b) no change will be made in the MANAGEMENT CONTRACT, nor
will VESTA issue any options or similar rights entitling any other party to
acquire any direct or indirect interest in the MANAGEMENT CONTRACT.
5.2 Access to Records. VESTA shall permit PURCHASER and its
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representatives full access to, and make available for inspection during normal
business hours, all of the books, records, financial information and other
documents related to the business affairs of VESTA MANAGEMENT and VESTA COUNTY
MUTUAL (or portions of documents which are so related) which VESTA has in its
possession or control and shall furnish PURCHASER with such copies thereof as
PURCHASER may reasonably request. Pending the CLOSING hereunder, PURCHASER and
its representatives (i) will preserve the confidentiality of all such books,
records, financial information and other documents inspected regarding VESTA
MANAGEMENT and VESTA COUNTY MUTUAL, (ii) will not make use of such material and
information for any purpose other than evaluating the business of VESTA
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MANAGEMENT and VESTA COUNTY MUTUAL or obtaining financing for the transactions
contemplated by this AGREEMENT, and (iii) will not voluntarily disclose to
others, or permit the use by others of, any such material or information. In
the event this AGREEMENT is terminated prior to CLOSING, PURCHASER shall, at
VESTA'S request, (i) return or destroy all such copies, and (ii) destroy all
notes, memoranda, correspondence and other documents reflecting information
obtained from VESTA pursuant to this section. PURCHASER shall thereafter
maintain the confidentiality of all such information.
5.3 Material Change. VESTA shall promptly inform PURCHASER in writing of
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any event or condition which has had, or is reasonably likely to have, a
material adverse effect on the business or assets of VESTA MANAGEMENT or VESTA
COUNTY MUTUAL.
5.4 Contracts. Except as provided herein, or as described in Exhibit 5.4,
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VESTA shall not waive any material right or cancel or amend any material
contract, debt or claim of VESTA COUNTY MUTUAL, nor will VESTA permit VESTA
COUNTY MUTUAL to assume or enter into any contract, lease, obligation,
indebtedness, commitment, or purchase or sale of assets without PURCHASER'S
prior written consent. VESTA COUNTY MUTUAL shall, however, enter into
amendments (copies of which are attached as part of Exhibit 5.4) to certain
contracts as follows:
(a) The 100% Quota Share Reinsurance Agreement with Vesta Fire Insurance
Corporation shall be amended to terminate all new and renewal business
commencing with the CLOSING, except for (i) Vendor's Single Interest
insurance and (ii) private passenger automobile insurance, written
through J. Xxxxxx Xxxxxx of Texas, Inc.; and
(b) The Managing General Agency Agreement with J. Xxxxxx Xxxxxx of Texas,
Inc. shall be amended to terminate the authority to write insurance
business on behalf of VESTA COUNTY MUTUAL, provided that for a period
of two years from the date of
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CLOSING, the authority will remain in effect for new and renewal (i)
Vendor's Single Interest insurance produced for its own account; (ii)
private passenger automobile insurance produced for its own account
and not written by, through or in conjunction with, any other general
agency under contract to VESTA COUNTY MUTUAL, including, but not
limited to, those described in Exhibit 3.6, and (iii) private
passenger automobile insurance written for the account of Superior
Insurance Company but such authority shall be limited to a total
premium written through VESTA COUNTY MUTUAL in an amount not to exceed
$10,000,000 any one year, the first year to begin on the date of
CLOSING.
5.5 Ordinary Course of Business. Except as contemplated hereunder, the
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business of VESTA COUNTY MUTUAL shall be conducted only in the ordinary course
and in a manner consistent with past practice, provided, however, that (i) all
intercompany obligations between VESTA MANAGEMENT, VESTA COUNTY MUTUAL, VIG or
Vesta Fire Insurance Corporation, or any other of VIG'S affiliates, shall be
settled at or prior to CLOSING, and (ii) VESTA COUNTY MUTUAL may make payments
to VESTA MANAGEMENT pursuant to the MANAGEMENT CONTRACT. The payment and
discharge of the Surplus Debenture debt to VIG shall be made as described in
Section 2.2 in accordance with the COMMISSIONER'S order described in Subsection
6.1.3.
5.6 Borrowing. No borrowing or agreement for borrowing shall be made by
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VESTA COUNTY MUTUAL.
5.7 Assets and Properties. VESTA will in good faith use all reasonable
---------------------
efforts to maintain and preserve all assets and properties of VESTA COUNTY
MUTUAL.
5.8 Insurance. Until CLOSING, VESTA MANAGEMENT will maintain in effect
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insurance coverage against loss of, or damage to the properties, if any, of
VESTA COUNTY MUTUAL and against
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the liabilities and risks of the business of VESTA COUNTY MUTUAL in amounts and
kinds not less favorable than those currently in effect, as well as fidelity
insurance applicable to the officers, directors and other employees of VESTA
COUNTY MUTUAL.
5.9 Books of Accounts. VESTA will cause VESTA COUNTY MUTUAL to maintain
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and continue to keep its books, accounts and records in a manner that is
consistent with prior practice.
5.10 Compliance with Law. VESTA will cause VESTA COUNTY MUTUAL to comply
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in all material respects with all laws, rules, regulations, orders and decrees
of any governmental authority applicable to VESTA COUNTY MUTUAL.
5.11 Encumbrances. VESTA will not make, grant or incur any mortgage,
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easement, lien, restriction, encumbrance or security interest or any kind
regarding VESTA COUNTY MUTUAL, or any of its properties or assets, (other than
liens for Taxes not yet due and payable), and will prevent VESTA COUNTY MUTUAL
from taking or permitting any such action.
5.12 Continued Disclosure. If any event or change of circumstance occurs
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or arises prior to the CLOSING which, had it occurred or been in existence on
the date hereof, would have required disclosure hereunder, then VESTA shall give
prompt notice thereof in writing to PURCHASER.
5.13 Prohibited Activity. Without the prior written consent of PURCHASER,
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VESTA will prevent VESTA COUNTY MUTUAL from the date of this AGREEMENT through
the CLOSING DATE, except in the ordinary course of business, from doing any of
the following: (i) except as specifically contemplated hereunder, make any
change in its Articles of Incorporation or By-Laws; (ii) be in material default
under any contract, agreement, commitment or undertaking of any kind (for
purposes of this subsection only, "material" shall mean a payment of, or
obligation to pay more than $5,000 under any one contract or $25,000 under all
contracts binding VESTA COUNTY MUTUAL);
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(iii) violate or fail to comply with, in any material respect, laws applicable
to VESTA COUNTY MUTUAL or its properties or business.
5.14 Ratings. The parties hereto shall cooperate in notifying rating
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services of the proposed sale. No communication to any such service with regard
to this transaction shall be made by one party without a good faith effort to
obtain prior approval from the other.
ARTICLE VI. CONDITIONS
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6.1 Approvals Required Prior to Closing. The following approvals shall be
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obtained by the parties hereto as a condition to the CLOSING:
6.1.1 Approval of Commissioner. The approval of the COMMISSIONER
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shall be obtained for the acquisition by PURCHASER of control of VESTA
COUNTY MUTUAL in accordance with Sec. 5 of Art. 21.49-1, of the CODE.
PURCHASER shall, in connection with its application for acquisition of
control of VESTA COUNTY MUTUAL, obtain the approval of the COMMISSIONER for
any affiliated transactions subject to Sec. 4 of Art 2.49-1 of the CODE
effective upon the CLOSING, including, without limitation, (i) a
reinsurance agreement between VESTA COUNTY MUTUAL and the PURCHASER and
(ii) the investment commitment of PURCHASER to supply the surplus of VESTA
COUNTY MUTUAL in accordance with Section 2.2.
6.1.2 Approval of Vesta County Mutual. The approval of VESTA COUNTY
-------------------------------
MUTUAL shall be obtained by VESTA for the sale and assignment of the
MANAGEMENT CONTRACT.
6.1.3 Other Approvals of Commissioner. VESTA shall cause VESTA
-------------------------------
COUNTY MUTUAL to obtain any other approvals for any transactions or
changes involving
18
VESTA COUNTY MUTUAL provided by the AGREEMENT for which the approval
of the COMMISSIONER is required prior to CLOSING, including, without
limitation, (i) any affiliated transactions referred to in Section
5.4, (ii) the payment of Two Million Five Hundred Thousand Dollars
($2,500,000.00), together with accrued interest from the date of the
last payment under the Surplus Debenture, to VIG in order to fully
discharge the Surplus Debenture dated March 10, 1997, a copy of which
is attached as Exhibit 2.2, and (iii) the issuance of a successor
surplus debenture to the PURCHASER, or its designee, in accordance
with Section 2.2.
6.2 Conditions Precedent to the Obligation of Purchaser to Close. The
------------------------------------------------------------
obligations of PURCHASER under this AGREEMENT are subject to the fulfillment or
satisfaction, prior to or at the CLOSING, of each of the following conditions:
6.2.1 Proceedings. No preliminary or permanent injunction or other
-----------
order (including a temporary restraining order) of any state, federal
or local court or other governmental agency or of any foreign
jurisdiction, which prevents the consummation of the transactions the
subject of this AGREEMENT, or prohibits PURCHASER'S acquisition of
control of VESTA COUNTY MUTUAL, shall have been issued and remain in
effect, and no other action or proceeding by any such court or
governmental agency shall have been asserted, instituted or entered to
restrain or prohibit the carrying out of the transactions contemplated
hereby.
6.2.2. Approvals. All approvals and authorizations required for the
---------
transactions contemplated hereby by VESTA (including approvals
described in Section 6.1) shall have been obtained from appropriate
state, local and federal governmental agencies, or from VESTA COUNTY
MUTUAL, as the case may be.
19
6.2.3 Representations and Warranties. All representations and
------------------------------
warranties of VESTA contained in this AGREEMENT shall be true and
correct in all material respects as of the CLOSING DATE, except as may
be otherwise expressly contemplated by this AGREEMENT.
6.2.4 Performance of Agreements; Instruments of Transfer. VESTA
--------------------------------------------------
shall have (i) fully performed in all material respects all
obligations, agreements, conditions and commitments to be fulfilled by
VESTA pursuant to the terms hereof on or prior to the CLOSING DATE;
(ii) tendered to PURCHASER, or it's designee, the assignment of the
MANAGEMENT CONTRACT (subject to the COMMISSIONER'S approval as
required by Subsection 6.1.1), and (iii) notified PURCHASER that it is
prepared to deliver all documents and records described in Section
7.1.
6.2.5 No Material Adverse Change. No material adverse change
--------------------------
affecting the VESTA COUNTY MUTUAL shall have occurred between the date
of this AGREEMENT and the CLOSING DATE.
6.3 Conditions Precedent to the Obligation of Vesta to Close.
--------------------------------------------------------
The obligations of VESTA under this AGREEMENT are subject to the
fulfillment or satisfaction, prior to or at the CLOSING, of each of the
following conditions.
6.3.1 Proceedings. No preliminary or permanent injunction or other
-----------
order (including a temporary restraining order) of any state, federal
or local court or other governmental agency or of any foreign
jurisdictions, which prevents the consummation of the transactions the
subject of this AGREEMENT or prohibits PURCHASER'S acquisition of the
MANAGEMENT CONTRACT or the control of VESTA COUNTY MUTUAL, shall have
been issued and remain in effect, and no other action or proceeding by
any
20
such court or governmental agency shall have been asserted,
instituted, or entered to restrain or prohibit the carrying out of the
transactions contemplated by this AGREEMENT.
6.3.2 Approvals. All approvals and authorizations required for
---------
the transactions contemplated hereby (including approvals described in
Section 6.1) shall have been obtained from appropriate state, local
and federal governmental agencies.
6.3.3 Representations and Warranties. Except as may be otherwise
------------------------------
contemplated by this AGREEMENT, all representations and warranties of
PURCHASER contained in this AGREEMENT shall be true and correct in all
material respects as of the CLOSING DATE.
6.3.4 Performance of Agreements; Instruments of Transfer.
--------------------------------------------------
PURCHASER shall have fully performed in all material respects all
obligations, agreements, conditions and commitments to be fulfilled by
PURCHASER pursuant to the terms hereof on or prior to the CLOSING DATE
and shall have tendered the payments, documents, instruments and
certificates required by Section 7.2.
6.4 Attorneys' Opinions. Attorneys' opinions of the respective parties
-------------------
shall be as follows.
6.4.1 Opinion of Counsel for Vesta. To the effect that:
----------------------------
(a) VIG AND VESTA MANAGEMENT are corporations duly incorporated,
validly existing and in good standing under the laws of their
states of domicile and have all requisite corporate powers to
enter into and form this AGREEMENT;
21
(b) All corporate and other proceedings required to be taken on
the part of VIG and VESTA MANAGEMENT to authorize them to carry
out this AGREEMENT have been duly and properly taken;
(c) This AGREEMENT has been duly authorized, executed and
delivered by VIG and VESTA MANAGEMENT, and constitutes a valid
and binding obligation of VIG and VESTA MANAGEMENT, enforceable
against them in accordance with its terms, except to the extent
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application
affecting the rights of creditors and secured parties generally;
(d) The consummations of the transactions contemplated by this
AGREEMENT will not result in the breach of, or constitute a
default under the Articles of Incorporation or Bylaws of either
VIG or VESTA MANAGEMENT; and
(e) VESTA COUNTY MUTUAL is a county mutual insurance company
authorized and formed under Chapter 17 of the CODE and currently
holds a valid certificate of authority to do the business of
insurance described therein.
6.4.2 Opinion of Counsel of Purchaser. To the effect that:
-------------------------------
(a) PURCHASER is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of Missouri, and has
all requisite corporate power to enter into and perform this
AGREEMENT.
(b) All corporate and other proceedings required to be taken on the
part of PURCHASER to authorize it to carry out this AGREEMENT have
been duly and properly taken;
22
(c) This AGREEMENT has been duly authorized, executed and delivered
by PURCHASER, and constitutes a valid and binding obligation of
PURCHASER, enforceable against PURCHASER in accordance with its terms,
except to the extent limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
application affecting the rights of creditors and secured parties
generally; and
(d) The consummations of the transactions contemplated by this
AGREEMENT will not result in the breach of, or constitute a default
under the Articles of Incorporation or Bylaws of the PURCHASER.
6.4.3 Attorney's Reliance. The opinions of counsel may, as to matters of
-------------------
fact, be given in reliance upon certificates of their respective clients'
officers or directors, certificates of public officials and, as to matters of
law involving another jurisdiction (other than the state of domicile of a
party subject to the opinion), upon the opinions of local counsel. The
opinions may contain such exceptions, qualifications and explanations as
shall be reasonably acceptable to the other party and its counsel.
ARTICLE VII. CLOSING DOCUMENTS
-----------------
7.1 Vesta's Obligations. At the CLOSING, VESTA shall deliver to PURCHASER
-------------------
the following:
7.1.1 Resolutions. Copies of resolutions of the boards of directors
-----------
(certified by the secretary, the assistant secretary, or other
appropriate officer) of VIG and VESTA MANAGEMENT, authorizing the
execution, delivery and performance of this AGREEMENT and the
transactions contemplated hereby.
23
7.1.2 Assignment. An assignment by VESTA MANAGEMENT of the
----------
MANAGEMENT CONTRACT, duly and property executed, a draft copy of which
is attached hereto as Exhibit 7.1.2.
7.1.3 Management Contract. The original signed document.
-------------------
7.1.4 Books and Records. The original corporate minute books and
-----------------
stock ledger books of VESTA COUNTY MUTUAL and such other documents,
books and records regarding the business of VESTA COUNTY MUTUAL as may
be requested by PURCHASER upon reasonable notice delivered prior to
the CLOSING DATE.
7.1.5 Resignations. Resignations of all directors and officers of
------------
VESTA COUNTY MUTUAL (the names of which are listed on Exhibit 7.1.5)
in a sequence permitting substitution of personnel designated by
PURCHASER.
7.1.6 Officer's Certificate. A certificate, in a form reasonably
---------------------
satisfactory to PURCHASER, signed by duly authorized officers of
VESTA, stating that to such officers' best knowledge and belief all
representations and warranties of VESTA set forth in Article III are
true and correct as of the CLOSING DATE.
7.1.7 Official Orders and Other Proof. A copy of the official order,
-------------------------------
if any, described in Subsection 6.1.3 and proof of VESTA COUNTY
MUTUAL'S approval, as described in Subsection 6.1.2.
7.1.8 Loss Portfolio Transfer. An executed Loss Portfolio Transfer,
-----------------------
the form of which is attached hereto as Exhibit 7.1.8.
7.1.9 Contract Terminations and Amendments. Executed terminations of
------------------------------------
any agreements between VESTA COUNTY MUTUAL and VESTA or any affiliate
(excluding the MANAGEMENT CONTRACT) except that (i) the 100% Quota
Share
24
Reinsurance Agreement with Vesta Fire Insurance Corporation and (ii)
the Managing General Agency Agreement with J. Xxxxxx Xxxxxx of Texas,
Inc., shall be amended as provided in Section 5.4.
7.1.10 Attorney's Opinion. The attorney's opinion described in
------------------
Subsection 6.4.1.
7.1.11 Closing Balance Sheet. VESTA shall deliver to PURCHASER at
---------------------
CLOSING a balance sheet prepared to reflect the financial condition of
VESTA COUNTY MUTUAL as of the CLOSING ("Closing Balance Sheet")
reflecting the financial condition after the results of operations
following the Quarterly Financial Statement of March 31, 1999, as well
as the transactions authorized by this AGREEMENT prior to or at
CLOSING. The Closing Balance Sheet shall show assets equal to
liabilities. The Closing Balance Sheet, for these purposes will
contain "assets" and "liabilities" and will not reflect the surplus of
VESTA COUNTY MUTUAL represented by the surplus debenture, to be paid
and discharged upon CLOSING.
7.2 Purchaser's Obligation. At the CLOSING, PURCHASER shall deliver to
----------------------
VESTA the following:
7.2.1 Resolutions. Copies of resolutions of PURCHASER'S Board of
-----------
Directors, certified by the Secretary, or Assistant Secretary, or
other appropriate officer of PURCHASER, authorizing the execution,
delivery and performance by PURCHASER of this AGREEMENT and the
transactions contemplated hereby.
7.2.2 Payment. Funds in the amount of the PURCHASE PRICE paid in
-------
accordance with section 2.1 and confirmation of the contribution to
VESTA COUNTY MUTUAL in consideration of the Surplus Note to VESTA
COUNTY MUTUAL in accordance with Section 2.2.
25
7.2.3 Officer's Certificate. A certificate, in a form reasonably
---------------------
satisfactory to VESTA, signed by a duly authorized officer of
PURCHASER, stating that to the officer's best knowledge and belief all
representations and warranties of PURCHASER set forth in Article IV
are true and complete as of the CLOSING DATE.
7.2.4 Official Order. A copy of the Official Order (or orders)
--------------
described in Subsection 6.1.1.
7.2.5 Attorney's Opinion. The attorney's opinion described in
------------------
Subsection 6.4.2, which may be rendered by PURCHASER'S General
Counsel..
ARTICLE VIII. TERMINATION
-----------
8.1 After Passage of Time. If this AGREEMENT has not been consummated and
---------------------
closed by August 20, 1999 (and not otherwise terminated pursuant to this
article) it shall then be automatically terminated with no further force and
effect unless extended by written agreement of the parties.
8.2 By Vesta. If the CLOSING shall not have occurred within ten (10) days
--------
from the CLOSING DATE (as determined by Section 1.2) through no fault of VESTA,
and the conditions of Section 6.2 have been met or satisfied, VESTA may
terminate its obligations under this AGREEMENT by written notice to PURCHASER,
and may exercise such remedies for PURCHASER'S failure to perform, if any, as
may be available at law or in equity.
8.3 By Purchaser. If the CLOSING shall not have occurred within ten (10)
------------
days from the CLOSING DATE (as determined by Section 1.2), through no fault of
PURCHASER, and the conditions of Section 6.3 have been met or satisfied,
PURCHASER may terminate its obligations under this AGREEMENT by written notice
to VESTA, and may exercise such remedies for VESTA'S failure to perform, if any,
as may be available at law or in equity.
26
8.4 Failure To Comply After Diligent Effort. Notwithstanding the
---------------------------------------
foregoing, a party hereto may not pursue against the other party hereto legal or
equitable remedies where such other party's failure to comply with a requirement
hereunder arises from its inability to secure a necessary consent or approval
from a governmental authority, and such other party has made an effort to secure
such approval as required by Section 10.2.
ARTICLE IX. INDEMNIFICATION
---------------
9.1 Indemnification by Vesta. Subject to the limits set forth in this
------------------------
article, VESTA hereby covenants and agrees to indemnify, protect, defend and
hold PURCHASER and VESTA COUNTY MUTUAL, their officers, directors, shareholders,
employees, agents and affiliates, harmless from and against any and all loss,
liability, damage and expense (including, without limitation, all actions,
suits, proceedings, claims, demands, assessments, judgments, costs, fines,
expenses, Taxes, injunctions and penalties, and any and all reasonable legal and
accounting fees incident to any of the foregoing) suffered or incurred as a
result of (i) VESTA'S breach of any covenant, warranty or representation, term,
condition or agreement contained in this AGREEMENT, and (ii) any material
inaccuracy in the representations and warranties of VESTA set forth herein.
9.2 Indemnification by Purchaser. Subject to the limits set forth in this
----------------------------
article, PURCHASER hereby covenants and agrees to indemnify, protect, defend and
hold VESTA and their officers, directors, shareholders, employees, agents and
affiliates, harmless from and against any and all loss, liability, damage and
expense (including, without limitation, all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, fines, expenses, injunctions and
penalties, and any and all reasonable legal and accounting fees incident to any
of the foregoing) suffered or incurred as a result of (i) PURCHASER'S breach of
any covenant, warranty or representation, term, condition or agreement
27
contained in this AGREEMENT, and (ii) any material inaccuracy in the
representations and warranties of PURCHASER set forth herein.
9.3 Survival of Representations and Warranties. The several warranties
------------------------------------------
and representations of the parties contained in this AGREEMENT, or in any
instrument delivered pursuant hereto, shall survive the CLOSING DATE and shall
remain in full force and effect until January 1, 2002, and shall be effective
with respect to any inaccuracy therein or breach thereof, notice of which shall
have been duly given prior to such date, in accordance with Section 9.4 hereof.
Neither party shall assert any claim against the other for indemnification
hereunder with respect to any inaccuracy or breach of such representations or
warranties (or for monetary damages which are claimed to have arisen from the
breach of a covenant or undertaking) unless and until the amount of claim or
claims with respect thereto shall exceed $25,000 calculated on a cumulative
basis, and not a per item basis. Notwithstanding the foregoing, the limitations
on the period of survival in this section shall not apply to any covenant or
undertaking which is to be performed following the CLOSING, or with respect to
any Tax obligation or any representation, warranty or indemnification provided
in Sections 3.1, 3.3, 3.4.1 or 3.5.7 or this Article IX or Article XI, each of
which shall survive until the expiration of the applicable statute of
limitations.
9.4 Notice and Opportunity to Defend. If either party becomes aware of a
--------------------------------
matter which it believes may be indemnifiable pursuant to Sections 9.1 or 9.2,
the party seeking indemnification ("Indemnitee") shall give the other party
obligated to provide indemnification (the "Indemnifying Party") prompt written
notice of such matter. If such matter involves (i) any claim or (ii) the
commencement of any action or proceeding by a third person, the Indemnitee shall
give such Indemnifying Party prompt written notice of such claim or the
commencement of such action or proceedings. Such notice shall be a condition
precedent to any liability of the Indemnifying Party hereunder. Such
Indemnifying Party shall have a period of 15 days within which to respond to
such notice. If such Indemnifying Party accepts
28
responsibility within such 15-day period, such Indemnifying Party may handle,
defend or pay the liability for any such matter, at its own expense and by
counsel chosen by the Indemnifying Party and reasonably satisfactory to the
Indemnitee, and the Indemnifying Party shall promptly provide the Indemnitee
with such written confirmations as may be reasonably required by the Indemnitee
to assure that the Indemnifying Party will assume, and be responsible for, the
entire liability for which Indemnifying Party is responsible hereunder, subject
to the limitation in Section 9.6. The Indemnitee shall have the right to
participate at its own expense in the defense of such asserted liability. The
Indemnitee agrees to cooperate fully with the Indemnifying Party and its counsel
in the defense against any such asserted liability. It is provided, however,
that any compromise settlement of such asserted liability by the Indemnifying
Party shall require the prior written consent of the Indemnitee, which consent
shall not be unreasonably withheld.
In the case of any indemnity obligation relating to taxes, if the
Indemnitee withholds such consent and the Indemnifying Party believes such
withholding of consent to be unreasonable, then a determination of the
reasonableness of such consent and withholding shall be made by an Arbitrator
(as described below), the expenses and fees of whom shall be borne by the
parties equally. The Arbitrator shall be a tax partner of a Big 5 certified
public accounting firm who is agreeable to both parties. The decision of the
Arbitrator shall be final and binding on both parties with respect to the
reasonableness of the Indemnitee's decision not to accept the settlement offer
by Indemnifying Party. Should the Arbitrator decide that Indemnitee's position
is reasonable, the settlement offer will be declined by both parties. The
Arbitrator shall be selected by the good faith agreement of the parties within
30 days after written notice of one party to the other of their disagreement.
Arbitration shall be held at an agreed upon location within 30 days from the
selection of the Arbitrator.
29
In the case of any indemnity obligation other than the one relating to
Taxes or in the case in which the Arbitrator of a Tax issue described above
decides that Indemnitee's position is unreasonable, if the Indemnitee refuses
its consent to a bona fide offer of settlement which the Indemnifying Party
---- ----
wishes to accept, the Indemnifying Party may tender such matter to Indemnitee to
be handled, free of any further participation by the Indemnifying Party, at the
sole expense of the Indemnitee. In such event, the obligation of the
Indemnifying Party to the Indemnitee shall be equal to the lesser of (i) the
amount of the offer of settlement which the Indemnitee refused to accept, plus
the costs and expenses (payment of which is provided for hereunder) of the
Indemnitee prior to the date the Indemnifying Party notifies the Indemnitee of
the offer of settlement, or (ii) the actual out-of-pocket amount the Indemnitee
is obligated to pay as a result of such party's continuing to pursue such
matter. An Indemnifying Party shall be entitled to recover from the Indemnitee
any additional expenses incurred by such Indemnifying Party as a result of the
decision of the Indemnitee to pursue such matter. If such Indemnifying Party
rejects responsibility for such matter in whole or in part, or does not respond
within such 15-day period to such notice described above, the Indemnitee shall
be free to pursue, without prejudice to any of its rights hereunder, such
remedies as may be available to such party under applicable law, including its
right to indemnification hereunder.
9.5 Adjustment for Insurance and Taxes. The gross amount which an
----------------------------------
Indemnifying Party is liable to pay to, or on behalf of the Indemnitee pursuant
to this article (the "Indemnifiable Loss") shall be reduced by any insurance
proceeds actually recovered by or on behalf of such Indemnitee (from any insurer
who is not an affiliate of the Indemnitee) related to the Indemnifiable Loss,
and increased to fully recover any Tax cost associated with the indemnity
payment and the insurance or other recovery. If an Indemnitee shall have
received or shall have had paid on its behalf an indemnity payment in respect of
an Indemnifiable Loss and shall subsequently receive directly or indirectly
insurance proceeds in respect
30
of such Indemnifiable Loss (from any insurer who is not an affiliate of the
Indemnitee), such Indemnitee shall pay to such Indemnifying Party the amount of
such insurance proceeds or, if less, the amount of such indemnity payment.
9.6 Maximum Liability. The maximum liability of any party hereto as a
-----------------
result of any action brought by the other party hereto pursuant to the terms of
this AGREEMENT (including that arising from Article IX) is an amount equal to
the PURCHASE PRICE. Notwithstanding the foregoing, the limitations on the
Maximum Liability in this Section 9.6 shall not apply with respect to any
liability or obligations for or in respect of Taxes, or any specific Tax
indemnification granted in Section 3.5.7, Article IX or Article XI hereof.
ARTICLE X. COVENANTS AND AGREEMENTS
------------------------
10.1 Application for Commissioner's Approval. Following execution of this
---------------------------------------
AGREEMENT, PURCHASER will promptly file an application for the approval(s)
described in Subsection 6.1.1.
10.2 Best Efforts. During the period commencing on the date of the
------------
execution hereof and continuing until the CLOSING DATE, PURCHASER, or its
designee, and VESTA shall incur usual and necessary expenses required by
governmental or professional entities to use their best efforts to obtain all
approvals, consents and authorizations needed to effect the transactions
contemplated hereby as expeditiously as reasonably possible, and to comply
promptly with all requests or requirements which applicable federal, state or
local law or governmental officials may impose on them with respect to the
transactions which are the subject of this AGREEMENT.
10.3 Disclosures. Neither VESTA nor PURCHASER, without the prior written
-----------
consent of the other, will make any public announcement concerning this
AGREEMENT or the transactions contemplated hereby prior to the CLOSING DATE;
provided, however, that if in the opinion of counsel
31
of any party such disclosure is legally required, they will cooperate in
preparing any notice or press release.
10.4 Books, Records and Information.
------------------------------
10.4.1 Inspection. PURCHASER agrees that all documents delivered
----------
to it by VESTA pursuant to this AGREEMENT or otherwise in possession
of VESTA COUNTY MUTUAL on the CLOSING DATE shall be open for
inspection by representatives of VESTA at any time during regular
business hours until such time as such documents are destroyed or
possession thereof is given up to the other party, and that VESTA may
during such period at its expense make such copies thereof as it may
reasonably request. VESTA agrees that all documents retained by VESTA
after the CLOSING DATE related to VESTA COUNTY MUTUAL shall be open
for inspection by representatives of PURCHASER at any time during
regular business hours until such time as documents are destroyed or
possession thereof is given up to the other party, and that PURCHASER
may during such period at its expense make such copies thereof as it
may reasonably request. VESTA agrees to provide PURCHASER or VESTA
COUNTY MUTUAL with draft schedules and such information regarding the
affairs of VESTA COUNTY MUTUAL within their possession as is needed to
prepare VESTA COUNTY MUTUAL'S Annual Statement for 1999.
10.4.2 Retention. During the period ending on the sixth
---------
anniversary of the CLOSING DATE, no party shall destroy or give up
possession of any item referred to in Subsection 10.4.1 without first
offering to the other the opportunity, at such other's expense (but
without any other payment), to obtain the same. Thereafter each party
shall be free to dispose of such items, subject, however, to the
provisions of Section 11.4.
32
Notwithstanding the foregoing, tax records, tax returns, tax
deductions or other tax information shall in no event be disposed of
prior to the time permitted under Section 11.5.
10.5 Names.
-----
10.5.1 Use of Names and Marks. PURCHASER specifically agrees that
----------------------
from and after the CLOSING DATE, or upon the approval of a new name
for VESTA COUNTY MUTUAL, if later, neither PURCHASER nor VESTA COUNTY
MUTUAL, and any affiliate thereof, will make use of word "VESTA" or
any name, xxxx or term confusingly similar therewith, except for the
sole purpose of historical identification of any products sold by
VESTA COUNTY MUTUAL prior to the CLOSING DATE.
10.5.2 Name Change. VESTA MANAGEMENT will cause to be called a
-----------
meeting of the policyholders of VESTA COUNTY MUTUAL for the purpose of
amending the Articles of Incorporation of VESTA COUNTY MUTUAL and will
cause VESTA COUNTY MUTUAL to take all action necessary to approve a
change in the name of VESTA COUNTY MUTUAL which would eliminate
"VESTA" therefrom as soon as possible after the CLOSING. In connection
therewith, VESTA MANAGEMENT shall cause proxy material, including a
notice, a proxy statement and a form of proxy, to be prepared and
distributed in accordance with all applicable laws and regulations.
Such proxy shall contain the recommendation of the Board of Directors
of VESTA COUNTY MUTUAL to its policyholders that they vote to change
the name of VESTA COUNTY MUTUAL to a name recommended by PURCHASER,
and upon receipt of such policyholder approval, VESTA COUNTY MUTUAL
shall promptly take all action necessary to the secure COMMISSIONER'S
approval for the name change and to have
33
the name change take effect as soon as possible after the CLOSING
DATE. In the event approvals from the COMMISSIONER and the
policyholders for the change of name are not received prior to
CLOSING, VESTA hereby grants a limited license to VESTA COUNTY MUTUAL
to continue to use the name "VESTA" (in the same manner and for the
same purposes it is currently used) until the name change is
effective.
10.6 Amendments to the Articles of Incorporation. In addition to the
-------------------------------------------
amendment of the Articles of Incorporation for purposes of changing the name of
VESTA COUNTY MUTUAL, VESTA MANAGEMENT agrees to cause the Board of Directors of
VESTA COUNTY MUTUAL to approve other amendments reasonably requested by
PURCHASER and, if necessary, to cause notice thereof to be given to the
policyholders, as well as proxy materials containing such other amendments, as
required by applicable laws and regulations.
10.7 Assumption of Liabilities. PURCHASER, upon the CLOSING, shall enter
-------------------------
into an agreement for the Loss Portfolio Transfer (in the form attached hereto
as Exhibit 7.1.8) to assume all liabilities ceded by VESTA COUNTY MUTUAL to
Vesta Fire Insurance Corporation, excluding Vendor's Single Interest insurance,
as of 11:59:59 p.m. C.S.T. on the CLOSING DATE.
10.8 Assumption of Brokers Obligations. PURCHASER, upon CLOSING, shall
---------------------------------
enter into an agreement (in the form attached hereto as Exhibit 10.8) to assume
all obligations of Vesta Fire Insurance Corporation to brokers for the services
provided relating to the business written by VESTA COUNTY MUTUAL. Copies of
such agreements with brokers are a part of and accompany Exhibit 10.8.
10.9 Post Closing Adjustment. Inasmuch as agents accounts for insurance
-----------------------
transactions prior to CLOSING will not be reported to VESTA COUNTY MUTUAL until
after the CLOSING, and because the amount due under the terms of the MANAGEMENT
CONTRACT through the date of
34
CLOSING may not be finally determined until after the books are closed of VESTA
COUNTY MUTUAL on December 31, 1999, it is agreed that a post-closing adjustment
shall be made to the Closing Balance Sheet on or before March 1, 2000, to
properly reflect all transactions as of the CLOSING DATE. At that time, VESTA
COUNTY MUTUAL shall remit to VESTA MANAGEMENT any additional amount due under
the MANAGEMENT CONTRACT as of the CLOSING DATE, or VESTA MANAGEMENT shall remit
to VESTA COUNTY MUTUAL any overpayment of fees under the MANAGEMENT CONTRACT
based upon the adjusted Closing Balance Sheet. It is understood and agreed that
any increase in accrued premium tax liability of VESTA COUNTY MUTUAL shown on
the adjusted Closing Balance Sheet shall be offset by any corresponding accrued
receivable from agents for any such premium tax liability, or inversely , any
decrease of accrued premium tax liability will be offset by any decrease in
accrued receivables from agents relative to such premium tax. However, any
overpayment in prepaid premium taxes paid by VESTA COUNTY MUTUAL prior to
CLOSING shall be properly accounted for on the adjusted Closing Balance Sheet.
ARTICLE XI. ADDITIONAL TAX MATTERS
----------------------
11.1 Review by Vesta. All returns, reports and declarations prepared by
---------------
VESTA COUNTY MUTUAL related to any periods for which VESTA has any liability
pursuant to subsection 3.5.7. shall be subject to the review by VESTA.
11.2 Tax Treatment of Transactions. VESTA and PURCHASER agree that for Tax
-----------------------------
purposes (i) the transfer of the rights and interests in the MANAGEMENT CONTRACT
are a sale by VESTA of all of its interest in the MANAGEMENT CONTRACT, and (ii)
the transactions effected by the Loss Portfolio Transfer Agreement to acquire
the VESTA COUNTY MUTUAL business is reinsurance.
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VESTA and PURCHASER agree not to take any position inconsistent with these
positions for Tax purposes.
11.3 Allocation of Purchaser Price. The parties agree that the
-----------------------------
consideration payable by PURCHASER to VESTA at the CLOSING DATE pursuant to this
AGREEMENT (after taking into account the reinsurance premiums, ceded
liabilities, ceding commissions and other related items under the Loss Portfolio
Agreement) shall be allocated in accordance with Section 1060 of the Code and
Temporary Treasury Regulation Section 1.1060-1T. VESTA and PURCHASER shall
mutually agree (such agreement not to be unreasonably withheld) as to the
allocation of such consideration amount to the MANAGEMENT CONTRACT and the
business transferred under the Loss Portfolio Transfer Agreement. Each party
agrees to file with its federal income Tax returns an initial asset acquisition
statement and any supplemental statements on Internal Revenue Service Form 8594
(Asset Acquisition Statement) required by Temporary Treasury Regulation Section
1.1060-1T, consistent with the preceding sentence.
11.4 Tax Refunds.
-----------
(a) VESTA shall be entitled to an amount equal to all refunds of
federal income taxes of VESTA COUNTY MUTUAL, and all refunds of state,
local or other Taxes of VESTA COUNTY MUTUAL with respect to taxable
periods or partial periods through the CLOSING DATE (and any interest
thereon), which are not shown on the Closing Balance Sheet of VESTA
COUNTY MUTUAL as of the CLOSING DATE. PURCHASER will pay such amount
to VESTA, within five business days after receipt of any such refunds
by VESTA COUNTY MUTUAL. This Section 11.4(a) shall not apply to any
refund attributable to any loss carryback and shall not be construed
to require
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VESTA COUNTY MUTUAL to effect any such carryback or to file any
amended return or refund claim, notwithstanding Section 11.5.
(b) VESTA COUNTY MUTUAL shall be entitled to all refunds of federal
income taxes and all refunds of state, local or foreign taxes of VESTA
COUNTY MUTUAL for taxable periods or partial periods occurring after
the CLOSING DATE (and any interest thereon). VESTA shall pay to VESTA
COUNTY MUTUAL, within five business days after receipt thereof, any
such refunds received by VESTA.
11.5 Cooperation and Exchange of Information. The parties shall provide
---------------------------------------
each other with such cooperation and information as either of them reasonably
may request of the other in filing any tax return, amended return or claim for
refund, determining a liability for taxes or a right to refund of taxes, or in
conducting any audit or other proceeding in respect of taxes. Such cooperation
and information shall include providing copies of all relevant portions of tax
returns relating to VESTA COUNTY MUTUAL, together with accompanying schedules
and related workpapers, documents relating to rulings or other determinations by
taxing authorities and records concerning the ownership and tax basis of
property, which either party may possess. Each party shall make its employees
available on a mutually convenient basis to provide explanations of any
documents or information provided hereunder. Notwithstanding the foregoing,
neither party shall be required unreasonably to prepare any document, or
determine any information not then in its possession, in response to a request
under this section. Except as otherwise provided in this AGREEMENT, the party
requesting assistance hereunder shall reimburse the other for any reasonable
out-of-pocket costs incurred in providing any return, document or other written
information. Each party will retain all tax returns, schedules and workpapers,
and all material records or other documents relating thereto, until the
expiration of the statute of limitations (including extensions) for the taxable
years to which such returns and other documents relate and, unless such returns
and other
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documents are offered to the other party, until the final determination of any
payments which may be required in respect of such years under this AGREEMENT.
Any information obtained under this section shall be kept confidential, except
as may be otherwise necessary in connection with the filing of returns or claims
for refund or in conducting any audit or other proceeding.
11.6 Filing Procedures. VESTA and PURCHASER shall mutually agree (such
-----------------
agreement not to be unreasonably withheld) as to the steps, if any, taken by the
Purchaser in connection with the filing of any Tax returns, amended Tax returns,
claim for refund, court petition or any litigation and consent to any settlement
in connection therewith with respect to any Tax of VESTA COUNTY MUTUAL relating
to any Tax period ending on or prior to the CLOSING DATE. Neither VESTA or
PURCHASER shall (or shall cause or permit any affiliate thereof to) amend,
refile or otherwise modify (or grant an extension of any statute of limitations
with respect to) any Tax return relating in whole or in part to VESTA COUNTY
MUTUAL with respect to any Tax year or period ending on or before the CLOSING
DATE without the prior written consent of the other party, which consent may not
be reasonably withheld.
11.7 Allocation Between Periods. For purpose of the representations made
--------------------------
in Subsection 3.5.7, including any determination of estimated Taxes, the
presentation of the Closing Balance Sheet, and the determination of tax refunds
for any tax period that includes but does not end on the Closing Date, and the
presentation of Financial Statements, all Taxes shall be determined on the basis
of an interim closing of the books of VESTA COUNTY MUTUAL as though its Tax year
ended on the Closing Date.
11.8 Definition of Tax. "Tax" (and, with correlative meaning, "Taxes")
-----------------
means any federal, state, local or foreign Taxes, charges, fees, levies or other
assessments, including, without limitation any net income Tax or franchise Tax
based on net income, or alternative or add-on minimum Taxes, any gross income,
gross receipts, premium, sales, use, ad valorem, value added, transfer, profits,
license, payroll,
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employment, withholding, excise, severance, stamp, occupation, property,
environmental (including Taxes under Section 59A of the Code), capital stock,
social security (or similar), unemployment, disability, registration, estimated,
or windfall profit Tax, custom duty or other Tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest credit
or charge, penalty (including any penalty for failure to file a Tax return),
addition to Tax or additional amount imposed by any Tax authority, whether
disputed or not.
ARTICLE XII. MISCELLANEOUS
-------------
12.1 Broker's Fees. Neither party has agreed to pay any commission or
-------------
other compensation to any broker, finder or similar agent in connection with the
transactions contemplated by this AGREEMENT.
12.2 Expenses. Except as specifically set forth elsewhere herein, each of
--------
the parties hereto shall pay its own expenses and costs incurred or to be
incurred by it in negotiating, closing and carrying out this AGREEMENT.
12.3 Notices. Any notice or communication given pursuant hereto by any
-------
party hereto to any other party shall be in writing and delivered or mailed by
registered or certified mail, postage prepaid, return receipt requested (notice
so mailed shall deemed given when mailed) as follows:
(a) If to Vesta:
-----------
Vesta Insurance Group, Inc.
P. O. Box 43360
0000 Xxxxx Xxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Senior Vice President,
General Counsel and Secretary
(b) If to Purchaser:
---------------
Employers Reinsurance Corporation
39
5200 Xxxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attn: Xxxxxxx Xxxxx Xxxxx
Vice President
Associate General Counsel
12.4 Integration. This AGREEMENT is the entire agreement between the
-----------
parties hereto with respect to the subject matter hereof and supersedes all
prior communications, representations, agreements and understandings, whether
oral or written, between the parties hereto. There are no oral or written
agreements, understandings, representations or warranties between the parties
hereto with respect to the subject matter hereof other than those set forth in
this AGREEMENT. The headings contained in this AGREEMENT and the Table of
Contents are for reference purposes only and shall not affect the meaning or
interpretation of this AGREEMENT.
12.5 Assignment and Amendment of Agreement. This AGREEMENT may be assigned
-------------------------------------
by PURCHASER to any affiliate, provided the assignee is not a corporation
chartered by the state of Texas. This AGREEMENT shall be binding on the
successors and assigns of the parties hereto. This AGREEMENT may be amended
only by written agreement of the parties hereto.
12.6 Applicable Law. This AGREEMENT shall be construed in accordance with
--------------
the laws of the State of Texas applicable to contracts made and to be performed
entirely within said jurisdiction.
12.7 Reasonable Assurances. Each party agrees that it will execute and
---------------------
deliver, or cause to be executed and delivered, on or after the date of this
AGREEMENT, all such other instruments, and will take all reasonable actions, as
the other party may reasonably request from time to time in order to effectuate
the provisions and purposes of this AGREEMENT.
12.8 Incorporation of Exhibits and Attachments. The Exhibits hereto are
-----------------------------------------
incorporated into this AGREEMENT and shall be deemed a part hereof as if set
forth herein in full. Reference herein to "this
40
AGREEMENT" and the words "herein," and words of similar import refer to this
Acquisition Agreement including its Exhibits and Attachments as an entirety.
12.9 "Affiliates". As used in this AGREEMENT with respect to VESTA
------------
MANAGEMENT, VIG or PURCHASER, the term "affiliate" shall mean any entity or
natural person controlling, controlled by or under common control with VESTA
MANAGEMENT, VIG or PURCHASER, as the case may be.
IN WITNESS WHEREOF, the parties have duly executed, through their
respective authorized officers, this AGREEMENT as of the date first above
written.
ATTEST: [SEAL] EMPLOYERS REINSURANCE CORPORATION
By: /s/ Xxxxxxx Xxxxx Xxxxx
______________________ -------------------------
Title: Secretary Title: Vice President &
Associate General Counsel
ATTEST: [SEAL] VESTA INSURANCE GROUP, INC.
Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx III
---------------------- ------------------------
Title: Secretary Title: President and CEO
ATTEST: [SEAL] VESTA MANAGEMENT CORPORATION
Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxx
---------------------- ------------------
Title: Secretary Title: Executive VP
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